HC 576 Progress towards the implementation of Universal Credit

Written evidence submitted by the Local Government Association (LGA)

The Local Government Association (LGA)

The LGA is the national voice of local government and our mission is to support, promote and improve councils.

We work with councils to achieve our shared vision for local government by focusing our efforts where we can have real impact, being bold and ambitious, and supporting councils to make a difference, deliver and be trusted.

This response has been agreed by the LGA’s cross party Finance Task and Finish Group which is responsible for local government finance matters at the LGA.

Introduction

1. The LGA welcomes this opportunity to offer written evidence to the Department of Work and Pensions Select Committee inquiry into progress on the implementation of Universal Credit (UC).

2. The LGA supports the principles behind UC of simplifying the benefits system and improving work incentives.

3. It is essential, in helping to achieve successful implementation, that central government and local government work closely on the issues which we detail in our submission.

Summary

4. The Local Government Association supports the principles behind UC to simplify the benefits system and improve work incentives. However, the LGA has concerns, that are backed up by early observations by councils, that fall into three categories of challenge:

4.1. Time/ timeline: Achieving a predominantly online service, achieving cultural change, putting effective IT in place and enacting the required regulations being enacted all present challenges to councils.

4.2. Costs: Rent collection, staff, systems, overheads, contractual and transitional costs, against a backdrop of 10% saving on council tax benefit councils are expected to deliver.

4.3. Social issues: IT literacy and digital access, face-to-face support, direct payments to one person in household posing risks impacting on equality and financial abuse and to rent collection.

Evidence

The proposed arrangements for claims and payments and the provision of support and advice for claimants, including:

The presumption of a predominantly online, self-service claims process

5. Councils welcome the opportunity to migrate customers to online systems due to cost benefits and ease of access for customers. However, the customer base for Universal Credit is the group amongst which internet access is at its lowest. The varied availability of high speed broadband connections, particularly in social housing and rural areas, means that internet access can be unreliable.

6. Applications for welfare support have a degree of complexity which will exclude many from carrying them out online due to basic literacy and language issues. Councils are concerned that, although they will migrate a significant number of customers to online systems, those with the most complex needs will continue to make a direct demand on their resources.

7. Assisted completion of on-line forms will continue to be a service councils offer via face to face appointments, over the phone and through the provision of onsite IT facilities. Work by Lewisham council has shown that only 1% of tenants wanted to make direct contact online due to concerns about making mistakes when completing on line forms, and the impact that could have on household finances. There is no clarity as to how councils can fund this provision in the future. It is also unclear whether the DWP will be offering any direct support to customers.

Monthly payment to one person in the household

8. There is general agreement that monthly payments require a level of budgeting skills which are not prevalent across the Universal Credit customer group. Claimants who have been out of work for a long period of time often lack the budgeting skills to manage their money in the required manner. Councils have recognised this issue and many are preparing to provide assistance to pass on these skills to their customers.

9. However, further thought needs to be given to the financial pressures which will occur at the first transition to the payment of Universal Credit. Any sort of delay could make claimants susceptible to taking out a Pay Day loan. There will be ongoing issues for customers around balancing UC payments with the need to pay rent especially at Christmas and the beginning of the school term.

10. The intention to pay Housing Benefit direct to tenants through Universal Credit will introduce a significant new burden to Councils and Social Housing landlords. Currently this benefit is automatically applied to rent accounts, which is an efficient and well understood system. Moving to direct payment to tenants brings real risks of increased rent arrears leading to a rise in rent collection costs and fluctuations in housing providers’ cash flow and overall financial position. This is a specific issue for stock owning local authorities.

11. The key concern around single payments to a household is the possible impact on equality and financial abuse. There is a concern that this will disproportionately affect women and children.

Arrangements for providing telephone and face-to-face support and independent advice for claimants who need it.

12. Local government already provides a significant level of advice to claimants over the phone and face to face. Although internet based options are on offer, experience has shown that people in need of this level of support prefer to deal with someone face to face. In preparation for Universal Credit most councils are developing a "triage" model allowing them to offer a broader level of assistance around housing, debt advice or employment in conjunction with their partners.

13. Most councils already offer One Stop shops or combined services where they have co-located partner organisations such as Job Centre Plus, Social Landlords and Credit Unions. This work is being expanded across local government in preparation for Universal Credit and will be highlighted through the work of the Universal Credit Local authority pilots. However, this type of high level customer care is resource intensive and will come under continued pressure as council budgets are tightened.

Progress with developing the necessary IT systems to administer Universal Credit, including the real-time information system for PAYE being developed by HM Revenue & Customs.

14. It is very clear that full and timely exchange of accurate data between councils and Job Centre Plus is going to be a key requirement for the implementation of universal credit, the benefit cap, localised support for council tax and the social sector size criteria regulations. It is understood that DWP intend to use the ATLAS system as the vehicle for this exchange.

