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Communities and Local Government Committee - Minutes of EvidenceHC 833
Taken before the Communities and Local Government Committee
on Wednesday 19 December 2012
Mr Clive Betts (Chair)
Examination of Witnesses
Witnesses: Councillor Sharon Taylor, Deputy Chair, Local Government Association, Paul Raynes, Head of Finance and Localism Programmes, LGA, Gavin Smart, Director, Policy and Practice, Chartered Institute of Housing, and Sue Ramsden, Policy Leader, National Housing Federation, gave evidence.
Chair: Welcome to our first evidence session of the inquiry into the implementation of welfare reform. First, one or two of us have to make a declaration of interest that is specific to this inquiry. As vice-president of the Local Government Association, I have to put that on the record.
Andy Sawford: In my previous job, I was chief executive of the LGIU. I have a continuing relationship with them, and they work on the issues that I want to raise.
Chair: Thank you all for attending this afternoon. For the sake of our records, please begin by saying who you are and the organisation that you represent.
Councillor Taylor: I am Councillor Sharon Taylor, and I represent the Local Government Association.
Paul Raynes: I am Paul Raynes, and I am an officer at the Local Government Association.
Gavin Smart: I am Gavin Smart, and I am from the Chartered Institute of Housing.
Sue Ramsden: I am Sue Ramsden. I am from the National Housing Federation, representing housing associations.
Q1 Chair: Thank you all for coming this afternoon. To begin with, the most important question is about the many changes in housing benefit. Is everyone ready for them? They will particularly affect councils, but housing associations might have some work to do as well.
Councillor Taylor: Local government is preparing. We still have quite a lot of detail that we need to understand properly as we go through the process. Clearly, one of the things that local government sets out to do as well as we can is to address issues of poverty, deprivation and so on. It is absolutely at our core to do that. We need to manage the effects of welfare reform on some claimants, the way in which the Government are delivering it and the risks in the reform programme along with our own risks. We have had the settlement today, and we are assessing the financial situation that we are in. We need to manage all that, alongside councillors’ desire to do the best we can to help our residents through what may be a very difficult process for some of them. That is what we are trying to do but, as you are all aware, we do so in the context of a greatly decreasing resource base.
We have had, what will be by the end of the comprehensive spending review period, 33% cuts. That is a fairly conservative estimate of the cuts that we will be experiencing by the end of that period. We take this on in a constructive way. We have some pilots running to look at what the issues might be, but there are definitely issues of great concern about universal credit, the changes to the housing benefit system, the council tax support schemes and so on, and the way in which they impact on our residents and their ability to cope with them.
Gavin Smart: I agree with that. People are getting ready, but they are not fully ready yet. There is a need for more information in some places. There are a large number of landlords and a large number of local authorities across the country with different states of preparedness as well and, of course, tenants and residents also need to prepare. The level of understanding is variable amongst tenants and residents of just how big a change they are facing. People are planning and preparing, but there is more to learn from things like the direct payment demonstration projects. More information is needed as well before people can complete that process.
Sue Ramsden: In terms of the forthcoming cuts, specifically in April 2013 and particularly those relating to the social sector size criteria for social landlords, housing associations are putting a lot of resources into visiting tenants, to explain to them the changes, to set up new payment arrangements when people will have to make a payment towards the rent and to discuss their options in moving to a smaller home. That is a very resource-intensive process.
Q2 Chair: So you are doing that on a face-to-face contact basis. Generally, is that what is happening?
Sue Ramsden: A lot of associations have done that on the basis of face-to-face visits. Key to that, in terms of being able to identify the people affected, has been the data sharing arrangements with local authorities, so that local authorities can share data about somebody’s benefit circumstances. That then allows the housing association to target their resources in terms of people particularly affected by the size criteria.
Q3 Chair: Paul, to answer more generally for local government, can you indicate whether you have worries that there may be some councils that are not quite getting there? It is all very well to say that most of them are, but it is the ones that are not which will hit the headlines. Their tenants will be really badly affected, if they don’t get it right.
Paul Raynes: Partly amplifying the point that Councillor Taylor made, any major change carries risks with it. There are a certain number of unknowns in all of this. We are at a phase of the conversation about welfare reform, where we are getting to understand better the uncertainties and the unknowns, and what the issues are. Reference has already been made, for example, to the demonstration projects. They have been ready for four months and are throwing up not only challenges, but avenues that councils are pursuing to manage those challenges. Part of where we will be during the next phase is looking at the demonstration projects, the pilots and so on, and saying that these places have either addressed issues we knew were coming down the track or have identified challenges that we were not expecting, but a said issue has emerged. One of the interesting things about the pilots is their variety, and they have identified in their various ways in which risks might be managed. The conversation is about taking that out to everybody else and helping them share in what has been learned.
Q4 Chair: As for identifying problems by running pilots, we are only three months from people actually having the effect on their doorsteps.
Councillor Taylor: I am concerned about putting too much weight on pilot projects where, inevitably, more resource and effort are put in. You may have a selective group of clients that you are running the pilot with; it is a bit dangerous to extrapolate all of the information from that out to a hugely wider section of benefit claimants.
The kind of concerns we have about building capacity-financial capacity-for benefit recipients in order to manage this business of having universal credit payments paid direct to them is, as I have discovered through family intervention project work, that it is not a quick project. It takes time to build that capacity, and it is very resource intensive. If you are going to provide someone with that capability who has perhaps come from a family of two or three generations of worklessness, it takes a lot of resource to deliver the capacity to manage personal resources. I am not saying it is not possible. I think that it is possible. I am just concerned about the level of resources that will be required to enable it to happen.
