WELFARE REFORM IN THE NORTH WEST IMPACT ON PEOPLE, SERVICES, HOUSING AND THE ECONOMY

Transcription

1 WELFARE REFORM IN THE NORTH WEST IMPACT ON PEOPLE, SERVICES, HOUSING AND THE ECONOMY March 2014

2 Contents SECTION PAGE 1. EXECUTIVE SUMMARY 4 2. ECONOMIC CONTEXT POLICY CONTEXT PEOPLE AND SERVICES HOUSING AND COMMUNITIES NORTH WEST ECONOMIC IMPACT CONCLUSIONS AND RECOMMENDATIONS 45 ANNEX 1 GEOGRAPHIC DEFINITIONS ANNEX 2 INTERVIEW PARTICIPANTS 2

3 Background This report summarises the potential impacts of the Government s welfare reforms on the North West of England: on its people, services, housing and the wider economy. Where possible the study includes evidence of quantifiable impacts. However many outcomes resulting from the changes are yet to be recorded. Many of the reforms have only recently come in to force, as well as the current inability of many monitoring systems to record change. Understanding the risks and impacts is complex, and in many cases definitive answers to important questions particularly surrounding the introduction of Universal Credit and cumulative impact are not possible. However, this report aims to provide a broad framework for understanding the risks and potential impacts associated with the reforms in order to inform a focused and priority-driven response. The report is structured as follows: Section 2 provides a summary of the regional economic context; Section 3 summarises the welfare reforms and relevant policy; Section 4 outlines the impact that welfare reforms could have on people and services; Section 5 illustrates the potential impacts on place, focussing upon housing impacts; Section 6 quantifies the high level economic impacts; and Section 7 sets out conclusions and issues for policy makers and practitioners to consider. 3

4 1. EXECUTIVE SUMMARY 4

5 Executive Summary (1) Scope This paper summarises the potential impacts of the Government s welfare reforms on the North West: on its people, services, housing and the wider economy. Where possible the study includes evidence of quantifiable impacts. However many outcomes resulting from the changes are yet to be recorded - due in part to the fact that many of the reforms have only recently come in to force, as well as the current inability of many monitoring systems to record change. This report therefore provides a framework for understanding the risks and potential impacts associated with the reforms to inform a priority-driven response. Current Spending on welfare reforms Of the 23bn ( 19bn when Tax Credits are excluded) Government spent on welfare in the North West in 2012: 36% ( 8.3bn) was spent on state pensions; 16% ( 3.7bn) was spent on Tax Credits; and 11% ( 2.5bn) was spent on Housing Benefit. In comparison, spend on Jobseeker s Allowance, where the traditional focus of welfare reduction policy has focused, accounted for just 3% of the regional total spend on welfare ( 0.6bn). Together Employment Support Allowance, Incapacity Benefit, and Income Support on the ground of incapacity, where policy has increasingly widened its focus to, accounted for 9% ( 2.3bn). 5

6 Executive Summary (2) Background to the welfare reforms The welfare state is undergoing a significant and radical change the most substantial since its inception 70 years ago. The main changes, unveiled primarily in the Emergency Budget 2010, the Comprehensive Spending Review 2010, and the Welfare Reform Act 2012 are to: replace the complex range of out-of-work benefits and Tax Credits with Universal Credit; reassess claims of disability and incapacity related benefit, assessing capability to work; and introduce a single Work Programme to support long-term unemployed people into work. At the same time Government is looking to deliver 18bn of savings in 2014 to 2015 nationally; and a further 3.6bn savings in the period 2015 to The impact of the reforms will be wide ranging, affecting both unemployed residents and those in work, as well as local authorities, service providers, charities, and even businesses. While the reforms bring with them a range of risks, careful management could help to promote more positive outcomes for the region s residents and its labour market. Some of the reforms will simplify the benefits system and will provide clearer incentives to work and labour market participation. Universal Credit in particular, assuming it is effectively implemented, will provide a flexible system, more tailored to the needs of individuals, that will deliver a smoother transition between welfare and work. The changes will create opportunities for support organisations and local authorities to focus their planning and delivery on the activities which give greatest impacts and value for money helping people to become independent of state support. 6

7 Executive Summary (3) Impact on people and services The reforms are intended to have a positive impact by supporting individuals to move from benefits into work and/or increasing their earnings. On average, moving from Jobseeker s Allowance to work results in additional annual earnings of 4,300 per year (in addition to savings to the exchequer of 8,500 per year) as well as improved confidence, self esteem and reduced isolation. However, there are risks for many individuals who currently rely on the current system of entitlements. Analysis highlights that: 812,300 of the region s households will be directly affected by the introduction of Universal Credit. Re-indexing benefits and limiting increases to 1% per annum contributes to the most significant, real-terms reduction in entitlements, equating, for example, to a loss in weekly income of 7 to 8 for Jobseeker s Allowance claimants by The most acute challenge linked to the reforms will likely be felt by Incapacity Benefit claimants, who are judged fit for work but, due to their lack of current work experience and/or the health issues which limit the type of work they can do. Over 136,700 Incapacity Benefit claimants in the North West have been reassessed between October 2010 and November 2012, of which almost a third were found to be fit for work. It is estimated that by the time the reassessment process is complete in April 2014 an additional 277,600 Incapacity Benefit claimants within the region will have been reassessed, of which 72,200 will be fit for work. The study includes a range of scenarios for impacts on different residents. Some of the most challenging impacts are potentially being faced by single parents, the elderly, and those residents living with a temporary carer. For example, a single Disability Living Allowance claimant living in two bedroom property who has carer staying five nights per week. On average such individuals in 2-bed properties could have up to 7-8 less per week to live on due to the welfare changes. Looking to the future, while the state pension is currently out of scope for reform, it is likely that a future government, faced with an ageing population and an already large pensions bill, will have to look to make savings in this area. A new service directly created by the reforms is the single DWP - Work Programme. A series of Prime Contractors have been commissioned and given considerable freedoms to determine what activities are delivered to help people into, and to sustain, employment. However, the first results of the Work Programmes shows that work still needs to be done to develop support that delivers better outcomes for those who remain at some distance from the labour market. Welfare reforms will also add pressure on public services that are already looking to deliver more with less. This includes: revenue and benefits services, family finances and financial advice, growing risks of default to housing service providers, risks of a growing number of transient families due to shifts in response to the under-occupation charge. 7

8 Executive Summary (4) Impact on housing and communities The housing and public service impacts of welfare reform are complex and, for some areas, difficult to predict with confidence. There have been changes to Housing Benefit entitlement both in the private rented sector reducing the maximum rent that claimants can claim support for and in the social sector, with those under-occupying social housing being charged for doing so. Analysis suggests that the under-occupancy charge potentially affects 131,000 households in the North West. These changes will force tenants to decide to stay and pay, or having to move; potentially leading to disruption for families and local communities. Anecdotally there has been an increase in the number of residents looking to buy their homes, but it is hard to draw any direct links to changes to housing benefit. More extreme impacts have already been recorded in national research for example Shelter s Eviction Risk Monitor shows that the North West contains some of the areas in England where people are most at risk of losing their home. 29,359 homes in the region were the subject of repossession claims in 2012, with the highest rates of mortgage and landlord repossessions recorded in: Salford, Manchester, Oldham, St. Helens, Knowsley, Halton, Liverpool, Tameside, West Lancashire, Rochdale. Each of these risks has the potential to increase disruption in the housing market. It is not possible to draw a direct link to other risk factors, however authorities should be aware of potential risks to homelessness, crime, community cohesion, household characteristics and subletting, changing use of local services; and a rising need for local information, advice and guidance. Further research interviews were undertaken with council officers and housing organisations across the region. Most interviews up to the end of December 2013 suggested that the impacts of the welfare reforms were more moderate than expected. However, later interviews (January and February 2014) highlighted a significant increase in risk factors such as the percentage in rent arrears particularly amongst the most vulnerable in parts of Liverpool and Greater Manchester. All agencies said that they were expecting the full impacts to be felt from the summer of 2014 onwards; and they were already preparing for impacts in a variety of ways summarised in this report. All interviewees reported a rise in the uptake of pay-day loans. Credit Union services are already proving a key part of the approach to support residents in difficulties. However, the biggest future risk reported was the introduction of direct payments to residents as part of the Universal Credit. Concern was raised about the potential pressure on services where the most vulnerable are unable to manage finances. 8

