Housing Benefit & Welfare Reforms: A Presentation to Housing LIN

1. Housing Benefit & Welfare Reforms presentation to Housing LIN by Graham CooperAssociate DirectorGreenwoods Solicitors LLP 5 May 2011

2. Timetable • Introduction • Re-cap on Housing Benefit • Proposed Reforms • Key Issues

3. Re-cap on Housing Benefit • During 2009-10 the Tribunals Service received nearly 800,000 appeals and claims, over 25% more than in 2008-09 • Appeals dealt with by Judge sitting alone • Housing Benefit Helps 4.5 million households (DWP) • Guards against homelessness, supports mixed communities, provides income for social sector landlords (DWP) – expensive but effective and very complex

4. Housing Benefit – a reminder • Income-related • Paid irrespective of the claimant’s work status • Administered by local authorities • Paid for (largely) by local government

5. Housing Benefit – where do I find the law? Entitlement, Claims, Payment and Overpayments (from 6 March 2006) • Social Security Contributions and Benefits Act 1992 • Social Security Administration Act 1992 • Housing Benefit Regulations 2006 • Housing Benefit (Persons who have attained the qualifying age for state pension credit) Regulations 2006 • Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006

6. Re-cap – Conditions of Entitlement • Liability: “A person is entitled to housing benefit if… he is liableto make payments in respect of a dwelling in Great Britain which he occupies as his home” s. 130(1)(a) SSCBA 1992 • Means-test

7. Re-cap – Liability 3-Stage approach • Is the claimant legally liable under ordinary law? • If not, does regulation 8 treat him as liable? • If yes (to either), does regulation 9 treat him as not liable?

8. Re-cap – Reforms thus far • ‘Building Choice and Responsibility: A Radical Agenda for Housing Benefit’ October 2002: 1. Benefit to be paid directly to the claimant rather than the landlord 2. A flat rate local housing allowance (LHA) to be paid for similar sized properties determined for each area and based on average rents – to be paid regardless of the actual rent level. Those with rent levels above the LHA would need to ‘shop around for cheaper homes’. Those with rents below the LHA would get to keep the difference

9. Re-cap – Reforms thus far • Cave proposed in his Review of the Regulation of Social Housing (June ‘07) that the DWP extend LHA in order to stimulate real choice for tenants • LHA – 2008 • Consolidation of Rules 2006 • Supporting People into work: the next stage of Housing Benefit Reform – December 2009 – support and incentives

10. Local Housing Allowance – Recent Changes • Came into force 7 April 2008 • 1st structural change since 1988 • Welfare Reform Act 2007 • Claimants receive an LHA based on the • area in which they live • number of occupiers in their property • Up to a maximum of the five bedroom LHA rate for all new claims made on or after 6 April 2009 • Entitlement subject to a means-test and proof of a valid tenancy • The payment normally to the tenant (NB: Exceptions – 8 wks, rent direct)

11. Steps to Tackle Benefit Fraud – Recent Changes • Credit Reference Agency (CRA) data-matching pilot • Bury, West Oxfordshire, Blackpool, Chester, Warrington, Derwentside, Rotherham, Leeds and Basildon • During the pilot 2,021 cases were actioned which resulted in 80 sanctions and prosecutions

12. Child Benefit – Recent Changes • From November 09, Child Benefit no longer deducted from HB and CTB payments

13. Proposed Reforms – Labour • Raising expectations and increasing support: reforming welfare for the future. December 2009 – White Paper • Principal objective – Housing Benefit system should complement wider welfare programme by supporting people to move into work. Should also support aspirations for a decent home in a mixed community, and it should be affordable and represent value for money • No implementation – withdrawal of the £15 excess in April 2010 (delay for year)

14. Proposed Reforms – Labour • What were the proposals?: • transition into work payments – fixing Housing Benefit entitlement for 3 months at the rate in payment immediately before the start work. Changes in circumstance, including changes in the amount of wages received, may be ignored during the period of the award regardless • fixed period awards for 6 months

