The welfare cuts since 2013 have lost Croydon Council and over 16,000 residents £8m. And worse is to come £19.4m+. This will be a big negative impact on the local economy and its small businesses.
This is highlighted in what is perhaps the most important reports being considered by the Croydon Council Cabinet on Monday 16 November is its assessment of the welfare cuts forced by the former Con-Dem Coalition and now Tory Government – ‘Welfare reforms & future roll out of universal credit’. It needs to be read by all those who support campaigning against the next round of welfare cuts, all those in the progressive political parties, campaigns, trade unions, and the alliance being developed through the Croydon Assembly.
Adverse effects 2013-15
The changes were the replacement of Council tax benefit by Council tax support, incurring a loss to the Council of c£3.5m in 2013/14; the £26,000 benefit cap; and the bedroom tax.
The Council set up a number of different support mechanisms working with partners, including a multi-disciplinary team that assisted in income maximisation, budgeting, housing, finding work and training for work. It initially targeted those losing over £50 in benefits per week (500), and has now assisted nearly 6,000 residents. That leaves 10,000+ residents who have been struggling without help. How many of those will be in private rented accommodation?
These will lose residents £19.4m a year, of which £12.4m will be the tax credit cuts, £3.1m through the changes to the benefit cap, £1.8m due to the ending of housing benefit to 18-21 year olds. The situation is complicated by the phased introduction into Croydon of Universal Credit.
- Benefits freeze – Working age benefits to 2019/20.
- Tax Credits – The level of earnings at which a household’s tax credit starts to be withdrawn for every extra pound earned will be reduced from £6,420 to £3,850, and the rate at which the credit is reduced will accelerate. Support through Child Tax Credit will be limited to two children for children born from April 2017. Equivalent changes will be made to Housing Benefit.
- Housing Benefit – cap reduced to £23,000 in London, though claimants in work will continue to be exempt from the cap. ‘In Croydon 305 households are already capped, and face a further income reduction of £58.31 per week, with 215 facing a significant risk of eviction. 90 of these will require a move to homes outside London and the South East; the remainder will need other interventions to prevent homelessness. 653 households with over 1750 children in Croydon will be affected by the cap for the first time.’ The backdating of housing benefit will be reduced from 6 months to 1 month Last year over 10,000 residents were supported in this way.
- Employment and Support Allowance (ESA) – From April 2017, new claimants who are placed in the Work-Related Activity Group will receive the same rate as those claiming Jobseeker’s Allowance, alongside additional support to help them take steps back to work.
- ‘Youth obligation for 18 to 21s – from April 2017, jobless 18 to 21s will have to participate in intensive support and after 6 months apply for an apprenticeship or traineeship, gain work-based skills, or go on a work placement. Automatic entitlement to housing benefit for that age group will be abolished. In Croydon 650 single claimants of housing benefit are age 18-21, of which 147 are care leavers and may be exempt from this measure. Other exemptions will include vulnerable young people and those who have been in work for 6 months prior to making a claim.’
- Reduced housing costs for single residents – under current housing benefit regulations, single people over 35 receive a maximum of £152 per week. From April 2017 under universal credit their maximum housing support is limited at £82 per week.’
- ‘Capped child premium – under means assessed benefits a premium is awarded for every child within a household/household. From April 2017 all new applicants under universal credit will have their assessments limited to 2 children.’
Effects on residents
JSA,ESA work related component, IS and Local Housing Allowance all frozen for 4 years from 1 April 2016: 24,253 residents, ‘Tenants in the private rented sector at risk of increased deprivation and homelessness if rent is increased annually’.
Reduction in tax credits from 1 April 2016: 10,105 residents. ‘Increased cost to Council, due to additional award of Council tax support. Average loss is £23.63 per week.’
Reduction of Housing benefit backdating from 1 April 2016: 1,020 residents. ‘Increased pressure on rent arrears.’
Reduction in Benefit cap from October 2016. 955 (653 new) ‘Overall household income is capped to £442 per week, a further reduction of £58.23 for those already affected with an average loss of £60.62 per household.’
ESA (work related) capped to JSA levels from 1 April 2016. 290 residents. ‘Reduced income for those deemed not able to work claim JSA. £40 per week.’
Excluding 18 to 21 from Housing benefit from 1 April 2017. 475 residents. ‘Residents currently in receipt of housing benefit are now zero entitled. Excluded groups include the disabled, those with dependents; previous looked after children and those who have been employed in the last 6 months.’
Universal Credit single room rate from 1 April 2017. 140 residents ‘Reduced support of housing costs owing to type of residents single, reducing from £155 to £82 per week. ‘
Universal and Child Tax credits Capped at 2 children. Claiming for the first time from 1 April 2017. 2048 residents. ‘Where a household has more than two children benefit will be capped at 2 children. Impact for those moving to UC is a loss of £229 per child as claim will be deemed a new claim.’
Outcomes for people assisted
The breakdown of the 5,435 residents assisted from April 2013 to September 2015 was as follows:
Into work. 656
Now entitled to exempting benefit such as personal independent payment (PIP). 149
No longer affected, owing to initial engagement. 1,060
On-going Council activity
As part of the work on financial inclusion from February this year the Council has:
- Trained over 300 Council employees in welfare, housing, resident services and benefits to provide basic budgeting support to residents
- Explored key services to provide money saving support and debt guidance, after which the aim is to agree joint approach/sign posting
- Reviewed self-serve options regarding budgeting, consider usage, functionality and promotion
- Identified and contact claimants that do not have a bank accounts actively work with them to put bank accounts in place
- Engaged with Credit Unions on service provisions and accessibility, whilst considering increased services
- Agreed approach with banks in relation to setting up bank accounts and financial support (para 7.16)
‘10.3 The main changes to be introduced in 2016/17 will affect Croydon residents in a disadvantageous manner. This includes:
- 305 households in Croydon already have their benefits capped. They face a further income reduction of £58.31 per week, with 215 facing a significant risk of eviction. 90 of these will require a move to homes outside London and the South East and the remainder will need other interventions to prevent them from becoming homelessness
- 653 households with over 1750 children in Croydon will be affected by the benefits cap for the first time
- Increase in the number of residents requesting support with their council tax payments. This will lead to increased costs for the Council.
- Tenants in the private rented sector at risk of increased deprivation and homelessness. Currently, Croydon has 13,781 housing benefit claimants of working age renting privately
- Increased pressure on rent areas due to reduced opportunity to backdate housing benefit
- Increase in homelessness
- Increased pressure on the provision of temporary accommodation
- Increase the numbers of households where out of borough placement is use
You can download the report here: Welfare Reforms Cabinet 16 November