welfare reform a situation analysis · david magor obe irrv chief executive institute of revenues...
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Welfare Reform
A Situation Analysis
David Magor OBE IRRV Chief Executive
Institute of Revenues Rating and
Valuation
• DEFICIT REDUCTION
• Government’s top
priority.
• Taxpayers were paying
almost £120 million a day
(£43 billion a year) in
debt interest - more than
council tax, stamp duty
and inheritance tax
combined last year
WELFARE REFORM
• Reforming the welfare
system - to make it
fairer, more affordable
and better able to tackle
poverty, worklessness
and welfare dependency
LOCALISATION
• Coalition principles of
increasing freedom and
sharing responsibility by
localising power and
funding.
• De-ringfencing of funding,
abolition of top-down targets
and inspection regime
• The most fundamental reform of the social security system for 60 years
• A continuing deficit target
• A further £10bn
• Under 25’s
• Financial support for the family
• So far it includes the following:
• Housing Benefit changes
• Universal Credit
• Personal Independence Payment, ESA changes and specialist disability support
• Benefit cap
• Social Fund changes
• State Pension age changes
• Single Fraud Investigation Service
• Council Tax Reduction Schemes
Welfare Reform - The Wider Picture
Personal Independence Payment
Universal Credit
The Changes
Child Benefit, Carer’s Allowance (will remain)
Income related JSA Income related ESA Income Support (including SMI) Working Tax Credits Child Tax Credits Housing Benefit
Disability Living allowance
Current system New system
Contributory JSA and ESA (DWP still considering how these will work)
Council Tax Reduction and Rate Support ( schemes being considered)
… will include support for housing and children
Pension credit
Universal Credit Programme
• Migration is being diluted
• Recapping the scheme
– A reduction in complexity via a new single system for means-tested support, for;
– Working age people, in or out of work
– Support for housing, children and childcare costs
– Additions for disabled people and carers
– Requires a change in cultural attitudes to work and claiming benefit
– To use new online channels - ‘digital by default’
– Monthly household payments
– Access to a bank account and personal budgeting
Migration - Three different types
of Universal Credit claim • New Universal Credit Claim – where legacy benefits are
closed to new entrants
• Natural Migration – where a change of circumstance no
longer results in a new legacy award, but a migration of
the entire household entitlement to Universal Credit
• Managed Migration – where DWP initiates the transfer
of an entire household from legacy benefits to one
Universal Credit entitlement –
75% of claims in the first 4 years will be as a result of migration
Natural Migration
• Natural Migration is triggered by one of a number of changes of circumstances, based on employment status or family criteria, e.g.
– Move from out of work, to in work over x hours (JSA or IS to WTC)
– Household becomes responsible for a child for the first time (New claim to CTC)
– Ceased full time education (JSA to IS)
• The Natural Migration claimant journey starts with the legacy benefit being notified of an eligible change
• Migration uses the new claim process
A three phased migration strategy
April 2014
~600k
Phase 1 - phased launch of Universal Credit. All
new claims to the current benefits and credits will
be phased out by the end of April 2014.
~5m
~End 2015
Phase 2 - managed migration begins; national
approach targeting those who will benefit most
from UC
Oct 2017
~8m
Phase 3 - prioritising on safe
closure of HB teams in the final
(geographic) stages of migration
as of September 2012
Managed Migration Design
Extracting in-scope claimants from legacy and then ultimately
closing all of these cases, all in scope claims will be closed.
Management and Control
Select Cases
Legacy
Systems
Trigger Claimant
Communications
Claimant Makes
UC Claim (using
UC Core
processes)
Legacy
Claimant
Legacy Claim Close Requested
UC Claim Not made
within Timescales
Small Amount of Legacy Information Provided to UC
Letter, E-Mail,
Phone, Face
to Face
Letter
Internet, Phone
The Management & Control capability
enables flexible volume management,
bespoke MI, and protection of
vulnerable cases.
