Government ‘clobbering the working poor’ with benefit reform

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government

There are fears the IT system won’t be ready, that the policy is being rushed through and that it’s really about cost cutting, not simplification.

Universal Credit you might think? No, unfortunately I’m talking about another of the Government’s benefit reforms – left out somewhat controversially of Universal Credit - council tax benefit (CTB).

The reform – which sees councils given 10% less to hand out to those struggling with housing costs – is really concerning local authorities because in seven months’ time they are meant to have their local schemes up and running, shielding pensioners from any cuts and protecting other vulnerable groups they identify.

It’s perhaps a marker of this Government’s haste that in a bid to make things simpler, we’ll soon have a council tax benefit that people go to the local authority for and a housing benefit that people apply for online and claim centrally. Crazy when you consider that there are 4.4m people claiming both housing and council tax benefit.

Most people welcome the concept of Universal Credit – because as its name implies – it should be universal. But leaving out the most widely claimed means-tested benefit or tax credit (5.9m claimants) is a messy oversight.

What’s more, there are some serious practical issues being flagged up by councils as the Government looks to save £500m through the measure.

Chief of those is the decision to protect pensioners - laudable as it sounds. Here’s why. Last year the Department for Work and Pensions paid a grant of £26m to Wigan to cover 34,000 claimants.

A 10% reduction is a £2.6m shortfall. With more than 40% of the claimants pension age – and thus protected from cuts – the burden inevitably falls on low-income working age claimants who face a 20% reduction.

And, that’s before other vulnerable groups such as disabled people and carers are protected, limiting the pool of funds even further.

As highlighted by Labour MP for Makerfield, Yvonne Fovargue, last week in Parliament, council tax is one of the few debts for which the final penalty is imprisonment. She also noted how people seeking help from debt charities because of council tax arrears rose by more than a quarter in 2011. 

Councils are also prohibited from getting on with ‘devising their own schemes’ because, as noted by Labour’s Clive Betts, chair of the Communities and Local Government committee, they haven’t received the detailed regulation from Government. So much for localism!

Then there is the line from Government about how a 10% reduction will strengthen councils’ incentive to promote employment. Labour MP for Bolton West, Julie Hilling, called this “absolute nonsense”, given that those who receive the benefit are already working – a criticism the Government has been accused of in its rhetoric on housing benefit reform.

In the same parliamentary exchange in Westminster Hall, Lib Dem communities minister Andrew Stunell – appearing initially to ignore this argument, evoked more rage when he said: “There has always been recognition in the House that welfare spending needs to be targeted properly,” he said, “and that more needs to be done to tackle poverty by getting people off benefits and into work.”

Labour MP for Warrington North, Helen Jones, was quoting government figures, when she said: “743,600 people are non-passported recipients of council tax benefit and in work. There are others on passported benefits, of course, who are in part-time work”.

After rattling off large numbers of council tax benefit claimants in work across a number of local authority areas (in Manchester, for example, more than 8,000 workers claim CTB), she said: “Do the departments talk to one another, or is this, as most of the opposition believe, a piece of Government spin designed to convince everyone that the benefits go to people who are out of work?”

Stunell once again defaulted to the deficit and blamed Labour, adding that the government is giving councils capacity to change their current discounts and exemptions for empty and second homes and for the local retention of business rates.

Indeed, he presented figures showing that if Wigan used the new discretionary powers to their full, it would actually be better off to the tune of £43,000.

“Of course, some of the recipients of the benefit are in work,” he recognised. “That is not in doubt or dispute.”

He added: “I understand the difficulties that this creates, but I remind Members that the reason why we have to reduce central Government spending is the inheritance that the Government received in 2010.”

The Communities and Local Government committee has recommended delaying the scheme by a year or more – a point seemingly backed up by Conservative MP George Hollingbery who said “it will be a complex system to put in place, with legal agreements that will need to be considered and thought through. A little more time for that might also be very welcome”.

Former housing minister Nick Raynsford couldn’t help but remind MPs that it was the Conservative Government that presided over “probably the worst administrative fiasco in the history of the welfare state” when housing benefit was introduced.

He said: “I put it to the Minister that he is now part of a Government who are moving in a direction that could well receive similar criticism in seven months’ time, when they try to put in place, with an impossible timetable and a lack of clarity on policy, a series of measures that will have far-reaching effects on the income levels of large numbers of people.”

The biggest concern is the cumulative effect of the welfare changes (housing benefit cuts, reductions or removal of tax credits) disproportionately impacting on people in low-paid work - those people doing what they can but not earning enough to live next to the factories, schools and hospitals they work in to keep the country going.

This was neatly summed up by Labour’s Andrew Gwynne – MP for Denton and Reddish – who urged the Government to consider their proposal carefully “because they are clobbering the working poor”.

Ross Macmillan is the deputy editor of 24housing magazine