PARTNERSHIP AND RESOURCES PDSP

CHANGES TO HOUSING BENEFIT - UPDATE

REPORT BY HEAD OF FINANCE AND ESTATES

A. PURPOSE OF REPORT

To provide the Scrutiny Panel with up to date information of the changes to the Housing Benefit (HB) / Council Tax Benefit (CTB) system and to outline details of how best the information / changes could be communicated to residents as agreed by the Council Executive meeting of 21 December 2010.

B. RECOMMENDATION

It is recommended that the Scrutiny Panel notes the content of the report and agrees that further updates on the changes and their impact on West Lothian are provided to the Scrutiny Panel, as required in the period ahead.

C. SUMMARY OF IMPLICATIONS

I Council Values • Focusing on our customers’ needs

• Being honest, open and accountable

• Providing equality of opportunities

• Making best use of resources

• Working in partnership

II Policy and Legal (including Universal Credit White Paper Strategic Environmental Assessment, Equality Social Security Contributions and Benefits Act Issues, Health or Risk 1992 Assessment) Social Security Administration Act 1992

Housing Benefit Regulations 2006

Council Tax Benefit Regulations 2006

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III Resources - (Financial, There is an impact on all staff involved with Staffing and Property) benefit administration, processing, appeals, advocacy, scrutiny and audit. There will be implications for benefit subsidy received by West Lothian Council. Additional costs of up to £3,000 will be incurred in giving early warning to those affected by the changes to benefits.

IV Consultations Department for Work and Pensions (DWP) Convention of Scottish Local Authorities (Cosla) Housing, Construction and Building Services Corporate Communications Advice Shop Local Housing Associations Local Landlords' Forums Voluntary Sector

D. TERMS OF REPORT

1.0 Background

In response to comments at the Council Executive meeting further explanation of the benefit changes that will come into force in the forthcoming financial year is included. This is supported by evidence in appendices that will enable Members to better understand the complex issues that surround the changes. A clear strategy has also been developed in publicising the changes.

1.1 HB and CTB are national welfare benefits administered by local authorities on behalf of the UK Government. The declared purpose of the HB / CTB Schemes is to help people on low incomes pay their rent and / or council tax (excluding water charges). The Social Security Acts set out the basic conditions of entitlement. The circumstances in which a claimant satisfies these conditions are set out in detailed regulations, which cover the following areas:

• the amount of rent and / or council tax which is 'eligible' for benefit, • the size of the claimant's family; and • the personal circumstances of the family members, principally their age; whether they have a disability or any caring responsibilities, • the claimant's income / capital, including the income / capital of their family members when compared to their family size and personal circumstances of its members; and • whether any other adults who are not part of the claimant's family live within the claimant's household and, if they do, any assumed contribution they make towards the rent / and or council tax.

Each claim is therefore subject to individual calculation for each period when the circumstances remain consistent. Entitlement to benefit at any time is calculated by reference to figures which are set annually by the UK Government. These are known as applicable amounts. An applicable amount 2

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is the figure used in calculating HB / CTB to reflect the basic living needs of the claimant and family.

A claimant's applicable amount is the same for both HB and CTB. It is the total of any personal allowances and premiums, which apply in their individual case. Individual calculations of entitlement take place in respect of each claim and are also reassessed as the claimant's circumstances change. Because of these factors entitlement to benefit can be volatile and may be subject to frequent amendment.

1.2 The UK Government's changes to benefit calculations from the forthcoming financial year onwards affect:

• the scale of applicable amounts, • the level of private sector rents deemed eligible, and • the level of assumed contributions to the claimant's household

These three areas are explored in detail in the remainder of the report.

