Friday, 19 December 2014

Putting the cap on it

From: Inside edge

Amid claim and counter-claim the benefit cap began this week with a deepening mystery about how many people will be affected and how much it will really save.

As the four guinea pig boroughs in London – Haringey, Croydon, Enfield and Bromley – began applying the cap on Monday, the Department for Work and Pensions revealed in ad hoc analysis that it now expects 16,000 fewer households to be affected by the time when it is introduced in the whole country over the next few months.

In media interviews, ministers hailed the reduction to 40,000 (from 56,000 in an impact assessment in July 2012) as evidence that the policy was encouraging people to get back into work. From Iain Duncan Smith in the Daily Mail to employment minister Mark Hoban on the Today programme they have claimed it had already encouraged 8,000 claimants who would have been capped to find jobs.

That appeared to be on the basis of ad hoc statistics on Jobcentre Plus activity that referred to ‘8,000 claimants identified as potentially capped households’ who had been helped into work out of 82,000 contacted between May 2012 and March 2013.

However, there was no attempt to compare that to the normal flows of people in and out of work that might be expected in a 10-month period. A second DWP ad hoc analysis was careful to stress that it had assumed ‘no behavioural change’. And the DWP press release quoted IDS as saying that ‘it will provide clear incentives for people to get into employment’ rather than claiming that it had already worked.

That’s led to extensive criticism that ministers have misused the statistics. For more on the detail of that see Declan Gaffney here, Gaffney and former DWP chief economist Jonathan Portes here and Nicola Smith of the TUC here.

All of which leads a real mystery about the numbers and what is really happening on the ground. The reduction in the headline number is maybe not so surprising since it has already gone up and down several times since the cap was first announced in responses to changes in its scope and to the exemptions. The ad hoc analysis cites the disregard for supported exempt accommodation announced in the Autumn Statement plus changes to benefit uprating and methodological improvements as the reasons for the fall to 40,000.

Even before the latest reduction, the national estimate was initially 50,000, then rose to 67,000, then fell to 56,000 (after the government agreed a nine-month grace period for people who have been continuously employed for the previous 12 months).

Another DWP report reveals that between May and September it sent letters to 89,000 households who data scans suggested could theoretically be affected by the cap. Limitations on the data meant that it could not identify two groups who are exempt (those in receipt of a widows or widowers pension and those within the employment grace period). However, the figures also illustrate the fact that new households are becoming potentially subject to the cap all the time: 14,000 in the three months between May and July 2012 and another 12,000 between July and September 2012.

Figures like those put ministers’ claim that the prospect of the cap has encouraged 8,000 people into employment into perspective. They are not so surprising when you consider how many people move in and out of employment and have insecure jobs with hours that fluctuate (you have to work at least 16 hours a week to be exempt from the cap). For example, the number of workers on zero hours contracts doubled to a record high of 200,000 in 2012.

The same mystery surrounds the numbers affected by the cap at a local level. The estimates are understood to have fallen in three of the guinea pig boroughs but risen in the fourth. In Haringey, for example, the council’s estimate has fallen from 1,300 at the beginning of the process to 993 now. A dedicated hub in Tottenham with staff from the council, the DWP and Job Centre Plus has helped 109 potentially capped households into work. With new households becoming unemployed, the net reduction due to finding work could be smaller than that and in any case that still leaves two-thirds of the reduction unexplained. 

Westminster – the borough with the most households affected by the cap in Britain – has also seen a large and unexplained reduction. The number of people facing the cap has fallen from around 2,200 in the Autumn to around 1,300 now, with 390 believed to have gone into work. With the same caveat about newly unemployed people joining the list, that leaves an unexplained reduction of 500.

So what’s going on? Some of the variation may simply reflect the fall in the national estimate at a local level. Some was predictable given the imperfections in the data being used, with some people dropping off the list and others not where the scans say they should be, and even the current numbers are eight weeks out of date. But are there other explanations?

