Examination of witnesses
Councillor John Fuller and David Orr.
Q102 The Chairman: A very warm welcome to this evidence session of the Select Committee on Financial Exclusion. I will ask you to introduce yourselves in a second. Just for the formalities, you have in front of you a list of interests that have been declared by members of the Committee. This meeting is being broadcast live via the parliamentary website. A transcript of the meeting will be taken and published on the Committee website, and you will have the opportunity to make any necessary corrections to that transcript. For the record, would you introduce yourselves, please?
David Orr: I am David Orr. I am chief executive of the National Housing Federation, which is the trade body for England’s housing associations. I fear I am in slight danger of losing my voice, but I will do my best.
The Chairman: I am sorry to hear that. We will try to be kind.
Councillor John Fuller: My name is John Fuller. That will not be a problem, because last week I went to Ireland and kissed the Blarney stone.
I lead a local authority in south Norfolk. I lead local government finance resources for the Local Government Association. Among other things, I have just participated in the CIL review, on infrastructure levies, which we have reported to the Minister.
The Chairman: Thank you both very much. I will start with the first question. We have been hearing a lot in these sessions about the Government’s role in co-ordination. To what extent do you feel the Government should take a lead in co-ordinating the response to financial exclusion among local authorities, business, housing associations and the third sector? How effectively do you think that role is currently being played? What impact would stronger national leadership and co-ordination have on the work done by local authorities and registered social landlords?
David Orr: I fear this will be a slightly complicated answer. Many people feel that it is important for government to play a leadership role. The challenge that many of us have found with government interventions is how lacking in stickability they are. What happens is that a new scheme is set up, some money is identified and people try to use those opportunities well and strategically to plan long term, and then a change is made: a decision to do something other. We in the National Housing Federation set up an agency designed to provide affordable credit for people who were not able to access credit—My Home Finance. It did exactly what it needed to do. To begin with, it was supported by funds from DWP. There were a whole lot of strings attached to those funds, which created a slightly unrealistic expectation of the cost of that financing. Then the funds were withdrawn, but the expectations remained.
It is a challenge to find ways of creating continuity in delivery. The majority of housing associations do not now look to government as a first port of call, or even a second or third port of call; they look to their own resources, to local organisations or to local agencies, rather than looking to government. Perhaps the key role for government is not an interventionist one but much more a leadership one. Frankly, some of the decisions that have been taken have contributed to increased financial exclusion, which is perhaps a bigger area of conversation.
The Chairman: Perhaps John would answer on this issue as well. Would you welcome the recommendation for a Minister for financial health being set up, as was recommended by the Financial Inclusion Commission?
David Orr: We have had such people in the past. Yes, I think I would. The role of such a Minister might most helpfully be some kind of sense-testing of proposals from other parts of government, and being able to reflect back to government the impact of decisions that they might be making elsewhere.
Councillor John Fuller: Clearly, it is the role of government to set national standards or national expectations. People have the right to equality of provision to a certain extent, or of outcomes, across the country, but the idea that the Government nationally can address the needs of one family at a time is clearly nonsense. An overly national approach would stifle innovation. There are particular circumstances that might relate between urban and rural areas, for example; different areas need a slightly different approach, delivered at a geography that people can recognise and relate to.
Councils have a leading role. In most cases, along the route to homelessness and need—homelessness prevention is something that we may drift on to later—people present to the council first, yet sometimes the way in which we are forced to act is constrained arbitrarily. The DWP has certain requirements, and if people are on council tax support, for example, they have to give the same stuff again. That is nonsense. Collocation clearly has an important role—a single-stop or integrated approach. Councils have the opportunity to show leadership there.
It is not necessarily councils working on their own; there are CABs, RSLs—it is a whole team effort. That is fair. Our view is that, although expectations need to be set and managed nationally, local councils should have the freedom and flexibility to look to local circumstances, and they should not necessarily be constrained by separate pots. Under your lines of questioning, I hope we will talk about the different sorts of pots. Sweeping them into a single heap, with local leadership in a geography that people understand, gets best value, rather than chasing the pots—the initiativitis that David referred to.
The Chairman: Would you support a Minister for Financial Health?
Councillor John Fuller: I would suggest more freedoms or flexibilities being given to local government, rather than more interference from the centre, because we are dealing with one family at a time.
Q103 Lord Northbrook: What do you think should be the role of the successor to the Money Advice Service in tackling financial exclusion? What good work have you and your members experienced from the Money Advice Service in the past, and what should the successor body do differently?
Councillor John Fuller: By the time it gets to the Money Advice Service or successor-type bodies, it is sometimes too late, because prevention and the work we do in preventing exclusion is sometimes the most effective thing. For example, my council area is rural and you would think that there was not much of a problem. In the past four years, we have had 1,722 cases of prevention of homelessness—we prevented those cases—of which more than a quarter were the result of debt and debt-related issues. Another example is relationship breakdown. We spend money on marriage support, marriage guidance and relationship support to keep people together if at all possible, because keeping a couple together, especially if they have children, saves two cases of homelessness, potentially, with social cohesion as well.
