1 Welfare Reform Friday 15 th June 2012 Jonathan Bottomer

2 Why change (1) managing rising costs delivering fairness increasing employment This means transforming what we do and how we do it

3 Why change (2) Growth of spending over a decade Caseload growth: nearly 4m; today nearly 5m

4 Housing Benefit has already changed From April 2011: Local Housing Allowance (LHA) reform (removal of 5 bed rate and £15 excess, caps to weekly rates) size-criteria: additional room for a non-resident carer where a disabled person has need for overnight care staged increase in non-dependant deductions LHA set at the 30 th percentile of rents in each Broad Rental Market Area, rather than the median From January 2012: LHA – extend shared accommodation rate to those under 35 From April 2012: LHA rates frozen

5 …and more reform impacts for local authorities from 2013 (1) LHA rates to be uprated annually by reference to the Consumer Price Index from April 2013 – this will end the monthly uprating of LHA rates and bring the system in line with other pensions and benefits Housing Benefit for working age Social Rented Sector customers will be restricted for those who are occupying a larger property than their household size and structure would warrant from April 2013: –affecting 19% of working age Social Rented Sector Housing Benefit claimants in London, with an average loss of £21 p/wk; compared to 32% and £13 p/wk in Great Britain

6 …and more reform impacts for local authorities from 2013 (2) introduction of localised support for Council Tax April abolishing the discretionary elements of the Social Fund. New locally-based provision to replace Community Care Grants and general living expenses Crisis Loans will be designed and administered by local authorities in England and devolved to Scotland and Wales

7 …and more reform impacts for local authorities from 2013 (3) Disability Living Allowance to be replaced with a new benefit to be introduced for eligible working age people (16-64) in 2013/14 called the Personal Independence Payment Single Fraud Investigation Service: –to consolidate benefit/tax credit investigation service across the DWP, local authorities and HMRC –to improve efficiency, consistency and fairness and provide better value for money, ensuring expertise and local knowledge is not lost –to co-design an organisational structure for 2013 –high level design issued for comment April 2012 …and of course introducing Universal Credit

8 Benefit Cap The benefit cap will be introduced from April 2013 and will apply to the combined income from the main out-of-work benefits, plus child benefit and child tax credits The working assumption is that the cap will be: –£500 per week for couples and lone parents –£350 per week for single adults 67,000 households will be affected by the cap in 2013/14 The average benefit reduction is £83 a week per household

9 Benefit Cap - Exemptions The following households will be exempt from the cap: those entitled to: –Working Tax Credit those in receipt of: –Disability Living Allowance –Industrial Injuries Benefits –Personal Independence Payment –Attendance Allowance –Employment and Support Allowance, if paid with the support component –War Widow’s and Widower’s pension claimants who have been in employment for 52 weeks or more when they claim benefit (and the loss of employment is not of their own making) will be exempt from the cap for up to 39 weeks

10 Benefit Cap - Implementation Phase 1 - from April 2012, Jobcentre Plus and local authorities will be providing support to those households claiming out-of-work benefits that will be impacted by the benefit cap in April 2013 Phase 2 - implementation of the benefit cap for new and existing claimants from April 2013, via a deduction from Housing Benefit Phase 3 - new claims to Universal Credit will be subject to the cap from October 2013

11 What is Universal Credit? the biggest change to the welfare system for 50 years an in-work and out-of-work credit at the heart of a simplified welfare system that will ensure more people are better off in work a change in cultural attitudes to work

12 Universal Credit is A policy A benefit A gateway A platform An ambition that tackles welfare dependency, poverty and worklessness by making work pay that replaces a complex system of working-age benefits and credits with the Universal Credit and a single set of rules that together with our employment support programmes, helps people into work that will help us deliver an internet-age service whilst continuing our face-to-face support for those who need it reforming welfare to transform lives