15. Proposed Reforms – Labour • What were the proposals? (cont): • fix the earnings element only of the Housing Benefit calculation for a fixed period • changes within a certain band to be ignored as Transition into Work Payments (above) • reform to the way Local Housing Allowance rates – to remove the most expensive properties which are distorting the system

16. Proposed Reforms – Labour • What were the proposals? (cont): • Housing Benefit conditional on housing meeting certain defined standards in terms of quality, energy efficiency and carbon footprint • merge Housing Benefit with other income-related benefits • create a form of housing tax credit • maintain a reformed Housing Benefit as a separate extra-costs benefit

17. Proposed Reforms – Labour • What were the proposals? (cont): • flat-rate approach to benefit rates • fewer direct payments to landlords • greater integration of the services provided by local authorities and central government agencies, building on the In and Out of Work project • align the reporting period for changes in circumstances more closely with other provision

18. Proposed Reforms – Labour • What were the proposals? (cont): • align the rates at which benefit is withdrawn when customers are in work so that they accord with Tax Credits • income and capital taken into account in the same way across benefits and tax credits

19. Proposed Reforms – New Coalition Government • 28 June, George Osborne – Housing Benefit will be cut and the savings used to cushion the impact of proposed spending cuts in other government departments • Speaking in Toronto, at the G20 summit, he said: ‘We have got to look at all these things, make sure we do it in a way that protects those with genuine needs, those with disabilities, protects those who can’t work but also encourages those who can work into work.'

20. Proposed Reforms – Coalition Proposals re benefits • End all existing welfare to work programmes; • Single welfare to work programme to help all unemployed people get back into work – in place nationally by the summer of 2011; • Cutting of four welfare to work projects; • JSA claimants with most significant barriers to work referred to the new welfare to work programme immediately, not after 12 months; • JSA claimants aged under 25 will be referred to welfare to work after a maximum of six months;

21. Proposed Reforms – Coalition Proposals re benefits • Reforming the contracts with welfare to work service providers to reflect more closely the results they achieve in getting people back into work;  • Reform of the funding mechanism to finance welfare to work programmes to reflect the fact that “initial investment delivers later savings through lower benefit expenditure”; • Ensuring that receipt of benefits for those able to work is conditional on their “willingness to work”;

22. Proposed Reforms – Coalition Proposals re benefits • Re-assessing all current claimants of incapacity benefit and moving those assessed as “fully capable for work” onto JSA; • Supporting would-be entrepreneurs through a new programme – “work for yourself” – which will give the unemployed access to business mentors and start-up loans; • Drawing on a range of service academies to offer pre-employment training and work placements for unemployed people;

23. Proposed Reforms – Coalition Proposals re benefits • Developing local work clubs where unemployed people can “gather to exchange skills, find opportunities, make contacts and provide mutual support”;  • Exploring how to simplify the benefit system in order to improve incentives to work; • Maintaining the goal of ending child poverty in the UK by 2020; • Reforming the administration of tax credits to reduce fraud and overpayments; 

24. Proposed Reforms – Coalition Proposals re benefits • Bringing forward plans to reduce the couple penalty in the tax credit system funded by savings from the welfare reform plans; • Restoring the earnings link for the basic state pension from April 2011, with a “triple guarantee” that pensions are raised by the higher of earnings, prices or 2.5%;

25. Proposed Reforms – Coalition Proposals re benefits • Phasing out the default retirement age and holding a review to set the date at which the state pension age starts to rise to 66, although this will not be sooner than 2016 for men and 2020 for women; • Protecting benefits for older people such as the winter fuel allowance, free TV licences, free bus travel, and free eye tests and prescriptions.   