The Money Advice Service was never set up to do that sort of preventive work. That plays to the previous points I wanted to make about a local, innovative approach. As an example, we hold a co-ordinating role in our local authority. I am not saying that we bend the rules, but we sweep together discretionary housing payments, the Social Fund-type lines and so forth into a single pot that we can apply flexibly. We get a lot more bang for our buck that way, with a more interventionist approach. The King’s Fund did some work on behalf of the district councils earlier this year, and it found that every £1 spent on prevention saved £70 elsewhere in the system, whether in homelessness, the health service or whatever. Prevention is a really important role; once you get to the Money Advice Service, you have failed.
Lord Northbrook: David, do you have anything to add?
David Orr: Not really. When we discuss this with our members, the Money Advice Service is not at the centre of any of the conversations. It has been much more about the kind of interventions that they are doing themselves, the investment they are making, to support people inside their organisations. When you ask people, they broadly think, “The Money Advice Service has been useful, but here is another change and we are starting again”. It is not the kind of intervention that our members are looking to in the first instance.
Lord Kirkwood of Kirkhope: I wish to cross-examine Councillor Fuller on his powerful pitch for localism. We heard some very interesting evidence last week from Francis McGee of StepChange. He gave us some worrying figures, I thought, that suggested that local authorities were the harshest in enforcing debts, particularly for things like rent and council tax arrears, and that they compared very badly to other financially regulated organisations. If local authorities do this better than anybody else, how do you defend yourself against that charge?
Councillor John Fuller: First, I do not recognise that charge. Thinking purely commercially for a moment, there is no point in instigating proceedings unless there is a chance of recovery. That is just a waste. Councils are in a better place to know that than anybody else. Our absolute focus is on using those powers sparingly. Technically, if one wants to get into a recovery situation one has to go for a court judgment, but clearly we want to try to resolve these with informal payment plans or whatever. I said earlier that we need the widest range of financial pots, if I can put it like that, whether discretionary housing payments or what have you, to try to resolve these situations.
Many councils have council tax support schemes, with hardship funds. We have other ways, and we have deep links with charities and social enterprises, but I do not recognise that we are quick to call in the bailiffs. In fact, quite the reverse: we go out of our way to try to prevent cases and to work creatively. At my own authority, we are one of the pioneers of what we call our early help hub, which is where we collocate all the different services, whether they be police, adult social care or what have you, into a single place to try to fix issues creatively. It is not necessarily just money that does it. Providing a washing machine is sometimes the most appropriate intervention.
The Chairman: We will explore those issues later on, but thank you for raising that.
Q104 Lord Shinkwin: As I assume you both know, financial exclusion often goes hand in hand with other forms of deprivation, whether it is educational or digital exclusion, physical and mental ill-health, disability, unemployment or indeed underemployment. David, I was interested in your point about housing associations no longer regarding government as a first port of call and looking to themselves and other agencies. John, you made a point about the importance of an integrated approach. Given that, I am interested to know to what extent you feel that agencies, local government and the third sector are able to co-ordinate interventions to address multiple deprivations.
David Orr: Probably not to the extent that we should be. There are various heroic attempts to be more engaged, but this is a very complex challenge. To give one example, health and well-being boards have a key local role to play, but only a small minority of health and well-being boards have someone with a housing background as a full member, because housing is seen as a service delivered, rather than part of a strategic or co-ordinated response to problems of exclusion or poverty.
Secondly, the fundamental problem is often poverty. We wrap that up in all kinds of other things: unemployment, underemployment or digital exclusion, all of which are absolutely challenges, but the fundamental underlying issue is one of poverty—the fact that people do not have enough money to get from one end of the week to the other. A bigger challenge is how we can find some way of understanding what the key components are. Sometimes people are invited to budgeting courses when their problem is not that they do not know how to budget but that they do not have enough money. We have to be a bit more honest about some of the underlying challenges.
Councillor John Fuller: I agree with all that. It is a complex issue. It would be nice if your recommendations recognised that this is a very complex situation that requires local solutions to local issues. The Government, understandably, have a siloed approach; the DWP does some things and other agencies do others. Having the DWP leading on an element—universal credit, for example—makes little sense in north Dorset, because there are no DWP offices in north Dorset. The collocation type of approach is important. Credit unions are another element. They have their challenges, not least in getting deposits. Many credit unions now have to be subsidised in some way and have their overheads paid for by the organisations in order to try to compete against payday-type loans.
Homelessness is a very significant factor in financial exclusion. Unless you have a roof over your head, it is very difficult to get the rest of your life in order. Prevention issues and an interventionist approach are important, but there are other ways to help people get on the level, too. For example, many councils have exercise referral schemes for some of the complex reasons why people in poor health are not able to get work; they can take an integrated approach there. That is not obvious, but it is an example of the breadth and full weight of council services that are offered in an area. It is more than just giving money. With dedicated staff working in a geography that people can relate to, you have the scale to deliver outcomes one family at a time. It is a complex area.
