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MPs concerned about Universal Credit fraud risk

3 April 2013

The Communities and Local Government Committee publishes its report on the implementation of welfare reform by local authorities.

The report

The Department for Work and Pensions must provide swift assurance that the transition to Universal Credit will not leave the benefit system vulnerable to fraud, says the Communities and Local Government Committee in its report. The call follows concerns raised with the Committee about the readiness of the ICT systems providing Universal Credit.

The Committee highlighted concerns that the Direct Payment of rent to tenants under Universal Credit could lead to increased rent arrears. This not only has implications for tenants, but could cause problems for councils and housing associations, potentially damaging their financial viability.

Calls for Government

The Committee urges the Government to provide guidance or a clear definition of the "vulnerable" tenants, who will have their rent paid direct to their landlord instead of to them. In order that adequate safeguards against rent arrears can be put in place from the start, it is also vital, states the report, that information from the Direct Payment pilots is made available before the rollout of Direct Payments to tenants begins.

The significance, timetable and volume of the reforms should not be underestimated. The Committee urges the Government to ensure that its promised assessment of the overall impact of the reforms on local authorities is comprehensive, and calls on the Government to meet with the Local Government Association to discuss the effects of specific burdens on local authorities.

In light of the exemptions given to serving members of the armed forces and families with children with certain disabilities from Social Sector Size Criteria (SSSC) the Committee also calls on the Government to look at the impact of SSSC on divorced parents and those with disabilities.

Chair's comments

Launching the Report, Clive Betts MP, Chair of the Communities and Local Government Committee, said:

"On 1 April the implementation of some of the most far reaching welfare reforms this country has seen in the past 60 years began. It is vital for all those affected that this implementation is handled successfully. Local authorities have a key role to play in ensuring this is the case.

We heard evidence that ICT systems for fraud detection within Universal Credit were still at an early stage in their development. This is extremely concerning given the advanced state of implementation. The Government must act to provide assurance that the benefit system will not be left vulnerable to fraud either during or after the transition. And it must do so urgently.

The Government has promised a great deal. It has provided assurances that the reforms will not undermine the financial viability of housing associations; it has promised guidelines for local authorities on how "vulnerable" tenants—who will have their rent paid to their landlord—will be identified; it has promised an arrears trigger that will switch payments back to landlords when arrears reach a given level; it has promised to take into account the results of the Direct Payment pilots, which show increased levels of rent arrears, before the rollout of direct payments nationwide. These promises are welcome but must be speedily fulfilled.

The reforms that began on 1 April are part of a wider set of changes including Social Sector Size Criteria, the Benefit Cap and local Council Tax Support schemes all of which will add to pressures on family budgets and local authority and housing association collection rates. The Government’s commitment to assess the overall impact of the reforms on local authorities is welcome. However, this assessment must be comprehensive and it must come soon.

We heard concerns that there may not be sufficient funding for local authorities to replace the national Social Fund given expected increases in demand. Pressures on the new localised support are likely to extend to Direct Housing Payments putting them under additional strain. This is why we called upon the Government to sit down with local authorities to assess funding requirements.

The frequency of the call for joined-up Government does not make it any less crucial. It is of central importance to the successful implementation of these reforms. This does not only mean close interdepartmental working between the DWP and DCLG, vital as this is. It means Government Departments working more effectively to assist local authorities. It also means Departments doing more to inform the public about the changes and where they can go for advice.

The need for better interdepartmental working is amply demonstrated by the current lack of passporting arrangements of benefits between Universal Credit and local Council Tax Support schemes. The Government must put these in place quickly so that claimants are not forced to make two separate claims for housing and council tax support in a new benefit system designed to be simple."


The report's other recommendations include calling on the Government:

  • To provide information on how local authority-determined Council Tax Support tapers—the rate at which support is withdraw when a person starts earning—are being applied, and how many claimants could have more than 95 per cent of their additional income deducted and, in light of this, to assess the need to give local authorities stronger guidance to ensure that work incentives are not undermined [paragraph 93].
  • To encourage broader awareness of the reforms and advise claimants to contact their local authority to find out more [paragraph 17].
  • To ensure that all future guidance is published well in advance of future implementation dates [paragraph 14].
  • To take action to help claimants and limit confusion resulting from the separation of housing and council tax benefits [paragraphs 91 and 96].
  • To set out for local authorities the details of the administrative changes that they will need to make, including the timetable, so that authorities can give their staff and contractors the certainty they deserve [paragraph 117].

Further information