Welfare Reform and
Local Taxation in 2013
Outline – Welfare Reform
• Current benefit arrangements / why change?
• Welfare Reform Act 2012
– Universal Credit
– Personal Independent Payments
– Changes to Housing Benefit
– Benefit Cap
– Changes to fraud arrangements and sanctions
– Social Fund
• Impact on LA benefit function
Outline – Local Taxation
• Local Government Finance Act 2012
– Council Tax Reduction Scheme
– Council Tax Technical Reforms
– Business Rates Retention Scheme
• Summary of Key Issues
Current Arrangements
• Attendance Allowance
• Carer’s Allowance
• Disability Living Allowance
• State Pension
• Pension Credit
•
•
•
• Council Tax Benefit
• Discretionary Housing Payments
• Housing Benefit
Income Support
Jobseekers Allowance
Employment and Support Allowance
• Child Benefit
• Child Tax Credit
• Working Tax Credit
Great Britain - Benefits Expenditure 2011/12
(£77.3bn)
PC, £8.1
AA, £5.3
CA, £1.7
BA, £0.6
DLA, £12.6
HB, £22.8
InCap, £4.9
SDA, £0.9
ESA, £3.6
CTB, £4.9
IS, £7.0
JSA, £4.9
Why Change?
Marginal Tax Rates (Single Adult)
The Centre for Social Justice - Dynamic Benefits (1999)
Net Income (Single Adult)
The Centre for Social Justice - Dynamic Benefits (1999)
Marginal Tax Rates (Lone Parent)
The Centre for Social Justice - Dynamic Benefits (1999)
Net Income (Lone Parent)
The Centre for Social Justice - Dynamic Benefits (1999)
Universal Credit
• Attendance Allowance
• Carer’s Allowance
• Disability Living Allowance
• State Pension
• Pension Credit
•
•
•
•
•
••
Council Tax Benefit
Discretionary Housing Payments
Housing
Supported
Accommodation
Housing Benefit
Credit
Income Support
Jobseekers Allowance
Employment and Support Allowance
• Child Benefit
• Child Tax Credit
• Working Tax Credit
Universal Credit
DWP – 21st Century Welfare (July 2010)
Universal Credit - Features
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•
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Replace existing in and out of work benefits
Standard withdrawal rate as income increases
Nobody should be worse off
Use Real Time Information from HMRC
Digital by default
Single monthly payment (in arrears) to
household (include rent)
• Role for LA in claim / advice process?
Universal Credit - Timetable
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•
•
•
June 2012: Direct Payment Demonstration Projects
Autumn 2012: 12 LA Pilots to support claiming UC
Late April 2013: UC pilots in 4 NW LAs
October 2013: National roll out of UC (out of work
claims)
• April 2014: National roll out of UC (in-work claims)
• Oct 2014: New claims for Housing Credit (pensioners)
• To Oct 2017: All existing claims migrated to UC or
modified Pension Credit
Personal Independence Payments
• Replace DLA for those aged 16 to 64
• New assessment process
• Timetable:
– April 2013 – new claims in NW England
– June 2013 – new claims remainder of country.
– October 2013 – changes in circumstances to DLA will be
assessed for PIP.
– 2015 – New assessments for remaining DLA cases
• Looking to reduce working age expenditure by 20% saving
£2.2bn
Social Sector Size Criteria
(a.k.a. Bedroom Tax)
• Number of bedrooms required calculated based on household
composition.
• Eligible rent used in HB calc reduced by:
– 14% one excess bedroom
– 25% two or more bedrooms
• Excludes pensioner households and supported accommodation
• Issues
– Definition of a bedroom
– Insufficient 1 or 2 bed properties in LA
– Will Registered Providers evict for non payment?
• £30m extra DHPs aimed at foster carer’s and significantly adapted
properties.
Benefit Cap
• Maximum weekly benefit for those aged 16 to 64:
– £350 single adult
– £500 families and lone parents
• HB reduced first.
• Implementation delayed to September 2013
• Four London Boroughs to pilot scheme from April
• £60m extra DHPs to tackle problem in short-term.
Single Fraud Investigation Service
• Create SFIS from April 2013
including LA fraud teams.
• But…. TUPE, DWP budget cuts,
LAs corporate teams
• Options paper – keep staff in LA
but working to SFIS standards review in 2015.
• Latest position “When SFIS is
introduced in 2014/15… SFIS will
be a partnership… Work on the
design of the SFIS continues…
pilots will inform future delivery
model”
Impact on LA Benefit Function
£600
£550
Discretionary Housing Payments
Millions
Millions
HB/CTB Adminstration Grant
£50
£2
£4
£49
£180
£160
£140
£15
£15
£120
£46
£100
£500
£65
£15
£22
£450
£80
£30
£60
£515
£488
£465
£400
£444
£40
£20
£20
£20
£20
2010/11
2011/12
2012/13
2013/14
£0
2010/11
Main
£40
£10
£20
£350
£40
Economy
2011/12
Transitional
2012/13
2013/14
New Burdens
Baseline
LHA Reforms
SSSC
Ben Cap
Social Fund
(Local Welfare Provision – April 2013)
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•
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Community Care Grants & Crisis Loans abolished.
