Welfare Reform

Governments view is: Benefits and tax credit system complex and expensive to administer Poor work incentives in system We need to deliver fairness to those claiming benefit and to the taxpayer. Key measures: -Universal credit -Protection of older people -Reduction in eligibility and level of other benefits “Biggest change since Beveridge” Background

Replaces a range of means tested working age benefits with a single payment that: o Ensures a single withdrawal rate o Ensures work pays, in particular low hours work o Reduces complexity Will be administered by DWP, using new real time IT system Expectation of online applications Paid direct monthly in arrears (including housing benefit) 40,000 people in South Tyneside affected Roll out from October 2013 to December 2017 Universal Credit

Social Housing (16,000 recipients in South Tyneside): -Size criteria/“Empty bedroom tax” – 2,500 South Tyneside Homes tenants affected -Direct payment to tenants as part of Universal Credit – currently paid direct to landlord Private housing (3,700 recipients in South Tyneside): -Various caps, freezes and restrictions – less rent now eligible Housing Benefit

Employment and Support Allowance (9,400 recipients): -Continued work capability assessments -To be time limited to 1 year in most cases -Additional work related requirements Personal Independence Payment (7,550 recipients): -Replacement for Disability Living Allowance for people of working age – North East will be pilot area from April % saving assumed – more people will not qualify -Longer qualifying period -“Medicals” for all current DLA recipients Sickness and Disability Benefits

Changes to tax credit system (19,000 families in South Tyneside): –Lowering income thresholds for tax credits –People keep less of their tax credits as income rises –Reduced amounts of child care cost that can be covered –Need to work more hours to qualify CPI rather than RPI used for uprating benefits Benefits cap of £26,000 (50 families in South Tyneside) More rigorous claimant commitments Lone parents have to be actively seeking work earlier Removal of legal aid for welfare benefits and debt Other changes

Council tax benefit localisation Each Council to design its own CTB scheme New scheme to start in April 2013 Consultation on local scheme currently underway

Social fund Discretionary social fund being devolved. Currently covers: –Community Care grants – grants for household goods to support people to return or remain in community (3,000 applications in South Tyneside, £0.5m spend) –Crisis loans – interest free loans to people who cannot meet short term needs in an emergency/disaster (8,500 applications in South Tyneside, £0.6m granted) Government view that devolving will link better with local needs, priorities and existing support services Freedom to design our own system 18% reduction in funding

Impact

Case study 1 Mr Scott is a 40 year old man living by himself in a two bedroom South Tyneside Homes flat in South Shields. His son visits him at weekends as he is separated from his former partner. He is unemployed, and receives Job Seekers Allowance of £71 per week. He has his rent of £72 per week paid for by Housing Benefit directly to South Tyneside Homes and receives full council tax benefit As a consequence of welfare reform: In April 2013, the “empty bedroom tax” will mean Mr S will have to pay £10 per week towards his rent, unless he can find a one bedroom property Depending on decisions made about council tax benefit, Mr S may have his council tax benefit reduce and have to pay council tax for the first time. This is estimated at £4.15 per week under the proposed local council tax benefit model. In October 2013, Steve may move onto Universal Credit and due to direct payment of this benefit monthly, will move from having £71 paid to him weekly to having £576 paid to him monthly. He will have to budget monthly to pay his rent to South Tyneside Homes and meet other bills monthly rather than weekly Income before:£143 per week of which £71 is discretionary spend Income after:£ per week all of which is discretionary spend

Case study 2 Mrs Williams is a lone parent from Boldon on Income Support, with 2 children aged 5 and 9 living in private rented property. Barbara has an income of £198 made up of Income Support, Child Benefit and Child Tax Credits. She claims Housing Benefit which covers all of her £130 rent, and receives full council tax benefit. As a consequence of welfare reform: Her housing benefit will drop by £15 a week as a result of using a lower benchmark for private sector housing benefit – she will either have to find a cheaper property, or make up the shortfall Depending on decisions made about council tax benefit, Mrs W may see her council tax benefit reduce and have to pay council tax for the first time. This is estimated at £5.57 per week under the proposed local council tax benefit model. Due to the age of her children, she will have to claim Job Seekers Allowance rather than Income Support and be actively seeking work. Unless she can find work that fits around school hours for her children, she will either have her benefit docked for refusing work, or have to pay for childcare – if paying for childcare, Mrs W will have to find an extra £30 per week due to reductions in the amount of child care costs tax credits will cover. Income before:£328 per week Income after:£ per week All Barbara’s income is discretionary spend as she rents privately

Headlines Estimated £55m annual reduction in household income in South Tyneside Places further premium on economic growth/job creation, particularly for low paid parents and people with a disability/long term sickness Financial inclusion – significant numbers of people will start receiving large sums directly Councils take over responsibility in April 2013 for: –Localised council tax support scheme –Supporting vulnerable people in emergency situations Council loses responsibility for Housing Benefit (October 2013 onwards)

Impact Increase in Homelessness Children and families: –Increase in child poverty –Increase in family stress –Impact on foster carers and care leavers Health and social care: –Impact on health and wellbeing –Increase in mental health problems –Increased demand for social care services South Tyneside Homes –Increased arrears –More demand for smaller properties –Increased stock turnover Advice services – significantly increased demand Impact on jobs market

Winners and losers Winners Single people in low paid work with no child care costs Losers People who fall ill and need to take an extended period off work People with a disability trying to work People with severe disabilities Low paid working parents relying on formal child care People with large families

How should we respond? 1.Support those most affected by welfare reform into jobs 2.Make the money of those affected by welfare reform go further Promote credit union, price comparison tools, money advice services and budgeting/financial awareness 3.Inform and prepare residents for welfare reform Family Resilience programme to promote resilience and enhance literacy, numeracy, IT, budgeting and financial skills Publicity/communications campaign, particularly for social housing tenants Digital inclusion Financial inclusion

How should we respond? 4.Inform and prepare staff for welfare reform Partnership event for staff to share information and best practice Workforce development implications 5.Engage, involve and prepare elected members 6.Internal council activity Establish exact impacts on services Put in place local schemes for council tax support and social fund Consider other policies – housing allocations policy, discretionary housing payments Consider impact on advice services

Questions