9 Executive Summary (5) Impact on the North West economy If successful, the reforms will provide clearer incentives to work, alongside more tailored support to get more people into employment, which will result in a boost to North West s economy which has long been held back by high levels of worklessness. However, given the economic context, the reforms present a significant challenge for the region. Analysis of the expected savings shows that benefit payments will be 2bn lower per year than would have otherwise been the case in the NW 2014/15. Of this 2bn (net), 1.1bn derives from the June 2010 Budget; and a further 890m derives from the Comprehensive Spending Review of that year. Accounting for how this money is then re-spent in the local economy, means that the cut to total economic activity is potentially up to 3bn, equivalent to 2-3% of total economic output in the region s economy. Accounting for how this money is then re-spent in the local economy, means that the impact on total economic output is potentially up to 3bn, equivalent to 2-3% of the region s economy. Whilst this is clearly very significant, this figure does not take into account the positive economic impacts arising from of residents moving from unemployment into work/ increasing earnings. 9

10 2. ECONOMIC CONTEXT 10

11 Economic Context (1) Analysis When interpreting the likely impact of welfare reforms on the NW it is important to note the economic context in which they are being implemented. The NW economy has changed significantly in the last 20 years, including more than a decade of sustained growth, followed more recently by recession and slow recovery. There are a number of key themes which has led to: rising employment in business services and public sector employment (although the latter has recently started to decline) which has offset declining employment in manufacturing; an increasingly hourglass shaped labour market, with rising demand for higher level skills, and increasing job opportunities requiring low/entry skill levels. This has been accompanied by increasing competition for low skilled work; falling numbers of job opportunities in manual, craft and clerical occupations, the jobs which allowed many people to access employment as well as progress in the labour market; and rising numbers of part-time workers. Forecasts (1) indicate that half of the jobs requiring replacement over the next decade in the region will require skills equivalent to at least NVQ level 3, and a quarter to NVQ level 4. The changing nature of employment has resulted in rapid increases in structural unemployment where there is a mismatch between jobs (demand) and the local skills available (supply). Despite significant falls in unemployment claimants, since the mid-1980s, the total stock of out-of-work benefits has remained - on average fairly flat across the region. It is also important not to overlook in-work benefits, which have become an increasingly large component of the welfare system. In part these factors have been driven by increases in part-time working and in part by the increase of low paid work. Tax Credits accounted for 40% of the rise in income between 2002 and 2008, without which real incomes would have fallen. Despite years of concerted investment and initiatives designed specifically to tackle worklessness and low skills, it has been impossible to eradicate challenges such as long-term unemployment and low pay, even within the longest period of growth. Economy and employment There are 2.98 million employees in the North West. The public sector remains a key employer for the region and accounted for 29.2% (869,000) of jobs in 2012 (Great Britain 28.0%). The other major employers in the region are: Business, financial & professional services (570,000 employees); Wholesale & retail (438,000); Cultural & creative (147,000) and Manufacturing (325,000). The North West s headline GVA in 2012 was 124 billion, accounting for 10% of total GVA in the UK. GVA per head stood at 17,800 per annum in the North West in 2012 below the UK average figure of 21,400. The median gross annual salary for people who live in the North West (either residence-based or workplace-based) is around 24,500 below the national figure of 26,500. Forecasts also estimate that total employment in the region will increase by 150,000 (4.5%) from Source: (1) Oxford Economics Forecasting 2012/13 for New Economy 11

12 Economic Context (2) Demography and skills The North West s population stands at just over 7 million. Compared with 2001 this represents growth of 283,000, or an increase of 4.2% below the rise seen in England over the same period of 7.3%. In terms of working age people, 64.5% of the region s population are aged 16 to 64 years old in line with the national average. The North West s population is becoming more ethnically diverse. According to the 2011 Census, almost one-in-ten (9.8%) of residents are from black & minority ethnic background based projections by the Office for National Statistics estimate that from 2010 to 2030 the North West s population will grow from 7.1 million to 7.4 million, representing an increase of 306,000, or a 4.4% increase on the 2010 level. 0.5 million people aged of working age have no qualifications in the region. This is 11%, compared to 10% across the UK. At the highest end of the skills scale, 30% of those within working age in the region have a level 4 qualification (degree or higher). This is below the national figure of 34%. Educational attainment is improving across the North West. For the 2012/13 academic year 59.6% of pupils in the region achieved five or more GCSEs at grades A*-C, including Maths and English higher than the national average (58.6%). There are 175,200 people in the North West claiming Jobseeker s Allowance (JSA). More than 84,200 of these claimants have been claiming JSA for six months or longer. Health, wellbeing and quality of life Of the North West s 4,459 Super Output Areas (SOAs), 568 SOAs fall within the top 5% most deprived areas of England. A further 857 of the region s SOAs are within the top 5%-20% most deprived parts of the country. Clear pockets of deprivation are evident in a number of areas, including Manchester, Knowsley, Liverpool and Blackpool. In contrast, Cheshire East and Cheshire West & Chester contain some of the least deprived parts of the North West. More than 58,600 people in the North West were claiming Disability Living Allowance as of February 2013and each sub-region saw an increase in the number of claimants with the exception of Greater Manchester where claimants reduced marginally. As of February 2013 there were 363,800 people claiming Incapacity Benefit or Employment and Support Allowance (IB/ESA), compared to 384,660 in February This represents a decrease of 5% in the last two years - similar to the average for GB. The life expectancy of residents in the North West at birth stands at 77.7 for males and 81.7 for females. This is lower than the national averages (M: 78.2; F82.3). The average house price in the North West is 109,000 and in there were 10,940 net additional dwellings in the region. Projections indicate that the number of households in the North West will grow by 538,000 from to reach 3.5 million. In 2011, 16.4% of households in the North West were considered fuel poor, compared to 14.6% in England. This is an increase of 1.8 percentage points since

13 August 1999 August 2000 August 2001 August 2002 August 2003 August 2004 August 2005 August 2006 August 2007 August 2008 August 2009 August 2010 August 2011 August 2012 June 1985 June 1986 June 1987 June 1988 June 1989 June 1990 June 1991 June 1992 June 1993 June 1994 June 1995 June 1996 June 1997 June 1998 June 1999 June 2000 June 2001 June 2002 June 2003 June 2004 June 2005 June 2006 June 2007 June 2008 June 2009 June 2010 June 2011 June 2012 June , ,000 Figure 1: Jobseeker s Allowance claimants by duration of claim in the North West, 1985 to , , , MONTHS MONTHS LESS THAN 6 MONTHS 800, ,000 Figure 2: Out of work benefits claimants in the North West, 1999 to , , , , , ,000 0 LPIS ESA/IB OTHER JSA 13

14 Analysis of Census data highlights that unemployment has increased in most areas of the region, and the highest increases recorded in areas that already experienced the highest unemployment rates in 2001 Unemployment Rate Census 2011 Figure 3: Unemployment rates by Super-Output-Area (SOA), Census 2001 to Most at risk Unemployment Rate Census 2001 Source: DWP 2013, HMRC 2013 Note: All figures rounded to nearest 10m Whilst unemployment rates have risen across the region up to 2011, due to the recession, it is clear that unemployment has risen faster in areas that already had higher than average unemployment in Census Output Areas within the following local areas had the greatest change in unemployment rates between Census; and are areas most likely to be at risk from the changes to Welfare Reform: Blackpool: Central, Little Carleton, North, Parade, Queenstown Bolton: Central, Burnden Burnley: Central, Rose Grove Bury Fairfield Liverpool: Everton Manchester: Harpurhey Oldham: Edge, Lees, Limeside Pendle: Nelson Rochdale: Central, Kirkholt Stockport: Brinnington / Portwood Tameside: Springs Wigan: Ince-in-Makerfield Wirral: Seacombe 14