There is a technical detail on collocation. Data sharing has historically been an issue, with people putting barriers in our way, talking about data security and privacy—I cannot remember the term, but you know what I mean; it is about data privacy. The troubled families initiative has been in the news lately, and has not obviously delivered the benefits that were promised from it, but let us not throw the baby out with the bathwater. Among the good points about the troubled families initiative are some of the ways in which it allowed mental health issues, police issues and truancy issues as well as council housing issues to come together without overly worrying about data privacy. They were really creative, and it would be a shame if that sort of principle were lost.
Viscount Brookeborough: Councillor Fuller, you talk about prevention being better than cure and definitely being cheaper. Would you like to say something about education in schools, not taking too long about it, starting from primary schools? The LGA website says: “One hundred and fifty English local authorities and all authorities in Wales have the strategic lead for education of children”. Surely the best place to start prevention is when people are young, to build something into their education, yet we found it to be very fragmented. I wonder what you are doing as a local authority.
Councillor John Fuller: In my particular authority we are not responsible for education; we are a district council, as opposed to an upper tier.
Viscount Brookeborough: My apologies.
Councillor John Fuller: No problem. Education in itself is becoming fragmented, with academies, free schools and so forth, but that should not detract from the key objective, which is to prepare people for life. Education is more than just passing exams; financial education is a core, critical component of PHSE—the personal, health and social education-type thing—and should be encouraged. I would leave it to the educationalists to decide at what stage it would drip in, whether at four years, five years, 10 years, 11 years or what have you.
People need to come away, especially now, with financial security, and security about their finances; fraud prevention and those sorts of life skills, to prevent people from getting scammed, are part of people’s financial education. If a deal looks too good to be true, it often is. We need to help people to avoid falling into obvious pitfalls. That is a key role for education.
David Orr: The experience of many housing associations is that people who have financial challenges have no embedded knowledge or expertise about the way in which systems work. I would very strongly support modules in school about basic financial education. I suspect that many of our children leave school without ever understanding how to manage a mortgage, or what one is. That is a basic life skill that we are not very good at in schools.
Q105 Lord Haskel: At the previous evidence session, we heard from the Money Advice Service and the debt advice charity StepChange that a rainy-day savings buffer can be the difference between financial survival and financial exclusion if people experience a shock to their income or expenditure. It is the kind of prevention that John spoke about. How effective is government policy such as the proposed Help to Save scheme in helping people to build such a buffer, and are further policy interventions required that could nudge people into doing that sort of thing? Do your member organisations have a role to play in that?
David Orr: Those organisations are right to say that having that kind of buffer makes a huge difference, but if you do not have enough money to get from one Monday to the next, even if government is prepared to provide additional funds to support any money that you have been able to save, the critical thing is that you have to save it yourself first. For many people, that is just not plausible. There are still many households in this country with a combined household income of £6,000, £7,000 or £8,000 a year. That is not an environment in which it is possible to save.
First, do no harm: if you look at the way universal credit is constructed, there is a week before you are even allowed to claim. Then it is four weeks in arrears, after a two-week processing. From the date of needing that support to the point of first payment, if everything goes absolutely 100% according to plan, it is seven weeks. If you are in an environment where you have struggled to get to the end of the week, waiting for seven weeks before you get anything is a real problem. Dealing with that, or making that challenge less of a burden, would have a much more profound impact than small-scale interventions by government to help people.
I do not for a moment want to suggest that it is unhelpful for government to create incentives to save, but there has to be an understanding that these incentives to save are possible only when people have enough cash to be able to save. Filling the gap for people who do not have that is a much bigger problem.
Councillor John Fuller: On the financial shocks, what is the quantum? A financial shock could be £50 here or there. If your washing machine has broken, that is quite a big lump. In our district, there was a case of truancy. A truancy officer went round, and it turned out that Johnny was not able to go to school because the washing machine was broken, so we bought a washing machine out of our DHP pot. That is the importance of having these pots all swept in together; you can be more flexible. That is a really good example of where sometimes in-kind contributions are more appropriate than just handing out a cheque, which is of course the DWP-type default issue, understanding the delays that David mentioned. In the seven-week hiatus that has been referred to, people often come to the council anyway. We end up getting drawn into what is essentially a DWP issue.
There are other ways. I referred earlier to the importance of getting a roof over your head. There, the sort of financial shock is £1,000 for a deposit in the private rental sector. That is a hell of a lump. Because rental deposits are held in trust by the deposit protection scheme, councils can lend; we can stand surety for a potential tenant to get into private rent, so we will do a rental deposit advance scheme—an RDAS. That helps get people a roof over their head, even if they do not have the deposit.