13 Current System The welfare system: has more than 30 benefits each with their own rules and criteria Work incentives: can be very low, benefits are reduced to take account of earnings but different benefits have different rules Conditionality: some benefit claimants are capable of working but have no obligations to look for work Payments: are paid to different adults in a household and for various periods How is Universal Credit different? Universal Credit Universal Credit: is a new single means- tested support for working-age people who are in or out of work Universal Credit: will ensure that work pays. Financial support will be reduced at a consistent and predictable rate and people will generally keep a higher proportion of their earnings Universal Credit: will personalise conditions according to people’s capability and circumstances Universal Credit: is a single monthly payment to each household (Though we will retain the ability to pay more frequently or to split payment in exceptional circumstances)

14 Personal Independence Payment Universal Credit How are we simplifying the system? Child Benefit, Carer’s Allowance (will remain) Income related JSA Income related ESA Income Support (including SMI) Working Tax Credits Child Tax Credits Housing Benefit Disability Living Allowance Current system New system Contributory JSA and ESA (still considering how these will work) Council Tax Support (localised scheme) … will include support for housing and children Pension Credit

15 Local authority engagement and governance Support and Exceptions Working Group Practitioners Operational Group Security Operational Group Local Authority Association Steering Group Local Authority Transition Working Group Local Authority Finance & Commercial Working Group

16 Financing Universal Credit: The Finance and Commercial Working Group Cost of decommissioning legacy Housing Benefit service Cost reductions: Reduction in resource required to deliver Housing Benefit as caseload declines (as a result of Housing Benefit claimant migration) Resource required to support Housing Benefit claimant migration: (Including support for claimants wanting Housing Benefit services help to claim Universal Credit from October 2013) Resource required to support ongoing Universal Credit service delivery Universal Credit will impact the local authority cost base and subsidy in 4 ways: An announcement on the detailed breakdown of subsidy, by local authority, for 2013/14 is expected in Autumn, which will include the impact of Universal Credit new burden funding

17 Local authority engagement and governance the Universal Credit Delivery Steering Group report to the Universal Credit Programme Board Paul Martin, Chief Executive of London Borough of Wandsworth now sits on the Universal Credit Programme Board to represent local authorities local authority staff are working with DWP as part of the Universal Credit teams. For example we have secondees working in the Programme Team and on the Agile Design team local authority staff are also involved in the Local Authority Transition Working Group and other specific working groups a local authority secondee is working on the project for the Single Fraud Investigation Service

18 Universal Credit – implementation and transition challenge Universal Credit supports people into work and continues support to ensure that work pays. To deliver this we need to: Convert 12 million claims to 8 million household accounts Create a digital platform that both meets the needs of people who are used to managing their lives online, whilst helping claimants who need extra support to get online Ensure the right support for vulnerable people Create a system capable of flexibility and continuous improvement We are building a 21st century benefits system, with Universal Credit as its foundation. DWP will lead delivery, drawing on tax credit and housing benefit expertise but we are keeping options open for approaches to delivery in the longer term.

19 Oct ‘13 Apr ‘13 Oct ‘14Oct ‘15Oct ‘16 Oct ‘17 Path- finder Go Live New claims from out-of-work customers Apr ‘14 Feb ‘11 Design & build New claims from in-work customers “Natural” migrations as a result of changes of circumstances Managed migrations Legacy load JSA, ESA, IS, HB, WTC, CTC 8m 6m4.5m2.5m UC load When will we deliver Universal Credit?

