The Impact of Welfare Reform in Stockton

A report by the Institute for Local Governance

October 2012

Introduction

This report is part of the Institute for Local Government’s Local Authority Research and Knowledge programme and arose out of a request from Stockton-on-Tees Borough Council to analyse the potential impact of the Welfare Reform programme on residents and organisations in the Borough. The research for this project takes the form of:

a)a set of interviews with key stakeholders in the Borough which will look at those areas of principle concern and record first indications of potential issues and patterns of behaviour amongst those most affected;

b)the collation of administrative and official data which places the information gained through the interviews in the context of Stockton’s overall profile relating to and, more critically, mapping those areas in which greater concentrations of affected residents can be identified.

This report is drawn primarily from interviews carried out in Stockton over three months in 2012and secondary materials provided by those interviewees and will present an Executive Summary and Recommendations. The first part of the report describes the most significant aspects of the reforms, including losses to income and the extensive administrative changes. This is followed by an analysis of the more critical anticipated impacts, particularly in relation to some of the changes affecting those in social housing. This reflects key aspects of the reforms but also the fact that Housing Providers were strongly represented on the list of interviewees. The report then moves into a discussion of some of the areas that arise from these changes, the behaviours that respondents are anticipating and, to some extent, the capacity to deal with them. The final section provides maps and data related to the location of particular claimant groups most affected by the welfare reforms and, more critically, areas where there is significant pressure from the introduction of a reduction in benefit for under occupation of a property.

These reforms introduce a fundamental restructuring of the benefits system but this process has only just begun. Although this report can outline the key issues and give some indication of anticipated changes in behaviour, it will be critical to monitor future developments as it is difficult to predict how people will react to the range of measures being introduced.It should also be acknowledged that, given the scope of the subject, this has been a relatively small project and the views of potentially important groups have not been included.

Much of the research for this report has taken place before full details of how the localised CTB and Social Fund replacement schemes will operate and has not therefore been included in detail.

A summary of the timeline for reforms and its principle characteristics are found in Appendix 1 and a list of interviewees in Appendix 2.

The Impact of Welfare Reform Changes in Stockton

A report by the Institute for Local Governance

Executive Summary

  • It can be estimated that Stockton may lose between £13 million and £20m as a result of the Welfare reforms. People with disabilities at risk of losing substantial amounts of money per week and up to 2,700 households will face a reduction in benefit due to new rules on “under occupation”. The greatest impact will be felt in families with children and sections of the disabled community.
  • In spatial terms, the most affected wards are those that have already felt the impact of the recession. As can be seen from the maps in Section 9, wards in a central belt that stretch from Hardwick to Stockton Town Centre and then southwards to Thornaby show high concentrations of benefit claimants and those most likely to be impacted by changes to disability benefits. This is also the case in the North of the Borough around Billingham.
  • More dramatically, the distribution of households affected by the penalty charge for ‘under-occupation’ show a similar pattern but with high concentrations in particular areas. Five wards in Stockton: Stockton Town Centre, Billingham East, Mandale and Victoria, Newtown and Hardwick account for well over half of the nearly 2,700 households currently assessed as being liable for the penalty.
  • There is little flexibility in the housing stock in both Stockton and surrounding areas to provide appropriate accommodation for those facing cuts in their income and needing to relocate to smaller properties. There is an acknowledged but substantial mismatch between housing supply and demand. Where tenants’ opinions have been sought, it appears that many who will face a reduction in benefits do not wish to move.
  • It is generally understood that, despite the above, there is not a clear understanding amongst affected tenants of the scale and the impact that the welfare reforms will have on individual lives. Amongst housing and advice professionals there is an expectation of rising debt levels amongst claimants and fears for family and community resilience in the more vulnerable sections of the community.
  • Housing Providers (HPs) perceive the welfare reform changes as a major risk to current business objectives; fearing increases in rent arrears, a potential impact on cash flow and an impact on future funding arrangements. They also have concerns about a dilution of their social cohesion role and an ability to work towards sustainable and balanced communities.
  • Administrative changes bring challenges to all agencies, particularly in relation to online benefits administration and finding alternatives for direct rent payments. There is good practice in this field, including the use of Credit Unions but there is concern about the lack of capacity and suitably developed infrastructure within these organisations as well as the wide range of providers on offer.
  • It is generally recognised that Stockton is a well organised Borough with an effective range of advice services within the council which has already taken proactive steps to target the most vulnerable individuals. In particular the integration of services between Housing Options and the Housing Benefit service enables effective targeting of resources and the ability to monitor developments. There are also examples of good practice in developing appropriate advice service from HPs. There are major concerns, however, that it will be difficult to meet the perceived increase in demand for advice after the introduction of the major reforms.
  • There is a high level of awareness of the risks and the impact amongst all agencies but it is unlikely that substantial parts of the Voluntary and Community Sector will be able to increase its contribution to dealing with some of the issues. From limited enquiries, there are concerns about diminishing resources in the VCS and a potential lack of awareness of the issues and appropriate training for staff in that sector.
  • Cooperation and monitoring of developments has been recognised as an essential need over the implementation period of the reforms. Through the work of the Welfare Reform Data Group established by the Borough the CAB has already started monitoring enquiries relating to the welfare reform changes. Other agencies are closely monitoring developments but there is a clear need to share and coordinate this information.
  • Notwithstanding the substantial amount of cooperation and good practice that exists, there is concern over the fact that many of the most substantial changes take place over a short period of time and that there are few options to alleviate substantial reductions in benefit and the resultant severe hardship both across the Borough. This is most likely to be felt in specific localities in the borough which need to be continually monitored. Amongst respondents to this project there were fears of increased crime and disorder and a negative impact on health in these localities.