The same applies to the digital by default issue. It can be managed. It can be done, but we need time to help residents through it. Councils are doing a huge amount. East Lindsey, for example, is running a training programme for benefit claimants on issues to do with financial capacity. Other councils are doing that. Most of us are now providing a lot of information to our residents about what is happening, and trying to start that process. But, as you say, with three months to go, it is a fairly short time scale.
Q5 Chair: Let us raise two other issues. Something that often causes problems is bits of government, whether central or local, not communicating very well with each other. I just wonder if we are making progress with councils informing DWP automatically when rents change, and how that would happen with housing associations.
In reverse, when people’s income changes, how are we going to manage to avoid people having to go to two different places to get their housing benefit or eventually their housing element of universal credit changed, on the one hand, and their council tax benefit changed on the other? Has DWP engaged at last?
Councillor Taylor: We certainly have the will to make this data sharing much quicker and simpler, but there has been, for example, a huge increase in change of circumstances because people’s job profiles are changing so rapidly. A lot of people are on zero hour contracts now, so they will go from working 30 hours one week to 16 hours the following week.
The increase in change of circumstances is putting a huge burden on revenue and benefit sections at the moment, keeping up with that. I have gone into a shared service on revenues and benefits. Nearly all the savings we made on that shared service have now been eaten away by the increase in work load. It is obviously better than if we had not had the shared service, because we would have had that on top of it, but it is putting pressure on. The will is there to do it but the increase in work load is slowing that down to a certain extent.
Sue Ramsden: Can I add something on the issue of data transfer between landlords and the DWP, when it comes to the point that the DWP are administering housing costs? We have certainly made the argument that it is much more efficient to allow that data to come direct from a landlord into the system. For example, landlords put their rents up every year. It should be possible for that data to be transferred from the landlord to the DWP rather than each individual tenant having to input that into their claim, taking up resources of the tenant’s time and those of the DWP. It is much more efficient if landlords can just transfer that information directly, as they do in the current system. I think there are a number of efficiencies in the current system that need to be transferred into the new system.
Gavin Smart: On a related point, under the current system local authorities, housing associations and other landlords have got used to working together and exchanging information very well. I have made this point to the Committee before: one of the challenges of moving to a national system is replicating those working relationships as effectively as we can. There is also a question about the degree to which local authorities have access to information on individual claimants’ situations. We need to be sure that can happen under the operation of fully blown universal credit.
Q6 Chair: So we are not sure yet.
Gavin Smart: I am unsure about that. Are we?
Paul Raynes: I think that is right. There is talk about risks and uncertainties. This is one of the uncertainties. One of the things that is very functional about the current set of arrangements is the way that people do work together and share information about clients. There is a risk that an oversimplistic view of how universal credit might work would effectively chop things back up into silos. We need to preserve that information sharing and working together on particular customers who present particular challenges.
Q7 Chair: Briefly, the matter of discretionary housing payments. Is it sufficient? What are you going to do if it isn’t?
Councillor Taylor: Discretionary housing payments represent about 6% of the total cuts to housing benefit. It is likely that councils will find that DHPs are unable to respond to need. That is our view at the moment. There are some big issues around this: the case of foster parents, for example. If we are going to allow foster parents to continue to under-occupy, we need to have the financial flexibility in the system to allow us to do that. That is a good example of where we would clearly want to make things as easy and flexible as possible to allow for that fostering. I am not sure there is enough money in the system to do that at the moment.
Sue Ramsden: We are very concerned that the discretionary housing payments budget will not be adequate to cover the demands on it. We are also concerned about the use of discretionary housing payments to plug some of the gaps that have been created within the system.
For example, a disabled person living in an adapted property-say, the property is wheelchair-accessible-may use their spare room for storage of their equipment. They may have been allocated that property because it particularly suits their circumstances. They will be hit by the social sector size criteria; they will see a reduction in their benefit. The problem with using discretionary housing payments to plug that gap is that that is a long-term situation for that disabled person. They need the security of knowing that the benefit is going to cover their rent in the long term. A discretionary system is inevitably at best a year-on-year decision; it can be much shorter than a year in terms of councils making a decision about a cash-limited pot.
Councillor Taylor: It further adds to the risks that councils are taking on. That is another point. I would want to stress very much that, the way that this system looks at the moment, councils will be taking on greatly increased levels of risk.
There is a particular issue around London councils. If you are in temporary accommodation exceeding the benefit cap, you will then have a statutory homelessness claim. If councils are going to meet that gap or house you out of the borough-the CLG has just ruled that you can’t house them out of the borough; they have to be housed in the borough-where are you going to house them? Back in the property that exceeds the benefit cap. We are kind of between a rock and a hard place on that at the moment. There are some big issues around this that need resolution.
Gavin Smart: One minor but important point is that the other problem is, because there is a cash limit, there is a timing problem here as well. You would very much prefer to be someone who presents at the start of the financial year with a problem than you would someone who presents at the end of the financial year.
Q8 Bob Blackman: I want to cover some of the issues around universal credit, starting with you, Sue. Under universal credit, all the payments will go directly to the claimant, and it will be up to them to pay their landlord, whether it is the council or another provider. Do you think that that is right, or do you think it should be done in a different way?
Sue Ramsden: I would support the recommendation made by the Select Committee on Work and Pensions on this matter. Do not underestimate the change that universal credit will bring to claimants: a single monthly payment to the household and a direct payment, in terms of all the money, including the rent money, in the tenants’ hand. That is a huge change from the system that we have at the moment.
The DWP Select Committee came to quite a wise conclusion in terms of issues about the transition over to universal credit and smoothing through that transition. The way to do that is not to automatically have it as the default option that people receive all the money in their hands.
