Work and Pensions Committee - Universal Credit implementation: meeting the needs of vulnerable claimantsWritten evidence submitted by Manchester City Council

1. We welcome this inquiry into Universal Credit and have chosen to focus on the strategic aspects of the introduction of this new benefit within the context of the range of other changes to welfare benefits that are impacting upon communities in Manchester.

2. As the Committee will be aware a number of districts within Greater Manchester (GM) are involved in piloting aspects of the introduction of Universal Credit and Oldham and Wigan hope to be playing a key role in delivering the face to face support for people making online Universal Credit claims.

3. Whilst these piloting initiatives take place, we have chosen in this submission to offer a perspective on the broader issues surrounding the introduction of Universal Credit that we feel will be of concern to the Committee. One is the cumulative impacts of the welfare reform as a whole on communities in Manchester. The other is the challenges that the Universal Credit faces in transitioning people into work without a more sophisticated approach to delivering a range of support services to help people access work.

Introduction

4. Universal Credit and the wider reforms are designed to simplify and reduce the cost of the national welfare system. However, unless a more sophisticated and nuanced approach is taken, the Government may not achieve the level of reductions in spending that they require. Our evidence for this assertion is from an analysis of spending that we have undertaken for total public expenditure across GM between 2009 and 2012. Total public spending has not reduced in total over this period, but the proportions have changed: Spending by the Department for Work and Pensions (DWP) in particular has gone up by 30% and health has gone up by 15% but local government expenditure has gone down by 22%. There are also big falls in public spending to support growth in terms of higher and further education, closing of the RDA (Regional Development Agency) and reductions in Homes and Communities Agency spending. Costs of dependency are therefore rising in GM but spending to support growth and jobs is falling. There is a risk that the country could spend another three years reducing the benefits paid to individuals, but not fundamentally reducing the national welfare bill, or the wider costs of dependency on public services.

5. Increasing the number of people in work is not simply a function of incentivising work through the levels of benefits offered but relies on a wider set of issues related to how people access the range of support they need to enable them to access jobs. The welfare reforms in the main do not address these wider issues and concentrate instead on the task of simplifying and reforming what had become an over-complex benefits system. We would argue that the approach to welfare reform should be more localised in its implementation so that it can be integrated around the needs of individual claimants and their families with bespoke packages of public services. The incentive of work paying more than benefits is necessary, but insufficient: People also need effective support to take work opportunities that may exist locally and the ability to sustain that employment over the long term.

6. We see Community Budgets as a tool for public service reform which helps to reduce demand across service silos and which enables us to capture some of the financial savings and retain them in the place for re-use to prevent further dependency or to help generate growth. Using the Community Budget approach, investment by one agency potentially reduces demand for other organisations services (you shake the tree and the fruit falls in someone else’s garden). Community Budgets, as part of a wider programme of reform, can help ensure that resources are shared over the garden fences all of the time by using a New Delivery Model where people can access appropriate service interventions, sequenced and co-ordinated through the Community Budget. These can include specific services such as mental health, drug and alcohol services, family intervention programmes, and interventions with offenders, together with employment and training support.

7. An added benefit of this approach is that local services can also ensure that frontline staff engages with local residents about work and their skills to access work. This helps develop their thinking about life without benefits. Some local programmes in Manchester are already taking this on but they need to be scaled up and delivered by public services working together at place level.

8. Evidence from early Community Budget piloting work shows faster progress in resolving some of the problems which stand in the way of people entering the labour market—such children attending school and better access to help with drug and alcohol problems. We considering how the approach can be used to support people into work and to help them stay in work. Critical to this also is the commissioning and provision of skills locally so that it dovetails with the way in which we intervene on worklessness within families and is bespoke to the current and future needs of the local economy.

9. If operated at sufficient scale this approach can support economic growth by increasing our productivity (through greater labour market participation) and reducing the costs of dependency. The rewards of this investment can then be re-invested both in similar interventions and in developing more employment opportunities.

10. We believe that there is huge potential going forward to link economic growth and competitiveness in Manchester with greater public sector reform to reduce dependency and to reduce the burden on Universal Credit when it is introduced. But without addressing the wider challenges of welfare reform and adopting a more localised approach to join up public service interventions, it is likely that overall costs in the public sector will increase.

The Cumulative Impacts of Welfare Reform

11. The welfare reforms will have a wide range of impacts for people in Manchester over the short and medium term. For cities with high unemployment and high benefit dependency it is a huge challenge to both manage the transition from dependency to self-reliance creating the sorts of job opportunities that many workless people can access at a time of low economic growth.

12. All the Council’s of Greater Manchester are currently working to manage the impacts of welfare reform in their local areas and preparing for the introduction of Universal Credit. The local authorities play a key role in identifying where the impacts of welfare reform are likely to be greatest, provide advice and other support services to communities, and play a community leadership role in co-ordinating interventions to help people get back to work.