2.0 Changes to Applicable Amounts Effective in 2011/12

2.1 Applicable amounts are subject to annual uprating. The Chancellor of the Exchequer announced in the budget that the Consumer Price Index (CPI) will be used as the measurement of prices for benefit and pension uprating. He stated that this was because it is a better reflection of the cost of living for benefit customers and is also deemed consistent with the Bank of England's inflation target. Therefore, most benefits applicable amounts will be increased by 3.1 per cent. Some, however, have been held at existing levels. In previous years most HB and CTB applicable amounts were uprated by reference to the ROSSI index (this is a measure of inflation which excludes housing costs rent and council taxes on the grounds that in such cases the costs are usually met by the state; it has been named after Hugh Rossi, the Senior Civil Servant who developed it). In September 2010 the ROSSI index was 4.8 per cent as compared to 3.1 per cent for CPI.

2.2 For claimants in receipt of "passported" benefits such as Job Seekers Allowance or Income Support, the level of that benefit is automatically set at the same level as the applicable amounts so there is no impact on the award of HB / CTB entitlement.

2.3 Confirmation of the applicable amounts was received from the DWP on 6 January 2011. The council's software suppliers are currently working on the uprating programmes for annual billing, but these are unlikely to be available for test purposes until 4 February 2011.

3.0 Changes to Eligible Rent Levels for Housing Benefit

3.1 There are four changes to the Regulations affecting the amount of rent deemed eligible for housing benefit in the forthcoming financial year. These were all outlined in the earlier report to the Council Executive in December. Further detail of the changes and their likely impacts are given below.

3.1.1 Local Housing Allowance (LHA) set at 30 percentile level

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The Rent Service sets the LHA for councils to use as the maximum eligible rent level for properties in calculating entitlement to housing benefit for privately rented properties. LHA levels are determined on an area by area basis each month. The levels are split according to the number of bedrooms that a property has. The Rent Service maintains a database of all formal contractual rents within each council's area and from this calculates the point within the range of rents, at which LHA is set. Up until 1 April 2011 LHA is set at the 50 percentile point in the range, from that date onwards it will be reduced to the 30 percentile mark. Put plainly this means that 70% of private rents within West Lothian will be outwith the amount which could be fully covered by housing benefit. A note of the most recent LHA levels is attached at Appendix A.

As from 1 April 2011 all new applications for private sector housing benefit will be assessed by reference to the 30 percentile LHA rate.

At present we have 1,931 existing cases that will be affected by this change. The timing of the impact on individual cases will vary as the Government has introduced a transition scheme which will delay the effect of the legislative change. Transitional protection will be lost or affected if the claimant's household circumstances change. This means if the number in the household changes or the claimant moves address. In all other cases the transitional protection will run from the point at which the LHA is due for its annual review (the anniversary date) for a period of nine months beyond this date. All private rent benefit claims are subject to annual review. The timing of this is broadly connected to the month of the year in which the claim was made originally. Anniversary dates are therefore distributed throughout the year. As has been previously stated LHA rates are set each month. When a benefit claim involving LHA is assessed the LHA rate for the month in which the claim is made is used. The amount of LHA then applies for one year before reassessment and is reviewed annually thereafter whilst the claim is in payment. At Appendix B a list of the incidence of annual reviews together with the likely effective date of the change is attached. By way of example for the 134 claims subject to annual review in April 2011, the nine month transition period would then follow and so the impact of the change would occur in January 2012. This assumes that entitlement to benefit is continuous and there are no relevant household changes during the intervening period.

3.1.2 Withdrawal of the £15 per week excess

Currently customers who have a contractual rent which is less than the LHA rate will receive up to £15 per week of the difference between their contractual rent and the LHA rate.

In West Lothian we currently have 669 such cases. This money is paid over and above their rental liability. Its removal will detrimentally affect the amount of income coming into the household. Changes become effective on the anniversary date and will apply immediately from that point onwards. Details of when the cases will be affected are included at Appendix C.

A breakdown of cases by weekly loss is as follows:

Loss between £10 - £15 per week = 343 cases Loss between £5 - £10 per week = 240 cases Loss less than £5 per week = 86 cases

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3.1.3 New Upper Limits of LHA

As previously reported West Lothian's existing LHA rates are significantly lower than the cap levels and so this change will not affect our claimants.

3.1.4 LHA Capped at four bedroom rate

The highest level of LHA has been capped as from 1 April 2011 at the four bedroom rate. There are five cases in West Lothian where benefit claimants occupy larger privately rented properties that are currently being paid at a higher rate. Their average loss of benefit will be £17.30 per week.

