Welfare Reform and Work Bill

Written evidence submitted by Local Government Association (WRW 06)

1. About the Local Government Association (LGA)

1.1. The Local Government Association (LGA) is the national voice of local government. We work with councils to support, promote and improve local government. We are a politically-led, cross party organisation which works on behalf of councils to ensure local government has a strong, credible voice with national government.

1.2. We aim to influence and set the political agenda on the issues that matter to councils so they are able to deliver local solutions to national problems. The LGA covers every part of England and Wales, supporting local government as the most efficient and accountable part of the public sector.

2. Summary

2.1. Local government is keen to work with central government to join up services locally to tackle the root causes of unemployment, low pay and rising housing costs. Therefore the decision to address welfare and work as a whole, together with the Troubled Families programme is welcome.

2.2. However, some of the provisions of the Welfare Reform and Work Bill risk simply moving costs to another area of public spending, particularly homelessness services and temporary accommodation.

2.3. The Troubled Families programme is a proven example of the success of integrating services around an individual or family, and should be replicated. Councils and central government already work together to share data and publish comprehensive results for the programme. The LGA questions the need for additional statutory reporting and would encourage the Government to make use of the Family Progress data.

2.4. Councils are best-placed to understand the range of needs faced by disadvantaged children but currently have limited scope to provide integrated support or influence the quality of early years and education provision.

2.5. Changes to benefits set out in the Bill do little to address the root causes and may instead just move the costs onto local government services. We are calling for the Secretary of State’s review of the benefit cap to include consideration of the impact on housing affordability and mixed communities.

2.6. Proposals to reduce rents paid by tenants in social housing in England by 1 per cent a year will cost councils around £2.6 billion by 2019/20. This is represents 60 per cent of local government’s total housing maintenance budget each year, or equivalent to building almost 19,000 new homes over the four years. Giving local government the powers it needs to build new houses would have more impact on housing affordability than freezing the Local Housing Allowance or reducing the social housing rents.

3. Reports (clauses 1 to 3)

3.1. The Government’s continued support for the Troubled Families programme is an important endorsement of councils’ successful leadership in this area. Councils and their partner organisations are at the heart of joining up services around families to help those with the most complex needs. Their work to integrate services around families and individuals should be seen as a model for other service areas, such as employment support, and it is useful that this Bill brings Troubled Families together with other key areas.

3.2. It is right that the results of this important work are published and its successes celebrated. However, councils and Government have already worked together to publish comprehensive results throughout the first phase of the programme . T he terms of the programme itself require councils to share relevant data with Government to enable this to continue. The LGA questions the need to add a statutory level of reporting to a process which is already working well.

3.3. We would encourage the Government to make use of the data that is already collected in the Family Progress data and the National Impact Study . This would avoid adding unnecessary administrative burdens.

3.4. On this basis, we are proposing the following amendments:

Clause

Amendment

Clause 3 (1), line 43

Insert – (c) The data contained in the report must so far as is practicable, be derived from any relevant official statistics, the National Impact Study and Family Progress data.

4. Social mobility (clauses 4 to 6)

4.1. The early experiences of children from more deprived backgrounds have an impact on life chances, attainment and social mobility. Councils are best-placed to understand the range of needs faced by children and families. However, their scope to provide integrated support and ensure good quality education and early years provision is currently highly constrained.

4.2. If the Government is serious about narrowing the attainment gap for deprived children, councils need greater influence over education and early years provision and greater scope to commission and deliver integrated employment and welfare support.

4.3. The Troubled Families programme provides a welcome emphasis on integrated support and we would like to be able to use this model more widely.

5. Welfare benefits (clauses 7 to 15)

5.1. The Government must work with local government to mitigate the impact of the benefit cap on other areas of public spending, so that costs are not simply moved to another part of the system. The provisions on Housing Benefit, Tax Credits and Employment and Support Allowance do little to address the reasons why people claim benefits. Long-term reductions in welfare spending will only be realised by increasing people’s income through employment and by reducing their outgoings, primarily through improving access to affordable housing.

5.2. Further devolution of employment and skills support will enable local areas to address the challenges of unemployment, under-employment and low pay in a way that responds to the needs of their local community and economy. This is particularly important for those with multiple and complex needs. The average job outcome from a Work Programme intervention is 23 per cent for JSA claimants, compared with just 10 per cent for Employment and Support Allowance claimants living with a disability or health problems.

5.3. The LGA would like to see the replacement of the Work Programme with two new programmes: one co-commissioned with local government for long-term JSA claimants, and one devolved to local government and tailored for disadvantaged claimants who require integrated employment, health and skills interventions.

5.4. The percentage of people claiming Housing Benefit who are in work increased from 11 per cent in 2008 to 22.5 per cent in 2014. This trend is likely to continue given the early indications of the impact of changes to tax credits.

5.5. Freezing the Local Housing Allowance rate will cause the supply of affordable property to contract most sharply in areas where rents are growing fastest. These tend to be areas of high demand where there is also considerable pressure on social housing. As such there will be a considerable impact on affordability and increased pressure on homelessness services, debt and crisis support. This measure does not address, and may further aggravate, the growing numbers of working people who rely on Housing Benefit to meet their housing costs.

5.6. Temporary accommodation tends to be more expensive than private rent. The application of the benefit cap to temporary accommodation exacerbates existing problems in relation to affordability and homelessness and represents a direct cost transfer to local government, who have to make up the shortfall. Households in temporary accommodation should be exempt from the benefit cap so that councils can carry out their duties to homeless households without incurring additional costs.

