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Welfare Reform and Work Bill Committee

Written evidence submitted by Liverpool City Council (WRW 82)

Welfare Reform and Work Bill

1. A bout Liverpool City Council

1.1 Liverpool City Council is the fourth most deprived local authority area in England according to the latest available data from the Office of National Statistics (ONS) . Prior to this the City was rated the most deprived local authority in 2010 , 2007 and 2004.

1.2 16.9% of Liverpool’s population is workless and c hild poverty levels in the city are the 4 th highest amongst core cities in England, and significantly above the national rate. 32.5% of Liverpool children are officially classed as living in poverty, increasing to 58.6% within the Liverpool Princes Park ward . Around 76, 200 Liverpool households receive either Housing Benefit (HB) or Council Tax Support (CTS ).

1.3 Liverpool’s Benefits Service is the second largest benefits service in England and is one of the first points of call for residents impacted by the welfare reform changes.

1.4 Austerity measures and reductions in Government funding of around 58% in real terms since 2010/11 have had a major impact on the City and its residents.

2. Executive Summary

2.1 Liverpool City Council would like to thank the House of Commons Public Bill Committee for the opportunity to provide feedback on the Welfare Reform and Work Bill.

2.2 The main purpose of this report is to provide Liverpool’s perspective on the significant changes to benefits and tax credits contained in the Bill. It highlights the potential impact on Liverpool citizens and services provided by the City Council.

2.3 The report also includes changes announced in the Government’s Summer Budget that are not contained in the Bill. These include removal of housing costs support for 18 to 21 year olds and tax credit changes coming into force in 2016.

2.4 The executive summary is based on the findings detailed in this report and focuses on the following changes:

· Definition of child poverty

· Social Mobility and Child Poverty Commission

· Changes to the Benefit Cap

· Removal of Housing Support from under 21’s

· Reductions in Tax Credits

· Other reductions in Housing Benefit

· Four year freeze of working age benefits including Tax Credits

· Expanded Discretionary Housing Payment fund.

2.5 Set out below is a summary of Liverpool City Council’s findings in respect of the Welfare Reform and Work Bill.

Definition of Child Poverty

2.6 The Bill proposes to redefine child poverty and abolish the existing four indicators based on family income and reframe child poverty in relation to behaviour, (such as unemployment, addiction and family breakdown). There is a concern that the new definition fails to capture the true extent of child poverty.

2.7 The new definition also does not seem to take into account the impact of housing costs on low income families.

2.8 The focus of the new definition would seem to exclude working families and will downplay the recent growth of working poverty at a time when changes to Housing Benefit and Tax Credits will penalise many working households and reduce their income and bring many families into working poverty. This is of particular concern to a Council with such a high child poverty rate of 32.5%.

2.9 The ‘Getting By’ report (2015) identifies the impact of in-work poverty in Liverpool.

2.10 In addition to this the Bill proposes to remove most duties and provisions set out in the Child Poverty Act 2010 in particular four targets for child poverty which were to be met by 2020-21.

2.11 The removal of these duties to eradicate child poverty and the associated material targets will clearly make measurement of progress more difficult.

2.12 It is important that we have a true picture of the extent of poverty in the UK and a clear focus on the structural and financial causes of poverty, as well as supporting families and addressing barriers to work.

2.13 The Bill also introduces a new duty for the Secretary of State to report annually on "life chances": children living in workless households and educational attainment at age 16. It would useful if this was linked to specific outcomes for children and young people and reported upon annually.

Social Mobility and Child Poverty Commission

2.14 The name and remit of the Social Mobility and Child Poverty Commission is changed so that it becomes the Social Mobility Commission. There is concern that this indicates a change of thinking and that the impetus of the Commission changes from addressing poverty and inequality to one of promoting social mobility.

Changes to the Benefit Cap

2.15 The Bill will reduce the ‘benefit cap’ from £26,000 to £20,000 for those families living outside London and removes the requirement for the level of the cap to be set by reference to estimated average earnings.

2.16 It is estimated that this proposed change will increase the number of claimants affected in Liverpool six fold. The household makeup affected will also change from predominantly large households with four or more children (86% of current cases) to smaller households. Under the proposed changes the largest group affected will be households with three children at 68% of cases affected.

2.17 There is concern that changes to the cap will lead to increased rent arrears and potential homelessness. As a Council we have a statutory duty to support any customers who are evicted as a result of rent arrears arising from the Benefit Cap.

2.18 To help the Council plan for these changes we require details of the exact implementation date of the reduced benefit cap and data on the families affected and confirmation of funding for Discretionary Housing Payments in 2016/2017.

