Welfare Reform briefing for Highland MPs

24th February 2013

The Highland’s three MPs - Danny Alexander (Inverness Nairn Badenoch and Strathspey), Charles Kennedy, (Ross Skye and Lochaber) and John Thurso (Caithness Sutherland and East Ross) - attended a meeting of The Highland Council’s Welfare Reform Working Group today (Friday) to hear the Council’s concerns about welfare reform and ideas for action that may reduce the impact of change.

Councillor Alasdair Christie, Chairman of The Highland Council’s Welfare Reform Working Group welcomed the opportunity of a face-to-face briefing with the MPs.

He said: “While I understand the need to reform the Welfare System, the Government’s proposals, in their current form, unfairly discriminate against the most vulnerable individuals in society. The Working Group was pleased to hear that the MPs will take every opportunity to speak further with the Secretary of State for Work and Pensions, Iain Duncan Smith, about the adverse impacts for rural councils such as Highland, and consider the suggestions for improvement that we have made.”

A briefing paper presented to the MPs said the “Bedroom Tax”, the introduction of Universal Credit and direct payments would result in rent arrears, greater pressure on housing lists, and may lead to increased homelessness.

Councillor Christie said the “Bedroom Tax” was the single biggest immediate concern relating to Council house and housing association tenants. It was estimated that this would affect around 3,000 council house tenants in Highland (23% of tenants). This measure alone would result in a reduction of around £2 million per year in housing benefit entitlement. An additional factor was that Housing Benefit is currently received directly by the Council in payment of rent but under the new Universal Credit, which starts to be phased in in Scotland from October 2013, one person in each household would receive monthly payments towards their housing costs and be responsible for budgeting to make these rent payments to the Council.

The Council has made changes to its allocations policy to make it easier for people to move to a smaller house, but it did not have enough smaller houses for everyone who needed them. For example, it only had 450 one-bedroomed properties available for let in the last year.

The Council, he said, had agreed to increase resources to its Income Maximisation Team, CABs and Housing Team to deal with the increased demand for services which is already evident.

He added: “In Alness, for example, the Council had 13 one-bedroom houses available in the last year, against an existing housing list of 170 applicants who had listed Alness as their 1st preference area. The Council estimates that there are 136 tenants in Alness affected by the bedroom tax who would be assessed as requiring a one-bedroom house. The Council cannot meet existing demand for 1 bedroom houses, and will not be able to transfer all tenants affected by the “bedroom tax” to the right size of house.”

The Briefing Paper -

The Highland Council
Meeting with Highland MPs
Welfare Reform Briefing Note

1 Purpose
1.1 This briefing note has been prepared ahead of the meeting between Highland
Council and Highland MPs on 22 February 2013.

1.2 It outlines some of the main impacts that the changes are likely to have on
communities in the Highlands and contains ideas for action that may mitigate
these impacts.

1.3 The aims of Welfare Reform are to:
• Create the right incentives to get more people into work by ensuring
that work pays

• Protect the most vulnerable in society
• Deliver fairness to those claiming benefits and to the taxpayer

1.4 This paper comments on how these objectives could be achieved.

2 Housing Impact

2.1 The paper focusses on the impact for tenants in the social rented sector,
although Universal Credit and other aspects of welfare reform affect tenants in
other housing tenures.
2.2 We anticipate that the “Benefit Cap”, “Bedroom Tax” and the introduction of
Universal Credit will result in an increase in rent arrears, greater pressure on
housing lists, and increased homelessness.

2.3 This would have a negative impact on the Housing Revenue Account, where
higher arrears and the need for greater bad-debt provision would reduce
capacity for new borrowing to fund council house building.

2.4 The Council has agreed to increase resources to its Income Maximisation
Team, CABs and Housing service to deal with the increased demand for
services which is already evident. We have created an additional budget of
£320,000 per year for these services. This demonstrates the Council’s
concern and willingness to commit extra resources, particularly at a time of
budget pressure.