5.7. The extension of the benefit cap, particularly when combined with the LHA rate freeze, other reductions in benefit, and the continued undersupply of affordable housing, is likely to make some areas of the country unaffordable for many low income households. This may have considerable consequences for both the demographic and socioeconomic make-up of communities. The Government must model the cumulative impact of policies on mixed communities, access to employment, community cohesion and the associated costs for councils supporting disadvantaged households.

5.8. Based on this evidence, we are proposing the following amendment to ensure that the Government takes into account the overall impact of the benefit cap on housing affordability and mixed communities:

Clause

Amendment

Clause 7

Section 94 of the Welfare Reform Act 2012 (benefit cap) is amended as follows.

At end insert-

"( ) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples owed a duty to be provided with interim or temporary accommodation under sections 188, 190, 193 or 200 of the Housing Act 1996.

Clause 8(1)(3), line 31

Insert – (c) the impact on housing affordability and mixed communities.

Social housing rents (clauses 19 to 22)

5.9. Proposals to reduce social rents by 1 per cent a year over 4 years will have a significant impact on councils’ 30 year housing investment strategies, which were agreed with the government just two years ago.

5.10. The LGA estimates councils will lose around £2.6 billion in planned revenue over the four years up to 2019/ 2020, equivalent to 19,000 new homes, with a gap of £1 billion per year thereafter once the lower rent base of CPI+1 per cent is reintroduced in 2020/202 [1] . The annual £1 billion gap is equivalent to 25 per cent of the controllable expenditure in the Housing Revenue Account or 60 per cent of the total maintenance budget.

5.11. The proposals also set an early precedent for central government intervention in the local Housing Revenue Account which will generate uncertainties impacting on councils’ confidence to borrow to continue investing in homes.

5.12. The proposal will significantly limit the capacity of councils to build new homes and to maintain the quality of their existing stock. The long-term impact on the affordable stock and overall housebuilding will be particularly acute when taken into account alongside other policy reforms, such as proposals to require the sale of high value council homes, and the extension of Right to Buy to housing association tenants.

5.13. Council tenants already pay the lowest rents across all housing providers. On average, English councils charged £82.44 per week in 2012/13 [2] , whereas Private Registered Social Landlords charged £95.54 per week [3] , and the private rented sector charged £137.31 per week [4] . Renting a council home is already 13 per cent cheaper than renting a Housing Association home and 40 per cent cheaper than renting in the private sector.

5.14. In reality few council tenants will likely benefit from the proposals directly, as 70 per cent claim Housing Benefit. Instead, it will be reflected as a short-term Housing Benefit saving for the Department and Work Pensions. Those council tenants that are directly impacted by the proposal will not be in receipt of Housing Benefit and so can afford to pay council rent, but under this proposal would each save, on average, just 82 pence per week in the first year and generate no direct savings for the Exchequer.

5.15. Medium-term, the measure risks generating additional cots for both central and local government. Falling availability in affordable housing stock will likely increase Housing Benefit spending as more tenants rent in the private sector, have a negative impact on house-building and on home-ownership, and increase the demand for temporary accommodation.

5.16. Based on this evidence, we are proposing the following amendments:

Clause

Amendment

Clauses 19-22

Delete clause 19, 20, 21 and 22

5.17. If the Government persists with this policy, steps must be taken to mitigate the costs for local government and the negative impact on housing affordability while still delivering planned savings for the Exchequer.

5.18. This could include exempting non-claimants of Housing Benefit from the rent reduction in council accommodation. These tenants can afford to pay council rents, which are already the lowest across all providers. The exemption would not impact on the Government’s planned Housing Benefit savings, and would protect some investment in affordable stock that will be crucial to managing down Housing Benefit spending over the medium-term.

6. Conclusion

6.1. We are keen to work with central government to join up services locally to tackle the root causes of unemployment, low pay and rising housing costs. The approach taken in the Troubled Families programme is welcome and should be used for other services.

6.2. The Welfare Reform and Work Bill risks making false savings if costs are simply moved to other parts of the public sector. In particular the implications for housing affordability are concerning and could lead to increased spending in homelessness services and temporary accommodation.

6.3. Proposals to reduce rents paid by tenants in social housing in England by 1 per cent a year will cost councils around £2.6 billion by 2019/20. This is represents 60 per cent of local government’s total housing maintenance budget each year, or equivalent to building almost 19,000 new homes over the four years. As such the LGA is calling for these clauses to be removed from the Bill.

6.4. When taken together with the impact of the benefit cap on housing affordability, freezing Local Housing Allowance, and the forthcoming extension of Right to Buy, this will have a significant and detrimental impact on the supply of new homes.

6.5. We want to work with the Government to meet its manifesto aims to build 400,000 new homes. Giving local government the powers and freedoms it needs to build new homes would have more impact on housing affordability than freezing the Local Housing Allowance or reducing the social housing rents.

6.6. In summary, the LGA is calling for the following amendments to the Bill:

Clause

Amendment

Clause 3 (1), line 43

Insert – (c) The data contained in the report must so far as is practicable, be derived from any relevant official statistics, the National Impact Study and Family Progress data.

Clause 7

Section 94 of the Welfare Reform Act 2012 (benefit cap) is amended as follows.

At end insert-

"( ) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples owed a duty to be provided with interim or temporary accommodation under sections 188, 190, 193 or 200 of the Housing Act 1996.

Clause 8(1)(3), line 31

Insert – (c) the impact on housing affordability and mixed communities.

Clauses 19-22

Delete clause 19, 20, 21 and 22

September 2015


[1] Local Government Association, July 2015

[2] Local authority housing statistics: year ending March 2014, DCLG, 2014

[3] Private registered provider social housing stock in England, DCLG Statistical Data return 2013/14

[4] Private rental market statistics, England, Valuation Office Agency, 2014

Prepared 11th September 2015