Spending Review 2021 departmental supplement: Department for Work and Pensions (DWP)

Spending review submission 2021
This supplement to the LGA’s Spending Review submission sets out further proposals which we would like to work with the Government on implementing. It should be read together with the main submission which also contains proposals relevant to various government departments.

The welfare system and the local safety net

Government has drawn on the skills, expertise and local knowledge of councils’ revenues and benefits services, alongside housing, welfare rights and money advice services in order to deliver targeted support to those at risk of financial hardship and economic vulnerability throughout the pandemic. Councils have worked closely with key partners including the Department for Work and Pensions (DWP), schools and voluntary sector colleagues, as well as across their own services including public health and social care, to deliver a wide range of targeted and discretionary support. Councils have been instrumental in delivering support on the ground, mobilising quickly and effectively to target resource and implement funding programmes such as the COVID-19 local support grant, test and trace support payments, and £63 million for food and essentials. All of these have enabled households to weather the economic storm and supported communities to build back better.

A wide range of research (for example, work done by The Trussell Trust, Greater Manchester Poverty Action and The Centre for Social Justice) suggests that sustaining this support, but with a greater focus on prevention and resilience, will be vital to tackling inequality and ensuring that all places and households are able to contribute to and benefit from social and economic recovery.

As we move into recovery, many councils have highlighted their desire to ensure that they are not just temporarily mitigating hardship but are able to work with households and communities to tackle the underlying causes of crisis and disadvantage, to reduce inequality, and promote strong, integrated and economically enfranchised communities. Research conducted for the LGA highlights the fact that many low-income households will still be worse off than they were prior to the pandemic when national support is withdrawn, and may continue to need further support.

Universal Credit implementation has progressed well, and the programme rose to the considerable challenge of a significant increase in claimants during the pandemic and put additional support in place swiftly through the £20 per week uplift. Councils have continued the important services of administering housing benefit and local council tax support, and they provide a wide range of essential support and advice to Universal Credit claimants.

The DWP provides councils with about 60 per cent of what it costs them to administer housing benefit and, as a result of a range of factors including a series of single-year settlements and continued adjustments to welfare reform policy, councils have had very little certainty on the future role of councils in delivering benefits or supporting claimants. This presents considerable challenges for planning and efficiency within revenues and benefits services. Despite this, councils continue to have a good working relationship with the DWP’s Local Authority Partnership, Engagement and Delivery division, and these services were once again relied upon by Government to deliver a wide range of very short-term, complex and bespoke COVID-19-related support in a rapidly evolving policy context.

Many councils have stressed the need for more sustainable funding with a greater emphasis on prevention and resilience to ensure that they are not just temporarily mitigating hardship but are able to work with households and communities to tackle the underlying causes of crisis and disadvantage, to reduce inequality, and to promote strong, integrated and economically enfranchised communities.

Councils have found it increasingly difficult to maintain local welfare provision since the removal of separately identified funding in 2015. Partly as a consequence of single-year settlements, funding for Discretionary Housing Payments has increasingly been based on previous years’ funding, rather than on a thorough analysis of demand drivers and policy objectives. Councils committed to improving financial inclusion and resilience have to pull together a range of short-term, piecemeal funding against a backdrop of well-intentioned but often fragmented departmental policy objectives. Since the move to Universal Credit, councils also have reduced access to valuable data about some of their most vulnerable residents.

During the pandemic national and local government have committed to developing a more integrated approach to tackling and preventing poverty. The Spending Review presents a crucial opportunity to deepen that integration and collaboration, and to put preventative funding that promotes financial resilience and economic wellbeing on a more sustainable footing. Putting in place a clear shared-outcomes framework and more sustainable, integrated funding for local safety net services (supported with sector-led improvement) would enable a more comprehensive, efficient and evidence-led approach to reducing inequality, promoting resilience and levelling up economic wellbeing across the country.

The following are different ways that the Government can support councils in their aim to help build a resilient safety net through the welfare system:

  • We would like to work with Government to clearly define, and fund, the long-term role of councils in administering benefits, supporting low-income households and delivering an effective welfare safety net.

  • Government should continue to invest in joint working on safeguarding vulnerable people and understanding the relationship between money and mental health. Recent initiatives such as the DWP’s programme of Advanced Customer Support and learning from the DWP / Crisis pilot on integrating homelessness and employment support demonstrate both the improved outcomes and reduced pressures on other support services that can be realised through a more integrated approach and provide an excellent foundation for re-setting the partnership-working relationship in the wake of the pandemic, with a greater emphasis on preventative, co-located and integrated support for vulnerable people.