15. Councils, however have some concerns over ATLAS, particularly whether it will it have the capacity and resilience to support the administration of the Benefit Cap. Some councils have reported difficulties coping with an overwhelming volume of information produced by the system. This has required manual intervention by council staff and lead, in some cases, to delays in payments.

16. Councils have real concerns both with the ability of IT suppliers to update their IT systems in time to enable the administration of new localised council tax support schemes and with the potential associated costs. With 326 billing authorities in England all potentially with different schemes and most vying for the simultaneous attention of the three main IT suppliers, there is a real risk that councils will not have fully operational IT systems ready to deliver localised support for financial year 2013/14. There is also a real risk that the central government Universal Credit IT systems will not be ready on time. We are concerned that key assumptions enabling an "Agile" systems development approach to meet the government’s ambitious timescale for Universal Credit are not grounded in reality and that if plans are not revisited now, additional costs will be incurred not just by central government, but also by councils which will incur the increased costs in dealing with and supporting UC claimants. In addition to this, the commencement of UC payments halfway through the 2013-14 financial year will further increase complexity for councils at a time when central government is cutting local authority benefits administration grants.

The impact of the changes on local authorities, including budgets, staff and support for claimants. The changes include those to Housing Benefit; the introduction of the benefit cap; and localisation of council tax support.

17. Impact on Staff. The full impact on councils will depend on the role councils are to have in the face to face delivery of UC and on whether council staff are going to be eligible for protected employment rights (under the TUPE Regulations) enabling them to be transferred into Job Centre Plus to join the DWP UC delivery teams. DWP have written to council chief executives expressing the view that there will be no TUPE rights for council staff. The LGA is questioning this. If councils are only going to have a limited role in the delivery of UC and there are to be no TUPE rights, councils will face a very significant and costly redundancy and pension burden. Additionally the central government teams processing Universal Credit claims will have no staff with expertise in Housing Benefit, many aspects of which will be carried forward into Universal Credit.

18. Impact on overheads. In small councils the administration of revenues and benefits represents a significant sector of council business. If councils have no or only a limited role in the delivery of UC, these councils will face a major reduction in revenue, with overheads having to be shared across a smaller base leading to a marked increase in unit costs. The ability of some councils to stand alone may be called into question. This uncertainty is compounding the difficulty of the planning for the future for all councils.

19. Benefit cap. With the benefit cap being delivered in the first instance by councils through housing benefit, councils and other social housing providers are concerned that they will see an increase in rent arrears from capped households with commensurate increases in the costs of rent collection. This is likely to be exacerbated in the social rented sector when combined with direct payment of UC. London Councils are particularly concerned that the benefit cap combined with reforms to the local housing allowance (LHA) will lead to demographic migration from high cost areas of London and lead to a breakdown of London’s mixed communities and a concentration of poorer families in smaller parts of London.

20. Localised support for council tax. Councils have concerns over the Parliamentary timetable for approving regulations. Some have questioned whether any consultation they undertake before the regulations have been enacted will meet legal requirements, although they have been assured by DCLG that it will. Others worry that the schemes they are consulting on, based on draft regulations, could prove invalid when final regulations are approved in the autumn once the Local Government Finance Bill has received royal assent.

21. All councils are concerned at the compressed timescale for devising, consulting and delivering plans by 31 January 2013. They also have concerns over the impact on the working poor of the statutory protection of pensioners in localised schemes and the 10% saving on council tax benefit they are expected to deliver even when combined with other adjustments to council tax discounts they could make. Councils would like to see greater freedom in the Local Government Finance Bill over existing council tax discounts where the law currently allows no local discretion. The 25% discount for single person occupiers is the most significant example. With discounts such as this protected by legislation, a 10% cut across the entire population of CTB recipients, actually becomes a much greater burden on the smaller cohort that councils can actually make the saving from, and these people are, in the main, the working poor. Precisely the people that we should not be dis-incentivising to stay in work.

22. Future funding. Councils are being hampered in their planning for the delivery of the reforms by a lack of clarity over future funding.

23. Although councils know that there will be a 10% cut in funding for their localised support schemes, they are worried that, because the 10% saving is to be based on forecast rather than current council tax benefit (CTB) expenditure, the reduction will in effect be more. DWP is currently forecasting a downward trend in the need for support over the next year, a conclusion that is totally out of line with many councils’ current experience of significant growth in numbers of council tax benefit claimants.

24. Councils with a high proportion of pensioners in their CTB cohort are concerned that their localised support grant allocation won’t recognise this, thus leaving the working poor to take a bigger share of the burden.

