Welfare Reform and Work Bill Committee

Written evidence submitted by Knowsley Council (WRW 74)

1. Knowsley – local profile

Knowsley is one of six metropolitan districts in the Liverpool City Region, and covers an area of 33 square miles. The 2011 Census estimates the population of Knowsley to be around 146,000 in 61,300 households. Over the last 10 years the population has fallen by 3% but the rate of decline has slowed compared to previous decades.

Overall, the Borough faces a number of challenges to the health and wellbeing and socio-economic circumstances of residents, with high levels of deprivation compared to regional and national averages. Worklessness is also amongst the highest in England and there are particularly high levels of limiting lifelong illness and poor health outcomes amongst the 55 plus population.

The Welfare Reform and Work Bill has far reaching implications for Knowsley and as such the Council wish to respond to the request for evidence from the Public Bills Committee on Welfare and Work Bill 2015.

Overall, Knowsley is concerned that a number of the changes in the Bill will further disadvantage our most vulnerable residents. We have provided local analysis to evidence the potential impact and where applicable suggest amendments to the Bill.

2. Summary of proposed amendments to the Bill

Social Mobility: Clause 4 to 6

· Inclusion of an income- based measure of child poverty.

· Inclusion of a measure of child poverty that is inclusive of working families in poverty.

· Inclusion of a national child poverty target.

· Inclusion of the duty to produce a national child poverty strategy.

· Social Mobility and Child Poverty commission to maintain child poverty functions.

· Inclusion of a local duty for local authorities and named partners to co-operate to tackle child poverty in a manner that best fits local arrangements

Welfare benefits: Clause 7 to 16

· Reconsider the proposed changes due to the harmful impact it will have on the most vulnerable group’s ability to meet essential day to day costs.

Social housing rents: Clause 19

· Wider consultation is required on the impact this would have on the housing market.

3. Detail of main points and local analysis

3.1 Social Mobility: Clause 4 to 6

We are concerned with the provisions in the Bill to repeal the majority of the Child Poverty Act. Child poverty and deprivation is a significant issue in Knowsley that has a strong influence on the way we deliver services. As of 2013, there were 10,205 (28.9%) children living in poverty in Knowsley, which is the 9th highest rate in the country. The scale of the challenge we face in Knowsley is further shown by the recently published Indices of Deprivation in which Knowsley has moved from the fifth, to second most deprived borough in the country over the last five years. [1]

Growing up in poverty can affect every area of a child’s development and future life chances. We know that the most disadvantaged children are less likely to achieve their academic potential, secure employment and gain a sense of future financial security. They are more likely to suffer from poor health, live in poor quality housing and unsafe environments.

Child poverty is a multifaceted phenomenon and we agree that a more rounded way of measuring poverty should be developed - taking greater account of causal (multi-dimensional) risk factors. Whilst we welcome that the Government will report annually on worklessness and educational attainment, on their own they do not represent actual measures of child poverty.

Poverty is fundamentally determined by inadequate resources, and an income based measure is an essential element of any national child poverty measurement. The existing measure is an internationally recognised measure of child poverty, and is the product of extensive historical, academic and rigorous development. Replacement of this measure must only be made if there is an adequate income based replacement. A measurement of worklessness on its own does not fulfil this, and places too strong an emphasis on ‘out-of-work’ poverty.

We are particularly concerned that the proposed new measure’s focus on worklessness fails to capture the increasing prevalence of ‘in-work’ poverty being experienced by many working families across the country. DWP figures shows that sixty-four per cent of children currently in poverty are in working households (compared with 55 per cent in 2009/10) [2] . This means that the proposed arrangements would see two thirds of all children experiencing poverty going ‘under the radar’. This is particularly concerning in light of the proposed cuts to tax credits and benefits for working families. The Institute for Fiscal Studies have calculated that the average net loss to a working family who receive tax credits or benefits will be £550 per year, even when taking into account the new National Living Wage. [3]

Average earnings amongst our residents are already £2,200 per year lower than the national average [4] and reductions in tax credits will undoubtedly have a major impact on the incomes of working families.

We are concerned that removing the Government’s specific child poverty targets and duty to publish a national child poverty strategy reduces national leadership and accountability to improve children’s life chances. This is very much a backward step. Removing a clear timescale for eradicating child poverty brings a risk that allocation of resources at a local level could become more difficult, and create difficulties in prioritising child poverty locally. This is particularly relevant in light of continuously diminishing local funding and resources, and persistent levels of deprivation and need amongst our most vulnerable residents.

Without a sufficient national focus on child poverty there is high risk that political will to continue onwards to tackle child poverty will become lost. This could have a severe impact on the local distribution of resources and on the good work already carried out in Knowsley and many other local authority areas.

Whilst we will continue to prioritise child poverty locally and have strong partnership arrangements in place to deliver out local child poverty plans, the duty to co-operate provides a valuable impetus in encouraging partner organisations to develop collaborative approaches to tackling child poverty. The duty helps to develop co-ordinated local approaches and embeds child poverty priorities in related local service delivery plans. Removal of this duty would see a reduction in the local focus on child poverty in competition with other competing priorities. Therefore we would like to see a duty maintained for local authorities and named partners to co-operate in a means they see fit to co-ordinate action to reduce child poverty.

