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Universal Credit and Local Support for Council Tax David Magor OBE IRRV (Hons) Chief Executive Institute of Revenues, Rating and Valuation.

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Presentation on theme: "Universal Credit and Local Support for Council Tax David Magor OBE IRRV (Hons) Chief Executive Institute of Revenues, Rating and Valuation."— Presentation transcript:

1 Universal Credit and Local Support for Council Tax David Magor OBE IRRV (Hons) Chief Executive Institute of Revenues, Rating and Valuation

2 Universal Credit and Housing Costs Introduction to Universal Credit The Components of Universal Credit The Implementation Programme The Potential Role of Local Authorities in Universal Credit Post Universal Credit – Housing Costs and the Pension Aged The Continuing Reform of Housing Benefit

3 Support with Council Tax Introduction Consultation on Local Support for Council Tax Response to the Consultation and developing the legislation Managing the Risks Administration Council Tax Collection

4 An Introduction to Universal Credit

5 The Scope of Universal Credit In scope Income-based Jobseeker’s Allowance Income-related Employment and Support Allowance Income Support (including Support for Mortgage Interest) Child Tax Credits Working Tax Credits Housing Benefits Social Fund (budgeting/alignment) Out of scope Council Tax support Disability Living Allowance Contributory Benefits (although earnings rules aligned) State pension Child Benefit Pension Credit Carer’s Allowance

6 Ten core principles for delivery of Universal Credit (1) The service will be easy for customers to understand and use. It will be designed in partnership with end users to enable this. Self-service will be the primary channel of use with other channels available for some services, to some individuals, by exception. The majority of transactions will be automated, with staff intervention reserved for cases where there is a clearly identified risk of fraud or error. There will be face to face contact for issues regarding conditionality (i.e. the obligations we expect customers to fulfil). Joint (for household claims) and single (for single claims and to accommodate individual customer commitments) customer accounts will enable customers, staff and some third parties to view information relevant to the assessment unit

7 Ten core principles for delivery of Universal Credit (2) Universal Credit will be delivered as a single entity, with a single department responsible for delivery. That does not mean it will necessarily be delivered by a single organisation The need for customer contact will be minimised unless it is integral to conditionality, fraud or error (including over and under payments) As far as possible, causes of fraud and error will be designed out of the system Universal Credit will connect with related services (e.g Work Programme, passported benefits) efficiently and in a way that customers understand Universal Credit as a benefit processing system will be scalable and extendable to other systems in the future

8 Universal Credit - Broad Impacts No cash losers at the point of change Estimated 2.7 million households will have higher entitlements - Over 1 million of which see a rise of more than £25/wk 250,000 children and 600,000 working-age adults could be lifted out of poverty 300,000 fewer workless households £2bn per year saved by reducing fraud and error overpayments in the long term APART FROM THE FIRST BULLET POINT, THESE ARE ALL FORECASTS

9 Universal Credit - Aims Success of Universal Credit is predicated on influencing customer behaviour: - to take up work, or do more hours - to be able to interface with the system as a couple as well as an individual - to trust the system to get the information it needs without their contact - to use new channels as the main way of making contact

10 Oct ‘13 Apr ‘13 Oct ‘14Oct ‘15 Oct ‘16 Oct ‘17 Pilot New claims from out of work customers Apr ‘14 Feb ‘11 Design & build New claims from in work customers Natural transitions due to change of circs Managed transitions Legacy load JSA, ESA, IS, HB, WTC, CTC 8m 6m4.5m2.5m UC load Implementation Timescale

11 The Migration Strategy The Migration Strategy will look at the steps required to prepare claimants for the behavioural changes of Universal Credit Making provision ahead of migration to smooth implementation

12 Delivering Universal Credit Universal Credit will be ‘digital by default’ For 2013, Universal Credit will be delivered using existing resources There will, therefore, be joint working between DWP, local authorities and HMRC Jobcentres are expected to be the primary channel for local, face-to- face support DWP is working with local authorities to define and agree their role in face-to-face delivery Contact centres and support centres will be provided from a subset of the best DWP and HMRC sites Delivery of Universal Credit in the longer term is under consideration The Delivery Model

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14 Managing the build up of claims to Universal Credit Rationale The Government recognises that the move from one welfare system to another needs to be carefully managed to ensure social outcomes are maximised, and that no-one is left without support. The Government has concluded that safe delivery must be the primary objective, as without this, the other objectives of social impact and cost management will be put at risk. The Government also recognises that the nature of the current set of working age entitlements mean that the move to Universal Credit will need to accommodate the closure of both national and local welfare schemes. That Housing Benefit is administered independently by over 380 local authorities needs to be a factor in the migration approach. Each local authority will need to separately manage down their Housing Benefit load and each will have unique challenges around maintaining performance and efficiency as the load drops. The Government recognises the risks this creates and safeguarding delivery of Housing Benefit will be a consideration in the Universal Credit migration approach.