Providing information to UC Core that the claimant might not know or willingly
provide. Validation and ‘fraud and error checks’ performed, and TP calculated
Use of multiple channels to
deliver agreed Customer
Journeys
An in-bound telephone service
supporting claimant’s Managed
Migration journey, limiting the
impact on legacy areas
Circa 3 months
Initial claimant
communications,
claimant preparation
and protection of
vulnerable cases
improves UC success
rate
Tom Harvey – works full time
Employer
runs
monthly
payroll
RTI to HMRC
Payment
instruction
to bank
HMRC
compare
to RTI
Bank extract hash, send to
HMRC Tom Harvey,
26,
full time
Update
taxpayer
record
HMRC
match record
Tom Harvey earnings reduced and
claims UC
Employer
runs
monthly
payroll
RTI to HMRC
Payment
instruction
to bank
HMRC
compare
to RTI
Bank extract hash, send to
HMRC Tom Harvey,
26,
full time
Update
taxpayer
record
HMRC
match record
If UC
claim,
send to
DWP
Department
for Work and
Pensions
Tom Harvey, second job
Employer 1
runs payroll RTI to HMRC,
shows amt
paid & hours
worked
Payment
instruction
to bank
HMRC
compare
to RTI
Bank extract hash, send to
HMRC
Employer 2
completes
new starter;
adds Tom
to payroll;
runs payroll
Department
for Work and
Pensions
As UC
claimed,
data to DWP
RTI to HMRC,
new starter;
amt paid &
hrs worked
Pays Tom
by cheque
HMRC
match record
Update
taxpayer
record
Early days a DWP View
It’s early days on the projects – first payments to tenants were made in July
2012
So, these are very much emerging learning and findings
And, we have committed to ensuring that we will learn throughout the projects
• We had a two day workshop in early September with the project areas
which enabled the projects to share their early findings on what went well
and not so well so far
• We will communicate our learning within DWP and with key stakeholders
There is an understanding that most of you will be interested in the amount of
arrears in the projects so far.
We are putting out a press release for the areas in October to provide an
overview including the arrears picture
In the meantime, we want to share with you some of the other things that we’ve
been learning about. Many of them will not be a surprise.
Finding: Support Assessment
Matrix
Who applicable to: Pathfinder/other live running; Universal Credit policy
development and supporting regulations; Social landlords, Local Authorities
and Support Agencies
What is being done as a result: One of the outcomes from the
September Design Review was the change to the support and exception
process used by DPDP. This process will be monitored over the project
lifecycle. The UC design area responsible for this are also working closely
with DWP and the 6 project areas.
What: The Support Assessment Matrix – used
to determine whether a tenant can go straight
onto DP with no support, straight on with some
support, or needs support for a while before DP
– needs to be supplemented with local
knowledge and insight.
Finding: Communicating with
Tenants
What: Tenants did not always respond to letters, though they responded
better to letters from their landlord than from Local Authorities and to letters in
coloured envelopes (by 42% in Shropshire). Some of the areas have had
good results with sending text messages – though, this requires having
tenants mobile phone details. Overall findings show that there is a need to
adapt the contact method depending on the demographic /geographic
characteristics of the individual area.
Who applicable to: Universal Credit policy development and supporting
regulations; Social Landlords and Local Authorities
What is being done to communicate this finding: It was captured in the
outputs from the Design Review and will be disseminated wider within DWP
to inform other testing (for example the LA led pilots) and ultimately the roll
out of Universal Credit
Finding: Tenants’ issues are
often complex
What: Tenants can often have complex and multiple
issues – e.g. they are unemployed, have literacy problems
and drug problems, The assessment process for direct
payments has uncovered the need for other services
(especially social services) to become involved.
Who applicable to: Universal Credit policy development
and supporting regulations; Social Landlords; Social
Services; Local Authorities and other Support Agencies
What is being done to communicate this finding: This
was captured in the outputs from the Design Review and
is being disseminated to the Support and Exceptions team
in DWP to inform Universal Credit and also to the
Personal Budgeting team in DWP.
Finding: the need to develop
staff
What: The project areas have found that there will be a
requirement to understand in greater detail budgeting and
finance advice for tenants.