Recommendations

  • Effects of the changes being introduced in April 2013 and onwards have both an immediate and cumulative effect on large numbers of claimants in Stockton. Remedies will therefore need to address both short term issues and those that develop over the time during which the reforms are enacted and new administrative systems are brought into play. The authority has already been proactive in identifying residents at risk but it is essential that a long term monitoring framework is established to ensure that changes in the status and behaviour of residents can be assessed. Suggested areas for activity are:
  • The system of monitoring new CAB enquiries which relate to welfare reform, already extended to some council services, should be applied to all contact points.
  • Housing Benefit records should be used to continuously monitor the numbers of people in under occupation and those leaving the registers.
  • Official statistics relating to disability benefits should be collated and analysed as a matter of course but the information in these data is not timely. Regular monitoring updates from the CAB and other advice centres should be carried out on numbers seeking advice and changes in claimants’ financial status.
  • Much of the critical data is held by housing providers and agreement will need to be sought to share data and information at a local authority level on:
  • Level of arrears in benefit claimants
  • Changes in choice based lettings policy ie how many under occupiers are staying in situ
  • Data on movers and potential movers from HPs administrative and survey dataand their conditions (debt, arrears etc.)
  • There are already examples of good practice being carried out both in the local authority and in a number of Housing Providers. The Welfare Reform Board should collate and disseminate these good practices to all relevant agencies, particularly in relation to:
  • Advice on getting back in to work
  • One to one welfare benefit advice work for those people who are facing a reduction in benefits
  • There are other areas of activity that need to be monitored. Concerns have been expressed about the pressures that will be placed on mental health services and the potential for increases in crime and disorder. Agreement needs to be sought with the appropriate agencies to provide data on increases in the use of services such as, in the case of criminal justice, increases in increases in opportunistic crime or anti-social behaviour. There should be regular inputs from health and criminal justice agencies into the Welfare Reform Board alongside formal agreements to share data.
  • It is clear from the above that a high level group that can gather and coordinate the interests of key stakeholders needs to continue. The Welfare Reform Board currently fulfils this function but should incorporate the work of the Data Group, receiving reports from members on the basis of the above recommendations. Consideration should be given to expanding the membership of the Board to ensure that the issues that arise can be dealt with at an appropriate level and that agreement can be reached on sharing critical information. Formal links to organisations such as the Safer Stockton Partnership should also be considered.
  • Areas identified in this report as being likely to the most affected by welfare reform are those which local authority and advice services have previously been aware. It is clear, however that more advice resources will need to be targeted at individuals within these areas. The Council should, however, review contact services in the light of a predicted increase in the need for both 1-1 advice and the increased demand for access to workstations. Resource constraints will limit the ability to expand individual advice, so effective signposting and information provision will have to be adopted. Advice on disability benefits is a particularly difficult issue as it is a complex area of social welfare law with a resource hungry need for expert advice on reviews and appeals. In this respect the pilot on the transfer of DLA to PIP that will run in Stockton should be closely monitored to feed in to the discussion on the overall provision of welfare advice services.
  • Local authorities will have new responsibilities on eligibility for localised Council Tax and the Social Fund replacement scheme and will also have to deal with requests for use of Discretionary Housing Payments. They also have current responsibilities for administering payments across other services and there is a need to review these areas of administration to ensure consistency and fairness. Close monitoring will be essential, particularly of Discretionary Housing Payments, where the scope for using them is not matched by the amounts that will be available.
  • One of the most intractable areas of policy is the mismatch between supply and demand in accommodation. This is not an area in which rapid changes can usually be made but the scale of the problem is so great that there is an urgent need for the local authority to work closely with Housing Providers to seek out innovative solutions for the lack of appropriate one-bed accommodation in the Borough. The local authority should also continue to cooperate with other local authority partners and regional bodies to highlight to the appropriate government agencies where, despite all efforts to ameliorate, significant social pressures remain.