2.19 The budget pressures faced by the Council mean that its ability to continue to ‘top up’ DHP to protect vulnerable households from national welfare reforms will become more limited. The Council would suggest that additional grounds of vulnerability could be developed to exempt households from the benefit cap and the ‘under-occupation penalty’. For example households requiring adaptations or with specific employment, educational or health needs associated with their current home.

Removal of Housing Support from under 21’s

2.20 In the Summer Budget the Government has stated that housing costs in Universal Credit will not be automatically met for people aged under age 21 from 2017. This change is not mentioned in the Bill.

2.21 Living at home for many vulnerable young people is simply not an option and it is important that these young people are protected by society to remove the risk of homelessness.

2.22 The definition of ‘vulnerable’ has not yet been confirmed by Government but it may include people with disabilities, care leavers and others. It is important that the definition of vulnerable captures all the reasons why young people may need support with their housing costs.

2.23 Although not included in the Bill there is an opportunity here for the committee to discuss the definition of vulnerability and insert reference to them in the Bill.

Reductions in Tax Credits

2.24 The Bill limits the amount of support provided by Child Tax Credits (CTC) to a maximum of two children from 6 April 2017 and households starting a family after April 2017 their tax credit entitlement will no longer increase to include the Family Element.

2.25 In addition to the changes mentioned above additional changes to Tax Credits are coming into force in April 2016. This include a reduction in earnings disregards for customers in receipt of Working Tax Credits and an increase in the tapers applied to Working Tax Credits which will increase the rate at which benefit is withdrawn. These changes will have an adverse effect on the working poor.

2.26 These changes go hand in hand with the changes contained in the Bill and it is only looking at the two together can the full ramifications of the changes coming into force on working age households be identified. The committee provides an opportunity to debate both set of changes and insert reference to them in the Bill.

Other reductions in Housing Benefit

2.27 Although not referenced in the Bill it is important to note that Housing Benefit (HB) claimants face additional changes. These include the removal of the family premium for new claims from April 2016 and the removal of allowances for any more than two children for new claims from April 2017.

2.28 Backdating of Housing Benefit claims will be restricted to a maximum of four weeks from April 2016. The current maximum period for backdating is six months for working age customers and three months for customers of pensionable age.

Four year freeze of working age benefits including Tax Credits

2.29 The Government has decided that a four-year freeze will be applied to working age benefits including Income Support, Child Benefit, Job Seekers Allowance, Tax Credits, Housing Benefit (including Local Housing Allowance (LHA) rates for private tenants) and the main components of Employment Support Allowance. Pensions, disability and carers benefits are not affected by the freeze. Disability related elements of frozen benefits will be uprated.

2.30 This change will affect all working age benefit and tax credit claimants in the city, including around 48,500 households currently claiming HB/CTS. It is likely to represent a significant real terms cut. The government estimates that the saving will equate to £4BN per annum by 2020/2021.

2.31 There is a potential that these change could create hardship and poverty for the claimants affected. Freezing LHA rates could place households at risk of rent arrears and homelessness.

Expanded Discretionary Housing Payment fund

2.32 In the Summer Budget the Government indicated that it will continue to provide additional funds for Discretionary Housing Payments (DHP). Nationally £800M per annum has been set aside for the next 5 years, averaging £160M per year. This represents an increase in DHP funds from the current national funding of £125M for 2015/2016.

2.33 In Liverpool 92% of existing DHP is already being used to address previous welfare reforms – in the main the ‘under-occupation penalty’.

2.34 The extra funding represents a very small fraction of the new losses that will be incurred as a result of the various changes; for example, additional benefit reductions consequential from the benefit cap alone are estimated by DWP at £1.67BN nationally over the same period.

2.35 The Council is waiting to hear about its funding for 2016/17.

3. Liverpool’s Perspective

3.1 A main aim of Liverpool City Council is to provide support and assistance to those residents facing hardship and poverty. As mentioned at the start of the report 16.9% of Liverpool’s population is workless and child poverty levels in the city are the 4th highest amongst core cities in England, and significantly above the national rate. 32.5% of Liverpool children are officially classed as living in poverty, increasing to 58.6% within the Liverpool Princes Park ward.

3.2 Tackling poverty is a key aim of Liverpool’s elected mayor, through his Fairness Commission he has set up an action group whose focus is to identify and provide support and assistance to those facing hardship. A ’poverty tracker’ report is reviewed on a quarterly basis to help the council develop its family and child poverty strategy. Its data provides an in-depth analysis of the factors and trends that directly indicate poverty within the city, including food bank use, impact of welfare reform changes, debt and homelessness.

