Welfare Reform and Work Bill Committee

Written evidence submitted by Southampton City Council (WRW 68)

Southampton Partners/ Southampton Anti-Poverty Network: Response to Welfare Reform & Work Bill 2015.

1. Southampton is the one of the largest cities in the South East and has huge economic potential. It was identified as the 4th highest ranked city for ‘good growth’ in the UK in 2013. However not all local people enjoy the benefits. There are huge differences in life chances, experiences and outcomes between our more affluent residents, neighbourhoods and communities and the most deprived, as well as between some areas in the city and regional or national averages.

2. Despite this - the best-paid jobs in the city are held by in-commuters. In 2014, the average gross weekly pay by residence was £487.40 per week compared to £547.00 by workplace. [1] The average annual gross earnings of resident workers in Southampton was £24,913 in 2014. This is lower than for England at £27,500 and the South East at £29,903. [2] There are higher unemployment rates amongst over 50s in Southampton (4.3%) compared to England and the South East (3.5% and 3% respectively). [3] Benefit Sanctions for Jobseeker’s Allowance (JSA) claimants are particularly prevalent in Southampton. The local job centre is in the top three in UK for highest use of sanctions [4] with 11.9 sanctions per 100 claimants in March 2014. Only Test Valley and Richmondshire have higher rates at 12% and 15.4 respectively. Nearly a quarter of children (9,830) live in poverty in the city and this figure rises to almost 40% in one of our most deprived wards. [5] The proportion of working age Housing Benefit claimants has increased from 13% in April 2009 to 18% in April 2015. [6] The city has a lower rate of owner occupation than the regional and national average: 49.7% compared to 67.6% for the South East and 63.3% nationally. This is linked to the high level of students we have in the city (around 47,000).

3. The following briefing outlines Southampton’s response to the relevant clauses of the Welfare Reform and Work Bill 2015 (2nd reading).

Key concerns include:

· The need to protect vulnerable residents as reforms are made.

· The need to understand the cumulative impact of reforms on individuals and households and the resulting pressures on residents, public and voluntary services.

· The need to give those affected clear information about what the change mean to them - how much will they gain or lose?

· The need to address barriers to work effectively.

· The impact on poverty and deprivation locally.

4. Clauses 4 – 6: Changes to the Child Poverty Act 2010. We are concerned that the removal of the child poverty targets and some of the duties on local government, such as the production of a Child Poverty Needs Assessment and Strategy, will weaken the national focus on child poverty and tackling poverty in general. We are also concerned that the lack of a specific income measure will not capture ‘in-work’ poverty which is a significant issue in area with low wage and high housing costs, like Southampton.

5. Clauses 7 – 15: Welfare Benefits. Southampton is concerned about the impact that the welfare changes covered by the Bill, including the freezing of benefits, the reduction in the Benefit Cap and the changes to the provision of tax credits, will have on the local population. We currently monitoring the local impact of welfare reforms and have concerns that:

· Claimants’ responses to welfare reform have been limited so far in terms of moving to more affordable accommodation or finding work.

· For some claimants the incentive to find work is high - for example - those affected by the Benefit Cap can become exempt if any adult in the household works 24 hours or more a week but there are still significant barriers for many of the individuals affected.

· Agencies are finding they are working increasingly with people who are in crisis but there is less provision and support available.

· Sanctions and benefit delays have had a significant impact on household budgets. Another factor is ‘waiting days’ for benefits. In October 2014, the number of ‘waiting days’ was extended for new Jobseeker Allowance (JSA) and Employment and Support Allowance(ESA) claims from 3 days to 7 days. This has also been introduced for Universal Credit (and this also includes housing costs)

· Changes to discretionary funding are creating gaps in provision and level of support available. There has been a significant increase in the number of claims for Discretionary Housing Payments (DHP) since April 2013. This fund has been used to support households affected by the Benefit Cap and has provided a respite to enable staff to work with individuals to explore longer term options. It has also been used to temporarily support those affected by the Social Sector Size Criteria/ under-occupation. The use of DHP has been effective in the short-term, however the greater challenge now is in assisting people in finding longer term, more sustainable strategies.

6. Clause 7: The Benefit Cap. As Southampton is an area of higher than average housing costs, the proposal to reduce the cap from £26,000 to £20,000 will have a significant and deep impact on the households affected and will leave some larger households having to find significant sums (up to £185.00 on a three bed property) out of their capped benefit just to fully pay their rent. This will leave less money for food, bills and other essentials, and quite possibly an increasing dependence on food banks. We judge that some larger types of housing will become completely unaffordable for capped families and they will inevitably become homeless. It is quite possible that private landlords with houses will not let to larger households on universal credit, or other non work benefits. Smaller capped families with two children will start to suffer major affordability problems, however, we believe that the 2 bedroom market might still remain viable for landlords and capped tenants.

