Webinar: Understand how Universal Credit affects Council Tax Reduction Schemes
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The document summarizes a presentation about how Universal Credit affects Council Tax Reduction Schemes. The presentation discusses trends in Council Tax reduction since 2013, how Universal Credit impacts schemes and objectives. It also outlines Wolverhampton City Council's scheme and four approaches to modeling scheme changes. The presentation aims to help councils understand how to design schemes that align with Universal Credit while meeting objectives like cost reduction and work incentives.
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Webinar: Understand how Universal Credit affects Council Tax Reduction Schemes
- 1. Understand how Universal Credit affects Council Tax Reduction Schemes Wednesday 21 February 2018 Policy in Practice
- 2. Housekeeping • Audio check • Please ask questions • Polls and a survey • Downloads available • Finish by 11:30
- 3. We make the welfare system simple to understand, so that people can make the decisions that are right for them
- 4. Speakers Zoe Charlesworth Head of Policy Juan Alvarez Vilanova Policy Analyst Jenny Hoare Lead Technical Specialist Wolverhampton City Council
- 5. Agenda • Background to Council tax reduction and trends since 2013 • Objectives of CTR schemes and the impact of Universal Credit • Wolverhampton City Council’s scheme with Jenny Hoare • 4 approaches to modelling CTR schemes • Questions and answers
- 7. Background: where are we now?
- 8. 888 Poll: What would your main objective be if you were changing your CTR scheme?
- 9. Why change your scheme? • Reduce cost of the scheme i.e. the cost of the benefit/discount • Reduce administrative costs for the authority • Reduce (or avoid increasing) council tax arrears and the cost of collection • Align with Universal Credit • Promote work incentives • Define and protect vulnerable people • Reduce poverty • Simplify your scheme From mid 2017 the impetus for scheme change has been the migration to Universal Credit full service and administration savings
- 10. Why introduce a new scheme with Universal Credit? • Residents will need to re-assess income as they migrate to Universal Credit so changes in Council Tax Support can be part of this • Partial introduction as households migrate to Universal Credit • A scheme to go alongside Universal Credit or to support those who are adversely affected by Universal Credit • The opportunity to use the Universal Credit assessment of income • Realisation of the relative cost of administration against awards once Housing Benefit is removed • Re-assessments with monthly Universal Credit changes / RTI
- 11. Re-assessment doubles under UC Data analysis of a full service site by Policy in Practice revealed the average number of re-assessments in one year is 3 The average re-assessments for households in receipt of Universal Credit is 6 Source: a seaside council in the East of England
- 12. Cost effective administration Increased re-assessment Alongside… • Reduction in cross subsidy from Housing Benefit administration • Proportionally more when CTR is standalone • Administration costs may be up to 25% of scheme costs once CTR assessment is standalone
- 13. Reduce administration costs 1. Number of claims • Some councils may see a drop off in numbers under the default scheme as households move to Universal Credit. This can be modelled and planned for • Drop-off due to households not claiming under Universal Credit 2. Number of re-assessments • Re-assessments for households in receipt of Universal Credit may double. Scheme design can minimise this • Introduction of additional elements such as de minimus rules and using average income • Software from CT software suppliers may limit re-assessments but this must be built into scheme design 3. Complexity of assessment • Using Universal Credit assessment can minimise administration time • Schemes can be simpler e.g. no tariff income, single non-dependant deduction etc
- 14. Default scheme: simple solution? What is it? • Similar to current scheme but UC Max replaces the “Applicable Amount” • Income for UC purposes PLUS UC replaces income • No earnings disregards General outcomes • Will usually cost slightly less than the legacy benefit scheme • Households not in work are unlikely to see difference in support • Households in work will receive lower CTR as they will be receiving higher UC. Good news for LAs! BUT…… Sticking a default based scheme will not be neutral – there will be winners and losers in any case
- 15. Default scheme: simple solution? This does not maintain the status quo – there will be winners and losers In particular groups that receive lower UC than legacy benefits AND receive lower CTR. This will happen if : • the assessment of “needs” is lower under UC than under legacy benefits because this also reduces the income side of the equation, e.g. ending disability premiums • Income that is taken into account is higher under UC than legacy benefits, e.g. self employed and the minimum income floor
- 16. CTR under UC: winners and losers
- 17. Some people will lose a lot • Employed households with a disability • Self-employed households • Lone parents working > 16 hours but < full-time on minimum wage
- 18. Others get reduced CT Support but higher Universal Credit • Most non-disabled employed households (but not lone parents) • Households whose needs have increased in UC assessment