25. It is the local government view that the early impact of the migration from Housing Benefit (HB) to UC will be minimal, but that managing the implementation of the benefit cap and measures around under occupancy in the social sector could prove resource intensive. In order to conduct their budget planning, councils will need some certainty on the HB allocation they will receive for 2013/14 and 2014/15 and would like a very early decision to maintain HB admin subsidy levels at the current level until at least March 2015. This is on the basis that councils will face increased levels of demand for support from UC claimants in the short to medium term which will significantly outweigh any savings from a reduced number of HB claims.

26. Housing. Councils are seeking more clarity on the UC model and how varying types of housing costs – particularly those in respect of supported and exempt and temporary accommodation - are to be treated. There is concern that the housing element of UC will only apply to the following:

26.1. charges for services necessary to maintain the fabric of the dwelling

26.2. charges for cleaning of communal areas

26.3. charges for cleaning of exterior windows where neither the claimant nor any member of his extended benefit unit is able to clean them.

27. This is a significantly narrower description than is currently the case in the Housing Benefit regulations. The LGA shares the concern of housing providers that the draft UC regulations take insufficient account of the implications of its proposed change of approach to service eligibility; that the list of eligible services is defined in very general terms; and that the proposals do not adequately reflect the range of practice in the sector about services and charging. We understand that discussions with DWP are continuing.

Local housing allowance (LHA) reforms

28. While the picture across the country appears to be mixed, London Councils in particular is concerned that the rent reductions the government hoped would occur, once both increases in and size of LHA awards were restricted, is not materialising due to a high demand for private rented properties and overall lack of churn. With increases in LHA to be restricted to no more than CPI there is a real risk that this situation will get worse making more and more parts of London and other major cities unaffordable for poorer families.

29. In areas where this happens, it could be expected that some families seeking to absorb the impact of the benefit cap and restrictions on LHA will move to accommodation that is legally overcrowded with all the associated negative educational and health outcomes. London Councils is also concerned that with a lack of availability of affordable temporary accommodation in London, families will need to be housed in cheaper areas away from the city.

30. Where migration driven by the welfare reforms takes place there are real cost implications of service delivery for councils receiving the migrants with no funding in place to address it. Failure to respond quickly and provide additional resources for countering the additional service pressures will have repercussions for service delivery particularly in London.

31. Families impacted by the benefit cap and LHA reforms will sometimes be those also being supported through the Troubled Families and Work programmes. For these programmes to be successful, measures will need to be put in place to ensure that participants can be tracked effectively and transferred between providers. If these measures are not put in place there will be implications for payment by result providers including councils.

32. Social housing size criteria. Combining the delivery of the social housing size criteria regulations with implementation of the benefit cap represents a significant challenge for councils. It is by no means clear that social housing providers have a clear picture of occupancy of their properties or indeed a method of tracking occupancy as family situations change.

33. For some councils implementing the size criteria will be hampered by an insufficient supply of the right size of accommodation. Theoretically, where there is insufficient social housing of the right size for people to move into, it should be possible to move into the private sector. But this assumes that:

33.1.1. there is sufficient affordable capacity in the private sector

33.1.2. there are sufficient numbers of families in private sector housing to move into empty social housing

33.1.3. RSLs are not going to be left with larger empty properties they can’t let, because of low demand.

34. There are also costs associated with increased levels of mobility in the social housing sector both to the tenant and to councils and housing providers.

35. New burdens. The costs associated with the benefit reform, including staff, systems, contractual and transition costs, should be fully met by Government under the new burdens doctrine, in order to prevent those costs becoming an additional pressure on council tax. The LGA and advisers have been involved in an assessment but this has not yet been completed and councils retain some level of concern about the conclusions that the government may reach. Assessing new burdens will need to be an ongoing process covering the full period of UC implementation to ensure that councils are fully compensated for any hidden or unforeseen costs arising from the changes.

Eligibility for and operation of passported benefits.

36. Councils are still awaiting information on government intentions for passported benefits.

Impact monitoring: what the DWP's priorities should be for monitoring the impact of the transition to Universal Credit?

37. The LGA considers that DWP priorities for impact monitoring should be:

· Tracking demographic movement

· Speed of processing claims and tracking backlogs

· Accuracy of claims processing (right first time) and fraud levels

· Costs to councils

· On line v face to face assisted transactions (bearing in mind that some on line transactions could have been with council assisted face to face transactions)

· Impact of direct payments on claimants, councils and housing providers (including rent arrears, evictions, homelessness)

· Increase in number of people who can manage money on a monthly cycle and have access to bank accounts

· Universal credit take up levels

· The number of enquiries and contacts, through DWP, Councils & Social Landlords in relation to Welfare Reform & Universal Credit.

· Work related statistics (Is the change impacting cultural behaviour and welfare dependency as envisaged?)

22 August 2012