3 “Bedroom Tax”

3.1 The “Bedroom Tax” is the single biggest concern relating to Council house
and housing association tenants. It is estimated that this will affect around
3,000 council house tenants in Highland (23% of tenants). This will result in a
reduction of around £2m per year in housing benefit payments received direct 2
to the Council. Tenants will be expected to make these rent payments to the
Council.

3.2 We have made changes to our allocations policy to make it easier for people
to move to a smaller house, but we do not have enough smaller houses for
everyone who needs them. For example, we only had 450 one-bedroomed
properties available for let in the last year.
3.3 There are local variations in the supply and demand for smaller houses. The
following table gives some information on current housing supply and demand
as well as the potential impact on tenants affected by the “bedroom tax” in a
random sample of communities.
Community 1 bed houses
to let in the
last year
Current
demand for 1
bed houses
Households
affected by
bedroom tax
Estimated
“shortfall”
ALNESS 13 170 136 34
AVIEMORE 7 181 18 5
BEAULY 5 72 13 3
CAOL 6 46 75 19
DINGWALL 8 246 53 13
EVANTON 4 33 8 2
GOLSPIE 4 38 9 2
MALLAIG 0 34 7 2
MUIR OF ORD 5 68 18 5
STRATHPEFFER 0 35 11 3
TAIN 9 76 55 14
THURSO 37 195 75 19

3.4 In Alness, for example, the table shows that we had 13 one-bedroom houses
available in the last year, against an existing housing list of 170 applicants
who had listed Alness as their 1st preference area. We estimate that there are
136 tenants in Alness affected by the bedroom tax who would be assessed as
requiring a one-bedroom house. The Council cannot meet existing demand for
1 bedroom houses, and will not be able to transfer all tenants affected by the
“bedroom tax” to the right size of house.

3.5 The estimated shortfall column in the table provides an estimate of the
additional housing that would be needed assuming 25% of households
affected by the “bedroom tax” wanted to move house. This is likely to be a
conservative estimate. The figures are for the selected communities. If that
were extrapolated across all communities the additional housing supply target
would be 750 new houses. It would be extremely difficult to fund a new build
programme of this amount given the risks to Housing Revenue Account
Income associated with Welfare Reform. That risk could of course be
mitigated by writing off the Council’s outstanding housing debt.

3.6 At its most extreme, Appendix 1 contains a list of 38 communities where we
have no 1 bedroom houses, but where there are tenants affected by the
Bedroom Tax. These are mainly small rural communities. In these cases the
only option available to tenants affected would be to seek a transfer to another
community, usually many miles away and with limited public transport links. In 3
practice this is unlikely to be viable given the under-supply of smaller houses
in “neighbouring” communities.

3.6 Appendix 2 provides some case studies highlighting real life examples of the
impact of the “bedroom tax” for Council house tenants.

3.7 Furthermore there is concern relating to the impact of the bedroom tax on
parents who have occasional access to their children and foster carers.

3.8 The current policy of the Council is to allocate an additional room to parents
with overnight access. Under the new provision, absent parents could be
forced into smaller properties or shared accommodation where there may be a
substantial risk to the child or access removed.

3.9 Although the implication for foster carers does not appear to be significant
across Highland, there is increased concern that the implementation of underoccupancy may be a barrier to encouraging potential foster carers in the
future.

Solutions:
• Amend proposals for bedroom tax to exempt households where there is
insufficient supply of smaller houses within the social rented sector.
• Amend proposals to exempt tenants of significantly adapted properties from
the “bedroom tax” where these properties meet their long term needs.
• Amend proposals to allow additional bedrooms for foster parents and parents
who do not live with their children and have overnight caring responsibilities
for these children.

4 Direct Payments
4.1 At present housing benefit payments are paid direct to Councils / Housing
Associations. Under Universal Credit claimant will receive a single benefit
payment, part of which they will be expected to use to pay rent to their
landlord.