Q9 Bob Blackman: What do you think the default option should be, if you don’t think tenants should get it?
Sue Ramsden: The system should recognise that for a number of people, this will cause a big problem in terms of budgeting. People are used to budgeting on a weekly basis, by and large. In order to manage this change, it will be very helpful for people to continue to have the option of having the benefit money paid directly to their landlord.
Q10 Bob Blackman: To be clear, your view is that the claimant should say, "Yes, I’d like this paid directly to my landlord."
Sue Ramsden: The claimant should be able to have that choice.
Bob Blackman: So the claimant can say that.
Sue Ramsden: Yes.
Q11 Bob Blackman: But no one else should be able to say that.
Sue Ramsden: Well, no; I think there is still a need for categories of people who are vulnerable.
Bob Blackman: I am going to come on to that in a minute.
Sue Ramsden: Also a trigger in terms of people who get into arrears.
Q12 Bob Blackman: Given that that is not the position, are there any other safeguards that should be built in for the sake of landlords?
Sue Ramsden: Certainly. These are not just safeguards for landlords, but safeguards for tenants, in terms of helping them manage their money and keep a roof over their heads. Certainly, there needs to be a category of vulnerable people identified at the start of the claim. That category of "vulnerable" needs to be broad and flexible, and include issues such as mental health problems, financial vulnerability-in terms of a history of unsecured debts or arrears with the tenancy-and also their housing history; whether a person comes through a statutory homelessness route.
Q13 Bob Blackman: Gavin, the pilots are under way. The DWP gives some views of trends emerging within the pilots. Have you seen any assessments of how these pilots on direct payments have been going?
Gavin Smart: I have only seen the published information. What we know from that information is that the rent collection figures are lower than you would normally expect. I think we have publicly said that. That is a cause of concern.
Q14 Bob Blackman: Should landlords in those areas take special measures to ensure that they recover the rent that is due?
Gavin Smart: I think all landlords in those areas are already taking special measures, and that is part of the purpose of the demonstration projects. I think they demonstrate, as Sue was saying, just what a big change this is and how tricky this is. We might expect that some of those figures may improve over time, as people develop the most effective mechanisms for ensuring that they collect the maximum amount of rent. But I think you will see arrears levels rise as a result of a switch to direct payment. That creates challenges for landlords and challenges in terms of where they choose to invest and not to invest. I agree with Sue: we would prefer that tenants have the choice to decide whether or not they want their rent paid directly to the landlord-excluding discussions about vulnerability, which I know you want to come on to.
Q15 Bob Blackman: Should there be any views about the length of a tenancy? My experience was that, in my local authority, people on six-month tenancies would make their claims, rents may or may not get paid, they might disappear early-all sorts of things would happen, and they would become untraceable. Do you think that the length of the tenancy agreement should have anything to do with it?
Gavin Smart: I am not sure that there is a direct relationship between the length of a tenancy agreement and the operation of the welfare system. I can see that there might be, but social landlords have the flexibility to give different length tenancies. Some are exploring that, but I would not say that that was directly related to the principle of direct payment.
Sue Ramsden: There is a particular issue around temporary accommodation and direct payments: people in temporary accommodation find the rent levels are higher. There is an issue about supply in terms of encouraging landlords to put properties forward for temporary accommodation, and the population in temporary accommodation is much more volatile; people come and go, and there is the difficulty of recovering money-even if you are just looking at waiting two months for the arrears trigger-when the people have disappeared.
Q16 Bob Blackman: So what do you think the arrears trigger should be: one month, or two months?
Sue Ramsden: I gave two months as an example.
Q17 Bob Blackman: But would you say that that should be the trigger?
Sue Ramsden: I think that we need to look at the evidence from the demonstration projects as they are testing a variety of arrears triggers. But we also need to look at how the legal system operates in terms of a landlord’s ability to recover possession of a property and the ground by which we can pursue legal action on the basis of arrears after eight weeks.
Q18 Bob Blackman: Sharon, do you have a view from the LGA perspective of the payments going direct to the tenants?
Councillor Taylor: We very much want to look at the outcome of the pilots; the best way to assess how this is working is to look at what happens when we try it out to see what kinds of issues arise. Most councils already do a lot of work on income maximisation and tenancy sustainability, but this may throw a spanner in the works.
From my own council’s point of view, we would not wait two months in terms of arrears; we would try to get on top of that as quickly as possible so that people do not get into the sort of arrears that they cannot pay back. There are big issues around the prevalence of payday loan companies, loan sharks and people like that; some of our tenants and housing benefit claimants are particularly vulnerable to that. If, when their rent payment is due, they find that they have not got the money because they have spent it on other things that they need-for example, the car breaks down and they need to fix it to get to work, and so on-they become vulnerable. That is a huge issue.
There are issues around the voluntary sector, who generally support our residents and tenants with issues around debt and managing their money. They are having their funding cut back at the same time that these additional issues are coming forward. Certainly, where I live I have an economy taskforce which works with the citizens advice bureaux, Jobcentre Plus, and so on. We will do our best to try to create a programme that helps to support people with this sort of financial capability, but the voluntary sector is struggling with the funds to help us deliver that at the moment.
I need to stress the point about councils’ HRA accounts. If I look at my own, and if we get a decrease from our current 92% rent collection to, say, 80%, which I do not think is beyond the realms of possibility in the universal credit programme, that would have an impact of £6.8 million on my HRA. The massive payment I have to make each year to pay back the £218 million debt we took on would be absolutely impacted upon in our business plan by that £6.8 million drop in income.