4.0 Level of Assumed Contributions by Non-Dependants

4.1 A non-dependant is someone who normally resides with the claimant such as an adult son or daughter, or other relative, or a person treated as not liable to make payments in respect of the dwelling.

4.1.2 The UK Government announced, in its emergency budget, its intention to increase the level of non-dependant deductions. These deductions had remained unaltered since 2001. The UK Government's intention is, by April 2014, to bring these deductions to the level they would have been at had increases been applied annually from 2001. The first stage of this process has now been announced and the new deductions and existing deductions levels are outlined in Appendix D. These show no changes to the level of non- dependant deductions for people who already attract a zero deduction such as those in receipt of certain state benefits. This means that of 1,902 benefit households with non-dependants 1,297 will retain a zero deduction rate and will therefore not be affected by the increase in non-dependant deductions in the forthcoming financial year.

4.1.3 Beyond those cases where the deduction level remains unchanged there are 605 cases where the increase will impact. In such cases the level of benefit will fall by an amount equal to the increase in the appropriate non-dependant deduction. There is no transitional period. Of these 605 cases:

107 are Housing Association Tenants 273 are Council Tenants 170 are Owner Occupiers 55 are Private Tenants

308 cases will have increased deductions of between £2 - £3 per week 158 cases will have increased deductions of between £4 - £5 per week 102 cases will have increased deductions of between £6 - £12 per week 37 cases will have increased deductions of between £12 - £15 per week

5.0 Publicity and Training

5.1 The UK Government have announced their intention to produce a leaflet that councils may use to inform customers of the benefit changes. This leaflet is not yet available. The cost of production and despatch of these leaflets will fall mainly on individual councils as only a limited number will be provided in hard copy form for councils to use. The leaflet itself will contain information that is general in nature and in order to increase its ability to inform our claimants a 5

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degree of customisation will be required.

5.2 As soon as the Housing Benefit reforms were announced, the Revenues Unit instigated a series of briefing sessions, seminars and meetings with stakeholders and partners within and outwith the council. These included the local private landlords’ forums, Registered Social Landlords, the Housing Support Providers Forum, advice, advocacy, and voluntary groups, the West Lothian Financial Inclusion Network and many others. These sessions are ongoing and have been adapted and revised to take account of further changes which have recently been announced.

5.3 The Revenues and Benefits Manager will make training available to all relevant customer facing staff to ensure they are able to understand and explain the benefit changes at the first point of contact. It should be acknowledged that it will be very difficult to deal with the fall out of these changes as they will impact directly upon the most vulnerable in the West Lothian community. The situation will be compounded by the fact that there will be a range of other changes to the benefit system, which will impact on customers in the months and years ahead. Details of the impacts are at this stage only generally known.

5.4 The efforts to make customers aware of the forthcoming changes, which may affect them during the coming financial year, have also been stepped up. This is being done with the twin objectives of raising awareness amongst those likely to be affected in some way, whilst avoiding causing unnecessary distress or worry to those vulnerable customers who will not be affected by the initial tranche of Housing Benefit changes this year. General publicity will be included in the annual council tax billing mail sent to all current benefit recipients. Our annual “Getting the Benefit” booklets, issued to every benefit customer at this time of year, are being substantially revised to include simple explanations of the main changes this year and signposting future likely changes. The Housing Benefit pages on the council’s website are also being substantially revised and will be kept up to date as the reforms develop. Plans are also in place to use the Local Area Committees and the council's Facebook to give general information on the changes.

5.5 In addition to the above measures, specific, detailed, and targeted information will be issued to those customers currently in receipt of Local Housing Allowance who will be affected at some point in the next financial year. These customers have already been identified. Individual advance notice letters will be sent to each relevant customer prior to their “anniversary date”. At the anniversary date the claim will be reassessed under the new rules and each customer will be sent a letter explaining the new assessment. This letter will highlight the new (reduced) LHA rate, and will give notice that this new rate will come into effect following nine months transitional protection – provided there are no relevant changes in the intervening period.