4.2 Current housing revenue account income from Housing Benefit is around
£29m per year. Direct Payment pilots are reporting figures of 90% payment of
rent. In practice collection rates are likely to be lower as not all tenants have
chosen to participate, and the pilots covered only housing benefit, not the full
range of benefits that will make up Universal Credit. A 90% payment rate in
Highland would result in a reduction in rental income of £2.9m per year.
Assuming a lower payment rate of 80% Housing Revenue Account income
would reduce by £5.8m per year. Either scenario would significantly impact on
our ability to provide landlord services and fund new council house building.

4.3 We believe that face to face contact and the option of direct payment of rent to
landlords at an early stage to avoid rent arrears are essential to protect
vulnerable tenants and to protect landlords’ rental income. It is important to
recognise the important role rent income plays in major capital investment in
housing, and in turn its importance to the local economy.

4
Solution:
• Amend proposals so that Councils and other housing providers/landlords
would be entitled to receive the housing element of Universal Credit direct
from DWP where a tenant is in arrears, has a history of arrears and/or is
vulnerable.

5 Universal Credit

5.1 The primary route for Universal Credit claims will be through an online service.
It is predicted that on average 80% of claims will be administered through this
method with assessments and award calculations being made automatically
with limited personal intervention.

5.2 The geography of the Highlands means that not all potential recipients of
Universal Credit will be able to access the online service. The majority of
Highland is deemed access-deprived on the basis of distance to services such
as a GP, shopping centre, fuel, education and post office. In addition, there is
limited access to Jobcentre Plus offices

5.3 We were encouraged by the press release issued by the DWP on 13 February
and Ministers’ commitment that vulnerable claimants will get personalised help
with their Universal Credit claim, and be protected and supported as they
move onto the new benefit.

5.4 Under Universal Credit every claimant will be required to accept a ‘claimant
commitment’ which will outline the individual requirements that they are
expected to meet in order to receive the credit. Although there are variations
dependent on each individual’s circumstances there is a concern as to how
the compliance with these requirements will impact locally within the
Highlands.

5.5 Factors such as availability of, and access to employment, transport links and
childcare will add considerable pressures making it difficult (impossible in
some cases) to ensure that the requirements are met. In some rural areas the
marginal benefit of taking up low paid employment, after offsetting the higher
costs of travel to work and the availability and increased costs of childcare will
not assist the Government’s reform aspiration that ‘work pays’.

5.6 Appendix 2 contains a case study of the impact of sanctions. Examples such
as this are likely to arise frequently within a rural area and the proposed
sanctions as a result of failure by the claimant to meet their commitment may
result in families slipping further into poverty as Universal Credit payments are
reduced or stopped.

Solutions
• If Universal Credit is to be phased in consider phasing rural areas in the later
stages, so that we can gain from the experience of earlier phases in relation to
issues of access, infrastructure and face to face support.

5
• Any sanctions that are imposed need to be realistic with legislation being
amended to take into consideration the particular issues that are faced by rural
and remote areas.

• We would like to work closely with the DWP and JOB Centre Plus in
developing a partnership approach to face to face contact and digital access
that meets addresses the challenges posed by the unique geography of the
Highlands. This would require recognition by UK Ministers that different
solutions are required in remote, rural communities.

6 Digital Participation
6.1 The introduction of Universal Credit will dramatically change the welfare
system for work age adults. Universal Credit will be ‘digital by default’,
meaning that the majority of claimants will make a claim online and then
personally manage their claim directly through an online account.

6.2 Not all people or businesses have access to the internet and, even if they
have the potential to access the internet, some feel they are unable to do so
because of a lack of skills or confidence. There are also those who do not
want to use an online system, with some expressing a general dislike of using
computers or concerns about online security. As a general rule it is considered
that across the population, 1/3rd will already be online and active, 1/3rd have
capability but not always do so, and 1/3 need a lot of support to do so.
However, once disadvantaged areas/individuals are considered the ratio
increases for those who need a lot of support.

