Welfare Reform Act 2012

The Welfare Reform Act 2012 has been highly controversial. While the broad thrust of Universal Credit has been welcomed – simplifying a complicated benefits system and easing the transition into work – many of the specifics of the new benefit, particularly in relation to Housing Benefit, have received a lot of criticism. It is worth noting the concerns that have been raised by numerous organisations about some of the proposed changes.

The proposal to impose a benefit cap has been criticised in particular for its failure to take account of household size. It is calculated on the basis of the average wage of in-work households, criticised as a “crude measure” by the Citizens Advice Bureau for failing to take into account household size, household circumstances, or variations in housing cost. It has been suggested that child benefit should not be included in the cap, which effectively denies the benefit to children in families who have already reached the £500 limit. Moreover, the cap could force the migration of families to cheaper locations – concerns about creating a Paris-style ‘doughnut’ in London, with a jammy rich centre surrounded by poor ghettos, are an example of this. There is also concern that the cap could cause overcrowding in cheaper but smaller properties.

Another concern about changes to Housing Benefit involves the imposition of size criteria on social housing tenants. This has been criticised for discriminating against disabled people, particularly those with fluctuating conditions who need overnight care during periods when their condition deteriorates. Moreover, a large proportion of people affected by the size criteria are disabled and if they were to wish to move a smaller property as a consequence this could require fresh adaptations; the average cost of a Disabled Facilities grant is currently £6,500.

Furthermore, even the DWP has admitted in their impact assessment that there could be a “mismatch” resulting in “insufficient properties to enable tenants to move to accommodation of an appropriate size even if tenants wished to move and landlords were able to facilitate this movement.”

The National Housing Federation has raised a number of concerns about removing the choice for tenants to have their benefit paid directly to their landlord. These include increased levels of arrears and debt for tenants, and increased costs for landlords in arrears recovery, legal costs, and bad debt. Six small-scale demonstration projects have been announced across England to protect landlords’ finances and to help with the clarification of those who count as “vulnerable” and will therefore be exempt from the requirement.

The changes to Employment Support Allowance have also been criticised. The removal of the ‘youth provision’, it has been suggested, threatens to undermine the ability of some young people with disabilities to live independently. They would left eligible only for income-based ESA, which is lost if one becomes part of a couple in which the other earns. Consequently this individual would be left with no independent income at all.

Alongside these criticisms of specific aspects of the Act, there are also a number of challenges it presents for local authorities as it is implemented.

The changes to council tax benefit will have to be navigated by councils within a very short timescale, during which they are meant to design and implement local schemes including the IT systems to support them. Adopting the default scheme suggested by the government may be a tempting option for many hard-pressed councils but doing so will make it difficult to manage the funding reduction. Overall, implementing a locally-tailored scheme without exceeding the grant and while continuing to protect the most vulnerable will inevitably lead to the burden of the cuts being shouldered by a relatively small set of people.

Alongside dealing with changes to council tax benefit councils will have to organise the delivery of local welfare payments in place of the centrally-administered Social Fund. This relates to some of the most struggling people within communities, and so the imperative for effective handling places some pressure on councils, who must deter people from turning to high-cost lenders and loan sharks.

The imposition of size criteria poses a further set of challenges to councils. They must work out how to deal with the situation in which there is an insufficient supply of suitable properties to accommodate those deemed to be under-occupying. If the reforms do result in the movement of benefit claimants – especially likely when the impact of the size criteria is combined with that of the benefit cap – then there may be a large number of people moving from areas with a higher cost of living to areas with a lower cost. Ensuring continuity of education, care, and other support will place great pressure on effective communication between councils.

This post is based on an LGiU member briefing by Toby Hill. To view more briefings please click here

    1. Howard Knight says:

      Also see:
       ‘All in it Together?’ : Measuring the Impact of Austerity, Housing Strategy & Welfare Changes on Vulnerable Groups in Social Housing
      The research reveals a group identified as PiPs – ‘Poor in Perpetuity’ – with squeezed incomes in the past few years from a position of already very low incomes.
      The PiPs, many of whom live in social housing, are poor and getting poorer as their incomes are eroded by inflation, austerity measures and the economic slowdown.
      The median income of social housing tenants rose by 9.3 per cent from 2005/06 to stand at £8,996 per annum in 2011/12. When comparing this increase to CPI and RPI (18.2 and 20.8 per cent respectively) a real terms loss of income of between 8.9 and 11.5 percent is revealed. Even tenants in full-time work have only just kept in touch with inflation with an increase from £14,040 to £16,655 (or +18.6 per cent) so are not better off than six years ago.
      Tenants have few savings on which to depend in times of crisis; more than two thirds (66.4 per cent) have no savings at all. Of those tenants with savings, 48.8 per cent have less than £1,000 with a further 24.1 per cent having no more than £3,000.
      Between 400,000 and 600,000 social housing tenants of working age in England will be affected by the ‘Bedroom Tax’ equating to between 13 and 20 per cent of all social housing tenants in England and between 25 and 35 per cent of those of working age. The ‘Bedroom Tax’ will be most keenly felt in the North of followed by the Midlands and the South-West. £14 on average will be lost to those affected tenants, rising to an average of £22 for those ‘under-occupying’ by two or more bedrooms.

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