Although it is clearly desirable for people to have a nest egg behind them—a buffer—where it is not realistic, as David mentioned, there is a role for the state at local level to be flexible and to try to understand the particular circumstances. Just writing a cheque is irrelevant, because you need a different cheque, whether you are £50 short of getting a washing machine or whether it is for a rental deposit. That is the sort of local leadership flexibility that councils need to hold a co-ordinating role. It would be much better, in my view, if councils had that leadership role.
We were operating the DWP system. It is a DWP system, and we should be operating it under contract. When people present, we can deal with all the other issues as well at the same time, rather than having people re-presenting and travelling to different offices trying to tell their story. They might not be as financially articulate as some of the people in this room. It is a difficult situation. We want to help people on their journey, and councils are best placed to do that.
David Orr: If I may add something on the washing machine question, there are of course many things where there is a sudden need to find £200, £300, £400 or £500, and people do not have the money to do that. We set up My Home Finance specifically to assist people in those circumstances, with affordable credit so that they could access the cash to buy the washing machine and then repay it. The delivery of that service is relatively expensive, because you cannot do it online. It is based on a 45-minute individual interview with the person seeking the finance. It goes through budgets—how much money you have, how much you can afford and how much of a loan you would be able to afford. We were very clear about the target group for this: often single parents—single mothers—in their 20s or 30s with one or two children. It was a product that worked absolutely for that client group. The problem, and the reason it failed, was that we found it impossible to get the investment we needed to keep the scheme going. The banks were not interested, despite the fact that we had set it up in the expectation of a partnership between housing associations and the major banks. Housing associations put a lot of money into it. We went back to that market in the same week the Chancellor announced a 1% per annum rent cut for housing associations, and they said, “Woah, no, we cannot do this”.
A possible intervention for government is not to provide grant funding for that kind of activity but to provide secure investment funding, which is repayable. We know a lot now. This is a small, immature market. Some heroic organisations still manage to keep going. We know that there is likely to be a 10% or 11% default rate. There is a whole lot of evidence about this. Some support from government, not based on handing over grant but putting in investment, with a degree of risk attached to it, where that investment would allow schemes of this kind to become properly stabilised, could make a significant difference.
Lord Haskel: By investment, do you mean loans?
David Orr: I mean loan finance, yes.
Lord Haskel: You think that Help to Save is too centralised and ought to be run locally.
Councillor John Fuller: There is a good example in the London Borough of Newham. Not only has it set up a MoneyWorks scheme; it has positioned it opposite the payday lender. It has gone out of the council office into the streets and thoroughfares where people might otherwise be attracted to other things. Again, that demonstrates the importance of local leadership. In many areas, credit unions are supported by councils.
It goes back to the earlier point about education. The slider on the mobile phone is so beguiling, if you do not know the difference between 10% and 1,000% on the repayments; you need the understanding behind that. That is what we need to get to.
The Chairman: David, you made a very interesting suggestion about the Government not providing grant funding, but doing it through some sort of investment, with some degree of risk attached. Would it be possible for you to submit a brief note to the Committee, outlining a little more of your thinking?
David Orr: It surely would.
The Chairman: This is probably the first time we have heard that suggestion, and we would like to hear a bit more about it.
Councillor John Fuller: Would you like the Newham case study as well?
The Chairman: Absolutely. If you could integrate that with the Newham case study, it would be absolutely excellent. Thank you very much.
Q106 Lord McKenzie of Luton: I am sure you are both aware of the huge raft of changes that have taken place in the social security system in recent years. Some would argue that they have been offset a bit by changes in the national minimum wage and tax thresholds, but the impact of those changes has been well documented by such as the IFS and the Resolution Foundation, and they show huge aggregate losses, particularly for working families. What are your organisations doing specifically to support people and to mitigate adverse effects of changes to the benefit cap, payment delays and the freeze in benefit uprating, to identify just some of the changes? There are obviously more to come as regards the two-child family. Are there particular lessons to be learned from the different policies and strategies being implemented in the devolved Administrations?
David Orr: The core answer to your question is that individual housing associations—I am sure this is true for individual local authorities, too—are developing their own strategies in conversation with their tenants and residents. I do not think there is any way round that. As a landlord organisation, if you are to provide support, you have to know the circumstances that people are in. Housing associations have been investing a lot of money in increasing and expanding the teams of people who provide financial assistance and advice, debt counselling, and who help people properly to understand what is happening and what the consequences and long-term implications might be, trying to support people and to identify places where there may be funds that they are entitled to that they did not know about. We have provided some examples. Those are very local interventions by individual organisations with individual people.
There remains a lobbying challenge for organisations such as the federation and the LGA. Parts of the design of the new system could be improved. I do not know anyone who argued very strongly against the concept of universal credit and bringing things together in one much more coherent package, but the great promise of universal credit was that people would always be better off in work than out of work, and that the tapers in universal credit would ensure that that was true. The compelling challenge with housing benefit has always been the scale of the tapers and the amount of withdrawal as people went into work. I am afraid that the last series of decisions made by the previous Chancellor have recreated an environment where the tapers are so high that that great promise is much less likely to be delivered. That is frustrating.