Q19 Bob Blackman: Can I just stop you? I understand and sympathise with your local authority-
Councillor Taylor: You are much more concerned with residents, clearly.
Q20 Bob Blackman: Hang on. You will have a trigger after one month, so if people have not paid their rent, you will pursue them. So why, if your council-as it should-is going to pursue people to make sure that they pay their rent on time, would those rent arrears go up?
Councillor Taylor: If they go to a payday loan company to borrow the money, you are stacking up future problems there-
Q21 Bob Blackman: But why should they? They have got the benefit in their hands-
Councillor Taylor: And potentially putting homelessness up. We have evicted 14 families so far this year for non-payment of rent, and that is before all of this comes in. People are struggling financially already. We need to see the outcome of the pilots. It may be that with some financial capability training this works, but it is very resource intensive to do that. Family intervention programmes have a key worker for each family who goes in and supports this work. That is very resource intensive. Whether we have the capacity across local government to deliver that kind of one-to-one support, I don’t know.
Q22 Bob Blackman: One of the trigger points is obviously, as Sue and Gavin mentioned, vulnerable families. What is your definition of "vulnerable"? If someone is vulnerable then that would be a trigger for the money to be paid direct to the landlord rather than into their hands for them to then pay out. Have you got a definition?
Councillor Taylor: I certainly think that if any of the families in our family intervention projects meet those triggers they should be in there. We will be working with them anyway. There will be other families where the particular vulnerability is around their financial vulnerability. We should be able to assess that.
Q23 Bob Blackman: At the moment there is no clear definition-
Councillor Taylor: No, there is no clear definition.
Q24 Bob Blackman: One of the things I am concerned about here is that when you have lack of clarity there are always problems.
Councillor Taylor: Absolutely.
Paul Raynes: This is a particularly interesting theme. There is a temptation in the way that universal credit has been designed to oversimplify and think that life is going to be less complicated than it really is. It is possible to get into a dialogue about vulnerable people and then forget what is coming out of what Councillor Taylor is saying. The need to build financial capacity, to learn how to budget, may be much closer to a general phenomenon that everybody is going to make the transition from the current benefit world into a universal credit world. There may be a much wider need for that sort of support precisely because, as Sue said, most people living within the current benefit world budget on patterns that are dictated by the way the old benefit system works.
Q25 John Stevenson: Moving on to the social fund, the community care grants and crisis loans; the discretionary part, as you are aware, is being abolished. This question is really to Councillor Taylor. What progress are local authorities making towards developing their own discretionary social fund?
Councillor Taylor: Generally, councils are concerned about their capacity to manage crisis loans. In two-tier areas this is exacerbated by the fact that they have been put with upper tier authorities and they may not be quite close enough to the front line. Crisis loan-the clue is in the name, really. People have a crisis. They need it resolved as quickly as possible. You are not going to be able to have a committee set up to decide whether someone can have a crisis loan and I don’t think councils are doing that.
Q26 John Stevenson: But the council could put a procedure in place and give an authority to an officer within certain parameters.
Councillor Taylor: Some councils are doing it through the voluntary sector. Some are doing it themselves but have a specific procedure to do it. But the quantum of funding at the moment is not sufficient to manage the need. I don’t think it ever was in the social fund. There probably never was enough there to manage the need.
Q27 John Stevenson: Can I just pick you up on a point there? What you are saying is that some of the councils are doing it themselves and some are effectively using the voluntary sector to do it for them?
Councillor Taylor: Yes.
Q28 John Stevenson: Do you think the smaller authorities are going to have the greatest difficulty in producing an adequate policy?
Councillor Taylor: I don’t think the two things necessarily correlate. Some small councils, because they may be closer to the people they are administering these grants to, may produce better systems than people who are more remote from it. We will keep a very close eye on it. If you apply for a crisis loan at the beginning of the year you may be more likely to get it than if you have a crisis at the end of the year. Sadly, crises don’t limit themselves to April, May and June. They tend to happen all year round. I have seen it before: you get a bank holiday weekend and people cannot get access and they have no cooker or their cooker breaks down and they have small children and they can’t cook a meal for them and all this sort of thing. When that happens it needs resolving very quickly. We need to keep a watchful eye on this and see how councils cope with the change.
Q29 John Stevenson: Are there any councils doing nothing?
Councillor Taylor: Not my knowledge, no.
Q30 John Stevenson: It is a discretionary policy, so, theoretically at least, a council could do absolutely nothing.
Councillor Taylor: The money is not ring-fenced, as you know. Paul may know better than I, but, as far as I am aware, most councils have some procedure in place. We can perhaps come back to the Committee when we have done our assessment.
Q31 John Stevenson: A council could effectively pass the problem down the road.
Councillor Taylor: They can, yes.
Q32 Simon Danczuk: Sharon, is the time scale for the implementation of localisation of council tax realistic?
Councillor Taylor: It has been incredibly difficult to get schemes ready in time, particularly because of the need to consult effectively on this and to respond to that consultation, which has been difficult to do with the constraints that councils have been under with the 10% cut. It has been very difficult to get there. I think that most councils have drawn up a scheme. They are very different, and there is a huge element here of the scheme in my borough being different from the scheme 3 miles away in the next-door borough. Councils have struggled to do it in the time scale. I do not think that we really know whether the software will work, and that remains to be tested when we get into the new financial year.
There is another big risk in this for us, because there are questions around whether it will drive down the take-up of council tax benefit. It may have exactly the opposite effect, because it is no longer a benefit; it is a support system. That may increase the take-up, and the financial risk, as you know, is with councils here.