15 The main proportion of 23bn spend by Government on welfare in the North West is on state pensions ( 8.3bn) and on tax credits ( 3.7bn) Figure 4: DWP spend on benefits & pensions, HMRC spend on Tax Credits, NW 2011/12 Over a third (36% or 8.3bn) of all welfare spending in the NW goes towards paying the state pension. The state pension is currently out of scope from reform savings. However the level of spending here presents a significant challenge to both central and local government: as the population ages there will be rising pension costs & rising demand for healthcare services. The next largest element is Tax Credits (in work and out-ofwork), which made up 16% or 3.7bn of welfare spending in the NW. Housing benefits (paid to both those in & out-of-work) made up a tenth (11% or 2.5bn). Jobseeker s Allowance, where the traditional focus of welfare dependency reduction policy has focused, in contrast accounted for less than 0.6bn (3% of the total). Source: DWP 2013, HMRC 2013 Note: All figures rounded to nearest 10m These findings suggest that serious in-roads to reducing levels of JSA claimants would have to be made before any real savings are made from these areas of reform. 15

16 The proportion of the spend by Government on welfare varies across areas in the North West, almost half (47%) in both Cheshire and Cumbria is on state pensions Figure 5: DWP spend on benefits & pensions, HMRC spend on Tax Credits, NW 2011/12 National NW Cheshire & Warrington Cumbria GM Lancashire Liverpool City Region State Pension 40% 36% 47% 47% 33% 39% 33% Housing Benefit 12% 11% 9% 8% 12% 10% 13% Disability Living Allowance 7% 8% 7% 8% 8% 8% 10% Pension Credit 4% 5% 4% 4% 5% 5% 5% Income Support 4% 4% 3% 3% 5% 4% 5% Attendance Allowance 3% 3% 4% 4% 3% 3% 3% Incapacity Benefit 3% 3% 3% 3% 4% 3% 4% Jobseeker's Allowance 3% 3% 2% 2% 3% 2% 3% Council Tax Benefit 3% 3% 2% 2% 3% 3% 3% Employment And Support Allowance 2% 2% 2% 2% 3% 2% 3% Statutory Maternity Pay 1% 1% Winter Fuel Payments 1% 1% 1% 1% 1% 1% 1% Carer's Allowance 1% 1% 1% 1% 1% 1% 1% Industrial Injuries Benefits 0% 1% Severe Disablement Allowance 0% 1% 1% 1% 0% 1% 1% Bereavement Benefit/Widow's Benefit 0% 0% 0% 0% 0% 0% 0% Over 75 TV Licences 0% 0% Maternity Allowance 0% 0% Total Tax Credits 15% 16% 14% 13% 19% 18% 15% TOTAL (including Tax Credits and Pensions) 100% 100% 100% 100% 100% 100% 100% 16

17 A total of 23bn of Government spending is on welfare benefits, tax credits and pensions, when excluding tax credits (HMRC) the figure falls to 19bn Figure 6: DWP spend on benefits & pensions, HMRC spend on Tax Credits, NW 2011/12 (unrounded figures) National NW Cheshire & Warrington Cumbria GM Lancashire Liverpool City Region State Pension 74,142 8, ,798 1,830 1,787 Housing Benefit 22,814 2, , Disability Living Allowance 12,566 1, Pension Credit 8,061 1, Income Support 6,997 1, Attendance Allowance 5, Incapacity Benefit 4, Jobseeker's Allowance 4, Council Tax Benefit 4, Employment And Support Allowance 3, Statutory Maternity Pay 2, Winter Fuel Payments 2, Carer's Allowance 1, Industrial Injuries Benefits Severe Disablement Allowance Bereavement Benefit/Widow's Benefit Over 75 TV Licences Maternity Allowance Total Tax Credits 28,103 3, , TOTAL (including Tax Credits &Pensions) 185,804 22, ,505 8,364 4,708 5,467 TOTAL DWP (i.e. excluding Tax Credits) 157,701 19, ,303 6,803 3,876 4,663 17

18 Changes to the way benefits are linked, by Government, to measures of inflation have the potential to create the biggest financial impact of any of the reforms Figure 7: Cumulative loss (real terms) of JSA income due to re-indexing (Adult rate) From April 2011 onwards, the measure of inflation used for the indexation of state benefit, Tax Credit; and public sector pensions changed. These now rise annually in line with the Consumer Prices Index (CPI) having previously changed in line with the Retail Prices Index (RPI) The Government also announced, from April 2012, that personal tax thresholds would be increased in line with CPI, rather than RPI inflation with the CPI series of data almost always being lower than RPI BUDGET 2010 AUTUMN STATEMENT 2012 Crucially entitlements will grow increasingly further away from where they would have been under previous index measures, and become distanced from inflation in costs such as mortgage interest, council tax). Figure 8: Cumulative loss (real-terms) of Tax Credit payments due to re-indexing Whilst this in itself would have constituted a major challenge to those whose budgets were already stretched, the Autumn Statement of 2012 made a further change, which limited the increase to 1 percent per annum, regardless of inflation or wage increases. While JSA payments would have increased by around 2.00 per week every year between 2012 and 2016, the reform changes mean that they will now increase by around 0.60 to 0.70 per week. By 2016 these changes potentially translate into a monthly reduction of 30, or an annual reduction of 360. Those receiving in-work Tax Credit claimants will also affected by these changes, and on average will have a similar cut in entitlement compared with those claiming JSA. BUDGET 2010 AUTUMN STATEMENT 2012 Source: New Economy calculations based on DWP, HMRC data and HM Treasury inflation forecasts (

19 3. POLICY CONTEXT 19

20 Policy Context (1) The key changes being made to welfare reform were first set out in the Government s Comprehensive Spending Review 2011 and set in law by the Welfare Reform Act which received Royal Assent in March The Act aims to deliver 18billion of savings in This section sets out each of the principal reforms, with subsequent chapters analysing impacts The Welfare Reform Act introduces a wide range of reforms which are intended to simplify, streamline and reform the benefits and Tax Credits systems in the UK. The main elements are: the introduction of Universal Credit to provide a single streamlined payment replacing income-based JSA, income-based ESA, Income Support (IS), Child Tax Credits, Working Tax Credits, and Housing Benefit (HB); a stronger approach to reducing fraud and error with tougher penalties for offences; a new claimant commitment which shows clearly what is expected of claimants; forms to Disability Living Allowance (DLA), through the introduction of the Personal Independence Payment (PIP); Welfare Reform - Overview changes to Housing Benefit intended to bring greater stability to the housing market and improve incentives to work; reforms to ESA and a new system of child support; replacing centralised support for Council Tax Benefit (CTB) with a localised support mechanism, with funding coming from grants paid directly to local authorities; and changes to the Social Fund giving greater power to local authorities. While all will impact on the region, the latter two reforms, as there is a much higher degree of local control, will be hugely important in ensuring local residents are supported through the changes and risks identified in this report. The 2012 Autumn Statement announced additional savings. The major change announced was a limit to the annual increase in all benefits and Tax Credits by 1 percent regardless of the rate of inflation. This was intended to make estimated savings of 3.6bn per annum. The 2013 Spending Round also outlined further detail on welfare reforms, including: a welfare cap to control overall public spending on benefits (that will not include the state pension); the implementation of a new programme called Work Search which job seekers must sign up to before they can claim any benefits (and a 7 day wait before benefits can be claimed); and steps to ensure all claimants speak, or be in the process of learning, English. 20

