Deconstructing Housing Benefit

By Malcolm Gardner

Contents

Introduction
   
On 28 June 1999, the Daily Mail published a front-page story that claimed "Brown to Axe Housing Benefit". This was not the first such story in recent months but the difference was that it contained timetables and detail of what was to come afterwards.
We believe that the story had been set up by the Treasury and contained several quotes from sources that were provocative rather than accurate. Treasury sources made several comments about local authorities being inefficient. The sources indicated that the housing benefit system was riddled with fraud due to councils having little interest in checking claims properly. The amount of fraud being quoted was the new Audit Commission figure of £840m. The reporter failed to explain that this figure is down from the £1bn previously quoted. One hopes that this is due to the work done by housing benefit fraud investigators although it was probably due to the fluctuations in the WBS rules. The reporter and the Treasury sources had clearly not read the Benefit Fraud Inspectorate's AD3 report, otherwise housing benefit administration might not seem quite so bad.
In case anyone thought that proposed changes were a piece of fiction by mischief-makers from the Treasury or the Mail should rethink. Alistair Darling, the Secretary of State for Social Security confirmed that a radical reform of housing benefit will be announced in a green paper to be issued in the autumn by the DETR. Unlike the un-named sources from the Treasury, Darling would not be drawn on whether housing benefit would be converted into a Tax-Credit. However, it would be unthinkable that it would not.
Birkenhead MP and former DSS minister, Frank Field immediately thought the unthinkable and said, in the Liverpool Post, that the proposed changes would result in people being evicted from their homes. It is strange when you consider that on the same day the Charity Shelter seemed to be supporting the changes. But Frank Field is right any changes that move away from direct payment to landlords will result in more evictions and less landlords being prepared to take-on those on low incomes. The fact of the matter is that many people can not manage their own affairs, and are not likely to use their tax-credits on housing. Of course the move to tax credits will reduce landlord fraud if the government knows there is a lot, but not how much.

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Possible Changes
According to the Daily Mail housing benefit is to be converted into a housing tax credit which for those who are working, will be paid    via their wage packet. Presumably those on JSA or IS will be paid with those benefits. The mail suggested those on IS would be expected to pay something towards their rent but is not possible to see how that could happen if their only source of income is benefits.
What is quite clear is that Landlords can not expect to continue to get Housing Benefit or Housing Tax Credit to be paid directly. Given that there is a growing push by central government to privatise the remaining council houses, and bring council rents to the same levels as private rents, one can only assume that Rent Rebate will not go directly to the council. There is some logic in this. It removes the confusion on overpayments and rent arrears and will make rent recovery performance indicators more accurate.
The Treasury see these changes as a way in which to reduce fraud. This shows how little central government knows about Housing Benefit fraud. Over the years the levels of organised fraud by landlords has been played up very strongly. Some senior politicians in the Labour Party knew that the backbenchers would not support any crackdown on claimant fraud as they held the perception that poor people did not commit fraud. They could accept the concept of the unscrupulous evil landlord fleecing the system like some modern day Fagin preying on poor single mothers.
While there is no doubt that Landlords have defrauded the system, there is no way of knowing by how much. The proposals will not change the vast amounts of low level fraud in the housing benefit system. False claims, etc will still exist. However, it may go someway to reducing income tax fraud by landlords who downplay their income.

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Dismantling

Move from one system to another will not be easy. The following will have to be considered:

If councils believe that housing benefit is about to disappear then there will be no commitment to invest in to the system. Best Value notwithstanding. Treasurers will not invest in training, computer systems and given that performance indicators will continue to remain they will be reluctant to implement the resource hungry Verification Framework.
The mass transfer of staff will result in increased redundancy payments. Councils recovering from reorganisation will again be placed in turmoil, as local trade unions will attempt to ensure that their members are re-deployed rather than sacked.
What of ancillary staff – organisations such as Barony, CIPFA revenues services and small contracting and consultancy firms such Chris Stewart Associates? The impacts on the IRRV will be significant.
In reality, this change will not occur until after the next elections. Given the speed of the negotiations on WBS it will be hard to imagine that this will be a speedy response. However, we can not expect that the change in some form or another will not take place.
In addition, what of the future of the Benefit Fraud Inspectorate? Arguably the whole raison d'être of the B.F.I. ceases to exist. What would be the point of inspections?

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Conclusion
The Benefit Agency should watch what happens with interest. If housing benefit can be turned into a tax credit, then Income Support will not be a problem. Rigorous enforcement of the minimum wage would ensure that basis of tax credits stand a chance of working.
My guess is that after the elections, assuming New Labour wins — wither old Labour? — that the DSS will be rolled into the Treasury (bits going to the DfEE) and the whole shebang becoming a super-department. Then everything will become tax-credits.
Will this eradicate fraud? Not a chance!

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© 1999 Radius Computer Services