HC 576 Progress towards the implementation of Universal Credit

London Councils Response to Universal Credit Implementation Investigation

London Councils is committed to fighting for more resources for the capital and getting the best possible deal for London’s 33 local authorities. We lobby key stakeholders, develop policy and do all we can to help our boroughs improve the services they deliver. We also run a range of services ourselves, all designed to make life better for Londoners.

London Councils supports the broad principles of the government’s welfare reform agenda and, to this end, we are working with the Departments for Work and Pensions and Communities and Local Government to manage and mitigate the impacts of welfare reform as well as focus on helping people into jobs. We do however have concerns that elements of the welfare reform agenda do not adequately take account of London’s unique situation and pose challenges for London’s local authorities.

We are hopeful that the government continues to work with us to ensure that the move to Universal Credit can be implemented in a way that does not compromise the delivery of services to London’s population.

The following summarises London Councils’ key concerns:

- High private rents in parts of London may potentially lead to significant numbers of households migrating from high rental cost boroughs to lower rental cost boroughs as a result of the LHA changes, the overall benefit cap and other welfare changes.

- If a significant number of households are either evicted or forced to leave their accommodation as a result of the welfare reforms, Councils are likely to experience an increase in homeless applications.

- Councils would also expect to experience a growing requirement to house families in temporary accommodation, access to adequate quantities of which they do not currently have. Councils will have to consider radical solutions if they are to procure sufficient temporary housing to meet requirements.

- The lack of clarity provided by the Department for Work and Pensions concerning the housing benefit subsidy for people in temporary accommodation from April 2013. This issue is now becoming pressing.

- The cost implications of service delivery for boroughs most affected by welfare migration could constitute a significant additional financial burden for Councils, particularly in schools and children’s services.

- It is not clear that mainstream job programmes can deliver the intensive support that many of those affected by the benefit cap will require in order to move into the jobs market.

- Councils are concerned that the quality of the data provided by the DWP is not adequate and that if the impacts of welfare reform are to be properly mapped, the data would need to be of much higher quality and able to be shared across public agencies.

- The localisation of Council Tax Benefit represents a de facto further reduction in Council budgets where they are already coping with up to 26% reduction in budgets over four years.

- Given the numbers affected and the timescales involved, it is likely that Councils will have a significant face to face advice role in managing the benefit cap and the transition to Universal Credit. No funding for this has currently been identified by government.

Outlined below is the background to London Councils’ current thinking on these important issues.

Impact on Local Authorities

1.0 Budgets & Services

1.1 The department for Work and Pensions has estimated that 49% of all households affected by the overall benefit cap will be in London. The same estimates indicate that 17 London boroughs will have at least 1000 households affected by the cap. We estimate that over 80,000 children in London will be members of impacted households.

1.2 We are in contact with our member boroughs who are responsible for administering the housing benefit changes, initially implementing the benefit cap in April 2013 and for setting up local Council Tax benefit and Social Fund successor schemes. We are attempting to map the impacts of welfare reform in London, particularly the potential migration of households between boroughs and any consequent pressure on Council services that arise.

1.3 London Councils commissioned a piece of research in 2011 that examined over 200,000 housing benefit records from a representative sample of London boroughs and gathered qualitative evidence from across London. The report estimated that over 130,000 workless households in London would be unable to afford their rent as a result of either the LHA changes or the overall benefit cap. It also found that the overall benefit cap would affect larger families more;

- One in five families with one child would be unable to afford their rent.

- More than a third of single parent families with three children would be unable to afford their rent.

- 50% of couples with three children would be unable to afford their rent .

- 80% of households with four or more children would be unable to afford their rent.

1.4 The average weekly loss for a household in London as a result of the overall benefit cap is estimated at £105.

1.5 The impacts on households in London are accentuated due to London ’s higher private rents vis a vis the rest of the country. Furthermore, higher childcare costs mean that financial incentives to work are lower than the rest of the country.

1.6 It is not possible to predict the ways in which households will react to rent un - affordability as resulting from benefit changes but there appear to be a limited range of options open to them including;

- Move into work or increase hours at a current job .

- Move into a smaller, cheaper property in the same area .

- Move into a similar sized property in cheaper part of London .

- Attempt to absorb the shortfall by cutting back on other spending.

1.7 Broadly, households where no member move s into work, for whatever reason, the choice is between moving to cheaper accommodation (either in a borough with cheaper rents, overcrowding a property or presenting to the Council as homeless and being placed in temporary accommodation ) or reducing other spending to make up the shortfall and remain in their current property.

1.8 Local authorities are likely to be involved in the decisions of households in a variety of ways including providing employment support, housing advice, dealing with increased demands for school places, care and social housing and re-housing families who are required to leave their current accommodation as a result of the reforms.