21 Policy Context (2) Universal Credit The Work Programme Youth Contract Benefit Cap The centrepiece of the Government s welfare reform programme. Its aim is to tackle perverse incentives in the system of entitlements where for some people, work has not been as financially attractive an option as it could be. Implementation has already begun within the North West (e.g. Tameside) in Greater Manchester) for claimants with lesscomplex circumstances), and will be rolled out nationally, attaining full coverage by UC provides a rationalisation of key entitlements for those both in-work and out-of work into a single monthly payment. It is designed so that transition to work, or move to increased hours/pay, is rewarded more uniformly across the income distribution. Those receiving increased wage earnings will be subject to a tapering-off of entitlement. There is also an earnings disregard for those initially entering employment, and these differ according to the individual circumstances of the claimant. The Work Programme (WP) provides tailored support for claimants seeking employment and forms the backbone of the Government s efforts to help job seekers back into employment. It includes requirements for work-focused interviews, work preparation, work search, and availability for work. The WP replaces previous programmes such as the New Deal, Employment Zones, and the Flexible New Deal. The WP seeks to address the shortcomings of previous programmes by providing clear incentives to deliver results, freedom for service providers, and the development of long-term commitments. Individuals are referred to the WP by Jobcentre Plus (JCP), with the length of time from the start of the claim to referral being determined by the claimant group. JCP advisors also have the ability to immediately refer claimants to the WP. The Youth Contract (YC) is a dedicated means of supporting young jobseekers into an employment opportunity. The key offer of the Youth Contract consists of 160,000 individual wage incentives of 2,275 each for 18 to 24 year olds taken on by employers. YC includes the offer of a guaranteed placement for all unemployed 18 to 24 year old wishing to participate in work experience. It is anticipated that 250,000 placements will be provided nationally, with opportunities lasting for up to eight weeks. In some parts of the region, e.g. Greater Manchester, there are opportunities for employers to access supplementary funding to create Apprenticeships, by giving employers a grant of 750 if they recruit 16 to 24 year olds that are unemployed. The cap, introduced from April 2013, applies to the combined income from the main out-of-work benefits, plus Housing Benefit, Child Benefit and Child Tax Credit. A cap of 500 per week applies to couples and lone parents, and 350 for single adults. There are exemptions from the cap: for example all pensioners are exempt, as well as working age households where the claimant, partner or any dependent child receives, or is entitled to, any of the following: Disability Living Allowance or Personal Independence Payment; Attendance Allowance; Working Tax Credits; War Widows, War Widowers or War Disablement pension; Employment and Support Allowance (Support Component); Industrial Injuries Benefits; and Armed Forces Compensation Scheme payments. 21

22 Policy Context (3) Work Capability Assessment, Incapacity Benefit and Employment Support Allowance The process of reassessing IB claimants through the Work Capability Assessment (WCA) is ongoing, having started in April By April 2014, all IB claimants (excluding those reaching pension age before then) will be required to take a test which looks at physical and mental capabilities. There will potentially be no IB claimants after April 2014, having been replaced by ESA. The WCA has three outcomes, claimants can be judged fit for work and no longer entitled to IB, or its replacement ESA; moved into the ESA Support Group; or moved into the work related activity group (WRAG). Those who are deemed fit for work can apply for JSA whilst they seek employment. However this will have an immediate impact on the amount of benefit they can receive and they will come under a new regime of increased conditionality. ESA claimants are essentially judged unable to work long-term, receiving higher payment and lower job seeking conditionality(1). The WRAG group are being placed on the basic rate of ESA, and receive additional support to support a future return to work. The Welfare Reform Act also sets out a time limit to contributory ESA to one year so that people who have paid only a small amount of National Insurance cannot qualify for unlimited ESA. The time limit does not apply to those claiming income-related ESA. It also does not apply to people who cannot work due to a long-term illness or disability. Young people who previously qualified for contribution-based ESA without having to pay National Insurance contributions will no longer be able to do so. Disability Reassessment and the Personal Independence Payment Disability Living Allowance will not form part of the Universal Credit benefit. It will be replaced by a Personal Independence Payment (PIP). Key features of the changes include: all new and existing claimants of DLA aged 16 to 64 years old will be required to undergo an assessment, regardless of the length of their original award; there will be no direct transfer of claimants from DLA to PIP; instead existing claimants will be invited to make a claim for PIP between October 2013 and March 2016; and under the new PIP arrangements, the application process will move away from a system where people self-assess, to an independent medical consultation. To qualify for the PIP people aged 16 to 64 years old will need to satisfy the daily living and/or mobility activities test for 3 months prior to claiming, and be likely to continue to satisfy this test for a period of at least 9 months. People will not necessarily have to wait 3 months from the date of their claim before getting PIP as the qualifying period starts when an eligible need arises. They will also be required to pass Residence & Presence and Habitual Residence tests. 1: Conditionality: having to comply with conditions to claim benefit, such as increasing the numbers of hours worked 22

23 Policy Context (4) Local Housing Allowance From April 2011 the Government made several changes to how Local Housing Allowance (LHA) was awarded. It is calculated with respect to the level of rent in the Broad Rental Market Area (MA). Benefit payments capped according to the number of bedrooms that the claimant and their family need rather than the number of rooms they have. The maximum per week 'excess' that some people were entitled to has ended, ensuring that housing benefit is not greater than the amounts paid in rent; and there are reductions in the amount received by non-dependents living at home. LHA is awarded up to a level no higher than the bottom 30% of the properties in the rental MA. Previously this was 50% (median rent). This reduces the number of homes available to those on LHA from a half to under a third of properties in the market area. Single claimants without children and under the age of 25 are only entitled to a lower rate of LHA the shared room rate, and the changes also extended the lower entitlement to those aged up to 35 years old. Housing Benefit and Under- Occupation Housing Benefit is to become one of the components of Universal Credit. Restrictions are being placed on the amount of HB that claimants in social housing can receive. Restrictions are based on the size of the accommodation that the claimant occupies, meaning that under-occupiers - with spare bedrooms - are at risk of having benefits reduced replicating the process that applies to claimants in the private rented sector. The new size-criteria on which under-occupancy is judged allow one bedroom for the following: every adult couple (married or unmarried); any other adult aged 16 or over; any two children of the same sex aged under 16; any two children aged under 10; any other child, (other than a foster child or child whose main home is elsewhere); a carer (or team of carers) that do not live-in, but provide overnight care. The amount of benefit removed is based on a national percentage rate according to the number of spare rooms in the household. It takes account of different rent levels in different parts of the country, and reflects the rent associated with additional bedrooms. Reduction rates are up to 25% where under-occupying by two or more bedrooms. This applies to working age claimants. People above the state pension age are unaffected by the changes. The default position under UC is a direct payment once monthly, to mirror and account for wages, directly to the claimant. The aim is to make claimants more independent and to enable a greater degree of control over personal finances. 23

24 Policy Context (5) Lone Parent entitlement to Income Support Lone Parents are entitled to claim Income Support (IS), but there has been a policy change in recent years (pre-dating the Welfare Reform Act) which has progressively reduced the age of the child for which benefits can be claimed. From October 2010 if the youngest child is aged seven or over, or would have been seven that year, then IS may have stopped during that year. From May 2012, this was extended to cover most lone parents with a youngest child of five or over. Child & Working Tax Credits Child Benefit Education Maintenance Allowance Changes to Child and Working Tax Credits include a freeze of the basic element and 30 hour element of Working Tax Credit, a reduction in the percentage of childcare costs that can be claimed with the childcare component; and a change in eligibility rules which mean that couples with children must work 24 hours a week between them (at least one working for 16 hours a week). In the 2013 budget, the Government announced that from the Autumn of 2015, 85% of costs of childcare for parents of in receipt of Universal Credit will be met - provided that both parents are working and they earn more than the personal tax allowance, due to reach 10,000 by Child Benefit payments were frozen for three years as of April 2011, producing an estimated saving of over 2 billion to the UK economy. Furthermore, families with one earner, who has a salary of more than 60,000 now lose benefit; and those earning 50-60,000 have lost part of their benefit. Education Maintenance Allowance, an entitlement for students aged 16 to 19 years old which incentivised further studies, was abolished in April Instead the Government has provided a 16 to 19 year old Bursary Fund which (with some exceptions) is primarily aimed at young people who are claimants of Income Support, ESA or DLA. Localisation of Council Tax Benefit and The Social Fund Council Tax Benefit (CTB) was abolished in April 2013, and replaced with an arrangement called the Local Council Tax Support Scheme (LCTSS). This gives local authorities the power to design their own support schemes. These changes aim to allow support to vary across the country based on local priorities, whilst also encouraging local authorities to promote employment and economic growth. In addition to the localisation of CTB, there has also been a 10 percent reduction in Government funding associated with the benefit. This places responsibility upon the local authority to determine how savings are made. The Social Fund offers monetary help to families on a low income when they find themselves in an emergency situation. Community Care grants and Crisis Loans are being abolished and replaced by local provision administered by local authorities. Crisis Loan Alignment Payments are being replaced by a national scheme of short term advances administered by the DWP. Budgeting Loans will remain until Universal Credit is fully rolled out, at which point people will have access to a new system of Budgeting Advances that will replace Budgeting Loans for Universal Credit recipients. 24

