Capita Reforming Housing Benefit Conference

Speech by Lord Freud , Minister for Welfare Reform.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The Rt Hon Lord Freud

After the tough work ensuring the Welfare Reform Act is now in place, we are working on what matters, the implementation of Universal Credit.

I have had a lot of involvement with the housing sector so far to make this happen and I am glad to have broad support for Universal Credit from social housing providers.

Universal Credit will help to lift as many as 350,000 children and 500,000 adults out of poverty and create a massive incentive to find work.

The changing profile of social housing tenants means you know the need for reform probably more than any other sector.

It used to be that the bulk of working age social housing tenants were in employment. Now only around 40 per cent are.

This means the housing environment has substantially changed as tenants become more dependent on the state. This makes it tougher to be a landlord.

That is why Universal Credit is a great opportunity for social landlords and their tenants.

I know the close relationship that exists between social landlords and tenants and we want to make sure that we can make the most of that relationship and help you to build upon it.

Beveridge warned of a benefits system that stifled incentive, opportunity, and responsibility.

This describes the benefits system we have today; a system that discourages people from returning to work and promotes dependency on benefits.

Universal Credit will ensure the welfare state is a system that acts as a safety net and encourages financial independence.

Universal Credit will change people’s behaviour and their circumstances for the better.

It will tackle the root causes of a growing dependency on welfare and recreate a culture of independence and self-reliance.

From October 2013 both new and existing claimants will be gradually moved onto Universal Credit and by October 2017 all claims will have been migrated over.

Universal Credit will bring together Jobseeker’s Allowance, Employment and Support Allowance, Working Tax Credit, Child Tax Credit, Income Support, and, importantly, Housing Benefit.

In total, that’s around 12 to 13 million tax credit and benefit claims that will be transformed into eight million Universal Credit payments.

A single Universal Credit payment will come with the assurance that people will be better off in work than on benefits and be a spur for many to get into employment.

Reducing complexity in benefits is a simple way to help people into work. No longer will people have to fight through a maze of bureaucracy to gauge if they will be better off in work or working more hours.

Helping more people into work will benefit landlords, as well as, of course, more importantly tenants.

The single benefit payment once a month - instead of benefits being paid weekly or fortnightly - is a key part of Universal Credit

It will allow people to budget as they would in work and make the transition into work smoother - so stopping another hurdle people are forced to jump and another disincentive for people to get into work.

Removing disincentives to work is why it is so important that the housing component forms part of Universal Credit.

Universal Credit has received wide support from the social housing sector, but people must know that that letting people budget and pay their own rent is a key element of Universal Credit.

Currently around 95 per cent of people in social housing on benefits have their rent paid directly to their landlords.

This figure is often used to prove that tenants prefer rent deductions.

Forgive me for being a little bit cynical about whose preference that is.

Supporting Universal Credit means supporting direct payments.

You cannot be positive and support Universal Credit and not support direct payments to tenants.

The single payment of Universal Credit means that we have a single benefits system for those in and out of work.

What we are delivering will erode the distance between being in and out of work or between working part-time and full-time.

Currently we have a mechanism that blocks flexibility and stops people from getting into employment.

What kind of system is that?

We are pushing on with the reform and the changes Universal Credit will make, but without undermining social landlords and we are determined not to undermine landlords’ income streams.

We will give pensioners the choice of having direct payments or not as well as ensuring vulnerable people who fall into arrears can have their rent paid to their landlords.

This will pre-empt a useless process of people switching from rent payments to landlords to direct payments and back again.

And this will also answer the question about why previous experiments of giving tenants greater choice failed.

Our Demonstration Projects covering tenants in local authority and housing association properties will also provide the evidence we need to give greater protection for social landlords and tenants.**

The Demonstration Projects will be taking place from June - and I understand there are some representatives from the projects here today.

The projects will test when tenants are ready to receive a direct payment and the level of support they may need to help manage their finances and budget for paying rent for the first time.