It has been a very difficult exercise for councils. Having to go out to consultation with such a group is like-I am sorry to use an old cliché-asking turkeys whether they will vote for Christmas. The consultations have been difficult. I would agree with previous comments. I think some of the recipients of council tax benefit are not aware as yet, and will not realise until it hits them, that they are going to be liable for paying some of their council tax bill when it comes round to April next year. I am concerned about that.
Q33 Simon Danczuk: Paul, the LGA is effectively the trade association for local authorities. You represent it. On a scale of one to 10, how unhappy or happy are your members about this process that they have been directed to deliver?
Paul Raynes: Without canvassing all 400-odd LGA members, I probably could not-
Simon Danczuk: I am sure that they would let you know.
Paul Raynes: It generated a lot of discontent.
Q34 Simon Danczuk: Where is it on the scale? If one is very unhappy and 10 is very happy, where are they?
Councillor Taylor: Looking across parties, I would say that it was an eight or upwards, because-
Simon Danczuk: For unhappiness?
Councillor Taylor: People are very, very unhappy about it
Paul Raynes: It partly comes back to the things that Councillor Taylor was saying earlier. It is not only adapting to a new system, it is implementing a new system with a large cut in the budget available. It is not administrative good practice to ask people to start paying tax at a higher-normally, what you do is that you start a new burden as low as you can. You do not bring in a funding cut in year one of a new system. There is that element, but there is also the instability element. This House and the other House were actually considering the legislation, and the legislation had not received Royal Assent at a time when, for practical reasons, councils had to be out to consultation. There was then a last-minute transitional grant introduced into the equation when the schemes were already out for consultation. As a process, it was not a terrifically happy one.
Q35 Simon Danczuk: You sound very unhappy about it, never mind all your members.
Paul Raynes: It was a great experience.
Councillor Taylor: The unhappiness is cross-party. It is important to say that.
Q36 Simon Danczuk: I accept that point.
Gavin, Sue, do you have views on this or are you not as close to it?
Gavin Smart: I have a view on some of the challenges for local authorities. One challenge is that it would appear to be a situation where coming together to run a policy across a number of local authorities would be a sensible approach, but there are some perverse incentives within the system that make that hard to deliver. For instance, the degree to which the proportion of the claimants in a given local authority area are within one of the protected groups determines how hard the burden falls on people who are not protected. Where you have a differential between local authorities in that proportion of people who are not protected, you will have some local authorities that will want to club together, but the ones that they would want to club together with will be reluctant to do so, because they will be spreading the burden across a greater group of people. In practice, it is hard for local authorities to club together, even though they might want to.
Councillor Taylor: We all start from different financial positions.
Sue Ramsden: There is a real issue about getting information out to people, and people understanding what they are and are not entitled to. A huge number of social housing tenants are reliant on council tax benefit to cover all or some of their council tax costs. This is coming in at the same time that they are potentially seeing reductions in their housing benefit. In terms of the size criteria, the benefit cap is coming in at the same time.
Gavin Smart: There is a massive communication challenge here because of the large number of changes that are happening. They are not happening absolutely all at once, but at about the same time, so people may find that their circumstances change several times. It is quite hard for people to understand what is going on.
Q37 Simon Danczuk: That is a really important issue. I have one final, quick question. Are local authorities designing systems that will reduce the amounts paid in council tax benefit? Are they designing systems that will reduce the money that they are spending on it?
Councillor Taylor: Because all the systems are different, it is very difficult to say that. Some of us are having to impose the payments that people make because we cannot afford to put the money back in. I suppose, from that point of view, the money is coming back from residents. Some councils are in a better position financially, and have been able to implement a default system. Some councils use all the exemptions that they are now granted-second homes, empty properties and so on-to support the system. In our case, if I had protected all the groups that came out of the consultation other than those that are protected by the Bill it would have meant that the other claimants would have had to pay 30% of their council tax. It would be a massive hit to go from zero to paying 30%. So we have designed systems around what resources we have to put into it. The other big issue for two-tier authorities is that districts are charged, if they do it, with making up the county council’s element of the council tax.
Q38 Simon Danczuk: That will be popular, won’t it?
Councillor Taylor: Yes. Let’s just say we had inducements from some counties to do just that. Some districts have put their foot down and said, "No, we are not doing it. We are only going to collect our bit of the council tax." So there may be issues that arise between tiers of authorities because of this. That remains to be seen. I am not sure how many districts are taking that line-I am not, by the way-but some are.
Paul Raynes: In terms of monitoring what is going on, we looked at 200 schemes at an earlier stage. Of course, that has now changed with the introduction of the transitional grant arrangements. The most up-to-date piece of work looking at what councils are doing was done by something called the New Policy Institute. By 13 December, they were looking at about 68 schemes. A third of those were preserving the council tax benefit system unchanged, so they must have been finding money from elsewhere to subsidise the cut. About a third were compliant with the conditions you have to meet to qualify for the Government’s transitional money-an 8.5% limit on minimum contributions. A third are going beyond that, therefore ex hypothesi they are looking to take savings out.
Q39 Andy Sawford: I want to focus on council tax benefit reductions. The Government said their aim was to give local authorities a greater stake in the economic future of their area. Speaking to the Select Committee last year-it was before I was a member, but I have read the write-up-the Minister, Grant Shapps, said that this would create a greater interest in starting up that new industrial estate or business park and getting economic activity going so that there are jobs. Councillor Taylor, what your has experience been of this new opportunity for economic development that the council tax benefit cut has created?
Councillor Taylor: Well, 60% of benefit claimants are in work anyway, so that is a huge issue; this does not apply only to people who are out of work. That is something that local government need to keep saying. Local authorities are very keen to take up the challenge of promoting economic growth. Many authorities do lots in that regard already, but we have a diminishing resource base, which makes it ever more difficult for us to do the vital things we need to do to support the growing economy. We are all doing our best out there to do this, but as council resources diminish, we need to keep more of our reserves to protect us from the increased risks we are facing.
