Welfare reform

The reforms to date and the impact on councils and communities

Overview of reforms to date• There have been two main planks to the welfare

reforms to date:

– The introduction of Universal Credit for working age claimants

– A range of changes to discrete working-age benefits, the majority of which have entailed a reduction in spending and more stringent eligibility and conditionality criteria

Current context• The reforms to date have saved some money (but not as

much as planned)• There is some evidence of behaviour change• The Conservative government had a manifesto commitment

to deliver a further £12bn of welfare savings• Universal Credit was a much more complex and demanding

undertaking than expected, but they are now making progress• The role of councils and local partners in supporting low

income households is at the heart of impact and implementation

The introduction of Universal Credit for working age claimants

Universal Credit• UC replaces the following benefits/tax credits:

• Working Tax Credit, • Child Tax Credit, • Housing Benefit, • Income Support, • Income-based Jobseeker’s Allowance• Income-related Employment and Support Allowance.

• Working age • Monthly payment to household• Online claims and interface• Processed by DWP through UC Service Centres

Universal Credit roll out• Live Service – began with new claims for single jobseekers in Tameside

(Ashton-under-Lyne) in April 2013• Digital Service – Sutton; Croydon; London Bridge; Hounslow; Great Yarmouth• Roll-out is for new claims and is expanding from single through to families• Roll-out slowed again after changes in Summer Budget 2015• Currently expanding to 5 further Job Centres per month to June 2017 then

ramping up• All of North West from June 2014• Digital and Live service rolling out alongside one another from 2016; migration

of existing claims from 2019

UC and the new GovernmentSummer Budget 2015 announced a series of changes to Universal Credit and, in advance of the full introduction of UC, to tax credits:• A reduction in the income threshold in tax credits, and an increase in the

withdrawal rate (“taper”), from April 2016• Reductions in the “work allowances” for most UC claimants, from April 2016• Limiting the child element of tax credits and UC to two children for new claims and

births after April 2017• Removing the family element in tax credits (and the corresponding first child

premium in UC) for new claims from April 2017

Following the Government’s defeat in the House of Lords on 26 October, the Chancellor announced in Autumn Statement 2015 that the planned reduction in the tax credits income threshold and increase in the taper rate would not now go ahead, however the reduction in the UC work allowance will. Migrated claims will have transitional protections but ‘new’ claims won’t.

UC and local government• We won’t administer HB anymore (eventually!)…• …funding and staffing while we do• Supporting individuals and households with transition

and claiming (Universal Support delivered locally)• Supporting DWP throughout transition and migration• Our role in achieving and sustaining the over-

arching policy objectives…?

A range of discrete changes to working age benefits

Overview of the reforms so far…• Started in earnest in April 2013• Aimed to:

– simplify mainstream housing and employment benefits– improve work incentives– encourage personal responsibility– target support at those who need it most– significantly reduce the overall benefits bill

• Income of households claiming benefit estimated to be on average lower by £1,615 a year – or £31 a week – in 2015/16 as a result of welfare reforms (Source: LGA/CESI 2013)

Summary of key Coalition reforms• Changes to Housing Benefit (HB) for renters in the private sector – reduction of the

Local Housing Allowance (LHA) from the 50th to the 30th percentile of local rents

• The removal of the “spare room subsidy” for most HB recipients in social housing

• The introduction of the Benefit Cap

• Under 35s Shared Accommodation Rate

• Changes to tax credits

• Tightening of eligibility and the restriction of contributory Employment and Support Allowance (ESA) to one year

• The replacement of Disability Living Allowance (DLA) with Personal Independence Payment (PIP)

• The uprating of benefits and tax credits by 1% instead of the CPI

• Replacement of Council Tax Benefit with Local Council Tax Support

• The replacement of the Social Fund with Local Welfare Support

• The introduction of Universal Credit

Review of savings from reforms to date• The coalition government did not manage to realise all of its planned savings,

however, according to the Institute of Fiscal Studies (IFS) it implemented changes that mean that spending in 2015/16 is £16.7bn lower than it would otherwise have been.

• The Government is, however, arguably running to stand still: overall welfare spending this year is the same as in 2010.

• The coalition also had to revise down some of its planned savings due to incorrect assumptions and problems with implementation.

