Welfare reform and the rates rebate system

Housing Rights Service is involved in discussions around the future of rates support in Northern Ireland and has responded to a recent Government consultation. Nicola McCrudden, our Policy Manager, outlines our views.

The Department for Finance and Personnel is facing a major challenge - how to meet the 10% Westminster funding cut for rates support while trying to ensure that assistance remains available for the most vulnerable.  Having spoken to the Department’s Rating Policy Division, I believe there is a genuine opportunity for the voluntary and community sector to help shape the new rates rebate arrangements as it is a devolved matter.

Phase one – up to the introduction of Universal Credit

The Department has set out a preferred phases approach. We agree that existing levels of support for those who are least able to pay should be retained. However, funding shortfalls will also need to be met. Phase one of the timetable envisages the NI Executive making up this shortfall in 2015-16. With the delay in the Welfare Reform Bill, it’s likely this timetable will extend beyond 2016 along with the additional cost of support. Some savings will be made up in part from ending the low income rates relief scheme (for those not currently entitled to Housing Benefit for rates). This is probably the ‘least worst’ option available. However, beyond this additional savings will be needed.

The funding cuts at Westminster have precipitated the need to refocus assistance to NI households in most need. That has led us to believe that all of the current non means tested rates relief support allowances and discounts should be reviewed. Based on figures provided in the consultation document there is potentially up to £18m to be saved by ending other schemes. In this funding climate, we question the availability of assistance to ‘better off’ households, in particular we question why the NI Executive is capping the maximum capital value at £400,000?. There are 5,000 ratepayers benefiting from this cap at a cost of £3.8m. We also question the levels of early payment/discount entitlements which reward those who can afford to pay lump sums up front including: 4% discount for full payment of rates upfront; and up to 12.5% discount for private landlords.

With landlord discounts, we appreciate that in these cases landlords are acting as collection agents for Land and Property Services. However, this in itself can contribute towards confusion regarding rate liability and responsibility for payment. To help clarify this situation, we have suggested that the Department sets up a system whereby payment of rates rebate, regardless of household tenure, is paid directly to LPS and deducted from rates bills.  This would avoid the need for a third party to act as rate collector. It would result in direct savings by reducing collection administration costs.

Phase two – after Universal credit implementation

The introduction of Universal Credit will mean the removal of passporting benefits. Therefore a new system to administer rates rebate will be required. In our view, it would be sensible to have a system which passports as many Universal Credit claimants as possible onto full rates rebate. Expensive? On initial consideration - yes. It would appear that an additional £70m funding would be needed to passport all claimants on to full rates rebate. However, it would be a much easier system to administer. We have recommended that the Department carries out an overall costing for this option, offset by ending the additional schemes, allowances and taking account of savings from administration.

A further option would be entitling claimants who have no income (earned or otherwise) to full rates rebate. Those who have earnings would be subject to the current means test, with Universal Credit minus the housing credit treated as income. However, there are concerns that those working more than 16 hours per week would lose out. In fact, under Universal Credit homeowner claimants who work any hours at all will lose all help with their mortgage interest. A further reduction in rates rebate may create work incentive issues. After all isn’t the policy intention of Universal Credit to ‘make work pay’?

Hardship

We are very aware that the removal of support could have a negative impact on some low income families. We are therefore recommending that the Department considers developing a hardship scheme. This should provide temporary or transitional assistance to those who would lose out and who are just above the threshold for entitlement to rates rebate. This system should be tied in with independent advice provision, with referral arrangements for claimants to receive appropriate benefit checks, debt and/or money advice.

Final rates rebate scheme

With no previously laid path to follow, we are entering the territory of new policy development. It’s difficult, at this stage, to give a definitive answer as to what the final scheme should look like. Even with the available modeling data there are still a lot of ‘ifs and buts’ to be considered. The Department does seem genuinely committed to continuing its engagement with stakeholders. If not already involved I would urge you too especially if, like us, rates affordability is a problem for your clients.