25 4. PEOPLE AND SERVICES 25

26 Impact on People & Services (1) Figure 9: Estimated Impact of Universal Credit on households in the North West HIGHER ENTITLEMENT NO CHANGE LOWER ENTITLEMENT (BEFORE CASH PROTECTION) Cheshire & Warrington 52,700 40,800 47,600 Cumbria 29,100 22,600 26,300 Greater Manchester 170, , ,000 Lancashire 86,800 67,200 78,400 Liverpool City Region 87,700 67,900 79,200 North West 426, , ,500 Figure 10: IB reassessment outcomes October 2010-Nov 2012 TOTAL CASE-LOAD ANY OUTCOME SUPPORT GROUP ESA WORK REL. ACTIVITY GROUP Figure 11: Projected outcomes of IB reassessment on current claimant stock FIT FOR WORK N % N % N % Cheshire & Warrington 10,990 10,540 3, % 4, % 2, % Cumbria 7,760 7,540 2, % 3, % 1, % Greater Manchester 54,380 52,370 14, % 23, % 14, % Lancashire 27,160 26,160 7, % 12, % 6, % Liverpool City Region 36,450 34,910 11, % 13, % 9, % North West 136, ,500 39, % 56, % 35, % GB 887, , , % 346, % 226, % NON-RETIRING IB CLAIMANTS ESA WORK REL. ACTIVITY GROUP REASSESSMENT OUTCOME ESA SUPPORT GROUP FIT FOR WORK Cheshire & Warrington 22,800 8,300 7,600 6,100 Cumbria 15,700 7,300 4,500 3,500 Greater Manchester 108,900 46,400 29,400 29,100 Lancashire 55,000 24,300 15,400 13,200 Liverpool City Region 75,200 28,600 23,100 20,400 North West 277, ,900 79,900 72,200 GB 1,904, , , , ,300 of the region s households will be affected by the introduction of UC. Government has made a commitment that no claimant will be worse off when they shift to UC, however claimants will be subject to increased conditionality. This will particularly affect those transferring from in-work tax credit who are not currently subject to any conditionality. The most acute challenge will be felt by IB claimants, who are judged fit for work but, due to their lack of current work experience and health issues which limit the type of work they can do, may struggle to find employment. Over 136,700 Incapacity Benefit claimants have been reassessed between October 2010 and November 2012, of which a third were found to be fit for work. It is estimated that by the time the reassessment process is complete in April 2014 an additional 277,600 Incapacity Benefit claimants will have been reassessed of which 72,200 will be fit for work. 26

27 Impact on People & Services (2) Figure 12: Council Tax Benefit Impact of a 10% reduction excluding those aged 65+ NUMBER AFFECTED REDUCTION PER WEEK PER YEAR Single, no child dependant 184, Single with child dependant(s) 126, Couple, no child dependant 37, Couple with child dependant(s) 62, ALL IN NORTH WEST 411, Cheshire & Warrington 35, Cumbria 21, Greater Manchester 163, Lancashire 79, Liverpool City Region 102, Figure 13: Impact of changes to Housing Allowance, number losing & loss per week Shared room 1-bed 2-bed 3-bed 4-bed 5-bed N N N N N N Cheshire & Warrington 1, , , , Cumbria , , Greater Manchester 4, , , , , Lancashire 2, , , , Liverpool City Region 1, , , , , North West 10, , , , , , Figure 14: Change in Lone Parent claimants of JSA and IS, 2007 to CHANGE JSA IS JSA IS JSA IS Cheshire & Warrington 65 7,320 1,105 6,210 1,040 1,600% -1, % Cumbria 45 4, , ,311% -1, % Greater Manchester ,240 6,070 32,500 5,650 1,345% -7, % Lancashire ,350 2,445 13,430 2,305 1,646% -2, % Liverpool City Region ,350 4,330 21,220 4,125 2,012% 4, % North West ,710 14,585 76,700 13,710 1,567% -8, % GB 7, , , , ,115 1,456% -176, % There were 789,270 recipients of CTB in the region (Feb-13), in total. However CTB has been replaced by a localised system of support, at the discretion of local authorities. Plans differ by district across the NW. However, approximately 411,000 families in the NW will be affected, losing on average 2.64 per week or per year. The DWP released estimates of housing benefit reforms impact. An estimated 133,900 recipients in the NW will receive on average 9 less per week, or 468 less per year. Areas facing the highest potential impacts in terms of benefit reduction include: Liverpool; Blackpool; Manchester, and Wirral. Lone Parent entitlement to IS has been progressively reduced with a considerable impact. There has been a 13,700 (+1,567%) Lone Parent JSA claims in the NW to 2011, rising from 875 in January

28 Impact on People & Services (3) Figure 15: Work Programme cumulative job outcomes as a proportion of total referrals, to September 2013 (Next release 20 March 2014) CUMULATIVE OUTCOMES AS % OF REFERRALS (TO SEPT 2013) TOTAL JSA 18 to 24 JSA 25 and over JSA Early Entrants JSA Ex- Incapacity Benefits ESA Volunteers New ESA claimants ESA Ex- Incapacity Benefits IB/IS Volunteers CHESHIRE AND WARRINGTON 17% 22% 19% 22% 10% 4% 9% 0% 0% 7% CUMBRIA 15% 20% 17% 22% 11% 2% 5% 0% 0% 4% GREATER MANCHESTER 15% 21% 15% 20% 7% 4% 5% 0% 0% 4% LANCASHIRE 13% 18% 16% 16% 6% 1% 5% 0% 0% 3% LIVERPOOL CITY REGION 14% 20% 16% 18% 6% 2% 4% 0% 0% 3% NORTH WEST 15% 20% 16% 20% 7% 4% 5% 1% 17% 4% NATIONAL 15% 20% 16% 19% 8% 4% 5% 1% 15% 3% JSA Prison Leavers NORTH EAST 14% 19% 14% 18% 10% 4% 5% 1% 33% 2% YORKSHIRE AND HUMBERSIDE 14% 18% 14% 18% 8% 4% 5% 1% 13% 3% EAST MIDLANDS 15% 22% 15% 19% 9% 5% 6% 1% 16% 3% WEST MIDLANDS 15% 20% 14% 20% 7% 4% 4% 1% 15% 3% EAST OF ENGLAND 16% 21% 18% 20% 7% 3% 5% 2% 14% 3% LONDON 15% 19% 17% 19% 8% 2% 4% 1% 16% 3% SOUTH EAST 16% 22% 18% 22% 10% 5% 5% 1% 18% 4% SOUTH WEST 14% 18% 16% 19% 9% 5% 5% 1% 9% 3% WALES 13% 18% 13% 18% 9% 3% 4% 1% - 3% SCOTLAND 14% 19% 15% 17% 7% 3% 5% 1% - 3% There is a great deal relying on the Work Programme (WP), the key measure introduced in order to support inactive residents into employment. Prior to referral onto the WP, claimants are able to access a range of other support tools as determined by their Jobcentre Plus advisor which fall under Get Britain Working. These include: work experience programme for 16 to 24 year olds; sector based work academies; and mandatory work activity. Whilst initial performance data for the WP showed that many areas across the country underperformed against expectations, the most recent data release (covering cumulative outcomes to September 2013) shows an improving picture for job outcomes across the region. On average 15% of job outcomes (as a proportion of all initial referrals) were still in employment 12 months after starting work. Job outcomes within the North West were broadly similar. However, looking at specific client groups and cohorts shows that performance in GM and Cheshire & Warrington was higher than the regional average for outcomes for young people (aged 18 to 24 and previously on JSA). However, outcomes for ex-incapacity benefit claimants and ESA is much lower in the North West than all other groups. Outcomes in the North West are broadly similar to other regions across Great Britain, with slightly better outcome rates than the national average for JSA early entrants and IB/IS volunteers to the programme Source: DWP Work Programme Job Outcomes to September

29 Figure 16: Work Programme: JSA & ESA referrals in the North West Figure 17: Work Programme: JSA & ESA job outcomes in the North West Source: DWP Work Programme Job Outcomes to September