Safeguards will ensure that vulnerable people can have rent deducted from benefits and paid to their landlord if needed.

By looking when it is necessary to step in, we can protect social landlords and their income streams as well as the tenants themselves from falling into arrears.

The Demonstration Projects will test different levels of arrears that would trigger payment of housing benefit back to the landlord.

What we learn from the Demonstration Projects will develop the appropriate arrears trigger which will apply to Universal Credit.

We are already seeing social landlords actively supporting people who need extra support in the preparation for them looking after their own budgeting and bills.

The Demonstration Projects will also look at the financial advice that people need, working with local Credit Unions and others groups, who provide support to start budgeting, .to set up bank accounts, and to organise payments such as direct debits for the first time.

This support will also encourage financial inclusion for many currently excluded from mainstream banking and likely to fall foul of doorstep lenders and payday loans.

We are working on financial products such as jam jar bank accounts - that will allow people to split their bank accounts into pots just as they would with jam jars on the kitchen windowsill.

Testing the thresholds now and learning lessons from the projects means we will be able to finalise our approach in early 2013.

The roll-out of Universal Credit will also see priority given for households who will benefit most, such as those claiming Working Tax Credit who currently work a small number of hours a week but could work more hours.

This four-year process and intelligent roll-out should further help to protect social landlords from upheaval.

Local authorities are vitally important to the success of Universal Credit.

We are working with the Local Government Association in England and its Scottish and Welsh counterparts on the role that councils will play with Universal Credit.

Councils’ experience and knowledge of working with and supporting residents is invaluable and Universal Credit should not mean that expertise is lost.

Principally we are working with the LGA to develop local authority led pilots looking at how councils may be able to develop their roles as Universal Credit is introduced.

It is a core fact that local authorities’ responsibilities are changing and they now have a greater role supporting vulnerable members of the community.

Councils currently have a major role to play in welfare reform and in the future this role will grow as they provide support for troubled families, develop localised council tax schemes, continue with homelessness prevention and take on parts of the social fund in a move to localism.

As people on Housing Benefit move across to Universal Credit, I also expect local authorities to play a role supporting vulnerable people who need additional help as they claim this new single benefit payment.

In Universal Credit we will build on the existing structure of Housing Benefit but simplify the housing element to make it easier to understand and administer.

Universal Credit will primarily be accessed online, but telephone and face-to-face support will still be needed and will be available in the same way it is now.

This support will help people learn how to access online services and support those who cannot log on - building on the help people already receive to get online from councils, Jobcentre Plus and housing associations.

The local authority pilots will start to shape the role and make sure Universal Credit and council services are aligned to provide the right support for families.

With the LGA, we have published a prospectus for councils to bid to set up pilots, prior to the roll out of Universal Credit.

These will test the potential role for local authorities in supporting Universal Credit face-to-face delivery.

We are expecting diverse pilots across Britain to begin this year and end by September 2013. The learning from these will inform Universal Credit planning and implementation, but not produce a “one size fits all” model for local authorities.

This means councils could assist and encourage claimants to access online support independently and improving financial independence.

Or councils could work with the existing public bodies - as council and Jobcentre Plus staff already work side by side supporting people in some areas.

But we are also expecting councils to work with local community groups and charities or housing associations to create the right services for residents.

Universal Credit will bring real change to people for the better.

And social landlords will play an important role in the success of Universal Credit.

But the success of Universal Credit should not only be judged on meeting timetables and milestones.

The success of Universal Credit will come when the first claimants start receiving the benefit, start moving into work and start to reduce their benefit dependency.

The success of Universal Credit will come as it changes people’s behaviour and their circumstances for the better.

As I have said, we need a Welfare State to be a strong safety net - Universal Credit guarantees that safety net is in place but will make work pay.

Working with social landlords and the housing sector will ensure the success of the Universal Credit safety net for future generations.

Thank you very much

Published 30 April 2012