Devo questions

The devolution of new powers over the housing costs elements of universal credit raises questions not just for Scotland but for the whole of the UK.

The report of the Smith Commission published this morning only proposes two major changes to the existing arrangements for universal credit:

• The Scottish Government will be given the administrative power to change the frequency of UC payments, vary the existing plans for single household payments, and pay landlords direct for housing costs in Scotland
• The Scottish Parliament will have the power to vary the housing cost elements of UC, including varying the under-occupancy charge and local housing allowance rates, eligible rent, and deductions for non-dependents.

All other elements of universal credit, including the earnings taper, conditionality and sanctions will remain reserved to Westminster. Some other benefits outside universal credit, including discretionary housing payments, will be devolved. National media coverage was dominated by the proposals on income tax but other taxes that affect housing, including capital gains tax and VAT, will be reserved.

As housing policy itself is already devolved to Scotland, housing only gets four mentions in the report and all of them are in the context of benefits. However, they could have profound consequences.

First, take the impact in Scotland. Although Holyrood already mitigates the bedroom tax in full through DHPs, it played such a big part in the independence referendum campaign that it was impossible to see how the UK parties could fail to give Scotland new powers without being accused of breaking The Vow.

However, the SNP is already saying exactly that and the recommendations seem to fall short of what both Labour and the Conservatives were proposing. Perhaps that’s because devolving the housing element of universal credit is much more complicated than devolving housing benefit.

Scotland will presumably be able to address some specific problems with welfare reform, for example on temporary accommodation. But what exactly does ‘varying’ mean? If it can ‘vary’ the bedroom tax and LHA rates, would that be within an overall budget for housing costs, meaning it would have to cut something else? And how will that budget be determined given that housing benefits are demand-led?

Taking the administrative and varying powers together, Scotland seems to be getting something similar to the devolution arrangements in Northern Ireland. The bedroom tax and some other elements of welfare reform are still not in operation there because the Stormont parties cannot agree but that means the government is losing money in block grant from London. Meanwhile Northern Ireland has already decided to stick with monthly payments and direct payment to tenants under universal credit.

Second, take the impact in the rest of the country. Different arrangements for one part of the UK that are a legacy of the Anglo-Irish agreement were one thing, but different varying and administrative powers for two UK nations could be quite another. If Scotland and Northern Ireland have the powers, why not Wales and why not the English regions? Those disproportionately hit by the bedroom tax have even more reason to want to vary it. Landlords and tenants warning about the dire impact of direct payment will get new hope they can get rid of it.

However, in line with my post yesterday, this will be another example of universal credit existing in two states at the same time: it will be universal in England and Wales and not-quite-universal in Scotland and Northern Ireland. A major reason why the DWP has been so stubborn about direct payment to tenants and monthly payment is that it wants life on benefits to be as close as possible to life in work.

And if the housing elements can already be varied so much, why not simply exclude them from universal credit? We know from the NAO report that the digital version does not exist yet and even the initial testing has been delayed yet again. Housing is one of the most contentious elements because of the risk of evictions and homelessness. The existing system of housing benefit works reasonably well. Why not simply leave well alone and try and salvage the rest of it (if that’s even possible)?

With apologies for extending my pun from yesterday, Schrödinger’s Cat could be well and truly out of the bag.