A lower cap makes it vital that sufficient and proportionate Discretionary Housing

Payment (DHP) funds are made available to local authorities. This will allow households the time they need to take action or adapt to their reduced income.

7. Clauses 9-10: Freezing of working-age benefits, including Tax Credits and Local Housing Allowances for 4 years. Welfare benefits have been uprated below inflation since the start of 2013. This has placed significant financial pressure on low income households in the city and has led to an increase in demand for advice and use of food banks in the city. Citizens Advice report a sharp increase in clients seeking advice on debt. The composition of debt is also changing, with a shift away from consumer credit issues towards problems in meeting basic household bills. The freeze will also affect some of the most vulnerable in society. 39% of Citizen’s Advice clients in Southampton have a long term condition or disability. Of Citizens Advice clients claiming the affected benefits and tax credits, nearly half have a health condition or disability and over 40 per cent have dependent children. These groups may have fewer options to increase their incomes in the workplace. The complete freeze of the coming four years will compound many of these existing pressures.

8. Clauses 11-12: Removal of entitlement top the child element in Child Tax Credits and Universal Credit. Tax credits and Universal Credit top up income for low income families and help to make work pay, including through support for childcare costs. This will impact on some of our most vulnerable families. Larger families and families with a disabled member (including disabled children) are more likely to be on a relative low income, so this change could have a significant impact on the incidence of child poverty. The financial benefits of work are also significantly reduced for some families - due to the cumulative impact of this change (alongside the freezing of tax credits and changes in secondary legislation to income disregards, work allowances and taper rates). It is unlikely that losses of this scale can be made up for by the new National Living Wage and is particularly relevant to working families who are low paid but paid above the National Living Wage.

9. Clauses 13 -14 ESA /limited capability for work element. The alignment of payment rates for those claiming Employment and Support Allowance (ESA) undertaking work-related activity and those claiming Jobseeker’s Allowance places greater importance on getting decisions on work capability right at the earliest possible opportunity. ESA is a significant driver of demand for advice. Our local CAB have helped 1376 clients with ESA related issues since March 2015. Nationally, Citizens Advice has previously highlighted concerns with the decision-making process for the Work Capability Assessment (WCA) and, although the numbers of appeals reaching tribunal stage has fallen since the introduction of mandatory reconsideration, over half of awards are still made in favour of the claimant. Nationally, almost 1 in 5 relate to challenging a decision made about their condition. A reduction by £120 per month for clients who have been assessed to require ESA because of a work-limiting health issue or disability must be balanced by better decision-making at the earliest possible stage, and appropriate, sustainable support for those who are found to have limited capability for work.

10. Clause 16: Loans for mortgage interest. This clause would transfer liabilities from state to individual by making the support offered on mortgage payments for homeowners claiming certain benefits repayable. While most homes are gaining value, and most homeowners will be able to repay their loan in the medium to long-term, this measure could make it harder for some homeowners on low or fixed incomes to retain their homes. Mortgage lenders have worked with vulnerable homeowners to help them manage difficult circumstances and retain their homes if at all possible; the removal of help for six months could leave vulnerable homeowners facing far greater arrears and increased risk of repossession and homelessness. Not only will struggling homeowners need to repay the support they receive with interest, but they will also be, on average, £887 further in arrears before they get any help at all.

11. Clauses 19-22: Social Rents. Rents in the social housing sector will be reduced by 1% per year for the next 4 years: This will have the immediate effect of reducing the council’s actual income for 4 years and over the longer term. Tenants living in social housing who have a family income of £30,000 (£40,000 in London) will be required to pay market, or near market, rate rents. This will impact on Southampton City Council as a landlord, as there will be a need to identify those families whose incomes exceed the threshold and agree the market rate.

October 2015

[1] NOMIS (2014). Official Labour Market Statistics. Labour Market Profile – Southampton. [Online]. Available from: www.nomisweb.co.uk. Accessed August 2015.

[2] Ibid

[3] Annual Population Survey (2015) Data from April 2014 – March 2015. [Online]. Available from: www.nomisweb.co.uk. Accessed August 2015.

[4] Beaty, C. et al (March 2015). Benefit Sanctions and Homelessness: A Scoping Report. Available from: www.crisis.org.uk. Accessed August 2015.

[5] Children in Low Income Families. (2014) HMRC. Data from Snapshot August 2012. [Online]. Available from: https://www.gov.uk/government/statistics/personal-tax-credits-children-in-low-income-families-local-measure-2012-snapshot-as-at-31-august-2012. Accessed August 2015.

[6] Southampton Welfare Reforms Monitoring Group (2015). Local Impact of Welfare Reforms 2014-2015.

Prepared 16th October 2015