One possibility is that the bedroom caps already imposed on the local housing allowance have reduced the numbers affected by the overall cap. Another is that people are moving ahead of the cap (and in the wake of the bedroom caps) to cheaper areas. The housing benefit stats show that claims in outer London are rising much faster than those in inner London. People could be deciding for themselves to move and anecdotally some authorities in Essex and Kent report that they are seeing people turn up in their areas.

However, councils with large numbers of capped families have limited options. They can use discretionary housing payments (DHPs) but these will only last for a limited time. They face costs for housing newly homeless families and caps on the rents of those they have already placed in temporary accommodation. Given the stream of reports about London boroughs exporting their homeless families elsewhere, and the lack of accommodation affordable within the cap in many areas, an increase in the out-of-area placements that are already happening looks inevitable despite ministers’ insistence that they have put guidance in place.

In the longer term housing directors think it is just a matter of time before overcrowding and sharing increase as capped families try anything to avoid moving miles from friends, families and children’s schools. They also expect another increase in unorthodox housing: beds in sheds, garages, retail units and offices.

Figures from Haringey illustrate the scale of the problem. The council has pledged not to move anyone out of London during the pilot. Some 294 of the 993 households currently affected (30 per cent) are living in temporary accommodation. The council has £2.4 million of DHPs for 2013/14 of which £1.4 million is specifically to cover the costs of the cap. However, it estimates that its extra liabilities because of the cap will be £8.2 million over 2013/14, leaving it with a shortfall of around £7 million. That’s roughly £7,000 for each capped family.

Figures like those suggest that the costs to individual boroughs will far outweigh savings to the Treasury that are now estimated at £110 million in 2013/14 and £185 million in subsequent years. Those have been reduced from £270 million a year savings in the July 2012 impact assessment.

They are also a reminder of the warning in the letter between the private offices of Eric Pickles and David Cameron that was leaked to the Observer in July 2011. The letter from Pickles’s private secretary said:

‘We are concerned that the savings from this measure, currently estimated ay £270m savings p.a from 2014-2015 does not take account of the additional costs to local authorities (through homelessness and temporary accommodation). In fact we think it is likely that the policy as it stands will generate a net cost. In addition Local Authorities will have to calculate and administer reduced Housing Benefit to keep within the cap and this will mean both demands on resource and difficult handling locally.’

Ministers see the benefit cap as good politics, especially when they can portray Labour as opposing it. However, it seems equally clear that it is a very bad policy that is being introduced at a very bad time. Leave aside the mystery about the figures, ignore for a moment the likelihood that it will cost more than it saves and turn a temporary blind eye to the fact that it contradicts the move to higher ‘affordable’ rents by the DCLG. The local authorities that will have to implement the cap and bear the extra costs are already seeing their budgets squeezed everywhere else. And they are having to implement a major change in the administration of housing benefit only months before they start to lose that role under the universal credit. 

Readers' comments (5)

  • Another timely excellent article which highlights the madness we are facing - the problem is that LA Directors you refer to who are likely to pick up the pieces can't make political comments and have to implement the Govt's wishes and the local flak associated with higher TA costs.

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  • Mike Batt


    Labour opposed?

    Shadow Work and Pensions Secretary, Liam Byrne, during the Commons debate: "we are in favour of a benefit cap, but we would like one that does not backfire and one that works in practice."

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  • Melvin that about sums up Labours bitterest opposition these days. sad sad times

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  • Joe Halewood

    Melvin

    Liam Byrne proposed a regional cap (stupid idea)

    The real issue is that we already have a (welfare) benefit cap and have had for decades as JSA or dole is the same wherever you live as are all other welfare benefits. The overall benefit cap simply cuts housing benefit and only cuts welfare benefit is you are a couple with 6 children

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  • I suppose I should be grateful that people are at last recognising the large cost that is about to fall on council's homelessness budgets, which there will be no easy way of relieving.

    Note the article earlier this week where Greenwich have calculated it will be cheaper to provide make-work to affected households so they can continue to receive HB.

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