3.3 A recent ‘poverty tracker’ report highlighted that over a three month period a total of 4,636 people were fed by the Trussell Trust foodbanks in Liverpool, 1,669 (36%) of these were children.

3.4 The Councils Liverpool Citizens Support Scheme (LCSS) provides help to vulnerable people in short term crisis to meet the needs for food and essential items or to maintain their independence in the community. Over the last six months the scheme provided support to a total of 2,663 LCSS applications (29.52%) were received from households with children with a total of 5,040 children affected.

Definition of Child Poverty

3.5 The Bill proposes to redefine child poverty and abolish the existing four indicators based on family income, although one of the targets also looks at children experiencing material deprivation and reframe child poverty in relation to behaviour, (such as unemployment, addiction and family breakdown). The Council has concerns that this new definition fails to capture the true extent of child poverty.

3.6 The new definition also does not seem to take into account the impact of housing costs on low income families.

3.7 The focus of the new definition would seem to exclude working families and will downplay the recent growth of working poverty at a time when changes to Housing Benefit and Tax Credits will penalise many working households and reduce their income and bring many families into working poverty. This is of particular concern to a Council with such a high child poverty rate of 32.5%.

3.8 The ‘Getting By’ report (2015) [1] identifies the impact of in-work poverty in Liverpool. The report charts the depth of poverty amongst 30 working families. The report sets out how working people earning below the Living Wage have been driven into inescapable debt, forced to use food banks to feed their families and are suffering anxiety, and sometimes depression, as a direct result of their financial stresses.

3.9 In addition to this the Bill proposes to remove most duties and provisions set out in the Child Poverty Act 2010 in particular four targets for child poverty which were to be met by 2020-21.

3.10 The removal of these duties to eradicate child poverty and the associated material targets will clearly make measurement of progress more difficult.

3.11 It is important that we have a true picture of the extent of poverty in the UK and a clear focus on the structural and financial causes of poverty, as well as supporting families and addressing barriers to work.

3.12 The Bill introduces a new duty for the Secretary of State to report annually on "life chances": children living in workless households and educational attainment at age 16. It would useful if this was linked to specific outcomes for children and young people and reported upon annually.

Social Mobility and Child Poverty Commission

3.13 The name and remit of the Social Mobility and Child Poverty Commission is changed so that it becomes the Social Mobility Commission. There is concern that this indicates a change of thinking and that the impetus of the Commission changes from addressing poverty and inequality to one of promoting social mobility.

Changes to the Benefit Cap

3.14 The Benefit Cap applies to working age claimants. Some households are exempt depending on the types of benefits the household receives these included Working Tax Credits, Disability Living Allowance/ Personal Independence Payments, ESA including the support component and Armed Forces Compensation Scheme. There is no exemption on the grounds of vulnerability.

3.15 Clause 7 – 8 of the Bill will reduce the ‘Benefit Cap’ from £26,000 to £20,000 for those families living outside London (£23,000 in London). The Bill also removes the requirement for the level of the cap to be set by reference to estimated average earnings which appears to be a punitive change by the Government and a move against the principles of the original policy.

3.16 The implementation date for this change has not yet been confirmed but is anticipated to be during 2016.

3.17 The new proposal will see a six fold increase in claimants affected by the cap in Liverpool. Under the current scheme in Liverpool 86% of households affected are families with four or more children. Under the proposed changes the size of households affected shifts to smaller households the largest group affected being households with three children (68%).

3.18 Some indicative preliminary analysis by the Councils Benefits Service has indicated that up to around 1,950 Liverpool households (including 6,600 children) may now be within scope of the Benefit Cap. In some of these cases exemptions may apply so this figure is likely to be a worst case scenario. It should be noted that this figure includes around 130 families already affected by the cap.

3.19 The table below shows the average reduction in Housing Benefit which is estimated currently.

Number of Children in Household

Number of Families

Average Reduction in Housing Benefit (£)

2

75

24

3

1320

42

4

393

105

5 or more

157

105

Table 1: Average Estimated Housing Benefit Reduction as a result of Benefit Cap


3.20 Current indicative scoping shows weekly losses of benefit ranging from under
£10 to over £50. Based on the current indicative data, around 850 families will
lose £50 per week or more.

3.21 The Government requires Councils to leave those who lose all entitlement as result of the Benefit Cap with a minimum of 0.50p per week Housing Benefit. This enables these customers to apply for a DHP. The DHP fund is therefore likely to see an increase in applications from customers affected by the Benefit Cap when there is already significant increased demand on the fund.

3.22 Currently all cases where a customer is identified as affected by the benefit cap are offered advice via the Councils Housing Options and Benefit Maximisation services.