There is a lobbying challenge about getting rid of the one week before you are able to claim universal credit. The Government—the coalition Government and the current Conservative Government—believe that it is a feature of dependency when individual households request that the rent element of their payment be made direct to the landlord. Actually, for people who are under financial stress every single day of their life, it is an entirely rational and thoughtful proposition, and the idea that it is banned in the universal credit architecture is just wrong. It ought to be a matter of choice, rather than the Government saying, “You are poor, and therefore you have to manage your money yourself”. It is a misunderstanding of the relationship that people have between themselves, benefit payments and their landlords. There are still things in the design and architecture of the reformed system that could make significant differences.
Lord McKenzie of Luton: Are there other key ones that you would instigate?
David Orr: There is a significant challenge in relation to benefit decisions for single people under the age of 35. Perfectly good housing will lie empty and young people under the age of 35 will struggle to find good-quality affordable homes within the benefit structure. In many cases, people will find work and find alternatives, but there is an absence of strategic thinking about the relationships between the different components.
If I have one broader criticism, it is that many of the measures were introduced without public consultation in advance of their introduction. The parliamentary process of Green Paper possibly, but certainly White Paper before legislation, is helpful because it gives government an opportunity to hone its thinking and it gives those of us who engage with government a structured opportunity to respond in advance of the legislative process. The more we can see of that, the better; but that is a broader comment.
Councillor John Fuller: We must remember that universal credit now is only for the simplest cases; it will get more complex as we go on. There is some evidence that there have been some behavioural shifts. We have noticed a substantial reduction in the number of people who are looking for work who previously were on UC. They have now found work, so there is some evidence of a behavioural shift, but that is not to gloss over the issues that David raised.
You asked what we are doing to help people in that circumstance. In our council, we have designed our council tax support scheme. There is a question as to whether UC is one level and council tax support is still a parallel universe, but we have designed our council tax support scheme to make people always better off getting into work. You are better off in work than not. Those who cannot work, for example single mothers with children under five, would get council tax support regardless of circumstances. Not all authorities have designed their schemes in such a way, but there is the potential to design those schemes.
I mentioned our encouragement for private sector landlords, and the rental-type deposit schemes to get people over that financial shock issue. There is an issue where David made only half the point, I think, and I would like to complete it if I may.
David Orr: Please do.
Councillor John Fuller: As regards universal credit, paying the claimant, to encourage personal responsibility, is one thing, but one has to consider the impact on the supplier, which could be the YMCA or a charity. They need the security of an income stream to make borrowings and future investments. If it is possible for the council to pay the rent directly to that charity for vulnerable people, the cash flow to the provider is assured, and they can borrow and invest on that basis. Channelling funds through the tenants, some of whom are very vulnerable, reduces the certainty that the charity or YMCA is going to get paid. Who will lend them money to build? That is an issue. At the moment, there is provision for vulnerable people for payments to go to the landlord directly, but it goes back to the fact that our friend the DWP makes that decision. That is a classic example of where the council should be able to access the DWP system and set the right flag, rather than going through a huge bureaucratic process, adding more delay to existing vulnerable situations.
There are ways in which that sort of situation can be fine. Of course, the key thing is to get more affordable homes built. We have a record in our authority: 200 local RSL homes each year for each of the last six years. That goes hand in hand with the development of other homes. Getting the country building is one of the best things we can do to help increase the stock of homes.
Lord McKenzie of Luton: Do you think the LGA, as a cross-party organisation, is doing enough to bring those direct payment issues to the attention of government?
Councillor John Fuller: Yes, I do. It plays into the wider housing agenda. You mentioned earlier the 1% per year reduction for stock-holding authorities. There is also the other side of that: leveraging finance from the housing revenue account. It is part of a much more complex social housing situation, and the LGA’s key lobbying points are on this, especially the housing revenue account. It is potentially a source of enormous capital, which could be used to improve the lives of not just the vulnerable but people in all walks of life.
David Orr: As you, Lord McKenzie and John have raised the issue of supported housing, perhaps I might add this point. Colleagues here will be aware that there has been a lengthy conversation between the sector and government about a solid basis for the future funding of supported housing. A big and important decision has been made by government that the amount of money going into supported housing at present should be protected and should be allowed to grow as need grows, but the mechanisms by which they propose that the money should be paid are a long way from delivering the certainty we need. There are a whole range of issues about ensuring that people have the opportunity to live fulfilling lives in the community that are as independent as possible, which I think have got lost in battles not about the total amount of public expenditure but between departments and over whose budgets it comes out of. That is deeply frustrating for those of us who are concerned about users and providers. There is a consultation coming out about that shortly, and we will continue to make these comments. These are some of the core, underlying challenges that create the environment where people are talking about financial exclusion.
Lord Empey: What evidence have you that paying people directly means that, at times, they cannot manage and they slip into arrears? I am personally against them being paid directly, but that is just a local issue. What evidence is there?
