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

• Council Tax Benefit • Discretionary Housing Payments

• Child Benefit

• Income Support• Jobseekers Allowance• Employment and Support Allowance

• State Pension• Pension Credit

• Attendance Allowance• Carer’s Allowance• Disability Living Allowance

• Housing Benefit• Child Tax Credit• Working Tax Credit

AA; £5.3CA; £1.7

DLA; £12.6

InCap; £4.9

SDA; £0.9

ESA; £3.6

IS; £7.0JSA; £4.9

CTB; £4.9

HB; £22.8

BA; £0.6

PC; £8.1

Great Britain - Benefits Expenditure 2011/12 (£77.3bn)

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

• Council Tax Benefit • Discretionary Housing Payments

• Child Benefit

• Income Support• Jobseekers Allowance• Employment and Support Allowance

• State Pension• Pension Credit

• Attendance Allowance• Carer’s Allowance• Disability Living Allowance

• Housing Benefit• Child Tax Credit• Working Tax Credit• Housing Credit• Supported Accommodation

Universal Credit

DWP – 21st Century Welfare (July 2010)

Universal Credit - Features

• 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

• 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

2010/11 2011/12 2012/13 2013/14£350,000,000

£400,000,000

£450,000,000

£500,000,000

£550,000,000

£600,000,000

£515,400,000£488,400,000

£464,700,000£444,000,000

£50,000,000

£49,000,000

£46,000,000

£22,000,000

£4,000,000

£15,000,000

£15,000,000

£2,000,000£14,800,000

HB/CTB Adminstration Grant

Main Economy Transitional New Burdens

2010/11 2011/12 2012/13 2013/14£0

£20,000,000

£40,000,000

£60,000,000

£80,000,000

£100,000,000

£120,000,000

£140,000,000

£160,000,000

£180,000,000

£20,000,000£20,000,000£20,000,000£20,000,000

£10,000,000

£40,000,000£40,000,000

30000000

65000000

Discretionary Housing Payments

Baseline LHA Reforms SSSC Ben Cap

Social Fund (Local Welfare Provision – April 2013)

• 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• 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 ReformsType 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

Unoccupied and substantially unfurnished

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

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 provisionHousing 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 DHPsCouncil 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:• 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 etcCouncil 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:• 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