3.23 The City Council continues to work with landlords in the city in relation to what can be done to help support tenants at risk of eviction due to rent arrears.

3.24 In addition to this the Council has developed a Benefit Cap Advice Model to help provide advice and support to customers affected by the cap. Households affected by the cap may need advice and support to establish:

a) Are there employment opportunities to get off benefits or avoid the cap;

b) Are they correctly affected or could they claim a benefit to become exempt
(a benefit check);

c) If they cannot be exempted what options for cheaper accommodation exist.

d) How can they maintain a secure home for the family in the face of potential
arrears developing.

e) Is any financial assistance available via a Discretionary Housing Payment
(funds are very limited).

3.25 As a Council we have a statutory duty to support any customers who are evicted as a result of rent arrears arising from the Benefit Cap in the context of reduced resources being available to the Council. This may lead to families being placed in temporary accommodation.

3.26 To help the Council plan for these changes we require details of the exact implementation date of the reduced benefit cap and data on the families affected and confirmation of funding for Discretionary Housing Payments in 2016/2017.

Removal of Housing Support from under 21’s

3.27 In the Summer Budget the Government has stated that housing costs in Universal Credit will not be automatically met for people aged under age 21 from 2017. This change is not mentioned in the Bill.

3.28 The Government has stated that there will be exemptions, including:

‘Vulnerable young people’.

People with dependent children.

Those who may not be able to return home to live with their parents.

People living independently and in work for 6 months prior to making a claim.

3.29 Living at home for many vulnerable young people is simply not an option and it is important that these young people are protected by society to remove the risk of homelessness. Some young people may be unable to live with their parents because of relationship breakdowns but this may be difficult to prove.

3.30 The definition of ‘vulnerable’ has not yet been confirmed by Government but it may include people with disabilities, care leavers and others. It is important that the definition of vulnerable captures all the reasons why young people may need support with their housing costs.

3.31 The current number of Liverpool households under 21 claiming HB is around 580, of which:

561 are single

227 have dependent children

61 are in receipt of Disability Living Allowance or Personal Independence Payment.

3.32 The Councils data suggests that if the measure were implemented immediately around 300 customers could see HB withdrawn. The number of Universal Credit claimants potentially affected is not known. The measure, which is being implemented from 2017, will in the main affect Universal Credit at that point. It is currently not known if and how help with housing costs might be withdrawn from existing claimants and if any transitional protection will be provided.

3.33 The Council will be determining the nature of any package of advice and support to young people potentially excluded from help with housing costs from April 2017. This will be undertaken when the Government provides more information in relation to the changes and will take account of the reduced resources available to the Council.

3.34 Although not included in the Bill there is an opportunity here for the committee to discuss the definition of vulnerability and insert reference to them in the Bill.

Reductions in Child Tax Credits

3.35 Clause 11 of the bill limits the amount of support provided by Child Tax Credits (CTC) to a maximum of two children from 6 April 2017. This will affect new claims and additional children in existing claims from 2017. This currently equates to a "real term" loss of £2,780 per annum for any third or subsequent child born after 6 April 2017.

3.36 In addition to this for households starting a family after April 2017 their tax credit entitlement will no longer increase to include a Family Element currently £545 per annum. As these reductions will be applied to new claims it is difficult for the Council to scope the impact this change will have in Liverpool.

3.37 The Council has no immediate powers to ameliorate the impact of reductions in Tax Credits other than making amendments to its own scheme of Council Tax Support. However it will undertake further analysis of the economic impact of the reductions in income both at the level of individual families.

3.38 In addition to the changes mentioned above additional changes to Tax Credits are coming into force in April 2016. This include a reduction in earnings disregards for customers in receipt of Working Tax Credits (WTC) and an increase in the tapers applied to Working Tax Credits which will increase the rate at which benefit is withdrawn. Preliminary scoping by the Councils Benefits Service shows that a family may typically lose at least £23.65 per week. These changes will have a detrimental effect on the working poor.

3.39 Data held by the Councils Benefits Service shows around 8,300 families claiming Housing Benefit and Council Tax Support (CTS) who also receive WTC. DWP data shows around 16,900 families claiming WTC within the five Liverpool parliamentary constituencies, including 28,500 children.

3.40 Nationally the Government has estimated that the first phase of reductions will save over £3BN per annum by 2017/2018. This compares to £315M for the removal of entitlement for additional children; however by 2021 this element is estimated to save £1.365BN per annum.

3.41 These changes are due to be discussed by the Government later this year. However, these changes go hand in hand with the Tax Credit changes contained in the Bill and it is only by looking at the two together can you identify the full ramifications of the changes coming into force on working age households. Ministers have an opportunity via this committee to bring both set of changes together in the debate of this Bill.