2.0 Housing

2.1 The Department for Work and Pensions have commissioned Professor Ian Cole of Sheffield Hallam University and others to monitor the impacts of welfare reform. The first interim report was released in June 2012 and whilst the interviews and data collection was from a period too early to give any indications of migratory flows, there was some useful opinion data. Where tenants were impacted by changes to their housing benefit;

· Landlords in London are more than three times more likely to evict tenants or not renew tenancy agreements (37%) than they were to lower rents (11%)

· 17% of London landlords said they would no longer let their property to housing benefit claimants as a direct result of housing benefit reforms, compared to nine per cent nationally.

· More London tenants (33% compared to 19% nationally) were trying to renegotiate their rent with their landlord than housing benefit claimants in other parts of the country but were less successful.

2.2 If these assertions follow through to action, London’s local authorities may experience;

- An increase in the number of evictions in the private rented sector.

- A reduction in the supply of private rented housing available to housing benefit claimants.

- An increase in the migratory flow of households from higher rental areas to lower rental areas.

- An increase in homeless presentations to Councils

2.3 Lord Freud has stated that one of the expected effects of reducing housing benefit payments will be the reduction of private sector rents. DWP figures show that between March 2011 (just before many of the LHA changes were implemented) and March 2012, private rents in London rose by on average £47. The change was most significant in properties in the lowest quartile, rising on average by £57.

2.4 A study by Hackney Citizens Advice Bureau in June 2012 found that of 1585 properties available for private rent in Hackney, only 143 were available under housing benefit limits. Furthermore, landlords for only 14 of the properties were willing to consider accepting housing benefit tenants. With low levels of private rented sector accommodation available to housing benefit tenants, the burden for housing statutorily homeless families will fall to Councils.

2.5 There are an estimated 350,000 households currently on social housing waiting lists in London. In order to discharge their duty to house families, Councils often have to offer temporary private rented sector accommodation.

2.6 Boroughs have expressed concern that they do not have access to sufficient quantities of temporary accommodation to keep up with demand. The situation is being further destabilised by the lack of clarity on the future arrangements for housing benefit for people living in temporary accommodation. Officials have indicated that both boroughs and Registered Providers of social housing would be consulted on the post-2013 arrangements. Boroughs have yet to receive clarity on the Department’s proposed way forward. Evidence from boroughs and Registered Providers suggests that this delay and uncertainty is having and will continue to have an impact on the future supply and availability of temporary accommodation available for homeless households.

2.7 Demand for temporary accommodation is likely to increase as households find they are unable to cope with rent payments and are evicted. The Housing Minister has written to local authorities in London for breaching the 6 week limit on housing families in bed and breakfast accommodation. Whilst boroughs always seek to minimise the time a household will stay in B&B, boroughs are having increasing difficult identifying housing within the LHA cap. The number of London households in temporary accommodation increased 41% between June 2011 and June 2012.

2.8 It is also to be expected that some families seeking to absorb the impact of the benefit cap will move to accommodation that is legally overcrowded. Overcrowded accommodation is associated with reduced health and educational outcomes.

3.0 Schools and Young People

3.1 An acute pressure point in London is the supply of primary school places. Rising demand has meant that London’s Councils built or started to build 241 new classrooms in 2011/12 to meet their legal requirement of offering every child a primary school place. In boroughs that already have high demand for primary places; the movement of a large number of families with children into the borough will have serious consequences for the availability of school places that will constitute a significant additional financial burden to local authorities. It remains to be seen how the affected Councils would secure the necessary funding to cope with such an additional demand.

3.2 As the number of children in a borough rises, it follows that the number of children ‘in need’ or ‘at risk’ will increase in similar proportions with implications for the Council’s children’s services.

3.3 In some affected households there will be adults in receipt of social care services who are not exempted from the cap by virtue of being in receipt of a disability benefit. In these cases, there will be service implications of their migration between boroughs. Councils and other public services will need to put in place systems and communications channels with which to track vulnerable people and ensure that they are in receipt of the necessary care.

4.0 Council Tax Benefit

4.1 The localisation of council tax support represents a significant reform to the current

welfare system. From April 2013, local authorities will not only be required to implement and administer a local scheme for Council Tax Support (CTS) that responds to local priorities within the parameters set by the Government, but also deliver a saving – which is potentially larger than the headline 10 per cent - in the national cost of council tax support.

4.2 London Councils is concerned that these proposals will not lead to the achievement of the Government’s stated objectives. We believe they represent a financial risk to local authorities and may prove confusing for many claimants – some of whom are the most vulnerable in society.

4.3 London Councils remains concerned that this policy will transfer significant financial risk to local government without true flexibility. Council Tax Benefit demand is currently managed by DWP through the flexibility of Annually Managed Expenditure (AME). Local authorities will now have to manage demand from a fixed and potentially declining funding pot (Local Government DEL) – a clear transfer of significant financial risk to local government at a time when local government funding overall is reducing.