26. 21st Century Welfare • DWP consultation. Key areas: • Simplicity – Tax Credits awarded by HM Revenue & Customs are taken into account as income by the Local Authority in assessing – Daft • Affordability – Budget – up-rating of Housing Benefit

27. 21st Century Welfare • DWP consultation. Key areas (cont): • Rewarding work and personal responsibility – more fundamental structural approach. By integrating and reforming the current income-related benefits and Tax Credits systems aim to ensure that: • households and families see the gains from increasing the amount of paid work they do because they would keep more of their earnings;

28. 21st Century Welfare • DWP consultation. Key areas (cont): • a fair balance is struck between support and conditionality, making clear that culture of dependency not accepted, nor will anyone be written off; and • positive behaviours, such as saving for retirement or buying your own home, are rewarded rather than penalised.

29. 21st Century Welfare • Reduce worklessness –encourage applicants to do some paid work, and then to remain in work and increase their earnings

30. Budget Announcement • Social housing – ability to claim full rent for a home bigger than their needs will be ended • Private rented – caps to benefit payable will be introduced – £400 for a four bedroom property and £250 for two bedrooms • Housing Benefit will also be linked to employment for people receiving job seekers allowance, with housing benefit cut to 90% after 12 months of looking for work - dropped

31. Budget Announcement • From October 2010, the standard interest rate used to calculate support for mortgage interest payments will be set at a level equal to the Bank of England’s published monthly Average Mortgage Rate; • From October 2011 (Now April 2011 for new claimants), LHA rates will be set at the £30th percentile of local rents; • Deductions for non-dependants will be up-rated in April 2011 on the basis of prices.  This will reverse the freeze in these rates since 2001-02;

32. Budget Announcement • From 2013-14, LHA rates will be up-rated in line with CPI; • From April 2011 (9 months from review for existing claimants – latest = Jan 2012), LHA rates will be capped at £250 per week for a one bedroom property, £290 per week for a two bedroom property, £340 per week for a three bedroom property and £400 per week for four bedrooms or more; • From April 2013, housing entitlements for working age people in the social rented sector will reflect family size;

33. Budget Announcement • From April 2013, Housing Benefit awards will be reduced to 90% of the initial award after 12 months for claimants receiving JSA; - dropped • From April 2011, HB claimants with a disability and non-resident carer will be entitled to funding for an extra bedroom; • The Government contribution to Discretionary Housing Payments will be increased by £10 million in 2011-12 and £40 million in each year from 2012-13.

34. Queen’s Speech • The main benefits of the Bill would be: • making the benefits system less complex • improving work incentives • getting the five million plus people languishing on benefits into work and out of poverty • reducing the scope for fraud and error

35. Queen’s Speech • The main elements of the Bill are: • removing the confusing complexity of the benefits system, which too often leaves people afraid to make any change to their circumstances and can be a barrier to moving from benefits to work • making people see a gain when entering work through simplifying the benefits system

36. Queen’s Speech • The main elements of the Bill are (cont): • reducing the scope for fraud and error by making the benefits system simpler. • reducing unnecessary administration of benefits. Currently people can have overlapping entitlements or switch between different benefits – around 200,000 people a year cycle between Jobseeker’s Allowance (JSA) and Incapacity Benefit (IB/Employment and Support Allowance (ESA))

37. Work & Pensions Select Committee • The Work and Pensions Committee has held an inquiry into those changes. Written evidence was invited from interested organisations. The focus of the inquiry was the implications of the announced changes for: • incentives to work and access to low paid work • levels of rent, including regional variations • shortfalls in rent

38. Work & Pensions Select Committee • levels of evictions and the impact on homelessness services • landlord confidence • community cohesion • disabled people, carers and specialist housing • older people, large families and overcrowding • Written evidence in connection with the inquiry should have been sent to the Committee before 6 September 2010

39. Social Security Advisory Committee • Social Security Advisory Committee (SSAC) has been asked by the Secretary of State for Work and Pensions to consider proposals for the Housing Benefit (Amendment) Regulations 2010, and the associated amendments to the Rent Officers (Housing Benefit Functions Order) 2010 • Responses were due by 10/09/2010 • Separate from Work & Pensions Committee enquiry