Other reductions in Housing Benefit

3.42 Housing Benefit will be affected by a number of other reductions including removal of the family premium for new claims from April 2016, and the removal of allowances for any more than two children for new claims from April 2017.

3.43 The freeze in LHA rates will result in HB being restricted to current rates in the private rented sector. The Government has also announced that social landlords will be required to reduce rents by 1% per annum for four years from 2016.

3.44 Backdating of Housing Benefit claims will be restricted to a maximum of 4 weeks from April 2016. The current maximum period for backdating is 6 months for working age customers and 3 months for customers of pensionable age. The Benefits Service already encourages all customers to make a claim as soon as possible and will need to consider how to further emphasise this message to customers.

Freeze of working age benefits including Tax Credits

3.45 Clauses 9 – 10 of the Bill proposes a four-year freeze will be applied to working age benefits including Income Support, Child Benefit, Job Seekers Allowance, Tax Credits, Housing Benefit (including Local Housing Allowance (LHA) rates for private tenants) and the main components of Employment Support Allowance. Pensions, disability and carers benefits are not affected by the freeze. Disability related elements of frozen benefits will be uprated.

3.46 This change will affect all working age benefit and tax credit claimants in the city, including around 48,500 households currently claiming HB/CTS. It is likely to represent a significant real terms cut. The government estimates that the saving will equate to £4BN per annum by 2020/2021.

3.47 There is a potential that these change could create hardship and poverty for the claimants affected. Freezing LHA rates could place households at risk of rent arrears and homelessness and may lead to customers reliant on benefit becoming increasingly excluded from the private rented market.

Expanded Discretionary Housing Payment fund

3.48 Discretionary Housing Payments (DHP) provide additional support to claimants where there is a shortfall in Housing Benefit or Universal Credit and provides a vital safety net for claimants affected by welfare reform. In most cases DHP can only provide a temporary opportunity for customers to seek alternative accommodation however for particularly vulnerable customers (including those with adaptations to their homes) it can be a permanent requirement.

3.49 During the Summer Budget the Government indicated that it will continue to provide additional funds for Discretionary Housing Payments (DHP). Nationally £800M per annum has been set aside for the next five years, averaging £160M per year. This represents an increase in DHP funds from the current national funding of £125M for 2015/2016.

3.50 As demand for DHP is currently high and is expected to increase substantially as a result of further welfare reforms (in particular the benefit cap) the fund is likely to come under increasing strain.

3.51 In recent years the Government has increased funding and the City Council has topped up the fund with additional budget. The additional demand for DHP is directly attributable to welfare reforms. The Government has frequently indicated that a safety net exists for vulnerable people at local level via DHP.

3.52 In Liverpool 92% of existing DHP is already being used to address previous welfare reforms – in the main the ‘under-occupation penalty’.

3.53 The table below indicates the proposed increased Government DHP national funding as additional benefit reductions take effect. The level of increase represents a very small amount relative to the savings which the Government intends to achieve.

2016/2017

2017/2018

2018/2019

2019/2020

2020/2021

£150M

£185M

£170

£150M

£140M

Table 2: Proposed DHP national fund increase

3.54 The national allocation of DHP funding for 2015/2016 is currently £125M of which Liverpool’s allocation is £1.72M.

3.55 In 2014/2015 £2.246M DHP expenditure in Liverpool was supported by £2.056M in DWP funding. In 2014/2015 the City Council made around 8,140 DHP awards. Of these awards around 94% were directly attributable to welfare reform, and 82% to the ‘under-occupation penalty’.

3.56 In 2015/2016 provision has been made for up to £2.558M in DHP expenditure including £0.837M funding from the authority at a time of reduced resources being available. As at 17 August 2015 £1.131M of that fund has already been committed to awards, due to continuing high levels of claims from vulnerable customers.

3.57 The extra funding represents a very small fraction of the new losses that will be incurred as a result of the various changes; for example, additional benefit reductions consequential from the benefit cap alone are estimated by DWP at £1.67BN nationally over the same period.

3.58 The budget pressures faced by the Council mean that its ability to continue to ‘top up’ DHP to protect vulnerable households from national welfare reforms will become more limited. The Council would suggest that additional grounds of vulnerability could be developed to exempt households from the benefit cap and the ‘under-occupation penalty’. For example households requiring adaptations or with specific employment, educational or health needs associated with their current home.

October 2015


[1] ‘Getting By’ report A year in the life of 30 working families in Liverpool www://gettingby.org.uk/wp-content/uploads/2015/Getting-By-a-year-in-the-life.pdf

Prepared 20th October 2015