13. The Council has been working with the Centre for Local Economic Strategies (CLES) to produce an initial analysis of the city-wide cumulative impacts and is applying this methodology to examine impacts within particular parts of the city, specific neighbourhoods and groups of the population. Whilst the picture of impacts is still emerging we know from that they are likely to be very significant: Over 64,000 people claim out of work benefits (17% of the working population) and will be eligible for Universal Credit. Changes will impact differently across the City according to the levels of benefit dependency.

14. We have concerns about the impacts on people but also on “place”—either from large scale churn de-stabilising people and communities or reductions in income within areas with high concentrations of people currently on benefit. In Manchester there has been significant success in increasing the numbers of families that are economically active through targeted restructuring of our housing markets creating stable and attractive neighbourhoods. There is a danger that some of this progress could be at risk with the changes in welfare now taking place.

Demographic change

15. The welfare reform changes are happening at a time when Manchester is expanding rapidly. The 2011 Census shows that Greater Manchester’s population has grown to nearly 2.7 million and the City of Manchester’s population has grown to 503,100, an increase of 6.6% and 19% respectively since 2001. This is one of the largest increases in England, behind Tower Hamlets and Newham and one that we forecast will continue. The Census shows a large increase in children aged 0–4 (40% increase since 2001) and also adults age 25–29 (up by 50.5% since 2001) a proportion of which are new migrants to the city.

16. There is a high coincidence of the wards where population (especially school age) is growing and the wards we are identifying as most impacted by welfare reform changes. The challenge that the Councils of GM face is the complexity of managing the impacts of demographic change and the demands on services that this will bring together with the impacts of welfare reform on a population which has high levels of benefit dependency.

Neighbourhoods

17. In terms of welfare, out of work benefits claimants in the city of Manchester live predominantly in wards in the north, east and central parts of the city. Changes to welfare payments, particularly as transfers are made from IB (Incapacity Benefit) to JSA (Jobseekers Allowance), will further impact these wards.

18. Over the last 10–15 years we have worked proactively across the City to stabilise and support mixed communities that are economically active. This has included changing the housing mix in areas and using levers such as the housing allocations policy to increase the number of working people in social housing leading to more balanced communities. There have been good successes in increasing the numbers of working families and reducing transience in areas where we have intervened in this way. In places such as Wythenshawe, Hulme and parts of East Manchester this has resulted in a far more positive, economically active community environment.

19. The Council is currently utilising the Community Budgets for Complex Families New Delivery Model across the whole of North Manchester, with the aim of engaging 1,000 families by March 2013. The priority in this work is to increase employment and reduce dependency, and there are strong links between partner organisations in delivering the appropriate interventions to achieve this aim.

Housing

20. Whilst we are uncertain about the extent to which people will move as a result of changes to housing benefit, we think it likely that there will be increased pressure on housing in areas with cheaper rent within Manchester, and between the districts and further afield. This could include movements to Manchester from other parts of the country. Potentially, some communities could become less sustainable as the support provided by family and social networks are lost as those furthest from the labour market are forced to move around and over time become even more concentrated in the same areas.

21. Reductions in housing benefit linked to under-occupancy of social housing could also have serious implications in Manchester. We estimate 14,000, or 44% of all working age social housing tenants, could be affected by the under occupancy element of the legislation amounting potentially to £7.95 million of lost housing benefit in the city. Where tenants can no longer afford their current rents it may be that they will often need to move to new parts of the city causing impacts on services including schooling and other support services. Moves may be also be into the poorer quality private rented market.

Local economy

22. The changing welfare system and payments will have implications upon individual, family and personal incomes, but also upon the wider economy of neighbourhoods where people live. Where income is lost for specific communities, there will be impact upon spending power and potentially increases in levels of debt in these areas. Less income will potentially have knock on effects for local shops, local businesses and local economies generally; however spend could increase if people move into work locally or elsewhere.

23. We forecast almost £45 million less income within the local economy as a result of the welfare changes, £13.7 million of which results from people moving from IB to JSA. Some may be replaced and even increased as people move from JSA into work but other benefit reductions (such as to DLA) are less likely to be made up over time. This emphasises the importance of working across agencies to support people into work as quickly as possible.

Personal Debt

24. The move to the single monthly Universal Credit payment could increase levels of debt and recourse to short term high interest loans. Many social housing tenants in Manchester are already in rent areas and direct payments of housing benefit will almost certainly lead to increased levels of debt and increases in related issues such as levels of depression, domestic violence and criminality. Many Registered Providers are increasing debt counselling and money advice provision and many are visiting tenants affected by changes to their housing benefits. We are also considering support we can provide through the Council Tax Support scheme from April 2013.