Who this is applicable to: Local Authorities, Social
Landlords, DWP Communications
What is being done to communicate this finding: This
was captured in the outputs from the Design Review.
Money Advice Service are putting together a toolkit and
the Demonstration Projects are feeding into this. The
DWP UC Personal Budgeting team are also feeding into
this.
Finding: the need to understand
the welfare reforms
What: Staff involved in dealing with tenants will need to
understand the welfare reforms and their wider context.
Who this is applicable to: Local Authorities, Social
Landlords, DWP Communications
What is being done to communicate this finding: This
was captured in the outputs from the Design Review and
DWP Communications will be providing information, the
next Communication is scheduled for October 2012.
Finding: need to separate rent
and benefits in communications
What: Need to separate rent from benefit in all
communications to the tenant. In Universal Credit tenant
communications will need to be clear that their benefit
payment will include their rent and it is the tenants
responsibility to pay their rent. Communications that
came jointly from Local Authorities and Landlords
confused tenants.
Who is this applicable to: Universal Credit; Local
Authorities and Social Landlords.
What is being done to communicate this finding: This
was captured in the outputs from the Design Review and
will be disseminated wider within DWP Communications.
Finding: setting up bank
accounts for UC payment What: validation by the Social Landlord of the type of bank
details provided by the tenant is very important as tenants can
provide Post Office account or prepay card details which do not
accept direct debits.
Who is this applicable to: Universal Credit; Social Landlords.
What is being done to communicate this finding: This was
captured in the outputs from the Design Review and will be
disseminated wider by DWP Communications to ensure that
tenants understand that certain types of account cannot be used
for direct debits. Money Advice Service are putting together a
toolkit which may also cover this issue and the Demonstration
Projects are feeding into this.
Finding: setting up and
maintaining Direct Debit details
• What: Tenant communications understanding Direct Debits and managing these throughout their UC life, including if there is a need to stop the Direct Debit
• Who is this applicable to: Universal Credit; Social Landlords.
• What is being done to communicate this finding: This was captured in the outputs from the Design Review and will be disseminated wider by DWP Communications. Money Advice Service are putting together a toolkit which may cover this issue and the Demonstration Projects are feeding into this. The UC Personal Budgeting team are also looking at how tenants can be helped to be made financially capable.
Finding: advantage in landlords
knowing more about their tenants
What: all of the project areas felt that the process of
implementing direct payments would have been smoother
if they had more information about their tenants, both in
terms of operating the support assessment matrix and in
actually giving the support
Who is this applicable to: Social Landlords.
What is being done to communicate this finding: This
was captured in the outputs from the Design Review, and
Social Landlords are aware that they need to understand
more about their tenant.
Universal Credit Calculation
Key stages in the UC calculation
process together with CTR and Data
Availability
Context • DWP currently transmits data to LAs for Housing
and Council Tax Benefit
• LAs require Universal Credit data to be transferred for CTR purposes
• The UC calculation process is markedly different from existing legacy benefits
• Devolved Administrations and LAs to clarify requirements for CTR
• Show the stages of the Universal Credit calculation
• Highlight which figures may be available for transmission to Local Authorities for the purposes of CTR assessment
• Explain which elements are still subject to design
and/or Policy activity
SUMMARY – THE KEY STAGES IN THE UC ASSESSMENT
PROCESS
STAGE 3 – CALCULATE UC ENTITLEMENT (APPLY ANY SANCTIONS, ADD ANY HARDSHIP PAYMENTS)
STAGE 2 – CALCULATE THE ADJUSTED UC AWARD (DEDUCT EARNINGS, CAPITAL, INCOME, BENEFIT CAP)
then
STAGE 0 – IDENTIFY WHO IS IN THE BENEFIT UNIT
(ADULTS, DEPENDENT CHILDREN AND NON-DEPENDANTS)
STAGE 1 – CALCULATE THE UC MAXIMUM AMOUNT
(TOTAL ALLOWED FOR LIVING AND HOUSING COSTS)
then
then
STAGE 4 – CALCULATE THE UC PAYMENT (ADD ANY ADVANCES, APPLY ANY DEDUCTIONS)
then
STAGE 0 – IDENTIFY THE BENEFIT UNIT
One or two ‘eligible
(and connected ) adult claimants,
and relevant child dependents
=
The UC Benefit Unit
Identify (for Housing
Element purposes only)
any
non-dependants
STAGE 1 – CALCULATE THE BENEFIT UNIT’S ‘MAXIMUM
AMOUNT’ BY ADDING UP RELEVANT AMOUNTS COVERING……
Childcare Element
Carer Element
Housing Element
L
CW
Limited capability for Work Related Activity,
or Work Element
C
are
r
Child Element/Disabled Child Additions
Standard Allowance
Ad
ult
s
Ch
ild
ren
Ho
us
ing
C
hil
dc
are
Tick
indicates
available for
CTRS
STAGE 2 (a) – CALCULATE THE UC ‘ADJUSTED AWARD’
Any earnings (subject to any disregards and taper)
Other applicable income
minus
UC MAXIMUM AMOUNT
Tariff income from applicable capital
minus
minus
And then......
