Universal Credit and Local Support for Council Tax

David Magor OBE IRRV (Hons)Chief Executive

Institute of Revenues, Rating and Valuation

Universal Credit and Housing Costs

Introduction to Universal Credit The Components of Universal Credit The Implementation Programme The Potential Role of Local Authorities in

Universal Credit Post Universal Credit – Housing Costs and

the Pension Aged The Continuing Reform of Housing Benefit

Support with Council Tax

Introduction Consultation on Local Support for Council

Tax Response to the Consultation and developing

the legislation Managing the Risks Administration Council Tax Collection

An Introduction to Universal Credit

The Scope of Universal Credit

In scopeIncome-based Jobseeker’s AllowanceIncome-related Employment and Support AllowanceIncome Support (including Support for Mortgage Interest)Child Tax CreditsWorking Tax CreditsHousing BenefitsSocial Fund (budgeting/alignment)

Out of scopeCouncil Tax supportDisability Living AllowanceContributory Benefits (although earnings rules aligned)State pensionChild BenefitPension CreditCarer’s Allowance

Ten core principles for delivery of Universal Credit (1)

The service will be easy for customers to understand and use. It will be designed in partnership with end users to enable this.

Self-service will be the primary channel of use with other channels available for some services, to some individuals, by exception.

The majority of transactions will be automated, with staff intervention reserved for cases where there is a clearly identified risk of fraud or error.

There will be face to face contact for issues regarding conditionality (i.e. the obligations we expect customers to fulfil).

Joint (for household claims) and single (for single claims and to accommodate individual customer commitments) customer accounts will enable customers, staff and some third parties to view information relevant to the assessment unit

Ten core principles for delivery of Universal Credit (2)

Universal Credit will be delivered as a single entity, with a single department responsible for delivery. That does not mean it will necessarily be delivered by a single organisation

The need for customer contact will be minimised unless it is integral to conditionality, fraud or error (including over and under payments)

As far as possible, causes of fraud and error will be designed out of the system

Universal Credit will connect with related services (e.g Work Programme, passported benefits) efficiently and in a way that customers understand

Universal Credit as a benefit processing system will be scalable and extendable to other systems in the future

Universal Credit - Broad Impacts

No cash losers at the point of change Estimated 2.7 million households will have higher entitlements

- Over 1 million of which see a rise of more than £25/wk 250,000 children and 600,000 working-age adults could be lifted

out of poverty 300,000 fewer workless households £2bn per year saved by reducing fraud and error overpayments

in the long term APART FROM THE FIRST BULLET POINT, THESE ARE ALL

FORECASTS

Universal Credit - Aims

Success of Universal Credit is predicated on influencing customer behaviour:

- to take up work, or do more hours

- to be able to interface with the system as a couple as well as an individual

- to trust the system to get the information it needs without their contact

- to use new channels as the main way of making contact

Oct ‘13Apr ‘13 Oct ‘14 Oct ‘15 Oct ‘16 Oct ‘17

Pilot New claims from out of work customersApr ‘14Feb ‘11

Design & build

New claims from in work customers

Natural transitions due to change of circs

Managed transitions

Legacy load

JSA, ESA, IS, HB, WTC, CTC

8m6m4.5m2.5m

UC load

Implementation Timescale

The Migration Strategy

The Migration Strategy will look at the steps required to prepare claimants for the behavioural changes of Universal Credit

Making provision ahead of migration to smooth implementation

Delivering Universal Credit

Universal Credit will be ‘digital by default’ For 2013, Universal Credit will be delivered using existing resources There will, therefore, be joint working between DWP, local authorities

and HMRC Jobcentres are expected to be the primary channel for local, face-to-

face support DWP is working with local authorities to define and agree their role in

face-to-face delivery Contact centres and support centres will be provided from a subset of

the best DWP and HMRC sites Delivery of Universal Credit in the longer term is under consideration

The Delivery Model

The Delivery Model

Managing the build up of claims to Universal Credit Rationale

The Government recognises that the move from one welfare system to another needs to be carefully managed to ensure social outcomes are maximised, and that no-one is left without support.

The Government has concluded that safe delivery must be the primary objective, as without this, the other objectives of social impact and cost management will be put at risk.

The Government also recognises that the nature of the current set of working age entitlements mean that the move to Universal Credit will need to accommodate the closure of both national and local welfare schemes. That Housing Benefit is administered independently by over 380 local authorities needs to be a factor in the migration approach.