We oppose the removal of child poverty functions of the Social Mobility and Child Poverty Commission which has provided a valuable source of independent research and expertise on how economic conditions and policy decisions is affecting child poverty across the country. Removing the functions implies a lack of serious commitment from Government to tackle child poverty.

PROPOSED AMENDMENTS

· Inclusion of an income- based measure of child poverty.

· Inclusion of a measure of child poverty that is inclusive of working families in poverty.

· Inclusion of a national child poverty target.

· Inclusion of the duty to produce a national child poverty strategy.

· Social Mobility and Child Poverty commission to maintain child poverty functions.

· Inclusion of a local duty for local authorities and named partners to co-operate to tackle child poverty in a manner that best fits local arrangements.

3.2 Welfare benefits: Clause 7 to 16

Knowsley Council opposes clauses 7 to 16 and calls upon parliament to reconsider the proposed changes due to the harmful impact it will have on the most vulnerable group’s ability to meet essential day to day costs. The proposed welfare reforms will also have a disproportionate impact on the most deprived areas, adding increased pressure on public services in these areas. The most sustainable method to reduce welfare spending is to address labour, childcare and housing issues.  However, the reforms do little to address these issues or the reasons why people claim benefits, such as long-term sickness or lack of skills.

Welfare reforms implemented since 2010, prior to these proposed changes, have already removed an estimated £75 million per annum [5] out of the local Knowsley economy and have placed significant financial strain on individuals and families on a low income. This equates to an average loss of £800 per adult per annum. Further reductions will have a significant detrimental impact on some of our most vulnerable residents within Knowsley.

The benefit cap affects residents who are unable to work, for example lone parents and those suffering long-term health problems, and who therefore face many barriers in accessing work. These families will have no other choice but to cut back on essentials such as food or heating.  Families who have already been capped and who face yet another reduction via this Bill may have already exhausted this option and are likely to be evicted as they will not be able to pay their rent.  Ultimately, they will present as homeless which will cost the public purse more in the long-run to address.  Families will become dependent on the local authority and charities for support, in particular through Discretionary Housing Payments, Local Welfare Assistance schemes and Foodbanks.  However, ongoing cuts in central Government funding is placing immense pressure on the Council’s budget and its ability to continue to provide discretionary financial assistance to those affected by welfare reforms at a time when demand for such support has increased and will continue to do so. 

The freeze of welfare benefits and tax credits payments for four tax year will put families who are on a low income under extreme financial strain. The Institute for Fiscal Studies (IFS) estimate that 13 million families will lose £260 a year on average because of the freeze, which is a significant amount for low income families under financial pressure. This pressure has been exasperated by the previous years’ below inflation increases, therefore the IFS estimate a total real cut of 8% between 2013 and 2020.

Knowsley has already seen an increase in demand on discretionary financial support services as a consequence.  With inflation set to increase over this same period, vulnerable families will again have to reduce spending on essential items, such as food and heating. 

Removal of entitlement to the child element in Child Tax Credits and Universal Credit for the third and subsequent children born after April 2017 will lead to loss of income for low income working families.

Joseph Roundtree Foundation evidence suggests that disabled people are likely to be out of work for longer than those living without a disability. Therefore, changes to Employment and Support Allowance work-related activity component and Universal Credit limited capability for work element would have a serious impact upon the living standards and life chances of those disabled people identified for work related activity.

The changes to support for mortgage interest would make it harder for some homeowners on low or fixed incomes to retain their homes and therefore increase risk of repossession and homelessness.

PROPOSED AMENDMENT

· Reconsider the proposed changes due to the harmful impact it will have on the most vulnerable group’s ability to meet essential day to day costs.

3.3 Social Housing rents: Clause 19

Knowsley recognises that the 1 per cent reduction would help working families that are not in receipt of housing benefit. However, the year on year reduction in social rents could have a significant impact on the rental income of Housing Associations. This in turn will have impacts on a the business operations of Housing Associations, including their cash flow models, their business plans, their credit profiles and their ability to raise finance. This in turn will impact on their ability to honour existing commitments and in particular to plan and deliver new build affordable homes. The Office for Budget Responsibility estimates that 14,000 fewer affordable homes could be built as a result of the changes, with the National Housing Federation estimating a higher figure of 27,000 fewer affordable homes being built.

Coupled with other measures announced following the general election, the budget and the Conservative party conference, this new policy direction could add to major financial difficulties for Housing Associations, and it particular impact on the delivery of new affordable homes. This is a particularly important issue in Knowsley where housing affordability remains a significant challenge for many of our residents, and where demand for social housing outstrips supply.

PROPOSED AMENDMENT

· Wider consultation is required on the impact this would have on the housing market

October 2015


[1] DCLG (2015) English Indices of Deprivation.

[2] DWP (2015) Households Below Average Income.

[3] Institute of Fiscal Studies (2015) http://www.ifs.org.uk/uploads/publications/bns/BN175.pdf

[4] Office of National Statistics (2014) Annual survey of Hours and Earnings.

[5] Sheffield Hallum University

Prepared 16th October 2015