40. CSR The key measures outlined in the Spending Review in relation to welfare benefits and tax credits are: • Universal credit – over the next two Parliaments the current system of means- tested working-age benefits and tax credits will gradually be replaced with the universal credit;  • Time limiting ESA – entitlement to contributory employment and support allowance for those in the work related activity group will be limited to one year; 

41. CSR (cont) • Household benefit cap – from 2013, household ‘welfare payments’ (excluding one-off payments) will be capped on the basis of median earnings after tax for working households, estimated to be approximately £500 per week by 2013, for all households except those in receipt of DLA, working tax credit or war widow's pension;

42. CSR (cont) • Child benefit – child benefit to be withdrawn from families with a higher rate taxpayer from January 2013;  • Working tax credit freeze – from April 2011, the basic and 30 hour elements of the working tax credit will be frozen for three years;  • Working tax credit hours rule – from April 2012, couples with children must work 24 hours between them, with at least one working 16 hours, for entitlement to working tax credit, rather than at least one working 16 hours as now; 

43. CSR (cont) • Childcare element of working tax credit – from April 2011, the proportion of costs covered by the childcare element of working tax credit will be reduced from 80 per cent to 70 per cent of costs; 

44. CSR (cont) • Child element of child tax credit - the child element of child tax credit will be increased by £30 above indexation in 2011/2012, and by a further £50 above indexation in 2012/2013;  • Tax credits assessments – real time PAYE information will be used to inform tax credits calculations, reducing the emphasis on the claimant to notify HMRC of income changes;  • Housing benefit shared room rate – the shared room rate in local housing allowance, that currently applies to single people aged under 25, will be extended to all single claimants under 35; 

45. CSR (cont) • Council tax benefit – spending on council tax benefit will be reduced by 10% from 2013/2014, and localised to local authorities and devolved to Wales and Scotland, with councils given flexibility to tailor the scheme to meet local priorities and to manage spending within lower limits, whilst protecting the most vulnerable; 

46. CSR (cont) • DLA for those in residential care – from 2012/2013, payment of the mobility component of disability living allowance to claimants in residential care, other than those who are fully self-funding, will end;  • Support for mortgage interest – the temporary measures introduced to reduce the waiting period for new working age claimants to 13 weeks and increase the limit on eligible mortgage capital to £200,000, that had been due to expire in January 2010, will be extended by a further year; 

47. CSR (cont) • Savings credit – the maximum savings credit award in pension credit will be frozen for 4 years from 2011/2012;  • State pension age – the equalisation of state pension age at 65 will be brought forward to November 2018, and both the male and female pension age will increase to 66 by April 2020;  • Cold weather payments – the increase in the cold weather payment to £25 will be made permanent; and  • National insurance cards – the DWP will stop issuing national insurance cards to customers and send letters instead.

48. Universal Credit: Welfare that works • White Paper – November 2010 • Replace Welfare system with Universal Credit • Removes complexity of out-of-work benefits and in-work Tax Credits & HB • Integrated working-age credit that will provide a basic allowance with additional elements for children, disability, housing and caring • Will replace WTC, CTC, HB, IS, IBJSA, IBESA • HB will disappear by October 2017

49. Universal Credit: Welfare that works • Universal Credit to be administered by DWP – remove admin function of Local Authority • Welfare Reform Bill 2011 • Universal Credit roll out start 2013 and complete by 2017 • Removal of various tapers – Single taper – 65% • Housing costs added similar to HB and targeted to lowest third of market rents • For social sector, will be based on the actual Housing Association and Local Authority rents, including the new ‘affordable rent’ tenure, ie between social rent and market rent (whatever that means – 80% of market?)

50. Universal Credit: Welfare that works • Other than recent proposed changes to HB, no other changes are planned in the short to medium term • No firm commitment to direct payments • Gov favours payment to tenants, but recognises business efficacy of direct payment to social landlords – some ongoing use of direct payments, use of direct debits, and a ‘protection mechanism’