David Orr: Universal credit as a full service is very much in its infancy, and, from experience so far, most of the challenges at present seem to be transitional ones. The evidence from housing associations where there is more experience of universal credit is that arrears have gone up slightly, but the cost of collection has gone up very substantially. Housing associations have invested a lot of money, as well as time and energy, in developing a different, closer relationship with residents. In some cases, that has been a good thing. In other cases, it is not what either party wants.
My challenge to government and to DWP on this is that the best solution is to have as much flexibility as possible to allow people to make good decisions about their own lives. If I as an individual in receipt of universal credit consider that it is right for me to ask to have that money paid direct, that is one area of financial stress that is removed from me. It means that, whatever else goes wrong, I know that my home is secure. That is an entirely rational thing for people to decide. There are issues not just of practice and impacts on arrears but really quite important issues of principle about the way the state interacts with individual citizens.
The Chairman: Before we move on, which we need to do, may I ask for a point of clarification? It is about the opportunities and the dialogue between the DWP and the LGA, representing local authorities. Earlier in the session, I got the impression, John, that you were saying that the DWP was not doing enough to consult you in advance. More recently, I think you said in answer to a question from Lord McKenzie that you thought that there were sufficient opportunities for you to lobby. Could you say whether you feel that there is enough opportunity for you to feed into some of these big changes in welfare policy and benefits before they happen?
Councillor John Fuller: The default position should be that councils, with a wide breadth of levers to pull, should be the default providers of the DWP service. That means collocating DWP functions in council offices or, if necessary, councils going into DWP offices. That does happen. Our benefits people from our council sit in DWP in Diss one day a week. I do not want to give the impression that there is no connection at all, but there should be a much more deeply integrated approach with DWP, with data being shared. Let us learn the lessons from the troubled families initiative, too.
That addresses the other point that David was making. Clearly there needs to be a predisposition that the state trusts people with their own money, but there are cases—you asked for cases, Lord Empey—involving drugs or alcohol dependency, certain mental health conditions or domestic abuse situations where it does not necessarily make sense to hand money to vulnerable people. There is a whole set of vulnerable clients, and they need our support. Paying direct to the landlord illustrates the importance of councils in helping the DWP to operate their systems. Lord Dannatt and I went to see Lord Freud about that some years ago. Councils should be the default partner of operating these sorts of things in a local geography. We have a little way to go, but that is where I would like to see the direction, so that we have the freedoms and flexibilities to address things and make things better for one family at a time, drawing in partners from among RSLs, charities and CABs. There is no end of opportunities.
David Orr: We have had good access, particularly to Lord Freud at political level, and we have worked very closely with colleagues in DWP charged with the responsibility for designing and delivering universal credit. There has been a real sense of partnership. We have had people seconded in to help with the design of the housing component. A couple of my colleagues spend most of their time in conversation with DWP officials. It is important to say that, at official level, there has been a real commitment to doing as much as possible with us and others.
The Chairman: That is very helpful.
Councillor John Fuller: Paying weekly rather than monthly would be a big help as well in those cases.
The Chairman: We need to move on.
Q107 Baroness Primarolo: In your evidence this morning, both of you, David and John, made a clear case about understanding the challenges that individual families and smaller communities might face, on a continuum from not enough money to specifically needing more support. I want to push the localism and co-ordination point that you made. Regrettably, John, we know from evidence that when budgets were devolved to local authorities post the Social Fund, one-third of local authorities spent less than 40% of their total allocation. There is clearly an issue about co-ordination, despite some excellent examples of co-ordination that you have both illustrated today. Given that proposition and the results that are coming in, and your main arguments about working closely with families and communities knowing what to do, do you have further suggestions, given the localism agenda, about how we could improve that working relationship, so that good practice occurs not just in pockets in some local authorities but responds to need across the board?
Councillor John Fuller: The problem was that the social care fund was given to the upper-tier authorities, which is fine in the unitary or metropolitan situation. In the shires, it was given to the county councils rather than the district councils, and the county councils have no nexus with housing benefit payment or anything else. The Social Fund was given to the wrong target—organisations that did not have anything to do with it. That largely explains the narrow point. I cannot talk for the upper-tier authorities. Separately, when it was abandoned, it was given a single line of £74 million to be spread over all the upper-tier authorities. It has subsequently been deleted, so it is now just part of the general local government settlement, and the settlement is going to fall away to almost zero by 2019. There are quite a lot of challenges on the specifics of the Social Fund.
There is a wider point. At the moment, we have pots of money from the DWP, from councils and from other areas. To have had a separate pot of money, small as it was, in a totally different tier of government was clearly opaque. One needs to bring these all together in an integrated manner at the benefit-processing authority level—the people with responsibilities for things such as debt advice, homelessness, health and into-work-type things. Then we might start to get some traction.