Present Government• £12bn further reductions:

– £4bn from rate freeze – including LHA– £6bn from changes to tax credits was defeated in

Lords but will be implemented more slowly through UC work allowances

– £1.4bn take-away from councils and RSLs – 1% pa freeze on social rents (saving on HB)

Present Government cont.• ‘Restoring fairness’

– Benefit cap reduced from £26k to £23k in London and £20k outside London

– Removal of HB entitlement for some out-of-work 18-21 year olds

– ESA WRAG reduced to JSA level– Shift from tax credits to ‘National Living Wage’

Local impact and response• Is the Government moving towards achieving

its overarching policy objective of sustainably reducing welfare spending (through positive behaviour change and improved ‘life chances’)?

• Are we able to support / respond locally in a way that supports that objective?

• Are we seeing unintended (local) consequences?

Life Chances strategy• Announced by David Cameron in January

2016• Looks likely Theresa May will retain (but may

be reframed as ‘social justice’• Focused on early years and families but has

been led by DWP and is linked to the Welfare Act

• Therefore significant overlap with welfare reform

Behavioural changePositive• Increase income (from employment)• Reduce outgoings (housing costs; improved household

budgeting; childcare)

Negative / unintentional• Debt and arrears• Overcrowding; homelessness• Charity e.g. foodbanks

Welfare impacts ongoing…• LWI currently updating our 2013/14 report• Unemployment is going down (how stable,

well-paid and sustainable are those jobs?)• Homelessness is rising• There is a growing affordability gap in some

places• Need to know how people are responding and

what it means for local government

Increase income…• Support for the most disadvantaged

jobseekers:– replacement of Work Programme with Work and

Health– Sustainability of good local schemes – e.g. ‘Me

and My Learning’• In-work progression in UC (recognition of

impacts on working households)

Reduce outgoings...• Housing affordability becoming a significant issue• LHA rate reduction impacts on quality and availaibility in PRS

in all areas• Complex interplay of factors including employment and the

safety net as well as HB reform and the housing market• Possibility of a statutory duty to prevent homelessness• Different impacts across the country• The LGA is looking to deliver a piece of work that looks at both

supply and affordability

Housing Benefit“In the case of housing benefit, underlying macroeconomic and demographic pressures more than cancelled out reductions in the generosity of support. The OBR identify three such pressures in their Welfare trends report: the growth of the private rented sector, real growth in private rents and falls in real earnings.”

Source: IFS 2014

Sustainable reductions in the welfare budget?You can’t reduce the welfare bill solely by cutting benefits you need to address:• Housing affordability (and supply)• Unemployment, underemployment and low

wages• Resilience, life chances and the safety net• Intergenerational fairness

Homelessness (since 2009/10)• 28.7% increase in households for whom the local authority

has prevented or relieved homelessness (212,600 households in 2015/16)

• 16.2% increase in households who had made a homelessness application to the local authority but the decision had been taken that there was no statutory duty to accommodate (57,040 households in 2015/16)

• 44.3% increase in households to whom local authorities have owed a statutory duty to accommodate (57,750 households in 2015/16)

• 102% increase in rough sleepers (3,569 people in 2015)• Biggest reason now end of AST

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

Reason for loss of last settled home - statutory homeless households

Relatives/friends no longer able or willing toaccommodateRelationship breakdown with partner

Mortgage arrears

Rent arrears

End of assured shorthold tenancy

Loss of other rented or tied housing

Other reasons

Housebuilding

Increase in HB claimants in work

Source: DCLG Homelessness Statistics, live tables 770 and 778

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

Homeless prevention, relief, duty and other homeless decisions

Prevention and relief

Statutory homeless

Other decisions on homelessapplicationsTotal responses from local authorities

Source: DCLG Homelessness Statistics, rough sleeping statistics Autumn 2015 table 1

1,768

3,569

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2010 2011 2012 2013 2014 2015

Rough sleeping

East of England

4

5

6

7

8

9

10

11

12

2009 2010 2011 2012 2013 2014 2015p

Average house price to median earnings - regions

East of EnglandEast MidlandsLondonNorth EastNorth WestSouth EastSouth WestWest MidlandsYorkshire And The Humber

Challenges• Benefit Cap expansion• Increase in out-of-area placements and people electing to

move?• LHA squeeze on PRS landlords• Continued reductions in social housing supply• Supported Housing (transfer of)• Stable, sustainable employment• A complex national picture that requires a national solution

alongside local solutions?