HC 576 Progress towards the implementation of Universal Credit

Written evidence submitted by the London Borough of Newham

Summary

The London Borough of Newham has high levels of poorer residents with huge pressure on housing and other public services. Our aspiration as a borough is to create mixed communities and to improve social outcomes for our population by building the economic, personal and community resilience of the borough. We are deeply concerned that the changes to welfare and benefits will make it increasingly hard to provide adequate public services, including housing - particularly in the current public spending climate. As currently envisaged, Universal Credit will cause severe hardship to many people who are making all possible efforts to find work and improve their situation. It will create further instability for those in insecure work. The changes also place significant financial risk on local authorities at a time when budgets are under severe pressure.

1. We have a number of key concerns with the new welfare system and our on-the-ground experience in the area should be useful to the Committee’s enquiry. We have focused on these areas of concerns in our written response but we are very happy to appear before the Committee to provide oral evidence covering the wider range of issues highlighted by this enquiry.

2. Our principal concern is that the benefit cap for workless households will make housing completely unaffordable for many families in Newham and across London. We understand that government policy is to "make work pay" and we agree in principle that the, perceived or otherwise, benefit trap should be tackled. In fact Newham was the first borough in the country to introduce a better off in work guarantee for our residents.

3. However, the impact of the benefit cap on low income households, when coupled with other policy changes such as the change to LHA rates, will be disastrous both for families who will not be able to afford their homes, and for local authorities whose budgets are already under significant pressure.

4. We are concerned that following the cap, thousands of Newham families will be unable to afford their rent and will therefore look to the Council for help with their housing. Not only do we have a severe lack of temporary accommodation in the borough, it is also an expensive option that is unsatisfactory for the family and community stability.

5. We are further concerned that, following high profile coverage of Newham’s and other London boroughs’ decision to place homeless households outside of the borough, the Government is seeking to restrict local authorities’ ability to place families in stable accommodation outside of their area. Whilst we recognise that location of the property must be taken into account, there are simply not enough properties in our borough that fall within the new LHA rates, much less the overall benefit cap or even private rented sector landlords who will consider benefit claimants as tenants.

6. It is hugely unhelpful for government to put restrictions on what local authorities can do when our work in this area is simply concerned with mitigating against the consequences of government policy. It is important to note that whilst government retains responsibility for employment policy, it is local authorities that will be dealing with the consequences of the benefit cap for workless households.

7. There is a huge risk that the suite of changes to welfare and benefits will put unsustainable pressure on local authority budgets. The main risk comes from the cost of temporary accommodation. Newham has one of the best records in London for reducing temporary accommodation, having reduced it by 63% since 2007. However the borough currently has around 250 households living in council temporary accommodation that will be subject to the total benefit cap losing a total of around £1.16m annually. Temporary accommodation in Newham costs a minimum of £75 per night or £525 per week. A cut in benefits under the cap to £500 a week clearly makes this cost unaffordable. It is highly likely that tenants will be unable to pay and will fall into arrears.

8. There are also around 150 households (subject to the cap) that are permanent council tenants that will lose a total of £676K per year of which around £500K will be Housing Benefit. These two groups alone represent a total budget pressure to the council of £1.6m/year.

9. In addition, it is thought that there will be large migrations across London, in particular to relatively cheap areas like Newham. There is no additional funding in place to help local authorities such as Newham to deal with the service pressures as a result of these migrations.

10. We have a number of suggestions for how the government could mitigate the risks associated with the changes:

a) Changes to improve the efficiency and fairness of the policy overall

· Do not introduce further regulation limiting council’s ability to discharge homelessness duty . Given the chronic shortage of affordable housing in London this amounts to an unfunded burden being placed on local authorities. If this policy is to be introduced appropriate funding should be transferred from DWP welfare bill savings to councils, reflecting the real cost of the policy in line with the agreed ‘new burdens’ principle.

· Exempt those complying with job seeking requirements from the cap. The benefit cap is intended to ensure that workless households cannot be better of than the average household. T here are already robust requirements on out of work benefit claimants at a time of significant levels of unemployment . Under the current proposals households where adults are doing all that they can to find work, and are recognised as such by benefit requirements , will be forced to live in conditions of poverty. W e suggest that where these conditions are being met by claimants they are exempted from the cap. Alternatively, we would support the London Councils proposal for a job support fund administered by local councils to support those affected.

· Lower the eligibility for the 9 month grace period: in order to benefit from the 9 month grace period before the cap is implemented an individual in the household has to have worked a full year. In Newham many people are employed in industries with short term contracts and high levels of churn. As such, despite a commitment to work, they move in and out of unemployment. These households will be immediately subject to the cap because they can not meet the requirement to have worked 52 weeks out of the previous 52.

· A higher cap in London . In a range of policy settings it is recognised that the costs of living in London are higher than elsewhere in the country. Newham has previously suggested that if there is to be a cap this should be higher in London reflecting this. We still believe that this would be a sensible step to introduce.

· Phased implementation of the benefit cap . If a cap is to be introduced we believe that it should be phased in more slowly than currently proposed to give households more time to adapt to the change

b) Specific changes to mitigate the financial risk to councils.

· Exemption from the cap for those already in temporary accommodation (as at 31/3/13). Whilst the financial risk to local authorities occurs across a range of household types the risk is most acute in temporary accommodation provided for vulnerable households and those with young children. Those in temporary accommodation at the time of introduction should be excluded from the cap. Temporary accommodation is inevitably of a higher unit cost that will often exceed the cap level. If local authorities are expected to continue to discharge their homelessness duty (in or out of their own borough) it is arguable that all households placed in temporary accommodation should continue to be exempted (perhaps for a fixed period). However the most immediate pressure is on those in such accommodation at the time the cap is introduced.

· Pay housing element direct to landlords . A wide range of households who are dependent on the state for housing support will receive their housing support as part of a single cash payment. For capped households where current rent alone may exceed their post cap income it is questionable that they will prioritise payment to their landlord over food and other immediate costs. For a wide range of others on low incomes in council housing for whom the benefit has previously been seen as a rent rebate they will now have to prioritise payment of rent. This is likely to lead to greater levels of rent arrears and therefore financial risk to the council. We believe that Government should act on the direct payment pilot being carried out in Southwark or at the very least give tenants the choice of this element going direct to their social landlord helping to provide greater housing security.

c) Full recognition of the administrative cost to councils of implementing changes in national policy.

· As outlined above the cost to local authorities in implementing new systems and dealing with resident queries will be significant at a time when council budgets are already under extreme pressure. We believe that councils should be provided with additional transitional costs to implement these inevitable consequences of a shift in national policy.

· Each month local authorities administering housing and council tax benefit are required to provide the Department for Work and Pensions with details of all claimants in their borough. The Department therefore holds information on the movement of claimants across boroughs which would prove invaluable to local authorities in planning services. The Department should make this information available to local authorities, and headline data publically available to show the impact of benefit and other changes.

17 August 2012

Prepared 7th September 2012