Your other point was that there is a shortage of money. That is undeniably the case; there has been a £12 billion reduction already, and there are further reductions, with the local housing allowance rate being frozen. It is not a problem that will go away, but in solving the problem we have to try to get people into work and get more housing built. That is very much in the planning and housing authorities’ remit—the same authorities that deliver the benefits.
David Orr: There is a pretty fundamental question about local decision-making. In the places where this works, it depends on local leadership and it depends on two or three people having a commitment to doing it and making sure that it happens. There are one or two examples in the paper we provided today. The Social Fund is one example. Supporting People funding is another, disaggregated and distributed by local government. That is clearly consistent with a commitment to making decisions at the most appropriate local level, but if you do not have a ring-fence, some of the money disappears. It is quite instructive. In our part of the woods, with things like the Social Fund and Supporting People funding, you almost never see those funds increased after they are disaggregated. They nearly always go, and there seem to be other challenges. In the first year of the disaggregation of SP funding, without the ring-fence, some authorities held on to 100% of it. The biggest amount lost in any one place was half. Half of it disappeared in the first year.
As a nation, perhaps, there is a big challenge. We like localism when we like the outcomes. When we dislike the outcomes, we claim postcode lottery. It is like night following day. At some level, we have to make a decision about whether we trust local leadership or not. My own view, which is perhaps of no significance, is that two-tier local government makes it more difficult to identify exactly where decision-making should be. If we are to create an environment that is much more about local decision-making and leadership, we need to be clearer and more transparent about exactly where those decisions rest. In the new environment of there being no block grant transfers from central government to local government, with local government relying on council tax and business rates and no system yet in place for redistribution around individual local authorities, all this will be much more challenging, at least in a transitional period.
Baroness Primarolo: May I press you on the issue of having money devolved locally—the localism agenda? Is there not a different structure, which of course involves local authorities but has a broader base of organisations that can take the work forward? I know local authorities that were housing authorities, and they still did not distribute the money; they kept secret that it was there. They knew full well. David, you talked about needing to have the advice capacity if you have raised the funds. I am absolutely in favour of local authorities. The old model is where you give it to local authorities and they decide, but is there something else that we could push that gives a broader base—local authorities plus organisations such as yourselves?
David Orr: I am always keen to see sensible local partnerships being developed. Because they are a partnership, they have a greater capacity to think strategically over a period of time. There are good examples of that, and there are other places where they do not exist. In the end, a lot is determined by the availability of funding. The absence of ring-fencing creates a different environment for local decision-making.
Baroness Primarolo: I know that John will have a view on this. On the vexed question of ring-fencing—this is just a yes or no answer—there are things in favour and things against ring-fencing, but am I correct in assuming that both of you are saying that having a strategic ring-fenced fund would enable you to make progress at a faster rate?
David Orr: Any environment where it is possible to have a degree of certainty about future funding is easier to plan in than an environment where you have no certainty of future funding. Ring-fencing is one of the mechanisms that you can use. Annual financing programmes are always a challenge in any event. I would much rather have us looking at three-year and four-year funding planning periods, rather than annuality.
Councillor John Fuller: It goes back to your opening remarks. What is the role of central government in setting expectations, with local people delivering them? To address the other point briefly, there has to be a role for local government to hold the ring. Ultimately, it is on the hook. Charities come and go. Where is the accountability? We have had cases where we have tried to contract with charities. They start with good intentions, but after a while they do the easy cases and leave us with the difficult ones. There is no benefit; it should be all or nothing. That is just the way of the world. There is a key role for authorities going forward.
The Chairman: We are starting to run out of time, so I must ask for quick questions and quick responses for the last two questions, please.
Q108 Lord Kirkwood of Kirkhope: This is on the narrow question of robust transfer processes. In the context of universal credit, as you know, a locally delivered support mechanism is being run by the DWP, which will be delivered by local authorities. This may give Councillor Fuller his opportunity to develop what he was telling us a moment ago, importantly, about some of the integrated services. The pilots that were staged between 2014 and 2015 were described as a cautious success, mainly because universal credit is so new. To what extent have your respective organisations been involved in the outcome and evaluation of those pilots? What input do you have into ensuring that universal credit delivered locally delivers some of the warm handovers that we think are necessary from DWP to other agencies locally to get the kind of beneficial outcomes that Councillor Fuller was advocating earlier?
Councillor John Fuller: Through the LGA, we were intimately involved with trying to work with Lord Freud and others on shaping those universal pilots. Some good lessons came out. I referred to the north Dorset one earlier. The district council area has no DWP office, so we had to think about that. There was also digital exclusion. The online system requires access to good broadband. There is a whole series of things that can be problematic. The trials were good, in that they were the simple cases. It probably took the Government’s foot off the accelerator to get it right, rather than rushing it, and we should give credit for that. They are making progress in small steps.
Once you are on universal credit it stays with you, even if you move around. We had a single case of universal credit in our district at one point, even though we were not in the pilot, because a gentleman who was based in Warrington got on universal credit, made up with his old girlfriend and came back to live in south Norfolk, and the universal credit came with him. At that early stage, nobody knew quite what to do, because we were not in the pilot. These are transitory changes. We learned a lot that way.