Our ability to do the infrastructure investment that we might have made to support economic growth may reduce. Our ability to support revenue base schemes, such as incubator-type functions to get new businesses going and so on, diminishes. That said, many councils that are keen on supporting economic growth will continue to do so. I am not sure that the council tax benefit scheme, in itself, provides the incentive to do that.
It is the overall resource base of local government that is fundamental-that either helps or does not help, depending on which way the needle is pointing at the time. The continual undermining of local government resource is taking its toll on our ability to support economic growth. That is a shame, because local government can absolutely be at the front line of driving the economic recovery, if we are given the freedoms and the finance to do it.
Q40 Andy Sawford: Does anyone else want to comment on that?
Gavin Smart: It is not an area where our members have a particular level of involvement, but I agree with Councillor Taylor. Local authorities are very interested in the economic development of their area, but the challenge is how you can drive that work forward with the reduced resource base. That is particularly tricky.
Q41 Andy Sawford: Paul, you said you had not asked all 400 of your members specifically about these things, but has any local authority in your membership, to your knowledge, expressly linked the changes in the council tax benefit-the council tax benefit cut-to economic development activity?
Paul Raynes: There is very little to add to the way that Councillor Taylor expressed it. Councils are incredibly powerfully incentivised to care about growing their local economies anyway, and many changes that are currently going on strengthen those incentives. In another conversation, we can talk about localisation of the business rate, the new homes bonus, the CIL and all those kinds of things, but there are lots of incentives in the system to care about growth to which councils respond. I do not think anybody has come to us putting the council tax benefit change high on the list of things that improve that incentives environment.
Councillor Taylor: It is about £5 or £8 a week from each claimant. It is the overall resource base that counts here, not the money that we get back in from council tax.
Q42 Andy Sawford: We are quite interested in the impact of localisation and the ideas behind this. I looked at the range of criteria that you could vary in the means test. What research or awareness do you have of the extent to which there will be variation of the means test?
Councillor Taylor: The means test for?
Q43 Andy Sawford: Well, you could have different means tests in different areas for council tax benefit. Some of the concerns that have been expressed in the past are around, for example, people moving between local authorities and the potential for that because of the way council tax benefit is applied in different areas-the schemes are different. Is that something that your members are concerned about? Have they raised that?
Councillor Taylor: Because different schemes are being drawn up in practically every council area in the country, and we are all applying our own financial situation to the solution that we find to this issue, I think there is a danger that people will want to start moving around between areas. In some parts of the country, the housing situation would militate against that, because the housing shortage, particularly in the south and south-east, is so severe that it is not easy for people to move around, but I think there is the potential for tensions to occur where you have very different schemes across borders. We have to look out for that in the LGA and see how that situation develops, but you are absolutely right. I have not looked at my neighbours’ schemes yet, but they will be different from mine. Our resource base and housing situation are very different from our neighbours’. People may well want to start moving around between boroughs to get the benefits of a different council tax system. No doubt somebody will put up a website that shows where to get the best advantage-I have no doubt about that.
Paul Raynes: Although, as Councillor Taylor has said, it all depends on the amounts at stake. I don’t think at the moment that there is a powerful public debate about people who are not on benefit moving between different areas, driven primarily by the varying level of the council tax, which of course does vary between places. I think we will just have to look at what emerges in terms of differential schemes and then see if we do pick up any behavioural effects; it is a live situation.
Q44 Andy Sawford: On a final point following from that: in terms of the significance for people’s finances and their decision making about their lives, are you concerned that, depending on how you structure the scheme in your local authority area, you may make pursuing the relatively few job opportunities less worthwhile for your local resident seeking work compared with someone in a neighbouring local authority?
Councillor Taylor: First, there is a group of people for whom seeking work is not possible. We have a huge group of disabled people in our area for whom there may be work options but they are limited. We have to think about them as a group. It is the combination of all these things-as Sue said, they are all coming along and they are coming at slightly different times.
If your budget is very tight, having to pay £5 a week towards your council tax can be the difference between having enough food to last for the week and not. That is why we see 230,000 food banks being set up around the country. These things really do make a difference: £5 a week can make the difference between your food lasting until Friday and not. The combination of that with the housing benefit changes, the universal credit changes and other pressures from outside, such as the increasing cost of energy, are having a very deep impact on people’s ability to manage financially from one end of the week to the next. I am concerned about that. We will keep an eye on that. As ever in local government, we will do our best to support our residents through it.
Q45 Mark Pawsey: I want to stick with council tax benefit, so my questions are largely directed at Councillor Taylor and Mr Raynes. Council tax benefit is a sum that central Government give annually to local government. It is a bill that has increased pretty steadily over the past few years, so as part of the economic measures the Government took in 2010 they said they would like to see the total amount paid out reduced by 10%. Given that everybody else and everywhere else in the public sector is taking these big cuts in budget, why shouldn’t council tax benefit take a hit in the same way? Mr Raynes, you said a third of councils were leaving their systems unchanged. That implies that they are going to find that additional 10% from somewhere else and that there are other services that they will not be able to deliver. Isn’t that irresponsible on the part of those councils?
Paul Raynes: One of the unsatisfactory aspects of the way the council tax benefit scheme has been localised or replaced with local council tax support, is as I have said. There is a debate about the merits of localising things or generally reforming things to make them work better, and there is a debate about taking money out of the budget, and normally-
Q46 Mark Pawsey: Getting expenditures back to a level that people can afford.