6.3 As a consequence of this ‘digital by default’ approach, targeted support is
required for certain groups of claimants, such as:
• those without access to the internet in their home;
• those who feel they do not have the skills or confidence to use a computer
or access the internet; and
• those who do not want to use the internet and have concerns about online
security or affordability.

Solutions
• Prioritise the use of DWP Flexible Support Fund for use in local partnership
activity/programmes to promote digital participation. This would allow for
example, DWP/JC+ to complement the Council’s existing Adult IT Literacies
courses being run and the recently prioritised Highland Council preventative
spend to support digital participation in Work Clubs.
7 Employability Services
7.1 It is anticipated (and now being evidenced by the clients who are coming to
the Council supported Work Clubs) that those individuals who are currently
unemployed and claiming Job Seekers Allowance, are becoming more active
in their search for work and there are new clients (previously IB/ESA
claimants) accessing employability related services. It is noted that many of 6
these clients are well removed from the labour market and need significant
and sustained support as they look for work or take steps towards it.

7.2 The number of individuals involved in each of the various claimant groups
across Highland are as follows:
Job Seekers Allowance 3,911 (Nov 12)
Employment Support Allowance/ Incapacity Benefit 9,600 (Feb 12)
Income Support 4,180 (Feb 12)

7.3 To support these clients in their journey towards work requires client focused
and aligned services from a range of public, private and voluntary sector
providers. Over recent years the public sector ‘landscape’ of employability
related services has changed significantly. This continues and change often
appears ‘out of the blue’ from both the UK and Scottish Governments. Much of
this change is well intended but is not aligned and therefore means in practical
terms on the ground that the ‘system’ actually impedes people from
progressing into work. Case study 7 in Appendix 2 provides an example.

Solutions
• Dialogue between UK and Scottish Governments over emerging policy and
alignment of effort. For example, resolve the funding issue which in practice
means that a Work Programme client is not able to access Skills Development
Scotland or EU funded activity.

• Open up performance data on Work Programme so that local partners can
understand how the service is working and whether local added value activity
is needed/can be provided to progress joint services in the interest of clients
including those clients who may exit the Work Programme from summer 2013
onwards.
• Prioritise the use of DWP Flexible Support Fund for use in local partnership
activity/programmes to increase front line advisory services. This would allow
for example, DWP/JC+ to complement and add value to the Council’s and
partners existing services.

8 Economic Impact
8.1 The table at Appendix 3 provides an estimate of the local impact of £3.1m
arising from the reductions made to the Housing Benefit system from April
2011 to April 2013.

8.2 Material reductions in household income is likely to impact the Council’s other
main income streams and place increased pressures on Health and the
criminal justice system. For example, a 1% reduction in Council Tax collection
would result in £936k less revenue to the Council.

8.3 The cumulative effect of Housing Benefit changes alone will have knock-on,
unintended, consequences to local businesses and introduces a further risk to
the Council’s income. For example, a 1% reduction in Non Domestic Rates
income would result in £1.1m less revenue.7