Tick
indicates
available for
CTRS
STAGE 2 (b) – ‘CALCULATE THE UC ‘ADJUSTED AWARD’ BY
APPLYING FURTHER CRITERIA
Any increases necessary (where Cap does/will not
apply) to take account of Transitional Protection
minus
ADJUSTED AWARD stage 2(a)
Any reductions necessary to take account
of the Benefit Cap
plus
UC ADJUSTED AWARD equals
Tick
indicates
available for
CTRS
STAGE 3 –CALCULATE THE ‘UC ENTITLEMENT’
minus
UC ADJUSTED AWARD
Any conditionality sanctions (plus any
hardship payment amounts)
equals UC ENTITLEMENT
Tick
indicates
available for
CTRS
STAGE 4 – ESTABLISH ANY DEDUCTIONS TO BE MADE TO UC
ENTITLEMENT TO WORK OUT THE ‘UC PAYMENT’
Any short-term or
budgeting advance
UC ENTITLEMENT
plus
The UC Payment
equals
and
Any agreed
deductions
e.g. child support,
third party
rent payments)
minus
Tick
indicates
available for
CTRS
Progress/Current situation
4 SFIS pilots Hillingdon, Corby, Wrexham, Glasgow
1 LA Managed and in LA accommodation
Partnership working, but
Still massive uncertainty
Council Tax Reduction (1)
• Is your scheme developed?
• Are you out to public consultation?
• Did you meet the consultation criteria?
• What is your relationship with Major
Precepting Authorities?
• Are you talking to Local Precepting
Authorities?
Council Tax Reduction (2)
• Have you prepared you EIA?
• Have you prepared a draft tax base?
• Are you ready to manage and monitor the
collection fund?
• Have you devised your communication
strategy?
• Are you ready to finalise your scheme and
deliver it?
44
Transitional grant - overview
– Additional £100 million of funding for councils to help support
them in developing well-designed council tax support
schemes and maintain positive incentives to work.
– The voluntary grant will be available to councils (billing and
major precepting authorities) who choose to design their
local schemes so that they comply with certain criteria.
– This grant is intended to provide some headroom for those
authorities who are looking across all of their options for
funding savings to ensure that those currently in receipt of
support do not face a large tax increase –
– Funding allocations have already been published, so local
authorities know how much they could stand to receive.
– Expect that councils will make applications after 31 January
2013, and that funding will be paid in March 2013.
45
Transitional grant – criteria (1)
•Those who would be entitled to 100% support under
current council tax benefit arrangements pay between zero
and no more than 8.5% of their net council tax liability;
• Applies to both means-tested and passported
• This is before the application of non-dependant deductions /
second adult rebate – these are not caught by the scheme
criteria
• If they would be entitled to 100% support under current
rules, they cannot be required to pay more than 8.5% of their
maximum net liability (i.e. after other discounts, such as
SPD, have been applied) under the new scheme.
• This means that changes to capital rules / similar that would
make claimants currently eligible for support completely
ineligible would not be compliant with the grant.
