New WHQ editor Jules Birch assesses the impact of welfare reform in different parts of the UK.
As seen from Westminster and Whitehall the case for welfare reform and housing makes perfect sense.
The over-riding concern to bring down the deficit means sometimes painful decisions have to be taken. The local housing allowance has been capped to cope with soaring London rents so it is only fair that housing benefit for social tenants should be cut too. Social housing in the capital is badly overcrowded so penalise under-occupiers. There are plenty of part-time jobs available in London so cap overall benefits for those who refuse to work.
The list goes on and on of assumptions made about welfare reform in London and the South East that do not apply in the same way in Wales or Scotland or Northern Ireland or much of the rest of England.
When Welsh housing minister Huw Lewis attacks the UK benefit changes as a ‘social atrocity’ and Scottish first minister Alex Salmond describes them as ‘the biggest threat to human dignity’ north of the border, they are not just expressing political differences with the coalition in London but clear national differences too. The same goes for Northern Ireland and the English regions.
Take the bedroom tax, the reform that will hit soonest and hardest. Over-crowding is far higher (16.1% of social tenants according to the bedroom standard) and under-occupation lower (28%) in London than anywhere else in the UK so matching the two appear to make sense. Everywhere else many more homes are under-occupied than over-crowded so if the aim is purely more efficient use of the stock incentives could work better than penalties.
Social tenants
As social tenants in Wales will need no reminding, the 46% of them who are facing the under-occupation penalty is a higher proportion than anywhere else. It’s more than twice as high as in London and the South East and South West of England, but the North West and Yorkshire & Humberside both have 43 %of tenants affected.
And so what seems a neat (if harsh) administrative solution in London starts to unravel the further you get from the capital. Tackled by MPs and peers in a series of debates at Westminster, ministers repeat the mantra that under-occupiers can downsize or take in a lodger or find a job.
Scotland and Northern Ireland face particular problems of their own (see boxes) with the bedroom tax that did not occur to its inventors in London. Yet across whole swathes of all four UK nations, landlords simply do not have the smaller stock available and under-occupiers would have to wait years to downsize. In rural areas, it can be close to impossible to move and stay close to friends and families. Finding employment may be easier in London and the South East than elsewhere but the loss in other benefits means it is not as simple as ministers make out to work a few part-time hours to make up for the bedroom tax. Few tenants anywhere seem to be seriously considering the option of a lodger or of moving to a smaller (but more expensive) home in the private rented sector.
Short term
So in the short term at least, many tenants seem set to sit tight and try to make up the shortfall from their other benefits or perhaps with help from family. This at least is one thing that should not come as a surprise in London, since it has been clear for some time that the only way the under-occupation penalty will save the amounts forecast is if it fails to tackle under-occupation.
Many of the same issues apply with the next wave of welfare reform: the universal credit. A system designed to make work pay does not work quite as well if there is no work. Direct payment of the housing element to tenants poses far more of a threat to landlords’ finances where the impacts of the recession and the bedroom tax have been hardest. Digital inclusion and making all claims online sound fine in cities but will not be possible in broadband and mobile phone notspots in rural areas.
Northern Ireland has negotiated its own flexibilities (see box) but landlords in England, Scotland and Wales are left watching the experience of the direct payment demonstration projects to try to gauge the potential impacts. The first report put arrears at 8% but this was among tenants selected to exclude the most vulnerable and with intensive support from landlords and local authorities.
A report by the Institute for Fiscal Studies estimates that, taken as a whole, welfare reform will reduce household income in Wales by £525million by 2014/15. The Welsh Government says this will have a ‘devastating’ impact, with potential knock-on effects for health, social care, education and economic development.
As in Northern Ireland, though without the same scope, the devolved administrations in Wales and Scotland can do things that are not possible for the regions of England. Both have both found extra money to insulate claimants from the effects of the UK cut in council tax benefit (Northern Ireland does not have the council tax). In England by contrast, while some councils have found extra money from their own budgets, most are passing on a cut that will cost claimants an average of an extra £3 a week on top of all the other cuts.
Mounting pressure
Back in London, as April 2013 draws ever closer ministers have been forced on to the defensive by extensive TV news coverage of real-life beneficiaries of welfare reform. And in the city around them, the implications of a reform that affects London more than anywhere else are becoming clear. Councils were already facing a severe shortage of private rented accommodation affordable within the local housing allowance bedroom caps. The household benefit cap will make temporary accommodation for homeless people unaffordable in large swathes of the capital and – despite official guidance that says placements be in the same area – several are talking openly of shipping families as far afield at Hull, Birmingham and even Merthyr. The knock-on effects and costs in other areas have not been quantified.
Meanwhile, the pressure on tenants and landlords from the other reforms will continue to mount. At some point, that seems certain to lead to rising homelessness and rising costs for local authorities that lead some people to question whether Westminster will even achieve much in its principal aim of deficit reduction. Perhaps, after all, we really are all in it together. It’s just that we don’t yet know what it is.
Northern Ireland
Flexibilities in the universal credit negotiated by the Northern Ireland Executive have attracted some envious looks from the rest of the UK.
The new benefit will not start until April 2014, six months later than in Britain (although the timetable remains to be seen given the scale of the change).
Payments can be fortnightly rather than monthly and to more than just one person in the households, which should go some way to addressing concerns about the impact on claimants unused to managing money. And, crucially for housing organisations, tenants will retain the option of having their rent paid direct to their landlord.
The concessions have led to calls for something similar in Scotland and Wales. However, that ignores both the different constitutional arrangements in Northern Ireland under the Good Friday Agreement. There is also the small matter that, as WHQ went to press in late February, the Northern Ireland Assembly had still not passed its equivalent of the Welfare Reform Act and that it will have to pay the cost of any delays out of its block grant.
In January an ad hoc committee reported back on the equality and human rights aspects of the legislation. These are especially important in Northern Ireland given its recent history. Downsizing under the bedroom tax in Belfast, for example, might look like moving a few streets on the surface but might also involve moving from a largely Catholic to a largely Protestant area or vice versa.
The delay has added two further complications too. First, the legislation and the associated regulations are now seen as highly unlikely to go through in time for April, leaving landlords with little or no time to prepare for the detail and tenants without the same sort of contact and support seen elsewhere. Second, any delays will have to be paid for out of Northern Ireland’s block grant. Welfare reform minister Lord Freud estimated last year that a six-week delay would cost £15 million.
Scotland
Local authorities in Scotland have an extra problem with the bedroom tax on top of all the
others faced by their counterparts in the rest of the UK.
As the Welfare Reform Act was going through the Westminster parliament, ministers repeatedly said that temporary accommodation for homeless people would be exempted from the under-occupation penalty and councils in Scotland and elsewhere breathed a sigh of relief. However, in October a circular from the DWP confirmed that the exemption only applies to temporary accommodation leased from the private sector. In Scotland, 70% of it is owned by local authorities and so the bedroom tax applies.
The timing was even worse for Scotland because its legislation abolishing priority need was about to apply from the end of December. It meant that, just six months before the bedroom tax was due to be introduced, they faced a huge financial headache that cannot be passed on to tenants they have placed in temporary accommodation. The unexpected charge had also only emerged after discretionary housing allocations were set. The impact in just one medium-sized authority was estimated at £3.5 million. Discussions involving Scottish housing organisations and local authorities, the Scottish Government and the DWP were continuing as WHQ went to press.
On the bedroom tax in general, a campaign was building in Scotland to prevent evictions as a result of arrears and the housing sector was continuing to press for more to be done to mitigate against the cuts.