Appendix 1
Parliamentary Constituency Communities with no 1-bedroom houses
Tenants affected by “bedroom tax”
Caithness, Sutherland and Easter Ross Altanaharra 1
Caithness, Sutherland and Easter Ross Aughengill 1
Caithness, Sutherland and Easter Ross Canisbay 1
Caithness, Sutherland and Easter Ross Forss 1
Caithness, Sutherland and Easter Ross Inveran 1
Caithness, Sutherland and Easter Ross Kinbrace 1
Caithness, Sutherland and Easter Ross Kinlochbervie 4
Caithness, Sutherland and Easter Ross Latheron 1
Caithness, Sutherland and Easter Ross Lyth 2
Caithness, Sutherland and Easter Ross Milton 10
Caithness, Sutherland and Easter Ross Oykel Bridge 2
Caithness, Sutherland and Easter Ross Papigoe 5
Caithness, Sutherland and Easter Ross Rhiconich 1
Caithness, Sutherland and Easter Ross Rosehall 2
Caithness, Sutherland and Easter Ross Strathy 1
Caithness, Sutherland and Easter Ross Ulbster 1
Inverness, Nairn, Badenoch and Strathspey Tornagrain 2
Ross, Skye and Lochaber Acharacle 1
Ross, Skye and Lochaber Achnaphubuil 1
Ross, Skye and Lochaber Achnasheen 2
Ross, Skye and Lochaber Banavie 1
Ross, Skye and Lochaber Cannich 2
Ross, Skye and Lochaber Contin 7
Ross, Skye and Lochaber Duirinish 1
Ross, Skye and Lochaber Duror 1
Ross, Skye and Lochaber Edinbane 1
Ross, Skye and Lochaber Ferrindonald 1
Ross, Skye and Lochaber Garve 5
Ross, Skye and Lochaber Glencoe 5
Ross, Skye and Lochaber Glendale 1
Ross, Skye and Lochaber Glenelg 1
Ross, Skye and Lochaber Lochyside 3
Ross, Skye and Lochaber North Ballachulish 1
Ross, Skye and Lochaber Poolewe 1
Ross, Skye and Lochaber Ratagan 2
Ross, Skye and Lochaber Shieldaig 1
Ross, Skye and Lochaber Spean Bridge 2
Ross, Skye and Lochaber Torridon 18
Impact of the “Bedroom Tax” on Highland Council Tenants: Case studies

Case Study 1:
Mr A is the sole tenant of a 3 bed house in a rural community, where he has lived all
his life. Demand for housing in this community is low, and this allowed us to offer Mr
B this larger house last year when he lost his job and accommodation. He is now
unable to work due to ill health and receives £71 a week in benefit. His rent is £75.64
weekly. Under current proposals he will only be eligible for full housing benefit if he
moves to a one bedroomed property. He is currently claiming housing benefit to help
him pay his rent. He will be under-occupying his home by 2 bedrooms come April
2013 and his eligible rent will be restricted by 25%. He will have to find an extra
£18.91 weekly from his benefit to pay towards his rent. He does not currently have a
transfer application lodged. Even if he does request a move to a smaller property,
there is no alternative housing available in his community.
Mr A will have to pay an extra £18.91 per week towards his rent from a gross
income of £71.00 per week.

Case Study 2:
Mr B has lives in a 3 bedroom house in a community where he has strong family
ties. He is of working age, but currently not working, receiving £71 a week and
claiming HB to help him pay his rent. His rent is currently £75.64 weekly. He will see
a 25% reduction in his eligible benefit from April 2013, and will potentially have to find
nearly another £20 a week from his other benefits. Although there are one bedroom
properties where he lives the turnover is limited and there is high demand from other
housing applicants in the community.
Mr B will have to pay an extra £18.91 per week towards his rent from a gross
income of £71 per week.

Case Study 3:
Ms C is a lone parent with a young child aged 6, living in a 3 bedroomed house. At
present she is on jobseekers allowance and receives maximum housing benefit of
£75.64 per week. Her total income from all her benefits, including child benefit,
housing benefit, council tax benefit and tax credits is £243.95 per week. She has
been offered employment in another town in the area. The hours she has been
offered are limited to 20 hours spread over 4 days. If she takes up the offer of
employment travelling on the bus to the next town means she will require additional
hours of childcare as she would be away from home for longer hours due to a limited
bus service. To travel by car is a more expensive option due to higher fuel prices in
rural areas. Under current Tax Credit legislation childcare has to be provided by a
registered or approved childcarer to be eligible for help towards the cost. There is
currently no registered childcare available where she lives, so she would be reliant
on friends and family to provide childcare before and after school and almost full time 9
during the school holidays. She estimates that she will need to spend at least £40 a
week on this childcare and to cover any food or activities for her child. If she was to
take on the offered employment her total income including wages, tax credits and
benefits would be an average of £302 per week however her weekly expenditure for
travel, childcare and an additional payment due to the ‘bedroom tax’ would be
£129.04, therefore her net income would be £172.96. She would be significantly
worse off taking this job than she would be on benefits.
Ms C will have to pay an extra £10.59 per week from a gross income of £243.95
per week. If she were to take the offered employment she would be worse off
by approximately £80 per week.