30 Impact on People & Services Scenarios (1&2) Clearly many people and families will be affected by more than one of the reforms listed above. The following provides a range of scenarios that are intended to illustrate the potential cumulative impacts of the reforms. PRE-REFORM SITUATION POST-REFORM SITUATION SCALE OF RISK IN THE NW Single DLA claimant in two bedroom property; has carer staying five nights per week Rent is 116 per week and the individual receives the one bedroom rate of Has a shortfall of per week for which they draw on their DLA entitlement. Qualify for the two bedroom rate of from April 2011, and so from this date would receive the full amount of rent. From October 2011, the additional changes limiting LHA to the 30th percentile mean the individual s LHA reduces from to from April 2012 onwards (the anniversary of the two bedroom rate entitlement). This leaves a shortfall in the rent of 2.08 per week. The NW has 485,950 DLA claimants of whom an estimated 228,400 (47%) claim housing benefit. In the NW an estimated 24,800 DLA claimants could have their LHA reduced due housing benefits changes over the next 4 years. On average individuals in 2-bed properties will have 7 to 8 less per week to live on due to these changes. PRE-REFORM SITUATION POST-REFORM SITUATION SCALE OF RISK IN THE NW Couple living with their three children in a three bedroom private rented property that they moved into in June 2010 They have been in receipt of JSA from Rent is 145 per week and they currently receive the 3 bedroom LHA rate of They have a shortfall in their rent of 6.92 that they fund themselves. Under the new scheme from October 2011 (when the LHA is based on the 30th percentile) their LHA rate reduces to This leaves them with a shortfall in their rent of From 2013, as they will have been in receipt of JSA for more than 12 months, they see their benefit cut by a further 10% ( 12.66). This reduces their LHA to from June 2013 (their next review) and leaves a shortfall in their rent of per wk. In the NW 133,900 people in total and 15,820 people in 3-bedroom properties stand to be affected by the changes to LHA. 34,680 (19.3%) of the NW s JSA claimants have one or more child and 5,880 of these have been claiming for over 1 year. There are 3,080 JSA claimants with more than 3 children, however only an estimated 530 have been claiming for over a year, and so would have seen the 10% cut. 30

31 Impact on People & Services Scenarios (3&4) Clearly many people and families will be affected by more than one of the reforms listed above. The following provides a range of scenarios that are intended to illustrate the potential cumulative impacts of the reforms. PRE-REFORM SITUATION POST-REFORM SITUATION SCALE OF RISK IN THE NW Single person aged 22 has been on JSA for more than twelve months living in a one bed flat. Rent is 68 per week Because the individual is under 25 they are only entitled to the shared room LHA rate 65 per week. This individual has a shortfall of 3 per week that is funded from their Jobseekers Allowance payment. From October 2010, as a result of the changes using the 30th percentile their LHA payment is reduced from 65 to From 2013, as they have been unemployed for 12 months, their benefit is cut by a further 10% ( 5.98) to 90% of the shared accommodation LHA rate. This means a payment of 53.86, leaving a rent shortfall of per week. 10,680 individuals claiming the shared room rate would lose out from the changes to HB over the coming years. In the NW, there are currently 7,900 eighteen to twenty-four year olds who have been claiming JSA for over a year, and would see their LHA cut by 10%. PRE-REFORM SITUATION POST-REFORM SITUATION SCALE OF RISK IN THE NW 28 year old ESA claimant living in onebedroom private rented flat, paying 88 per week Currently rent is 88 a week and is met in full by LHA. Because this amount of rent is below the local housing allowance limit they receive 10 additional benefit. ESA (WRAG) is a week. 10 additional benefit was withdrawn due to changes in LHA in June From April 2012 people under 35 years of age are only entitled to the shared room rate of LHA which is a week. This leaves a weekly shortfall of There are 264,870 ESA claimants in total, with 86,180 on the WRAG. 60,110 ESA claimants are under 35. The average loss from the reforms for those receiving the Shared Room Rate of LHA is 4.75 per week. 31

32 Impact on People & Services Scenarios (5) Clearly many people and families will be affected by more than one of the reforms listed above. The following provides a range of scenarios that are intended to illustrate the potential cumulative impacts of the reforms. PRE-REFORM SITUATION POST-REFORM SITUATION SCALE OF RISK IN THE NW Single parent, living in a five bedroom private rented property since June 2010 On Income Support and needs a five bedroom property for 7 children, the 19 year old is working (non-dependant) and earning 150 per week. LHA entitlement for a five bedroom property is per week. Rent is 235 per week, so the individual also gets excess LHA of 15 per week as rent is below the LHA level. From this 250 per week the individual has a non dependant deduction taken of 17 per week. This means the individual currently gets 233 per week and pays 2 towards rent each week. If the non dependant deduction increases by 10 per week to 27, the rent paid to this household would reduce to 223 and would leave a shortfall in the rent of 12 per week From June 2011 (the LHA anniversary review date) as a result of the changes restricting the room rate to four bedrooms, the LHA rate is reduced from to a week. The non dependant deduction of 27 will then be taken from the leaving the individual with towards rent each week (a shortfall of 77.89) From October 2011 when LHA began to be based on the 30th percentile this further reduces the LHA rate from to from June 2012 (the next anniversary review date). After taking the 27 non-dependant deduction, the individual will get help of towards rent each week ( ). This leaves a rent shortfall of per week. In the NW there are 1,840 lone parent IS claimants with more than 5 children. There are 6,070 lone parents with children on JSA and 230 claimants with 4 or more children have been claiming JSA for over 12 months. In total 4,000 LHA recipients living in 5 bedroom properties stand to see a reduction/shortfall as a result of Housing Benefit changes. The average loss per week from all LHA changes for those in 5-bedroom properties will be an estimated 28. From 2013 this individual will have been in receipt of jobseekers allowance for more than 12 months, their benefit will be cut by a further (10%). This will reduce the amount of benefit paid to leaving a shortfall in their rent of per week. 32

33 Impact on People & Services This section provides an overview of the potential impacts of the reforms on services provided both by local authorities and their partner organisations. The factors identified are not exhaustive, but aim to illustrate some of the main risks faced. Revenue and benefits services Registered Social Landlords Housing Associations /Arms Length Management Organisations Adult and Children s Social Care Children s Services Revenue and benefits services will clearly be one of the main frontline services impacted immediately. Changes to benefit entitlements and uncertainty for some customers will increase the number of enquiries to service and contact centres. Reductions in the amount of benefit paid out to customers is already leading to increased pressure upon council tax collections, as well as the potential risks of increased arrears, evictions and court actions. Family finances and financial advice will be one of the top issues for many authorities, and is an area likely to see an increase in demand for support. The reforms have the risk of creating financial hardship, including the risk of those affected turning to payday loan companies, as well as loan sharks. Registered Social Landlords / Housing Associations, many of which have financial inclusion services offering low-level casework in debt management and welfare benefits which go a considerable way to supporting tenants. Many have already established financial inclusion services offering support in areas such as budgeting and debt management. Many are also now actively involved with supporting tenants to deal with the reforms to welfare; Credit Unions, which are responding to the current climate and upcoming reforms by developing the skills of staff to offer additional financial advice, and by developing innovative products, e.g. jam jar accounts and the ability to offer loans up front. More evidence is included from the interviews undertaken by New Economy (December to February 2014) in the next section. Risk of a growing number of transient families moving as a result of the reforms and different areas response to the changes that may lead to swings in the demand for services such as the numbers of childcare and school places required. Potential for the reforms to reinforce concentrations of deprivation and dependency in particular areas as more families look to move to more affordable locations. This will place pressure on services in these areas. Adult Care Services provide support, care and advice to vulnerable adults across the region. There is a high risk that these individuals will be negatively affected as a result of the reforms. Potential impacts include increased stress as a result of a loss of income may result in increased rates of referral for Adult Social Care as family units ability to cope with illness reduces. Risks to the attainment of disadvantaged children that have to move around, as well as other negative impacts on child development and educational attainment, especially where more extreme financial hardship is experienced. Children may lose free entitlement to school dinners if they move around and authorities are unable to respond quickly to changing circumstances Increasing risk for people with mental health & those who have long-term sickness who might be forced back to work. Equally, the UK Centre for Mental Health has identifies that there have been few job outcomes for people with mental health problems. 33