Paul Raynes: Exactly, but normally-I speak as a former Treasury official-the modus operandi is that you ease in reform and you don’t accompany reform with a significant budget cut.
Q47 Mark Pawsey: But these are exceptional times, aren’t they? The country is in a difficult financial position. So we are asking local authorities to do two things at once. What is unreasonable about that?
Paul Raynes: Exactly, but to go back to your original question, is it irresponsible to say, "Globally, within our responsibilities, we have this total of money, and for our community-because this is a world of localism-weighing all our priorities one against another, we are going to protect working poor people from having to pay more, and that will come at the cost of our ability to spend money on something else."? That is a completely responsible budgetary choice within the global budgetary picture, and it is apparent that some places have chosen to do that.
Councillor Taylor: Hopefully, they have done their consultation and talked to their local community, and they have taken the decision according to the responses they have had to the consultation. Some of us have taken a different decision, but it is for the local community to say either, "Yes, that was the right decision. Cutting out that service because you wanted to fund this is fine," or, "No, it wasn’t," in which case they will find out when the election comes round.
Q48 Mark Pawsey: A further objective is that everybody should pay something. I think there is a minimum 20% that people will pay. Can I ask you about the challenge of getting in relatively small sums of money? How are local authorities working on that?
Councillor Taylor: It costs about £80 to chase a debt, and if you consider that some residents will be paying about £150 a year council tax in my area-
Q49 Mark Pawsey: But is there not an obligation on local authorities to say, "The system has changed and we are now in a regime where everybody enjoys the services that local authorities provide and, even if it is a modest amount, it is quite reasonable for everybody to contribute something"?
Councillor Taylor: Theoretically that is fine, but when it comes down to your weekly budget, having to find £5 a week that you did not have to find before, when your budget is very tight already, may be beyond some people. As I say, we have seen an increase in the prevalence of food banks because some people just cannot-
Q50 Mark Pawsey: Food banks have existed for years, haven’t they? They are not a new phenomenon.
Councillor Taylor: We have got a lot more of them now than we had before.
Q51 Mark Pawsey: They are charities doing a great job.
Councillor Taylor: They are, but when it comes to just making ends meet, that extra £5 a week can be a tipping point for some people. I am not saying that it is for everybody, but it can be.
Q52 Mark Pawsey: For those authorities that are reducing by 10%, is there a bit of a perverse incentive within that for them to devise a scheme that is a little bit more complicated than before, which perhaps does not encourage take-up? I would be interested to know if you can tell us what the percentage of take-up was under the old scheme. Are new schemes likely to be taken up at a higher or lower level?
Councillor Taylor: As I said, there is a potential that there will be a greater take-up, because this is no longer a benefit; it is a support scheme.
Q53 Mark Pawsey: What were levels of take-up previously?
Councillor Taylor: I do not know the actual levels.
Q54 Mark Pawsey: Mr Raynes, are you able to help us with that?
Paul Raynes: I do not have the figure in my head, but I know that there was a very large number of people with probably very modest entitlements who were not taking it up. One of the bits of the science around that was that they were deterred by the fact that they did not see themselves as the kind of people who made a claim for benefit. Redefining it as just a discount on the council tax bill may well change that take-up dynamic.
Q55 James Morris: Chair, can I ask some questions about some of the potential data barriers to some of the changes? I think DWP are moving towards wanting to encourage people to use a digital route for claiming JSA, and I have seen some comments about the unintended consequences of trying to drive people down that channel. What do you think the implications would be if we went down the route of trying to put people exclusively down a digital channel for claiming some of the benefits that we are talking about in relation to universal credit?
Gavin Smart: Digital channels will not work for all people. It is increasingly common for people to be used to operating large parts of their lives through digital means, and it is a sensible mechanism for DWP to adopt, but we also know from work on digital exclusion through skills and abilities that it will not work for all claimants. One of our concerns is what mechanisms you put in place for those people who are not able to manage with a digital-by-default dimension. That is not to say that the ambition to have digital by default as the primary delivery route is not the right one, but it is clear that it will not work for everyone.
Sue Ramsden: May I add to that the extent of support that people might need-not just support to make the initial claim, but support in managing their claim online? DWP is proposing that there is no paper form; it is digital by default. Whether or not somebody is there to support the person to claim digitally and you ensure the person has access, there is no paper form. That is a problem particularly for social housing tenants: the DWP’s research shows that about 74% of working age people on benefits have access to broadband internet, but when you look at the population of social housing tenants, which is concentrated in particular areas, you see much higher levels of people excluded from digital access. Some housing associations have reported that 40%, 50% or 60% of their tenants do not have access to the internet.
Taking the sheer numbers of people, concentrated in particular communities, there are issues about access for those communities. It is not just about the skills to use the internet, although that is really important, but about poverty and costs. The cost of a broadband connection if you have not got a landline is prohibitively high for a number of households, and there is also the issue of access to broadband full stop in rural areas. Our concern is the extent of the support people will need to manage their claim, and how people are going to gain access if they do not have it in their own home.
Councillor Taylor: Currently, only about 14% of claimants claim online. When asked, about 45% of claimants said that they would need assistance to enable them to claim online, which is quite a high percentage-higher than I would have expected. We understand the need to move to online claims, because it is obviously more efficient, but there is a generational issue here as well. I am really generalising, but younger people are more comfortable with IT than some of our older residents.
