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NIAO report finds welfare reform will have ‘major’ impact on Northern Ireland

Picture of NIAO welfare reform report cover

The Northern Ireland Audit Office (NIAO) has today published a report documenting the ‘major’ impact welfare reform will have across Northern Ireland.

In its report ‘Welfare Reforms in Northern Ireland’ the NIAO has found that the mitigation measures and flexibilities introduced by the Department for Communities (the Department) through the Fresh Start Agreement, together with lessons learned from their counterparts in the Department for Work and Pensions (DWP), has led to a smoother implementation of welfare reforms in Northern Ireland to date, but found that more work needs to be done in respect of mitigating the impact of welfare reform in Northern Ireland.

Significant proportion of funding for mitigations was underspent in first two years

With regard to the impact of welfare reform upon the housing sector, NIAO have reported that, from June 2016 until April 2018, 2,790 households in Northern Ireland had their Housing Benefit (or Universal Credit) awards reduced following the introduction of the Benefit Cap. Of these households, around eight per cent had been capped by more than £100 a week. In addition to this, almost 39,000 social housing tenants have been affected by the introduction of the Social Sector Size Criteria (often referred to as the ‘Bedroom Tax’) during the 2017-18 financial year. However, mitigation payments of £91 million were set aside to offset these reductions until March 2020.

Despite the availability of mitigating payments, the NIAO reports that mitigation payments of just £2.3 million were paid out in 2016-17, with £22 million paid out in 2017-18. In addition to this, Housing Rights understands that only half the available budget has been used for Discretionary Housing Payments (DHPs) which in some instances can be used to offset Benefit Cap deductions, Bedroom Tax deductions and also to help bridge the increasing gap between the cost of private rental properties and Local Housing Allowance (LHA) rates (the level at which housing costs assistance is capped). It is expected that tenants will become increasingly reliant upon DHPs if welfare mitigations payments are not renewed after March 2020. Housing Rights, Law Centre NI & Advice NI have recently launched a report ‘Welfare Reform: Mitigations on a Cliff Edge’, calling for extension and re-profiling of existing mitigation measures beyond March 2020.

Welfare reforms will have a significant impact on housing sector in Northern Ireland

The NIAO has commented that there is also a significant financial risk to the Northern Ireland Housing Executive (NIHE), the largest social landlord in Northern Ireland, with the roll out of Universal Credit across Northern Ireland now complete and the fact mitigation payments are due to cease in March 2020 (NIHE currently receive in the region of £16.5 million in mitigation payments each year).

The NIAO has reported that, when a claimant applies for Universal Credit, it can take between five and nine weeks for social housing providers to receive their first payment. Early indications from NIHE suggest that its rent arrears are increasing significantly, against a trend of decreasing arrears prior to the implementation of welfare reform. The Department has informed NIAO that it is too early to determine whether or not rent arrears are increasing due to welfare reform, (however, CAB Scotland has indicated that their client experience would indicate arrears have increased significantly further to the roll out of Universal Credit, with 73% of social tenants on Universal Credit in arrears, compared with 29% of other tenants).

Furthermore, the NIAO has stated that the shortage of smaller properties could result in rent arrears when mitigations in respect of the Bedroom Tax come to an end, which could then result in homelessness for tenants and also threaten the financial stability of social housing providers, posing a risk to both the building and maintenance of social housing in the future. NIHE has also identified that current new build levels will not address the potential requirement for smaller stock.

The NIAO has noted that opportunities for more joined up working between the housing and social security functions of the Department have been missed and concluded that the Department must continue to improve in this area. NIHE has noted, for instance, that ongoing differences between the Housing Selection Scheme rules (the scheme by which tenants are allocated social housing) and social security legislation rules mean that households in Northern Ireland are being allocated social homes with more bedrooms than can be paid for through the benefits system. 

Impact of Universal Credit

The NIAO has reported that Universal Credit for new claims was introduced to Northern Ireland in September 2017 and by June 2018 there were approximately 12,000 new claims. The Department’s data shows that 82 per cent of these new claims were paid in full and on time, meaning 18 per cent of claimants would have faced additional delays in receiving payment of Universal Credit, which could have resulted in further arrears building and a risk of homelessness. NIAO has also reported that 52 per cent of new Universal Credit claimants requested and received an advance payment of Universal Credit to help them until they received their first payment.

The Department set up a Universal Credit Contingency Fund of £7 million, from 1 November 2017, to provide non-repayable emergency payments to cover claimants in hardship situations. Crucially, the NIAO has reported that there has been a low uptake of this grant to date, with just 115 payments made, totalling £17,000, up to March 2018 (the NIAO has also reported that uptake of payments under the Discretionary Support Scheme has also been low). The NIAO has concluded that the limited uptake of these payments may suggest difficulties in accessing these funds, or a lack of awareness.

Since Universal Credit has been fully rolled out across Northern Ireland, the Department has announced plans to postpone managed migration to Universal Credit until 2020, leaving approximately 300,000 legacy benefits claimants at risk of naturally migrating to Universal Credit due to a change of circumstance in the intervening period. Claimants who naturally migrate to Universal Credit will not benefit from transitional protection - a means of ‘topping up’ claimants’ Universal Credit awards, should their Universal Credit award be less than the total amount of legacy benefits they had received. While the NIAO reports that 114,000 households will be entitled to receive slightly more per week under Universal Credit (£26 on average), 126,000 households will receive less per week (£39 on average) and will be at risk of losing out on transitional protection to mitigate against this, should they naturally migrate to Universal Credit prior to the roll out of managed migration.

Having consulted with the advice sector, the NIAO has commented that the complexity of the new benefit system and the vulnerability of many claimants means that good quality, focussed advice services are crucial. However, the additional £8 million funding for welfare reform advisors under the Fresh Start Agreement will end in March 2020, three years before the migration of all working-age claimants to Universal Credit in Northern Ireland is complete.

Recommendations going forward

In light of its findings, the NIAO has recommended that the Department:

  • Collects and analyses data on the impact of welfare reform and regularly reports on the issues raised and progress made to address these issues;
  • Consults with the advice sector and improves simplicity of its communications;
  • Explores the possibility of implicit consent, particularly for vulnerable claimants;
  • Evaluates and reports on the value for money of the additional advice funded through mitigations funding;
  • Undertakes a review to establish the reasons behind the limited uptake of mitigations payments, with a view to enhancing uptake before mitigations cease;
  • Publishes a detailed plan for the expected outputs from its outcomes-based evaluation framework; and
  • Leads a programme of research to assess the wider impacts of welfare reform across Northern Ireland.

The National Audit Office (NAO) has also concluded that the implementation of Universal Credit in Great Britain has not delivered value for money to date and that It may cost more than the legacy benefit systems it replaces, but that it is too early to assess the value for money of any of the welfare reforms in Northern Ireland.

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Benefits, Research, Welfare Reform