David Orr: Not much and not much are the answers to your two questions. Housing associations need to be more involved, as do potential contractors, in a relationship with DWP for the delivery of some of those services.
Lord Kirkwood of Kirkhope: But you both agree that a robust transfer process is an essential part.
David Orr: It is critical; absolutely.
Lord Kirkwood of Kirkhope: It is an essential part of the undertaking that DWP is making to stakeholders.
David Orr: Absolutely.
Councillor John Fuller: It is critical. A separate point is that people in receipt of universal credit often have council tax support as well. Council tax support is operated exclusively by the district or the upper-tier authority or unitary council. That is a compelling reason to have it all done in one visit. DWP will never do council tax support, so, by design, there has to be a one-way trip, should councils end up doing this.
Q109 Lord Fellowes: The issue of the difficulties in the wide disparity of practice between different authorities and landlords has largely been dealt with in an earlier answer from you, Councillor Fuller. Could I add to that? Surely there must be some tension for local authorities, in that they are acting as creditors and benefactors at the same time as trying to cut costs. You make it sound not terribly difficult, but it sounds almost impossible.
Councillor John Fuller: It is difficult. I believe that the state is there so that people who can get on should be able to do so, but the state is also there to help those who cannot. That means doing things in a businesslike manner rapidly. We are proud that we do all benefit processing in eight days. Many local authorities do it in 90 days. In chaotic lifestyles, people may have moved twice during that period, so no wonder they never catch up. It needs a businesslike approach.
In fairness, the Government give us a housing benefit processing grant as a small contribution on the way, but it comes down to, “What is the state for?” Our having a degree of flexibility that we have carved for ourselves has allowed us to innovate, and that has given good outcomes, I would say. The opportunity is there—if you put aside the postcode lottery—and good leadership should win out. Not only is that a good thing, but it is good for society, and it should be popular at the ballot box. There are all sorts of incentives to get this right, as well as social cohesion, which is sort of what we are here to do.
David Orr: I do not have anything to add on that specific question. You referred in an earlier question to local authorities and housing associations being quick to go to court. I do not recognise that. I am quite anxious about it, and I would like to see the evidence.
Q110 The Chairman: I was going to ask if you could help us. We have received evidence, both written and oral. We have had some from citizens advice bureaux in various parts of the country telling us that council tax arrears have shot up to the top of their problem debt list. We also had some evidence that, at national level, local authorities with the highest bailiff use were recovering 22% of arrears, and those with the lowest bailiff use were recovering 31%. That is what we have received so far. If you have other figures, we would very much like to see them. As a Committee, we really need to get to the bottom of this. Is that something you would be able to provide us some written evidence on?
David Orr: We will see what we have.
Councillor John Fuller: I wonder whether this is down to the design of local council tax support schemes. There are two ways of doing it. On the vesting date, which I think was in 2012, the Government cut it by 10% in aggregate. Therefore, many authorities just slashed; simplistically, they took the benefit down by 10%. We took a different approach, which I think was more intelligent, to try to design it to keep people in work. I suspect the problems are probably in authorities where they just took an arbitrary 10% cut. A bit of focus on the design of CTS—council tax support—might help you.
The Chairman: Thank you very much. We would be very grateful to receive written evidence from you on that point. It would be fair to say that the Committee generally feels quite perplexed on that issue at the moment. It is really important for our final report that the evidence we use is pukka and agreed. The final question is from Viscount Brookeborough.
Viscount Brookeborough: Before I ask that question, I want to ask whether there is an issue with who is paid universal credit in the family unit. Is it the homemaker or the breadwinner?
David Orr: We pretty strongly believe that, in almost all circumstances, it makes more sense to pay it to the woman if there is a woman in the household.
Q111 Viscount Brookeborough: Thank you. Finally, in considering the subject of financial exclusion, where should the Committee focus its attention? Please, can it be something that might be achievable? Could you answer in two simple sentences for each of you: first, as it affects you or your organisation; and, secondly, looking at the situation overall—a more sweeping statement as to what can be done? Just two sentences.
Councillor John Fuller: Prevention is better than cure—£1 spent on prevention—and collocation, so that the person can tell us once and have a single conversation for the entire interaction. That is the answer to the first one. Local leadership is critical. If one is to tinker with universal credit, having it paid weekly or direct to the landlord is much better than paying monthly in arrears. Plenty of people have a salary, but hourly paid workers tend to get paid by the week. It is an obvious thing.
David Orr: The first is understanding that the fundamental problem is poverty, not a system or structural one. We support the idea that there are changes in the design of universal credit that could make a fairly significant difference.
The Chairman: Thank you both for your evidence. It has been very helpful. David, I hope this has not made your voice worse.
David Orr: Thank you.
The Chairman: Thank you very much indeed. We will move swiftly to our next evidence session.