15 The Migration Strategy The Migration Strategy looks at the steps required to prepare claimants for the behavioural changes for UC and what changes can be made ahead of transition: - Household Accounts and managing household budgets - Four weekly/monthly payments - Budgeting and Financial Management - Conditionality and variable conditionality - Self service/Digital

16 Local Support for Council Tax The Implications for Ashfield District Council

17 Introduction Spending Review 2010 Localise support for council tax reduced by 10% from Abolition of council tax benefit provision in the Welfare Reform Act Part of wider policy giving councils increased financial autonomy Enabling power for the new scheme to be contained in a finance bill now before the current parliamentary session

18 Why localise support for council tax the CLG view Give local authorities (LAs) a greater stake in the economic future of their area Give LAs the opportunity to reform the system of support for working age claimants Reinforce local control over council tax Give LAs a degree of control over how the impact of the 10% reduction Give LAs a financial stake in the support for council tax.

19 Overview Broad parameters Framework for support for eligible pensioners The importance of supporting incentives to work LAs encouraged to collaborate to reduce costs LAs to consider how system can be simplified for working age claimants LAs will seek to integrate arrangements for providing support within council tax system Reform accompanied by a new grant Proposals to create local mechanisms to manage financial pressures

20 Vulnerable Groups Pensioners Passported Claimants Means Tested Claimants Vulnerable Groups Child Poverty Act 2010 Disabled persons (Services, Consultation and Representation) Act 1986 Housing Act 1996 Equality Act 2010

21 Establishing Local Schemes Analysis of caseload Impact analysis Developing a scheme Factors to be covered by schemes Consultation Adoption of the scheme Revisions to schemes Default schemes

22 Benefit cost funding The authorities that will receive grant The position on parishes Powers to pay grant Methodology for distributing grant Frequency of grant allocation Grant allocation in future Spending Review periods Limits on spending Maximising the tax base Managing pressures through the collection fund

23 Calculating the Council Tax under the new rules

24 Grant allocation The DCLG has indicated that a separate technical consultation will be held on the specific factors and indicators which should determine the level of grant allocated to a particular authority. Issues to be considered in this consultation will include: The basis for allocation (what factors are taken into account in distributing grant) The frequency of allocation (how frequently grant is adjusted – annually or less annually).

25 Grant allocation The relevant factors for the basis of allocation could include: The relative size of eligible claimant groups Previous expenditure Other indicators – unemployment levels etc Council tax costs

26 Grant allocation The issues that will need to be considered are: What are the advantages – and disadvantages of using previous expenditure to determine shares of funding? Is there a case for using previous expenditure initially? What other factors could be taken into account as well or instead? How should Government balance the need to reflect costs with the importance of incentivising local authorities to manage down demand/ensure there is accountability over council tax levels?

27 Grant allocation Consideration will need to be given to the frequency of allocation. There are two broad options: Reflecting as closely as possible levels of take-up or demand, by adjusting as frequently as is practicable. This would achieve a better match between needs and grant across all authorities and would tend to reduce the financial risks to authorities Leaving the grant allocation unchanged for several years. This would provide local authorities with greater certainty about their allocation in future years and help with financial planning; it would also enable a local authority to gain if liabilities under its scheme were to fall during that period.

28 Local precepting authorities Option one - pass no money on Disregard the parish share entirely in distributing the total grant between billing and precepting authorities Pass the parish share to billing authorities – but with no obligation to pass it on to parishes Implications Does not require additional legal powers Administratively simple for billing authorities – more complex for central government if parish share has to be identified Could lead to big leap in Band D for some parishes – may mean that some get caught by any referendums principles

29 Local precepting authorities Option two - pass money on Pay grant directly to parishes Implications Requires additional legal powers Highly administratively complex for central government Minimises impact on Band D Unclear how this could operate under retained business rates