34 5. HOUSING AND COMMUNITIES 34

35 Impacts on Housing and Communities (1) The impacts of welfare reform on housing are complex and, for some elements, difficult to predict with any level of accuracy. This section therefore aims to highlight some of the potential consequences of the reforms for the region s housing market for the different sectors, organisations and individuals which make up that housing market. These consequences largely flow from the choices made and decisions taken by individuals and households as they anticipate and experience changes to their income as a result of welfare reform. Those decisions in turn influence the financial position, attitudes and decisions of key agents including: social landlords, private landlords, financial institutions; and neighbourhoods in which choices and decisions are made. There are a number of key questions which will help to determine the likely impacts of welfare reform on housing, forming the main content of the analysis presented. These include: Which households are affected, and where do they currently live? Will households choose to move to cheaper or smaller accommodation? Will alternative accommodation be available in sufficient numbers? Will rent arrears increase as households face reduced income? Will payments made directly to households rather than landlords lead to rent arrears? How will landlords respond to increasing arrears, including the legal response? 35

36 Impact on Housing & Communities (2) This section provides an overview of the potential impacts of the reforms on services provided both by local authorities and their partner organisations. The factors identified are not exhaustive, but aim to illustrate some of the main risks faced. The main impact across all interviews relates to the Housing Benefit and Introduction of the Under-Occupation charge. We have used a radical approach to influence the Family Intervention Project design and delivery, bringing together people from different areas of the council and its stakeholders is vital to weathering the impacts of welfare reform In terms of the bedroom tax, there is a lot of effort for very little reward and benefit...the policy has a disproportionate and perverse outcome, and put pressure on our resources. We have seen a big increase in the volume of vulnerable single people coming in the door seeking debt advice, this is just the tip of the iceberg Research interviews and focus groups were undertaken during January 2014 with organisations covering: Housing Associations - and their CEOs; and focus groups with Local Authority Officers (see appendix for the full list of participants). Respondents were from organisations across the North West, from: Cheshire & Warrington, Cumbria, Lancashire, Liverpool City Region, and Greater Manchester. Key findings and illustrative comments are summarised on this page, with more detailed findings in the subsequent section. It would make a big difference if we could support more vulnerable and disabled residents,but we don t know who they are because of poor data sharing practice with agencies of government Its not good enough to wait for official data, you need primary data collection and at the same time a series of priority activities with the most at risk Fuel poverty across the region is starting to run rife, this is a combination of factors that have stretched tenants ability to pay for rents, council tax, food price rises The voids review showed that there is a huge growth in 3 bedroom stock that are much harder to let, particularly larger properties in more deprived areas People are really struggling in the aftermath of Christmas, rising gas and electricity prices and the bedroom tax Partners tell us it will be at least 8-12 months before we see full impacts, however we have already trained front-line staff it manage risks There s no point in letting future problems build up, the affordability checking is helping us manage this.but we re still helping people that fall into the emergency category, however this will be a huge risk when discretionary funds are gone 36

37 Impact on Housing & Communities (3) Direct monthly payment of Housing Benefit and Local Housing Allowance made to recipients rather than landlords, combined with the various reductions in amounts payable, including through index changes and the 1% cap, result in landlords being faced with an increased risk of nonpayment of rent. Context In a survey (Source:1) of social landlords across the North West in 2012, many were worried about the impact of this specific measure. Almost all (98%) expected a rise in rent arrears and over four-fifths (85%) expected overall rent incomes to decline with an increase in rent arrears already measurable at most participating social landlords. This latter point highlights a potential risk that housing associations may be less able to retain access to relatively cheap lending from financial markets in order to support the development of future stock. The full impact of policy such as the under-occupation charge may take some time to become apparent as households realise that they are becoming increasingly unable to make up the gap between their rent and their Housing Benefit. Taking into account the exclusion of households aged over 65, significant proportions of existing (social renting) households in the region will be affected by this change. Figures from DWP (2010) estimate that 86,500 NW households could be affected (Source: 2 - DWP 2010). Data from a selection of Local Authorities suggests that this figure may be an under-estimate. For example, August 2012 data and analysis for Manchester City Council indicated 12,374 households in the City alone are at risk of potential displacement. Despite some more severe cases making local news headlines, most interviews up to the end of December 2013 suggested that the impacts of the welfare reforms were more moderate than expected. However, later interviews (January and February) highlighted a significant increase in risk factors such as the percentage in rent arrears particularly amongst the most vulnerable in parts of Liverpool and Greater Manchester. All agencies said that they were expecting the full impacts to be felt from the summer of 2014 onwards; and they were already preparing for impacts in a variety of ways summarised in this report. Housing organisations had actively promoted actions to mitigate impacts including: intensive support and advice & guidance, rather than initiate sanctions and court proceedings. Overview on the prevalence of impacts: studying key groups and locations in the region All respondents to the interviews recognised that there was no one set location where the prevalence of impacts was relatively higher. However all said that there was a growing problem with rising numbers of three bedroom stock which constitute a large proportion of the voids that are proving hard to let due to size criteria. These properties were harder to let in areas with multiple deprivation and larger housing estates, i.e. mainly city centres. The impacts were reported across both rural and urban areas. Strong concerns were raised at the destabilising effect of the impacts on local communities within smaller towns and rural villages, especially when combined with rising accommodation/rental prices in more affluent rural areas. Concern was also raised about the difficulty in attracting younger families in future to rural areas. There was a clear consensus that the impacts of the welfare reforms had both a disproportionate level of costs/impacts compared to the benefits which have been observed within local communities and social tenants. The impacts were more prevalent for: single parents, those with limiting illness, mental health and at risk, and the elderly (in particular those over 55 that might not yet be able to retire but find it hard to find work). The interviewees highlighted a range of evidence which they used to prioritise support, including the use of quantitative client data, National Statistics, as well as the development of bespoke qualitative research, e.g. 30 Stories tracking the changing lives of those affected by the Welfare Reforms. This aims to mirror research from the 1920/30s about how the poor spend money and the choices and pressures they face. Despite good practice examples of using research to inform support, many of those interviewed do not have resources to implement detailed data systems to capture impacts, in particular capturing hard quantitative data about the economic impacts of the cuts. Sources: (1) Impact of welfare reform on housing associations baseline survey 2012 Regional summary North West Region (2) DWP (2010) "Impacts of Housing Benefit proposals: Changes to the Local Housing Allowance to be introduced in

38 Impact on Housing & Communities (4) Tenants have already made difficult choices about the balance between paying for rent, utilities, food. In particular records show much higher levels of food bank use, as documented in regional and national press. There was also consistent evidence that residents are choosing to reduce expenditure on utilities - heating - in order to meet the financial pressures of Welfare Reform. Despite the pressure on personal finances, many residents are coping with the changes, and finding the extra money they need to pay bedroom tax and/or dealing with cuts in their benefit levels. Furthermore, sanctions from housing providers have not been severely implemented to date, with a strong preference for use of discretionary funding to help prevent future impacts. However, all recognised a pinchpoint would come when housing organisations would need to pursue payments and evictions would start to rise, Concern was raised that the level of funds to support those most at financial risk such as discretionary housing support were reaching saturation point. Despite tightening conditionality, up to 80-90% spend has been discharged in some cases. When these funds have been spent interviewees were concerned that residents would have little more left, other than general advice and guidance : A lot of people are being propped up by discretionary payments...it is only a matter of time until the full weight of the impacts are felt. The biggest impacts are concentrated amongst those residents already having problems with arrears, council tax payments. Holding other things constant such as the range of WR cuts, the under-occupancy charge has by far the most disproportionate impact both in terms of costs and benefits to residents, landlords and authorities: Financial impacts on tenants, housing organisations / landlords It is costing us a lot more to deal with the problems it creates than it actually saves the Government. Interviewees recognised that drawing a direct link to Welfare Reforms was difficult, but highlighted feedback from tenants which indicated that much of the stress on personal finance was due to the reforms. All reported an increase in the value of rent arrears, mainly by those tenants who were already in arrears. However they also reported seeing an increase in numbers of tenants that have never been in difficulty before: Hundreds if not thousands of people who have never been in arrears before are going into arrears for many of them this will be mortifying. Some interviewees reported a rise in the uptake of pay-day loans. Credit Union services are already proving a key part of the approach to support residents in difficulties. However, the biggest future risk reported is the introduction of direct payments to residents as part of the Universal Credit (Timetabled for 2017: At present direct payments to the landlord is not automatic, and is based on either arrears, or residents choosing for it to be paid direct). Concern was raised about the most vulnerable and their ability to manage finances. Evidence from almost all interviews shows that demand for one bedroom properties is outstripping supply, and even if people want to move into smaller properties, for the most part many do not exist. However, housing organisations and social landlords highlighted that moves as a result of the under occupancy charge were much lower in number than expected. Some also reported an increase in applications to buy properties but links to reform changes is difficult to establish. The main reason given was: Comparably lower prices that are around in the current property market and economic climate. There was no evidence to show that landlords are increasing evictions. Most are currently showing forbearance regarding the still comparably low levels of individual household arrears, claiming that it currently makes more financial sense - in the short-term - to do so. However, many interviewees highlighted that financial constraints will affect the ability to both raise future finance and to invest in both additional accommodation and conversions: They are caught between natural sympathy for the people who are affected, but also an awareness that there are business imperatives at stake and they are acutely aware that business plans are going to be affected and ultimately that may affect their ability to build new homes. 38