Findings

1Overall financial impact

Analysis of figures provided by the Government through its Impact analyses and Stockton Council’s own figures suggest that there will be an overall loss of income to Stockton of between £13m and £21m. These reductions stem principally from the £18 billion cut from the welfare budget and the additional £10 billion from the March 2013 budget. The introduction of Universal Credit creates both gainers and losers and there will be some protection for older age groups. The Institute for Fiscal Studies (IFS), however, has calculated that households with children will suffer the most, with child poverty predicted to rise to a peak of 3.1 million by 2013. The IFS also states that many of the gains introduced by Universal Credit will be offset by using the CPI for uprating benefits instead of the RPI.

In terms of specific benefits, the Council has calculated that provision for £3.85m will need to be found for the introduction of the local scheme for Council Tax Benefit but more concern has been expressed about particular benefits and groups affected by the reforms. In particular:

Disabled people. The impact on people receiving disability benefits is substantial. The financial impact has been assessed by researchers as:

  • Over 3,500 claimants affected by the reform of Incapacity Benefit and the introduction of Employment Support Allowance, leading to a potential loss of just over £12m
  • The transfer of claimants from Disability Living Allowance(DLA) to Personal Independence Payments (PIP) leading to a fall of over 2,000 in the number of claimants with a loss of benefits of just over £8m

Families. Under the proposed changes families who are deemed to be “under-occupying” by one bedroom or more will face a loss of benefit as will those subject to the Benefit Cap, where total weekly benefits will be limited to £500pw for lone parents/couples and £350pw for single claimants. In Stockton, this is estimated to lead to:

  • Up to 2,700 claimants affected by under occupation with a consequent loss of approximately £1.6m
  • Just over 120 claimants affected by the benefit cap with a loss of £0.3m.

There are also a range of other measures that impact on families and individuals. For example, raising the age limit for the shared accommodation rate for single people from 25 to 35 is already in place and the effect of which has been described as “driving people back” into the parental households. This, in conjunction with the change in the non-dependent deduction rules which leads to a greater notional payment to the rent, is likely to place families under more pressures.

2Administrative impact

In the interviews carried out for this piece of work the concern expressed over the amount of benefit lost by the more vulnerable members of the community was matched by a concern over the different administrative changes that accompany a wholesale restructuring of the benefits system. These include:

  • A difficult transitional period where localised Council Tax schemes will have to run in tandem with Universal Credit. The IT systems for Universal Credit will not be operational until 2017.
  • Operating Universal Credit online and with telephone advice causes concern -particularly in relation to older people. Internet usage drops off with age and there are fears of increased isolation.
  • Monthly payments are reported as a major issue. - Budgeting with low disposable income over a longer period is considered more likely to lead to greater indebtedness.
  • There are concerns raised in relation to the flexibility of a monthly system when sections of the population are caught in “low pay, no pay” work periods of only a few weeks.
  • The loss of automatic direct payments to landlords is likely to increase indebtedness amongst claimants and bad debt issues for housing providers.

3Under occupation