Each local authority will need to separately manage down their Housing Benefit load and each will have unique challenges around maintaining performance and efficiency as the load drops.

The Government recognises the risks this creates and safeguarding delivery of Housing Benefit will be a consideration in the Universal Credit migration approach.

The Migration Strategy

The Migration Strategy looks at the steps required to prepare claimants for the behavioural changes for UC and what changes can be made ahead of transition:

- Household Accounts and managing household budgets- Four weekly/monthly payments- Budgeting and Financial Management- Conditionality and variable conditionality- Self service/Digital

Local Support for Council TaxThe Implications for Ashfield District Council

Introduction

Spending Review 2010 Localise support for council tax reduced by 10%

from 2013 -14 Abolition of council tax benefit provision in the

Welfare Reform Act Part of wider policy giving councils increased

financial autonomy Enabling power for the new scheme to be contained

in a finance bill now before the current parliamentary session

Why localise support for council tax the CLG view

Give local authorities (LAs) a greater stake in the economic future of their area

Give LAs the opportunity to reform the system of support for working age claimants

Reinforce local control over council tax Give LAs a degree of control over how the impact of

the 10% reduction Give LAs a financial stake in the support for council

tax.

Overview Broad parameters

Framework for support for eligible pensioners The importance of supporting incentives to work

LAs encouraged to collaborate to reduce costs LAs to consider how system can be simplified for

working age claimants LAs will seek to integrate arrangements for

providing support within council tax system Reform accompanied by a new grant Proposals to create local mechanisms to manage

financial pressures

Vulnerable Groups

Pensioners Passported Claimants Means Tested Claimants

Vulnerable Groups Child Poverty Act 2010 Disabled persons (Services, Consultation and

Representation) Act 1986 Housing Act 1996 Equality Act 2010

Establishing Local Schemes

Analysis of caseload Impact analysis Developing a scheme Factors to be covered by schemes Consultation Adoption of the scheme Revisions to schemes Default schemes

Benefit cost funding

The authorities that will receive grant The position on parishes Powers to pay grant Methodology for distributing grant Frequency of grant allocation Grant allocation in future Spending Review periods Limits on spending Maximising the tax base Managing pressures through the collection fund

Calculating the Council Tax under the new rules

Grant allocation

The DCLG has indicated that a separate technical consultation will be held on the specific factors and indicators which should determine the level of grant allocated to a particular authority. Issues to be considered in this consultation will include:

The basis for allocation (what factors are taken into account in distributing grant)

The frequency of allocation (how frequently grant is adjusted – annually or less annually).

Grant allocation

The relevant factors for the basis of allocation could include:

The relative size of eligible claimant groups Previous expenditure Other indicators – unemployment levels etc Council tax costs

Grant allocation

The issues that will need to be considered are: What are the advantages – and disadvantages of

using previous expenditure to determine shares of funding?

Is there a case for using previous expenditure initially?

What other factors could be taken into account as well or instead?

How should Government balance the need to reflect costs with the importance of incentivising local authorities to manage down demand/ensure there is accountability over council tax levels?

Grant allocation

Consideration will need to be given to the frequency of allocation.

There are two broad options:

Reflecting as closely as possible levels of take-up or demand, by adjusting as frequently as is practicable. This would achieve a better match between needs and grant across all authorities and would tend to reduce the financial risks to authorities

Leaving the grant allocation unchanged for several years. This would provide local authorities with greater certainty about their allocation in future years and help with financial planning; it would also enable a local authority to gain if liabilities under its scheme were to fall during that period.

Local precepting authorities

Option one - pass no money on Disregard the parish share entirely in distributing the total grant

between billing and precepting authorities Pass the parish share to billing authorities – but with no

obligation to pass it on to parishes

Implications Does not require additional legal powers Administratively simple for billing authorities – more complex for

central government if parish share has to be identified Could lead to big leap in Band D for some parishes – may mean

that some get caught by any referendums principles

Local precepting authorities

Option two - pass money on Pay grant directly to parishesImplications Requires additional legal powers Highly administratively complex for central

government Minimises impact on Band D Unclear how this could operate under

retained business rates

Local precepting authorities

Option three - pass money on Pay grant to billing authorities with a requirement to pass the

grant on to parishes Paying grant to billing authority, with requirement to pass on

through council tax systemImplications Requires additional legal powers Degree of complexity for both central and local government –

integrating within the council tax system could make less administratively onerous