Funding and responsibilities transferred to LAs.
DWP retain Budgeting Loans and Short Term Advances
Up to individual LAs (upper tier) to develop own scheme
Funding (England): £144.2m plus £30.5 admin
Questions:
– Who will administer it?
– Cash or goods?
– Operate loans scheme?
– Demands on service as result of other welfare
reforms?
Local Government Finance
Act 2012
Council Tax Reduction Scheme
• WRA 2012 abolished Council Tax Benefit
• LGFA 2012, has amended s13A and inserted
Schedule 1A into LGFA 1992, requiring each billing
authority (in England) to:
– have a reduction scheme in respect of persons
who it considers to be in financial need;
– state classes of person entitled to a reduction
– consult with major preceptors; publish a draft
scheme, as it sees fit; and consult with other
persons it considers to have an interest in the
operation of the scheme
Council Tax Reduction Scheme
• Secretary of State has powers to prescribe
regulations.
• Default scheme (existing CTB scheme) applied if LA
does not approve a scheme by 31 Jan 2013
• LA must consider by 31 Jan each year whether to
revise scheme in following year. Scheme can not
change during financial year.
• Independent review to take place within three years.
CTR – Issues to consider
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Funding 10% less than existing CTB scheme
Pensioners protected (prescribed regulations)
Grant paid via Business Rates Retention Scheme
£100m transitional grant available in year 1
CTR a discount so will reduce council tax base
Options, one or more of following:
– Reduce level of awards to claimants
– Fund from reserves / savings, but will reduce tax
base including preceptors
– Technical reforms (see later)
• Issues for LAs will depend on scheme approved.
Council Tax Technical Reforms
Type
Period
Option
From April
“Second Homes”
All
10%-50% discount
0%-50% discount
Empty (Major
Repair / Structural)
Max 12
mths
100% exemption
0%-100% discount
Under 6
months
100% exemption
0%-100% discount
Under 2
years
0%-50% discount
0%-50% discount
2 years
and over
0%-50% discount
0%-50% discount or
0%-50% premium
Unoccupied and
substantially
unfurnished
Business Rates Retention Scheme
• Replaces current pooling arrangement
• Government determines spending baseline and NNDR
baseline based on collection rates over number of years.
• 50 : 50 split between central government and local
services (9 or 10% to county, 1% to fire).
• Collection fund pays preceptors and central government
based on NNDR1 estimate
• Mandatory and discretionary relief shared 50:50
• Top-Up or Tariff calculated from NNDR baseline and
spending baseline. (Uprated by RPI each year).
• Safety net or levy may also apply.
• Complicated accounting arrangements for collection fund
surpluses or deficits.
Summary of Issues
Residents within LA:
• Residents with have less money - changes to HB, CTR, PIPs and
benefit cap
• Increase demand on services – inc local welfare provision
Housing Benefits:
• Year End – Implementation of Social Sector Size Criteria
• Maintaining provision and retaining experienced staff with
reducing admin grant
• Reduction on non-core functions, quality assurance / reviews
• Subsidy – change of External Auditors
• Timetable for UC migration - TBA
Summary of Issues (2)
Housing Benefits (continued):
• Fraud and error as part of UC pilots?
• Uncertainty around introduction of SFIS
• Increased role with DHPs
Council Housing /Registered Providers:
• Reduction in HB as a result of SSSC
• Direct payments of UC
• More evictions – impact on Homeless Sections?
Social Fund (Local Welfare Provision):
• New function
• Procurement issues
• Internal / external fraud?
Summary of Issues (3)
Council Tax Reduction:
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Financial risks transferred to LA
Legal challenge?
Year end and annual billing
Is scheme detailed enough?
Incentive to concentrate on CTR/ CTB fraud (no CTB subsidy)
Review caseload, SPDs etc
Council Tax:
• Recovery procedures - CTR cases
• Targets and monitoring of in-year and overall debt
• Robustness of assumptions used in council tax base / budget
setting process
• New frauds as a result of Technical Reform
Summary of Issues (4)
Business Rates:
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Financial risks transferred to LA
Know your area – work with planning, economic development
Missing hereditaments?
Reconciliation to VOA list - Accidental deletions
Robustness of assumptions used on NNDR returns
Aware of outstanding appeals – recent decisions
Empty property avoidance – Makro Case
Occupation by Charities – fraudulent and otherwise
Review of mandatory and discretionary rate relief
Accounting arrangements