30 Local precepting authorities Option three - pass money on Pay grant to billing authorities with a requirement to pass the grant on to parishes Paying grant to billing authority, with requirement to pass on through council tax system Implications Requires additional legal powers Degree of complexity for both central and local government – integrating within the council tax system could make less administratively onerous Minimise impact on parish Band D Unclear how this could operate under retained business rates

31 Administration Costs and Transition Administrative cost Implementation costs (£80k on the way to billing authorities and £27 to major precepting authorities) System apportionment Transitional arrangements Cost of transition Link to existing subsidy arrangements New Burdens Assessment

32 Delivery Building on existing approaches The existing structure Personal allowances Premiums Non-dependant deductions Disregards Second adult rebate Taper Forecasting Designing schemes Data Sharing Systems

33 Fraud What structure? SIFIS? Enabling statute Specific powers or general powers? Developing local services Risk based verification

34 The Ashfield Timetable Winter/Spring 2011/2012 Primary legislation in passage through Parliament. Government preparing and consulting on draft secondary legislation. Initial thoughts on local scheme Discussions between billing authorities and major preceptors Political direction Technical consultation on grant distribution

35 The Ashfield Timetable Summer 2012 Primary legislation passed. Secondary legislation prepared Develop operational project plan Billing authorities designing local schemes Scoping IT changes Consultation with Major Precepting Authorities Modelling proposed scheme Public consultation

36 The Ashfield Timetable Autumn / Winter 2012/13 Secondary legislation passed (early Autumn) Prepare risk assessment Grant allocations published Establishing local schemes – final consultation with major precepting authorities and public, revisions to schemes. Technical changes to systems begin Setting budgets. Adopt local scheme

37 The Ashfield Timetable Winter/Spring 2012/13 Finalise system changes Prepare tax base Set council tax and formally adopt scheme Publicise scheme Agree monitoring arrangements Billing

38 Protecting pensioners and the vulnerable in Ashfield Under the new scheme the amount provided to support Council Tax benefit will be reduced by 10% amounting to £1.04m Annual Council Tax benefits £10.4m Less: 10% reduction as proposed£ 1.04m Less: Protection for pension age groups £ 4.68m Balance to be used for working age£ 4.68m This means that the assistance with Council tax for working age claimants will be reduced by around 19% which means that in future working age claimants will be entitled on average to around 80% of the their current entitlement.

39 The Ashfield caseload 12,700 total caseload Working age 7,300 ISA/JSA etc Earners Non earners Second adult Elderly 5,400

40 What are the realistic options for Ashfield? Maximise the tax base and utilise the discount changes Adjust the tax base provision Fund the 10% locally from own resources either partially or fully The Billing Authority proportion The Precepting Authority’s proportion Continue with existing scheme less up to 10% cost and protecting vulnerable groups, achieved by either/or A straight cut of the appropriate percentage for all non protected claimants – the “equal pain” approach A flexible approach to minimum benefit or a cap A regressive taper A modified existing scheme protecting vulnerable groups and reducing cost

41 Options on work incentives Run on Disregards Non-dependant deductions Progressive manipulation Second adult rebate Progressive taper Cash award These all have a cost

42 Constraints System Funding Capping Protecting vulnerable groups Transition Setting aside a sum for extraordinary events Political dimension Timetable Adverse consultation Collection issues

43 Risk Sharing Sharing risk through the collection fund Integration of schemes Deficit or surplus in the collection fund Shared the following year? Should major precepting authorities be able to influence scheme design Varying precepts in year To reflect collection rates A new power

44 The Risks of Localisation If the current financial crises continues, benefit costs will continue to rise. Collection performance will suffer significantly with the 10% reduction which will fall largely on working age claimants. The impact of the reduction in housing costs as a result of housing benefit changes and the cap will have a cumulative affect on the ability to meet council tax and other domestic bills CTB is currently based on actual as opposed to estimated eligibility. Therefore an increase in the number of claimants will automatically lead to an increase in CTB costs This will expose councils to increased expenditure. Any cap on expenditure needs to protect local authorities from the burden of increased caseloads. CTB becomes a discount is likely to increase take-up, for example among pensioners, again leading to pressure on local authority budgets

45 Managing risk Billing authorities should be able to share the risk of any scheme across the tiers of administration and with Precepting Bodies Strict budgetary control is necessary to manage the financial risk Managing the Collection Fund and regular reporting will be critical There is however a need for more discussion on how risk is managed across the tiers of local authorities and between central and local government.

46 Immediate next steps An Ashfield/Major Preceptors summit Officer consideration Member direction Outline scheme Project plan Risk assessment Start consultation


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