6.0. HB / CTB Changes

6.1 Estimates can be made based on the current make up of the benefit caseload. An assumption has been made that the caseload will remain the same at the point of introduction of any change. This will undoubtedly not be the case but it is the most reasonable way to predict the future impact of the Government’s plans. At Appendix E the breakdown in terms of each multi member ward is attached. A copy of the monthly multi member ward breakdown of the full 6

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benefit caseload as 31 December 2010 is attached as contextual evidence at Appendix F.

7.0 Discretionary Housing Payments (DHP)

7.1 DHPs are stand-alone payments and do not form part of HB / CTB entitlement. They were introduced in July 2001 and have allowed councils to help those entitled to HB/CTB who, in their opinion, require further financial assistance with housing costs.

7.2 The extent of the UK Government funding to date has been £20m nationally of which this council has received around £40,000. When placed against an overall annual HB / CTB spend in West Lothian of £58m it can be seen that its application can only be minimal and apply to exceptional rather than routine circumstances.

7.3 The UK Government announced in the July 2010 budget that it will increase its contributions to local authorities funding for DHP by £10m to £30m in 2011/12. The Government's stated purpose for the additional funding is to provide additional support to local authorities who will be adversely affected by changes in the LHA rates. The allocation of DHP has not been finalised as the UK Government is considering whether the allocation of the increased funding should be directed towards the areas most affected by the changes in LHA rates. At the time of writing this report this council's DHP allocation is not known. It is however, unlikely to be greatly different to previous years' allocations and will most definitely be insufficient to make up for all the benefit reductions that will occur in the forthcoming financial year.

E. CONCLUSION

That Members note the following changes:

• Changes to Applicable Amounts effective in 2011/12 • Changes to Eligible Rent Levels for Housing Benefit • Withdrawal of the £15 per week excess • New Upper Limits of LHA • LHA Capped at four bedroom rate • Level of Assumed Contributions by Non-Dependants

In terms of informing the public of the changes, a variety of means will be used including:

• Early Warning Letters for LHA Changes • Use of the council's Internet and Facebook • Ongoing consultation with Sectional Interest /Voluntary Groups • Provision of training to relevant frontline services

F. BACKGROUND REFERENCES

Emergency Budget June 2010

Comprehensive Spending Review October 2010 7

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Various DWP Circulars

Report to Council Executive 21 December 2010

Appendices/Attachments: 5 Contact Person: Jim McCafferty, (01506) 776850

Donald Forrest Head of Finance and Estates

Date: 12 January 2011

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Current weekly LHA rates for EH postcodes in West Lothian based on the 50th percentile:

1 Room 1 Bed 2 Bed 3 Bed 4 Bed 5 Bed £65.77 £98.08 £121.15 £138.46 £190.38 £207.69

Estimated weekly LHA rates for EH postcodes in West Lothian based on the 30th percentile:

1 Room 1 Bed 2 Bed 3 Bed 4 Bed £63.35 £92.31 £115.38 £132.69 £182.54

Appendix B

The likely effective date of impact on the existing caseload of the reduction in LHA rate from 50th to 30th percentile

Anniversary Date Number of Households in Effective date of impact if West Lothian affected no change in household or address

April 2011 131 January 2012

May 2011 155 February 2012

June 2011 160 March 2012

July 2011 170 April 2012

August 2011 203 May 2012

September 2011 215 June 2012

October 2011 231 July 2012

November 2011 200 August 2012

December 2011 132 September 2012

January 2012 100 October 2012

Feb 2012 107 November 2012

March 2012 127 December 2012

Appendix C

The likely effective date of impact on the existing caseload of the removal of the “£15 excess” payment