20 Migrating to Universal Credit: a phased approach UC Caseload Oct 17 Apr 14 End of 2015 Oct 13 Phase 1 – begin taking in claims / changes (natural migrations) based on a manageable profile Phase 2 – prioritising the start of managed migration based on those who will benefit most from UC Phase 3 – prioritising safe closure of Housing Benefit in the final stages of migration 8m House holds

21 How will people migrate? new Universal Credit claims – where legacy benefits are closed to new entrants natural migration – where a change of circumstances no longer results in new legacy award but a migration of the entire household entitlements to Universal Credit managed migration – where DWP initiates the transfer of an entire household from legacy benefits to one Universal Credit entitlement

22 Who will deliver Universal Credit? from October 2013, Universal Credit will be delivered by DWP, drawing on the expertise of HMRC and local authorities the best of the current capability will be used to deliver the new service, taking the opportunity to modernise and improve it to deliver better efficiency for the taxpayer and better service for claimants –minimises risk to implementation –based on external advice how Universal Credit will be delivered in the longer term is under active consideration. Decisions will be taken in 2015, so that we can learn from our early experience of delivery

23 DWP National Service Offering  Labour market services  Claimant support  Complex needs  Budgeting support  Visits  Online access  Risk identified Local Flexibility  Claimant support  Complex needs  Budgeting support  Online access Developing Face-to-Face Services Since the announcements in May 2011 we have worked in partnership with local authorities to co create the design options for the face-to-face service delivery from 2013 The joint design team established that a national service offering with targeted local flexibility is the optimum solution from October 2013.

24 Preparing customers for the changes we have set up a Support and Exceptions Working Group, at the request of Ministers. This group will look at support required for claimants to make the move and what exceptions are needed the Migration Strategy will look at the steps required to prepare claimants for the behavioural changes and what moves can be made ahead of transition: –Household Accounts and managing household budgets –four weekly/monthly payments –budgeting and Financial Management –conditionality and variable conditionality –self service/Digital the Migration Plan was published on 1 November 2011

25 Direct payments in Universal Credit responsibility prepares people for the world of work: –managing your rent or mortgage is a social responsibility –progress has already been made through the LHA private rented sector tenants will generally be paid as now social-sector landlords need stable incomes: –Welfare Reform Act pledges appropriate protection –Demonstration projects to commence June 2012

26 Direct Payment Pilot Sites Scotland: City of Edinburgh with Dunedin Canmore Housing Association Northern England: Wakefield, with Wakefield and District Housing West Midlands: Shropshire, with Bromford Group, The Wrekin Housing Trust, Sanctuary Housing Southern England: Oxford, with GreenSquare group Wales: Torfaen, with Charter Housing and Bron Afon Housing London: Southwark, with Family Mosaic Housing Association

27 Live Innovation Trialling testing to start by the end of April 2012 To trial components and as far as possible, replicate Universal Credit in a live environment Model Office (planned to start by April 2012) A series of incremental, integrated tests in a ‘controlled’ environment that will be built as the Universal Credit system, processes and support products are developed Pathfinder (planned for April 2013) An early implementation of Universal Credit – to enable us to learn from experience and build confidence LA-led Pilots Will test service integration at local level for improved claimant support and work focus Next steps – testing Universal Credit

28 Next steps – online services There is a four year transition period from 2013 to We don’t expect everyone to switch channels on day one. 50% of contacts that can be digital, should be digital in % of contacts that can be digital, should be digital by 2018 For our claimants IT skills are increasingly important: It is cheaper to buy goods and services online It is easier to search for work online and move into work We want to help people to make the change.

29 Universal Credit and Housing The way things fit together is becoming clearer Local authorities will: continue to deliver Housing Benefit for up to 6 years have a critical role in developing the Universal Credit Programme be responsible for localised Council Tax support be critical to managing transition have a role in supporting claimants be critical in tackling issues will have a role in other welfare provision Local authorities may: provide some face-to- face delivery of Universal Credit retain some residual housing cost functions