Minimise impact on parish Band D Unclear how this could operate under retained business rates

Administration Costs and Transition

Administrative cost Implementation costs (£80k on the way to

billing authorities and £27 to major precepting authorities)

System apportionment Transitional arrangements Cost of transition Link to existing subsidy arrangements New Burdens Assessment

Delivery Building on existing approaches The existing structure

Personal allowances Premiums Non-dependant deductions Disregards Second adult rebate Taper

Forecasting Designing schemes Data Sharing Systems

Fraud

What structure? SIFIS? Enabling statute Specific powers or general powers? Developing local services Risk based verification

The Ashfield Timetable

Winter/Spring 2011/2012 Primary legislation in passage through Parliament. Government preparing and consulting on draft

secondary legislation. Initial thoughts on local scheme Discussions between billing authorities and major

preceptors Political direction Technical consultation on grant distribution

The Ashfield Timetable

Summer 2012 Primary legislation passed. Secondary legislation prepared Develop operational project plan Billing authorities designing local schemes Scoping IT changes Consultation with Major Precepting Authorities Modelling proposed scheme Public consultation

The Ashfield Timetable

Autumn / Winter 2012/13 Secondary legislation passed (early Autumn) Prepare risk assessment Grant allocations published Establishing local schemes – final consultation with

major precepting authorities and public, revisions to schemes.

Technical changes to systems begin Setting budgets. Adopt local scheme

The Ashfield Timetable

Winter/Spring 2012/13 Finalise system changes Prepare tax base Set council tax and formally adopt scheme Publicise scheme Agree monitoring arrangements Billing

Protecting pensioners and the vulnerable in Ashfield

Under the new scheme the amount provided to support Council Tax benefit will be reduced by 10% amounting to £1.04m

Annual Council Tax benefits £10.4m Less: 10% reduction as proposed £ 1.04m Less: Protection for pension age groups £ 4.68m Balance to be used for working age £ 4.68m

This means that the assistance with Council tax for working age claimants will be reduced by around 19% which means that in future working age claimants will be entitled on average to around 80% of the their current entitlement.

The Ashfield caseload

12,700 total caseload Working age 7,300

ISA/JSA etc Earners Non earners Second adult

Elderly 5,400

What are the realistic options for Ashfield?

Maximise the tax base and utilise the discount changes Adjust the tax base provision Fund the 10% locally from own resources either partially or fully

The Billing Authority proportion The Precepting Authority’s proportion

Continue with existing scheme less up to 10% cost and protecting vulnerable groups, achieved by either/or A straight cut of the appropriate percentage for all non protected

claimants – the “equal pain” approach A flexible approach to minimum benefit or a cap A regressive taper A modified existing scheme protecting vulnerable groups and

reducing cost

Options on work incentives

Run on Disregards Non-dependant deductions Progressive manipulation Second adult rebate Progressive taper Cash award

These all have a cost

Constraints

System Funding Capping Protecting vulnerable groups Transition Setting aside a sum for extraordinary events Political dimension Timetable Adverse consultation Collection issues

Risk Sharing

Sharing risk through the collection fund Integration of schemes Deficit or surplus in the collection fund Shared the following year? Should major precepting authorities be able to

influence scheme design Varying precepts in year

To reflect collection rates A new power

The Risks of Localisation

If the current financial crises continues, benefit costs will continue to rise.

Collection performance will suffer significantly with the 10% reduction which will fall largely on working age claimants.

The impact of the reduction in housing costs as a result of housing benefit changes and the cap will have a cumulative affect on the ability to meet council tax and other domestic bills

CTB is currently based on actual as opposed to estimated eligibility. Therefore an increase in the number of claimants will automatically lead to an increase in CTB costs This will expose councils to increased expenditure.

Any cap on expenditure needs to protect local authorities from the burden of increased caseloads.

CTB becomes a discount is likely to increase take-up, for example among pensioners, again leading to pressure on local authority budgets

Managing risk

Billing authorities should be able to share the risk of any scheme across the tiers of administration and with Precepting Bodies

Strict budgetary control is necessary to manage the financial risk

Managing the Collection Fund and regular reporting will be critical

There is however a need for more discussion on how risk is managed across the tiers of local authorities and between central and local government.

Immediate next steps

An Ashfield/Major Preceptors summit Officer consideration Member direction Outline scheme Project plan Risk assessment Start consultation