46
Transitional grant – criteria (2)
•The taper rate does not
increase above 25%;
– Local authorities would be free to
stick to the 20% taper rate – or lower
47
Transitional grant – criteria (3)
•There is no sharp reduction in support for those entering work
– This is intended to ensure that there is no sudden drop in support as a
person’s income increases and they move off entitlement for the maximum
reduction
– It is intended to ensure that the taper operates as at present – that is, that
excess income is tapered in relation to the maximum eligible reduction
– This means schemes which cap support at a band level would not be
compliant – as the starting point for all is a greater than 8.5% minimum
liability
– Also means that schemes which, for example, require those out of work to
make no contribution but require everyone in work to make at least some
contribution before the application of the taper or non-dependant
deductions would not be compliant
The Process
• Notification
– Extent of detail
– Detailed statements
• Appeal to the local authority
– Decision
• Appeal to another place
– The Valuation Tribunal Service
– Enabling power already in place
Appealing to the VTS
• Process
• Need for regulation?
• Practice Statements
• Procedure Statements
• Sufficient expertise?
• Customer friendly?
• Is there a capacity issue?
The Hearing
• Amendment in the Bill
• Provision for cases to be heard before a
Judge in England but not in Wales
• Evidence of scheme to be formally given?
• These are liability appeals
• Will there be a crossover with UC
appeals?
• The big question “what is the potential
volume”
Local Authorities and Welfare
Reform • Local authorities, along with other public, private and
third sector organisations, have a significant role to play
in managing the changes associated with Welfare
Reform
• Local authorities will have a key role in supporting
customers and tenants during the transition to and
beyond new local services – whether you want to or not
• Local authorities will need sufficient expertise,
knowledge and capacity to effectively manage the
impact of Welfare Reform – but who is going to pay for it
• Local authorities will have to align local services with the
Government’s aims and objectives as they become
clearer
Supporting the transition
• There are a number of roles, planned and imposed by
default, for local government in preparing customers for
the changes
– By delivering new local services
– Reconfiguring service offerings to reflect post-reform world
– Some of these functions have already been started
– But, budget uncertainty is hampering change
– The impact of Welfare Reform and localism will need to be
refined, integrated and aligned strategically to existing
Local Authority services
– Time is short
Preparing customers for the
changes • Keep local government informed by
– Developing a meaningful communication strategy
– Providing generic information and advice regarding the
changes
– Tailoring the advice to ensure individual impacts are
communicated
– Signposting citizens/tenants to other sources of
information/support
– Identifying those most affected by the changes and
provide individual/tailored support and advice/guidance,
but
• Who does what ???
Development of New Local
Services
• Carry out a service review
• Adapt how existing services are delivered
• Administer local welfare provision, whatever its
going to be
• Revise council-wide/strategic approach
• Develop integrated new local services
• Create new service delivery models
• A new relationship with DWP and HMRC
Preparing the way
• Have you thought about how your authority will support
the cultural change of Universal Credit with channel shift
and personal responsibility?
• Have you considered the totality of the Welfare Reform
on your local services? Have you completed any impact
assessments on existing services?
• What will the broader advice network look like in your
authority? Have you considered aligning Welfare Reform
to other Local Authority responsibilities, specifically
those around financial and social inclusion?
In Conclusion, Some Unanswered Questions
• Is the Coalition trying to develop a new culture rather than a new system?
• Claimants are in a period of unprecedented change but are they aware of it ?
• Local Government is attempting to deliver localism, but do they know what it is ?
• CTR, one successful challenge and then what happens?
• The Government is building a 21st Century benefits system designed with flexibility and with continuous improvement from the outset in other words in reality is that chaos and uncertainty?
• What is the real position in the preparations to deliver UC ?
• Will it achieve its aim to simplify the benefits system and ensure that work pays, while providing support for those who need it?
• It is being designed as a service based on claimant journeys, what does this really mean
• Are the DWP and HMRC really working with partners and stakeholders or is the change being imposed upon them using their specialist knowledge and skills to understand and meet the challenges of the overall reform package ?
AND FINALLY !
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