30 IT and data sharing with local authorities What we have achieved Successfully delivered the Employee Authentication Service project and Tell Us Once now utilising the infrastructure Successfully delivered the ATLAS project and this is on track to achieve the expected savings in from reduced under and overpayments of Housing Benefit and Council Tax Benefit Looking forward DWP recognises the importance of sharing data with local authorities for a wide variety of purposes We are planning to brigade together work on the delivery of data sharing initiatives to maximise efficiency and the re-use of existing infrastructure In particular we are considering: –streamlining the provision of ETDs –how to help with the transition of housing costs into Universal Credit and, subsequently, Pension Credit –how we can keep local authorities informed on the changes that PIP will introduce –how best to support the delivery of the benefit cap –how we can support local authorities in running local Council Tax support schemes –how we can support local authorities in delivering a range of other services (e.g. things like Blue Badge and Fairer Charging)

31 Changes to Pension Credit (1) as a result of the introduction of Universal Credit the following changes will be made to Pension Credit: –help with eligible rent. Support for eligible rent for customers over Pension Credit qualifying age will be provided through a new component of Pension Credit called Housing Credit –help with dependent children. A new additional amount will be included in the Guarantee Credit element of Pension Credit for dependent children the earliest date that these changes will be incorporated into Pension Credit new claims is currently 12 months after the go-live of Universal Credit e.g. October 2014 Housing Credit will broadly replicate existing Housing Benefit rules so that pensioners should continue to receive the same support as now

32 Changes to Pension Credit (2) the current planning assumption is that migration of Housing Benefit and Tax Credit information for pension age customers will be completed by October 2017 the number of customers over Pension Credit qualifying age in receipt of the above benefits is as follows: –Pension Credit only – 1.4m –Pension Credit and Housing Benefit – 1.3m –Housing Benefit only – 0.3m –Child Tax Credit – 0.1m

33 Changes to Pension Credit (3) Migration Information The migration approach for the pension age caseload will be based largely upon the managed movement of cases in accordance with a profile agreed with both the importing and exporting businesses The intention is that the migration process for pension age customers will be as intervention free as possible. The underlying principle of the migration approach will be to ensure continuity of financial support for pension age customers and to minimise the potential for avoidable contact, confusion and anxiety. This will be achieved through a comprehensive communications strategy and close collaboration with local authorities and HMRC throughout the planning process and beyond.

34 Funding (1) Discretionary Housing Payments (DHPs) –Government contribution towards DHPs trebled to £60m in 2012/13 –Increasing further in 2013/2014 Financial Support –Housing Benefit Administration Subsidy will continue, levels yet to be decided –Financial Flows Working Group set up –looking at all the implications for local authorities including staff and existing service contracts and deciding the appropriate action to take

35 Funding (2) some funding issues will continue beyond the introduction of Universal Credit: –Discretionary Housing Payments –Housing Costs which are not paid direct to the claimant as Universal Credit we are currently looking to see how we will manage –Rent Rebate Subsidy Limitation –management costs related to housing the homeless –costs in relation to Supported (exempt) Accommodation –related Audit arrangements –any administration costs related to the above

36 Maintaining delivery and building resilience for transition continue to collect, use and publish key Housing Benefit and Council Tax Benefit information engage with local authorities if there are concerns about performance. In England, this can include inspection. (In Scotland and Wales the audit bodies have a role in assessing and reporting) offer Performance Development Team support - to help address DWP concerns and to respond to LA requests for support keep arrangements under review – as need to deliver Welfare Reforms and Fraud Strategy

37 Here to help The Performance Development Team offers support on a wide range of issues including: –reviewing processes to reduce handoffs and duplication –maximising efficiency through introducing shared services –sharing good practices within groups –working with neighbouring local authorities to build resilience and share resources –reducing outstanding overpayments in the run-up to Universal Credit

38 Conclusion radical changes to the benefit system move towards Universal Credit over time, with implications for delivery of housing services and costs work in progress on delivery model we will need to do things differently: on-line claims and real-time processing …and so will our citizens Universal Credit in context of broader welfare transformation Welfare Reform alongside some major work to configure broader services especially localised Council Tax support and new fraud services Remember Pension Credit will be amended to provide help with eligible rent and dependant children for pensioners Universal Credit some key decisions are needed to help you plan

Questions