  • The Spending Review presents an ideal opportunity to fully restore core, separately identified funding of at least £250 million each year for local welfare provision to ensure that all communities are fairly and effectively supported throughout recovery and beyond. The LGA would like to work with Government on a shared-outcomes framework to ensure that crisis support is integrated more effectively with prevention, and outcomes data is collected more consistently and effectively to assess the impact of support on wider outcomes.

  • The LGA has worked closely with councils and stakeholders to bring together a range of national indicators on financial hardship and economic vulnerability to support local decision-making. We would like to work with Government to develop a more evidence-based, demand-led and outcomes-focused approach to poverty prevention to ensure that the approach taken is both improving outcomes and reducing cost pressures in other crisis support services such as homelessness and social care. This could be closely aligned with existing cross-Government initiatives focused on prevention and early intervention including supporting families and family hubs.

  • The LGA is committed to continuing to work in partnership with Government on the implementation of Universal Credit. We would like to see Government invest in improved data-sharing, with an ultimate aim of ensuring that councils to have full access to Universal Credit data for their residents, to ensure that councils can more effectively identify and support low-income households.

  • The national benefits system should always provide the first line of defence, to ensure that limited resources for local welfare support can be targeted effectively. Government should retain the £20 per week uplift in Universal Credit for as long as it is needed to support low-income households into economic recovery.

  • Government is placing an increasing emphasis on preventing problem debt and promoting financial inclusion. The most recent analysis of debt advice provision by the Money and Pensions Service (MaPS) identified that nine million UK adults are ‘over-indebted’ and that demand for debt advice far exceeded supply, with around 60 per cent of demand being unmet. Since that research was published in June 2019, MaPS has been working hard to expand provision through a range of initiatives such as the PACE (Pilot of Adviser Capacity and Efficiency) debt advice pilot, and to improve referral pathways. Councils are a key partner – as creditors, as commissioners and providers of advice, and as a source of referrals. The impact of the pandemic presents real and substantial risks around problem debt. The Spending Review needs to ensure that councils have the resources to sustain crucial partnership working with MaPS and advice providers.

  • With the right funding and flexibilities, councils could accelerate work with credit unions, community development finance institutions (CDFIs), advice providers and financial services providers to improve access to affordable credit and financial services – engaging with households through their existing financial relationship with the council, for example via council tax or rental liabilities, to improve inclusion and capability. The Spending Review provides an opportunity for Government to invest in joint working to increase financial inclusion, access and literacy.

  • The Spending Review is an opportunity for Government to continue to invest in improved fairness and efficiency in local debt recovery by enabling councils to invest further in data-sharing and preventative support. This could include expanding the successful pilots between HM Revenue and Customs, the Cabinet Office and councils; acting on the recommendations of the Cabinet Office call for evidence on fairness in Government debt recovery and ensuring that councils have sufficient funding for local council tax support schemes.

  • Research by Citizens Advice identified the harm and inefficiency that arises from lack of flexibility in council tax regulations that make it hard for councils to initiate a deduction from benefits without getting a liability order. Councils identified an increase of £500 million in council tax arrears between March and June, making it more important than ever for councils to be able strike the best possible balance between supporting vulnerable customers and recovering vital income. We would like to work with the Government to urgently review council tax guidance and regulations to ensure that councils are able to identify and support vulnerable households, while also ensuring that all those who are able to, meet their liabilities.

  • Research commissioned by the LGA showed that restoring the Local Housing Allowance (LHA) rate to the 30th percentile of market rents would save councils with homelessness responsibilities an average gross cost of providing temporary accommodation of between £1.4 million and £3 million. We are calling on the Government to remove the reinstated freeze and maintain the LHA rate at least at the 30th percentile of market rents.

  • Discretionary Housing Payment (DHP) enables councils to provide vital support to households facing a temporary shortfall. However, DHPs have increasingly been used as a panacea for shortfalls that result from welfare changes and housing policy. The LGA would like to work with colleagues in the Department for Work and Pensions on a long overdue review of DHP policy and funding.

  • Research conducted by HouseMark showed that social sector arrears stood at over £1 billion in January 2021. This alone suggests that as other COVID-19 support expires, councils are likely to face a significant increase in demand for DHPs. Councils are currently prohibited from carrying over DHP funding between financial years and face a lack of certainty about future funding. It is vital that the Spending Review ensures that funding for DHP and other local discretionary support is both adequate and fit for purpose.