- 19. Some will see higher Universal Credit and higher CT Support Households with income from boarders
- 20. Default scheme: impact on costs Cost savings are dependant on local demographics Higher proportion of employed and self-employed = higher reduction in cost • London borough with 45% of caseload employed and self-employed (17% self- employed) saw a cost reduction of 12% when all households migrated to Universal Credit • A Borough Council with 13% of caseload employed and self-employed saw an insignificant reduction when all households migrated to Universal Credit. Analysis of your local data can provide an indication of cost savings
- 22. Jenny Hoare Wolverhampton City Council
- 24. 4 approaches to modelling CTR schemes 1. Do nothing 2. Make small tweaks 3. Income-banded schemes 4. Discount schemes
- 25. Your Housing Benefit / Council Tax data Our Benefit and Budgeting Calculator Rich, detailed impact assessment: who is impacted and by how much Our approach to data analysis We use administrative data capturing detailed information on low income households We combine these datasets together over time, and model policies across four government departments combined, to examine the impacts both now and in the future CTR support now and in a future scenario, both under the current system or under UC
- 26. 1. Do nothing approach • Shows council impact if nothing was changed, but the following occur: • Council Tax Liabilities increase • National Minimum Wage, Personal Tax Allowance increase • XX% of households are migrated over to Universal Credit • Rent prices, benefit rates increase • “Not doing anything is the most radical thing you can do”
- 27. 2. Make small tweaks Model the social and financial impact of small tweaks, including: • Introducing band cap, capital limit • Changing max. support, taper rate • Reducing/removing non-dependant deductions • Introducing Minimum Income Floor to all self-employed Amendment type Numbers affected Capital limit reduction 35 Band cap 75 Changes to non-dep deductions 834 Application of MIF 174 Total 1,118Example • A NW council made 4 small tweaks to make savings; modelling showed this allows reduced minimum payment from £3.50/week to £3.22/week • Impact broken down by demographics; which household types lose out and which gain. Useful for consultation
- 28. 3. Income-banded schemes • Modelling the financial and social implications of sorting households into set income bands, each with corresponding discounts • Building in protection for larger households through different ways: • Disregarded earnings or incomes (e.g. Child Benefit, childcare element, housing element etc.) • Equivalising income – dividing by number of household members • Different bands for single people / couples with children • Reverse engineer income bands, and levels of discount for each, to keep scheme cost- neutral.
- 29. 4. Discount schemes • Like income-banded schemes (not repeating assessment) but looking at circumstances only • Households sorted into small number of bands, for example: • Band 1 – households on UC and not earning • Band 2 – households on UC and earning below work allowance • Band 3 – households on UC and earning above work allowance • Above, use of work allowance (which varies by household type) means larger households not penalised • Reverse-engineering to find discounts that keep cost same
- 30. See social and political impacts On different demographics -8.0% -8.6% -10.9% -15.5% -6.6% -3.5% -4.9% -4.4% -20% -15% -10% -5% 0% Single Lone Parent Couple no children Couple with children % change in CTR compared to retention of current scheme, by household composition Household not on UC Households on UC On different tenures
- 31. Some current CTRS clients
- 32. 323232 Poll: Are you planning to change your CTR scheme soon?
- 33. Conclusion Universal Credit is coming and the status quo will not be neutral The best scheme for an authority will depend on: • Demographics • Current scheme • Political climate • Overarching policies and local priorities The effectiveness of your scheme can only be understood through detailed cost and social impact analysis
- 35. Next steps Download Modelling Services flyer Download Universal Credit and Council Tax Reduction Schemes white paper Short survey • We value your feedback • Ask questions • Take another look at our CTRS work Next events • 9 March: Roundtable: Improving lives whilst reducing dependency • 21 March: Helping disabled jobseekers on their journey into work • 18 April: Proactively tackle homelessness
Editor's Notes
- What would your main objective be if you were changing your CTR scheme? Reduce cost of the scheme i.e. the cost of the benefit/discount Reduce administrative costs for the authority Reduce (or avoid increasing) council tax arrears and the cost of collection Align with Universal Credit Reduce poverty
- Didn’t have expertise internally UC rollout Wanted objectivity for members – internal process – where did members come into it?
- Governments may know how one policy affects many people. We can show how all policies combined affect one person. We work with household level data from over 40 different local authorities to Welfare reforms we model, and how accurate we are.
- Are you planning to change your CTR scheme soon? Yes, for implementation in 2019/20 Yes, for implementation in 2020/21 Yes, but not in the near future No