25. Demand is increasing in GM for a range of benefits and advice services connected to welfare reform particularly those delivered by agencies such as the Citizens Advice Bureau through a Community Legal Advice Services (CLAS) contract administered by the Council. Six centres across the city provide debt, housing, welfare benefits, family, community care and employment advice to residents free of charge. We are working with many families already through our Community Budget pilot and debt is one of a number of issues that many families face and for which we are providing support as part of a range of sequenced interventions.

Impact on the Revenues and Benefits service

26. The introduction of Universal Credit will directly impact on the Revenues and Benefits service and Customer Services, and the Council is assessing the degree of the impact that this will have on the workforce. The change will affect all staff involved in benefits administration including benefits officers, visiting officers, appeals staff, administration, development staff and management as well as well as counter and phone staff. Whilst DWP will take on all new claims some residual work will remain such as discretionary housing payments and the Council administered Council Tax Support scheme. The volume of the work remaining and the required workforce numbers is not yet known.

Impact of benefit changes on families and children

27. The change to Universal Credit will have an impact upon individuals who claim the current range of income and in work related benefits. According to the Institute of Fiscal Studies1 those in work and working less than 16 hours a week will generally be better off; whilst those working over 30 hours a week will be worse off as a result of changing thresholds in the shift from Working Tax Credit to Universal Credit. For example, a single full-time working mum of three on the minimum wage under Universal Credit her income could drop by £67 per week or £3,484 per year pushing her family into poverty. This is because the earning disregard under Working Tax Credits is more generous than under Universal Credit.

28. The changes to Housing Benefit (or the housing element of Universal Credit) particularly under-occupancy penalties are also having an impact. For example, an unemployed couple (JSA of £105.95) living in a two bed Wythenshawe flat (£75.85 per week) per week) whose son has left home currently receive full housing benefit and do not have to pay anything towards their rent. From April 2013 they will have a 14% deduction for under occupation by one bedroom amounting to £10.62 per week which they will need to make up out of their Jobseeker’s Allowance entitlement.

29. The consequence of both these examples is that benefits may be saved but the families (one working the other not) may become more dependent on other public services as their needs increase.

Conclusions

30. Welfare reform and the introduction of Universal Credit presents a major challenge to cities such as Manchester, but we are taking a strong leadership role in managing welfare reform within the context of our vision for growth, reduced dependency and increased self-reliance and responsibility within our communities.

31. We believe that there needs to be a broad and sophisticated approach to welfare reform that ensures that reforms being made deliver the outcomes that are sought. The main aim of Universal Credit is improving work incentives so that people do not need to rely on the benefit as a main source of income. But moving people into work is not just a function of incentivising them through the level of benefits received, it is also about access to the range of support services available to enable them to access jobs. Providing these in a co-ordinated and sequenced way is what Community Budget pilot in Manchester is seeking to achieve—potentially with long lasting and more widely beneficial results extending not only to the benefits bill but to the cost of public services more generally.

32. In terms of impacts of welfare reform we are concerned about the impacts on people and place rather than simply a focus on changes to specific welfare programmes—such as Universal Credit. In Manchester we are seeking to consider the total impact on families and communities of welfare policy together with demographic change and the spending changes that are taking place across public services, for instance in health and social care budgets and in children’s services. Together these factors will have a major influence on the services we are able to deploy to support families in our most dependent families and communities.

33. We are seeking to develop a better understanding of the cumulative impacts of welfare changes upon places and residents and believe that this should be monitored at both a national and local level. We would be very happy to work with the Committee on ideas for how this could be taken forward.

34. In Manchester we are seeking to help people through a difficult transition from welfare and a life free from reliance on Universal Credit, by:

Creating the mechanisms and incentives to join up action in local places that connect people back to work. We are ensuring that our work with complex families is tackling worklessness, poverty and dependency issues within families and that people are able to make a transition into work. We believe the Community Budget pilots will provide an evidential base supporting this approach and we would like to take this further in the next phase of the City Deal process by looking at how we can use “investment model” principles between public agencies to drive action across agency boundaries linked to the transition to Universal Credit.

Developing more effective help to manage the potential for benefit dependent areas to simply become poorer. Cities’ capacity to intervene in areas of failure has been severely curtailed by national and local government spending reductions eg with the cessation of the HMR pathfinder programme. Through this programme Manchester and Salford had significant successes in turning round failing areas through a combination of targeted demolition, rebuilding for sale and market rent alongside the use of allocations policies that incentivise working families. There is currently a lack of a coherent national policy response to failing markets and the role of housing in strengthening the economy and this is something we would wish to see addressed by Government in the next parliamentary session.

17 August 2012