Case Study 4:
Mr D lives in a 3 bedroomed property in a small rural village. He is in poor health and
currently receives £108.05 per week employment and support allowance (ESA), this
amount includes an additional transitional amount of £8.90 and is due to his
Incapacity Benefit entitlement being more than his ESA. This transitional amount will
gradually reduce with the annual uprating of his benefits or when he has a change of
circumstances. From April 2013 he will be under occupying his property by 2
bedrooms and therefore subject to a 25% reduction. This means he will have to pay
an extra £17.52 towards his rent. If Mr D requested a move to a smaller property in
the same general location this would undoubtedly take some time as there are only a
limited number of one bedroomed properties in the area with very few becoming
available for let each year and many other applicants for housing from the area.
Mr D will have to pay an extra £17.52 per week towards his rent from a gross
income of £108.05 which includes a transitional amount of £8.90.

Case Study 5:
Miss E lives in a significantly adapted 2 bedroomed property in a small town. She
requires use of a wheelchair in and around the property. Miss E currently receives
£300.70 per week in benefits, of which £131.50 is Disability Living Allowance. From
April 2013 she would be subject to a 14% reduction due to her under-occupancy and
would be required to pay £9.62 per week towards her rent. Although there are a
number of one-bedroomed properties in the area, very few become available for let
each year and overall demand is high. There would be a significant cost to the
council if Miss E were to move, as her new property would require to be significantly
adapted to meet her need. In fact the current property is more suitable for Miss E’s
long term needs as she may at some point require an overnight carer and therefore
no longer be subject to the bedroom tax.

Miss E will have to pay an extra £9.62 per week towards her rent from a gross
income of £300.70 per week and lives in a property which has been
significantly adapted for her needs.10

Case Study 6:
Mr F lives and works in a small rural community. He currently resides in a 2 bedroom
property and receives £14.42 in Housing Benefit towards his £67.84 rental liability.
Mr F receives working tax credits in addition to his earnings, which includes an
additional amount for a disability; he also receives Disability Living Allowance. Mr F
will be subject to a 14% reduction from April 2013 which will reduce his benefit
entitlement to £4.92 per week meaning he will need to find £9.50 per week from his
weekly income of £212.87 to pay towards his rent. Mr F could request a transfer to a
one bedroomed property but would need to consider employment prospects and the
associated travel costs and implications if an alternative property is not available in
the community in which he currently lives and works.
Mr F will have to pay an extra £9.50 per week towards his rent from a gross
income of £212.87 per week.

Appendix 3
Housing Benefit Changes
Commencement date of change
Benefit Change Estimated annual loss
April 2011 Introduction of the 30th Percentile
rent for Local Housing Allowance £260,000
April 2011 Removal of the up to £15 per week
top-up for Local Housing Allowance £554,320
January 2012 Implementation of the Local
Housing Allowance shared room rate to those aged under 35
£150,800
April 2013 Restriction to Housing Benefit as a result of under -occupancy
£2,000,000
April 2013 Overall Benefit Cap (Housing Benefit claimants)1
£189,731
Estimated loss attributed to Housing Benefit changes £3,154,851

1
Estimate based on DWP data scan January 2013

To see the origianl document and get see the tables neatly laid out go to
http://www.highland.gov.uk/NR/rdonlyres/5CB5008F-3BDF-4A8D-9CEA-C6E6DD5127D3/0/WelfareReformBriefingforMPsFebruary2013.pdf