4.4 The extent to which the cost pressure, created by the national funding cut to CTS, can be covered through the workings of a local scheme, or will become a further cost pressure to the overall budget of the authority, will depend on: how the cut is distributed across authorities; local decisions on scheme design; and local demographics. For local authorities the risks under local council tax support plans are magnified: a local authority area which suffers an economic shock outside of its own control, could see its council tax support claimant count rise without matching recourse to additional funding for council tax support.

4.5 In our view, the policy is a mechanism for asking local authorities to (a) deliver a 10% saving in the national cost of council tax support, and (b) to take on the financial risk of the future cost of council tax support demand.

4.6 London Councils believes that it would appropriate for council tax support to be incorporated within the Universal Credit with a system of direct payments to local authorities. This would create a single and simplified benefit system with all claimants subject to the same rules. In this way, the Government’s objectives of improving work incentives can be aligned across all relevant benefits

5.0 Support for Claimants

5.1 Our intelligence from senior officers in boroughs suggests that there is likely to be a significant role for Councils in supporting affected benefit claimants through a face-to-face service.  It could be argued that any such role should be funded by government under the New Burdens Principles.

5.2 A piece of research carried out by IPSOS MORI on behalf of the Department for Work and Pensions produced interesting insights into the likely implications of the ‘Digital by Default’ approach to benefit administration. The report found that

- In total, 78 per cent of respondents said that they use the internet, including 48 per cent who said they use it every day. Internet access was most commonly from home, and the majority (74 per cent) said that they had a home broadband connection.

- Around half of respondents (53 per cent) had searched for a new job online, while 43 per cent had found out about government services online and 14 per cent had put in a new claim for a benefit online.

- The majority of respondents (62 per cent) said they would be willing to make an application for a benefit or tax credit online. Where respondents were not willing to apply online, this was either because of their own lack of skills, concerns about making a mistake, perceived cost, concerns about privacy or security, or a general lack of interest.

- Just under half (45 per cent) said that they would need help or support to use the benefits and tax credit service online. The most popular type of support was a telephone helpline to answer queries if people get stuck online.

5.3 It is therefore likely that Councils will also have a role in managing the transition to digital channels but also providing non-digital support for households unable for whatever reason to use digital methods to claim benefits and report changes in employment circumstances.

5.4 Lord Freud has said that the precise role of Councils in managing the Universal Credit transition would be decided following the face-to-face pilot schemes in the Autumn but he has indicated that he considers Councils ‘natural intermediaries’. We would argue that if the government decides that Councils should have a significant role in administering the transition to Universal Credit and providing face to face support to claimants, then this would constitute an additional financial burden to authorities already facing reductions of up to 26% in their revenue budgets.

6.0 Worklessness

6.1 It is clear that the best way a household could deal with a benefit shortfall or avoid the overall benefit cap is by one or more of its inhabitants moving into work. London Councils is supportive of attempts to design a benefits system that makes work pay.

6.2 We recognise that the government’s Work Programme is aimed at getting people from the welfare system into work, but remain concerned that it may not be responsive enough to meet the immediate needs of this target group.

6.3 It is our contention that for some long term benefit claimants, moving into the jobs market will require tailored, intensive and targeted support to build skills and capabilities. We suggest that such individuals might benefit from a flexible job support fund, locally administered, that would fill the gaps in mainstream and local employment schemes in which local authorities would play a key role.

6.4 It is not clear that mainstream job programmes can deliver the intensive support that many of those affected by the benefit cap will require in order to move into the jobs market; there may be gaps in this support e.g. outreach work and confidence building. A locally administered job support fund, that could fill gaps in provision locally, would require buy in from the Departments for Work and Pensions and Communities and Local Government

7.0 Impact Monitoring

7.1 Predicting the actions that households might take as a result of finding their rent unaffordable due to welfare changes is challenging. Furthermore, actions households might take (e.g. moving to a smaller property, running up rent arrears, moving to a cheaper part of London) cannot always definitively be defined as direct consequences of welfare reform.

7.2 However, there are a number of expected actions which cannot be measured directly, but can be implied by measurement of associated indicators. For example, we might expect to see an increase in demand for school places in areas where cheaper larger properties are available for rent. This would imply that households affected by the LHA reforms to bedroom HB or by the overall benefit cap were moving to properties elsewhere that were available for a rental level that was affordable under their new benefit entitlement.

7.3 We suggest that the indicators similar to the following on a geographical basis could offer some insight into the impacts of welfare reform:

- PRS evictions

- Homeless applications to Councils

- Households in temporary accommodation

- Housing Benefit claims

- Employment figures

- Housing Benefit claims

- Social Housing waiting lists

- School rolls

7.4 Furthermore, we also suggest that some thought is given to how government departments are able to track individuals or families across borough boundaries, particularly Troubled Families, individuals on the Work Programme and vulnerable children and adults.

17 August 2012

Prepared 7th September 2012