39 Impact on Housing & Communities (5) The growing oversupply of 2 and 3 bedroom property, in some cases concentrated within single housing estates, has led to perceptions that crime and anti-social behaviour had risen in these areas. However, there was limited evidence across the region of for example actual reported rises in minor theft, and domestic violence. We have tried to avoid tin windows policy, however in places with a concentration of voids it really has affected perceptions of safety... blight and anti-social behaviour is beginning to creep up again due to the empty homes. Community cohesion, crime and anti-social behaviour Actions to mitigate risk: Information Advice and Guidance There was little evidence of impacts on community cohesion from changes in housing benefit, and in those areas witnessing a higher prevalence of housing under-occupancy charges. Interviewees highlighted anecdotal evidence of residents choosing to move to lower quality private accommodation - despite higher rents - in response to the additional charges placed on them due to under-occupied rooms. They also provided examples of rising family stress: It s the unrecorded things such as kids sharing rooms, coping with smaller living spaces, these are things that lead to family stress, poor educational attainment and potentially more anti-social behaviour. However, Councils and social housing providers were keen to highlight that a lot more work was being done to connect with private landlords to ensure a smooth transition: We ve worked more with the private sector, letting them know more about Housing Association contacts, public services and links. There was consistent anecdotal evidence that sanctions are affecting those furthest from the labour market, causing them to make alternative choices about sources of income, potentially through the grey economy, but it is almost impossible to track the prevalence of this issue. The introduction of the reforms have already led to increased demand for both frontline and specialised services, as well as increased uptake in residents seeking support, in particular requesting information about the under occupancy charge. Most organisations interviewed have been proactive, and have made significant staffing investment to address the impacts attached to Welfare Reform. In this respect they are (well prepared for) currently managing the risks, despite levels of funding cuts and significant pressure on budgets. However, most were concerned that the investments they have already made would fall away with further cuts in particular any cuts to Discretionary Housing Payment funds and Local Welfare Assistance Funds. There are regarded by interviewees as one of the most important policy tools in addressing the WR impacts to date.(1) A variety of support solutions had been put in place including, for example: training of front line professionals to support affected residents, advice and information published on website and posters, information stands in local facilities (ASDA, primary schools, etc.), door-to-door approaches, and panels/meetings with social landlords and residents at risk. Many organisations have devised approaches using client data and national statistics contact to identify localities and work with those particularly at risk, typically: Disabled people, lone parents and families working over 30 hours, people dropping out of welfare altogether, women & child poverty, households on multiple benefits & in arrears, 50 years of age or older, and residents with mental health issues. As well as leading with internal staff training, all organisations provide additional resource and staffing to provide advice and guidance on a range of topics, including in many cases financial advice, working with Credit Unions, CAB and housing associations to helping residents connect with community finance and open jam-jar accounts. The interviews provided many good examples given of multi-agency working, in particular within family intervention projects, and in key-worker Information, advice and guidance services. Cross-team and cross-agency working seen as the critical success factor to reducing reform impacts, especially to ensure that Discretionary Housing Payments are focussed on those most in need. Sources: (1) Removal of hardship funds: 39

40 Impact on Housing & Communities (6) Case Study: Impact Housing Cumbria Took part in establishing a Welfare Reform Task Group to address risks and impacts, including membership with: DWP, County Council, Districts, Housing Providers. The group were tasked with responding to both regional leaders in Cumbria, and Chief Executive s Group. Actions included: Health and Wellbeing emphasis reports to the elected member leads on this. Set up an early warning signs series of indicators on health and wellbeing. Use official statistics and other sources of front-line information about hose most at risk, e.g. risk of homeless, self-harm, suicide etc and use this information to take the temperature of vital signs of risk signs of family stress. Undertaken extensive research mapping exercise of those at risk across the region and made visits to all tenants providing information, advice, guidance on impacts and rising rents. Mapping exercise also identified different community hubs where additional investment in web-based information points was made, e.g. within housing estates, service points etc especially the points near the most at risk. Whilst the task group agrees that there isn t a long-time series / extensive data on economic impacts, they are using their research and intelligence systems to monitor early signs, and at same time prioritise support and contact with most at risk. Case Study: Liverpool Mutual Homes LMH have taken a lead in several areas to mitigate the impacts of Welfare Reform and Under-Occupancy charges. They have been proactive in cross-department and inter-organisational work. They have dedicated teams to tackle debt, but they are also helping tenants to maximise income through benefit advice and guidance; and enabling links to employment services. LMH are currently partnered with Local Solutions a Social Enterprise to promote a range of financial inclusion / fuel debt advice covering: Financial capability advice and training, e.g. prioritising bill payments, preventing arrears. Advice and help in opening bank accounts or Credit Union Membership. Help in reducing debt, accessing charitable grants. Energy efficiency advice helping fuel switches and checking bills. Advice supporting savings from switching suppliers, additional savings through the Warm Home Discount scheme on winter fuel bills. LMH continue to working in a coordinated way across to minimise impacts. The key is targeted support, working with frontline staff and data to focus where the impact is greatest. They have a Working Together Team that support the most vulnerable and sustain their tenancies; and an income services team that give specific rent benefit advice. LMH also recognise that Credit Unions have an important role to play in terms of helping residents set up accounts and to manage personal finance. 40

41 Impact on Housing & Communities (7) Figure 18: Eviction risk monitor results from Shelter national study, rate of possession claims issues in the North West, Region/ local authority At present, it is impossible to provide evidence for the hypothesis that welfare reforms will lead to an increase in homelessness. The consequences of the welfare reforms will largely depend on the response of the individuals and households affected. The Eviction Risk Monitor, a report that has been published annually by Shelter the national housing and homelessness charity, shows that the region contains some of the areas in England where people are most at risk of losing their home. 29,359 homes in the NW were the subject of landlord or mortgage repossession claims in 2013, with the highest rates of mortgage & landlord repossession claims per 1,000 dwellings (rank in region shown) in the districts shown in the table below. An increase in homelessness acceptances (those for whom the Council has a statutory duty to make an offer of accommodation) will lead to increased costs for local authorities as the use of temporary accommodation increases. The same situation will arise if a landlord elects to evict a family due to arrears. National rank out of 325 (by rate of possession claims) Rank within region by rate of possession claims Number of mortgage and landlord possession claims, Oct 2012 to Sept 2013 Rate of possession claims - 1 in x households North West ,359 1 in 103 Salford ,685 1 in 61 Manchester ,186 1 in 64 Oldham ,382 1 in 65 St. Helens ,057 1 in 72 Knowsley in 72 Halton UA in 73 Liverpool ,642 1 in 78 Tameside ,187 1 in 80 West Lancashire in 86 Rochdale in 95 Source: Shelter (2012): Eviction Risk Monitor