Anniversary Date Number of Households in West Lothian affected April 2011 57

May 2011 53

June 2011 58

July 2011 63

August 2011 71

September 2011 76

October 2011 77

November 2011 69

December 2011 45

January 2012 26

February 2012 32

March 2012 42

Appendix D Non-Dependant Deductions

Weekly Weekly Weekly Deduction Weekly Deduction Deduction from Deduction from from Council Tax from Council Tax Non-Dependant Income Housing Benefit Housing Benefit Benefit Benefit 2010/11 2011/12 2010/11 2011/12 Aged 18 or over not in remunerative work £7.40 £9.40 £2.30 £2.85 Aged 25 and over in receipt of Income Support or Job Seekers Allowance (IB) or Employment and Support Allowance (IR) £7.40 £9.40 Nil Nil Aged 18 or over earning less than £122 weekly £7.40 £9.40 £2.30 £2.85 Aged 18 or over earning £122 to £179.99 weekly £17.00 £21.55 £2.30 £2.85 Aged 18 or over earning £180 to £233.99 weekly £23.35 £29.60 £4.60 £5.70 Aged 18 or over earning £234 to £309.99 weekly £38.20 £48.45 £4.60 £5.70 Aged 18 or over earning £310 to £386.99 weekly £43.50 £55.20 £5.80 £7.20 Aged 18 or over earning £387 or more weekly £47.75 £60.60 £6.95 £8.60

Appendix E

Benefit Changes

LHA Percentile Shift (see 3.1.1)

Area Number of Households Affected Armadale 140 285 Broxburn 186 East Livingston 224 Fauldhouse 172 87 Livingston North 285 Livingston South 259 Whitburn 293 Total 1,931

£15 Cap (see 3.1.2)

Area Number of Households Affected Armadale 51 Bathgate 92 Broxburn 65 East Livingston 93 Fauldhouse 73 Linlithgow 32 Livingston North 69 Livingston South 82 Whitburn 112 Total 669

LHA Cap at Four Bedroom Properties (see 3.1.4)

Area Number of Households Affected Bathgate 3 Livingston South 2

Households to be affected by Non-Dependant Deduction Increase (see 4.1.3)

Area Number of Households Affected Armadale 52 Bathgate 72 Broxburn 45 East Livingston 85 Fauldhouse 63 Linlithgow 26 Livingston North 70 Livingston South 93 Whitburn 98 Total 605

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DATE: 06/01/2011 Armadale and Bathgate Broxburn East Livingston and Fauldhouse and Linlithgow Livingston Livingston Whitburn and Total Blackridge East Calder Breich Valley North South Blackburn

Number of claimants 1799 2322 1852 2031 2140 812 1958 2194 3056 18164

Public 975 1060 688 403 1083 382 851 820 1543 7805 Private 191 342 230 282 245 130 355 344 363 2482 Housing Associations 243 568 459 904 368 91 369 627 558 4187 Council Tax 1688 2075 1666 1863 1987 751 1760 1936 2810 16536 average HB (weekly) 64.00 66.88 63.57 68.11 63.91 61.89 64.42 64.88 63.89 64.57 average PT (private) 103.04 99.97 94.96 96.93 102.25 92.83 100.69 105.63 102.65 100.53 Housing Associations 84.41 65.30 66.31 56.76 65.68 85.90 67.52 65.18 68.94 65.82 weekly HB Totalled 62396.60 70896.04 43739.38 27449.7 69219.71 23642.79 54821.65 53200.26 98588.01 503954.14 weekly PT Totalled 19681.30 34189.74 21840.3 27334.71 25050.98 12068.44 35744.57 36335.19 37262.08 249507.31 Housing Associations 20512.20 37090.17 30436.97 51315.12 24171.1 7817.12 24913.79 40865.27 38466.89 275588.63

Standard Benefit 556 689 614 649 697 255 607 652 938 Pension credit claimant 487 467 420 411 488 233 354 377 684 IS/JSI/ESA/EP 624 921 630 771 767 243 764 891 1158 Claimants in work 132 245 188 200 188 81 233 274 276

Council Housing in Ward 1589 1773 1189 654 1865 705 1486 1349 2519 Council Tax properties in ward 6789 9454 8438 8842 6982 6663 9765 9355 9117

N.b Where customers are in receipt of both Housing Benefit and Council Tax Benefit this is counted as one claim.