One of the worries the LGA has is that there is an increased risk to councils from having to provide this support without it being recognised as a new burden. It won’t be, because it is simply a way of applying for something, and not a new policy as such. We are concerned that library rationalisation may be going on, so people may not have access to IT in a library, or one that is close enough for them to get to, because transport is a huge issue. If you have not got much money, getting from one place to another is really a massive issue, so you need something that is close to you, and it may be that the only place you can get that is from your local council. Are we going to have to provide that support to our residents to enable them to do this online? We will not shirk the task, but it needs thinking through and a lot of resource and thought put into it if we are going to assist with it.
Gavin Smart: A point of detail, but one that demonstrates the risk of unintended consequences here, is that one of the things that may happen as a result of the move to the digital-only system is that, if you have a claimant who fails to be able engage with that system, you may see behavioural change in landlords as well. At the moment, if a landlord is worried that a tenant is going into arrears, but the tenant has the paperwork and says, "Look, I have a benefit claim and it is being processed," the landlord may take a view that, "That’s okay. In the fullness of time, this claim is likely to be sorted out, because we can understand your circumstances and we can see that you have made a claim." If the resident has failed to be able to engage with the digital-only route, and so does not have any documentation, what does that do to the view that the landlord has to take about whether or not these arrears are likely to be repaid or whether they need to start to move to repossess the property?
Q56 James Morris: May I ask a couple of specific questions about data and potential data problems? Some wider problems have been reported with the Atlas computer system. What are your views on the effect of those problems on the implementation of localised council tax support, for example?
Councillor Taylor: Some councils have struggled with trying to put the volumes of data that we need to through the Atlas system, so there are issues around that. We will continue to monitor that. We can perhaps feed into the Committee as the evidence builds up on whether the volumes are really causing a problem.
Q57 James Morris: The second part of the question is about barriers to local authorities sharing information with housing associations. Do you perceive that as being a problem? What do you think needs to be overcome?
Sue Ramsden: The powers are in place to allow data sharing between local authorities and housing associations, and that has worked very successfully in a number of areas, particularly, for example, in allowing landlords to identify people affected by the benefit cap. There have been some issues in some areas around systems, such as systems needing updating and people not being able to transfer the data as yet. Obviously we are now getting very close to April 2013, and the cap and the size criteria coming in. In the longer term, we need to start concentrating on the issue of data sharing between the DWP and landlords, in terms of how universal credit is going to work. Particularly over the past 10 years, a very good relationship has built up, broadly, between social landlords and local authorities, in terms of the delivery of housing benefit. We now run a much more efficient service in terms of local authority administration of housing benefit than 10 years ago.
Councillor Taylor: I agree with Sue. When there is such a big change to the system, the danger is in the change process. We are worried that some of that effective communication may be lost. The DWP are very aware of this problem and we will continue to talk to them about how we resolve those issues. But inevitably, with a huge change programme like this, there is always the danger that good working relationships get lost in the process somewhere.
Q58 Chair: You were talking about the practical implementation of the online claiming, so we do not get to a situation where people are told-there has been evidence of this-"If you have not got a computer at home, haven’t your family got one?" One or two local authorities have said that to people, I understand, where they have instituted online claiming in the past. It is not up to the family to provide a means for someone to claim their benefit, is it? Have you had any discussions with the DWP about the sort of criteria they are going to apply on this?
Councillor Taylor: Again, this is part of the pilot projects that we are running. We are looking at the digital implementation and what kind of effect that has on people. We will be reporting further on that when we have the evidence from the pilot projects. I imagine that most councils-I am not speaking for all of them-would want to support most residents with this. Nearly all of us have one stop shops. We help every day with online things, whether they are to do with the council or-as is often the case-are not. Libraries do this; libraries are very good at support. But with such a huge change affecting so many people, the capability to deal with that all at the same time is concerning some of us. We need to monitor what happens in the pilots, and see how much support people need, both in terms of hardware resource and software support to make the actual claims. Again, Chair, if you will permit us, we will report back to the Committee when we have the output from the pilots.
Paul Raynes: There is a specific point there about whether, if there is to be new burdens funding for a future face-to-face offer aimed at individual claimants, within the scope of that, DWP see the provision of actual IT kit-it might be in public libraries or council offices-to help people to claim as the kind of thing that merits public funding. There is a very interesting conversation there about public libraries.
Councillor Taylor: There are huge issues, of course, in rural areas: accessing fast broadband is very difficult, still, in many areas of the country. Although we are all working on that as hard as we can, that still exists. As I say, if you are very short of money, transport and getting yourself from one place to another in order to access that kind of IT facility can be very difficult. Councils need to continue to work on this to see what we can do to support residents with it.
Q59 Chair: Very briefly, what is your biggest concern in terms of something that could go badly wrong with this?
Councillor Taylor: I think it is the extent of the change all happening at once, both from the residents’ side, in terms of coping with the financial capability, and from the councils’ side, with all the issues around change management-communicating it effectively, the software changes we need to deal with it and the financial resilience we have to deal with it. It is the scale of the changes happening in such a short time that would be my biggest concern.
Paul Raynes: The thing that could go wrong is around communication. It is really important that all the players on the governmental side are communicating adequately with each other about what they are up to and what is changing, and that there is enough communication with residents about the changes they will face, the changes in behaviours-that word has been used-and how the residents interface with the new system.
Gavin Smart: It is the scale of change in a compressed time frame, the communication challenge that that provides to all the actors involved and, I suppose, the need to ensure that there is a back-stop mechanism for those claimants who still require face-to-face assistance to help them process their claim.
Sue Ramsden: I absolutely echo those three other comments. There is the level of risk, in terms of the leap of faith that has been made in terms of people being able to cope with this, and the need for systems to be in place for people who are not able to manage. Those systems need to recognise that that will be a significant number of people.
Chair: Thank you all very much indeed for coming to give evidence this afternoon.