Commercial property purchases: Bizarro ft. Brassneck

I’m a fairly placid guy, most of the time. But last week I did get a touch fuming about an off the cuff comment from the Leader of the Liberal Democrats. This one is going to get a little bit technical at times, but stick with me, because it is worth thinking about the changing nature of local authorities and the choices and risks they have little option but to take.

What wound me up was Sir Vince Cable’s statement about councils purchasing capital investments out of their areas, labelling this activity ‘utterly bizarre’. Even more, he seems concerned that some councils are exercising their right to borrow from the public works loan board in order to buy these investments.

So let’s take a few steps back and state the bleeding obvious. Councils are under intense financial pressure, with a combination of reduced spending power and significant demand on statutory services. More people need help from social care, especially as the population ages and there are more conditions that are debilitating but no longer fatal. The Public Accounts Committee last week stated that councils with social care responsibilities overspent their service budgets by £1 billion in 2016/17. To be clear, in the vast majority of cases this is after significant attempts to balance a budget, cutting back as far as is possible and making sacrifices that would have seemed unthinkable even a few years ago.

I’ve written elsewhere on social care funding and some options. We’ll keep waiting to see what the social care green paper says. Given we now have a new secretary of state we don’t know if there will be yet further delays for this. But the key message is that councils are having to make hard, tough-headed decisions, in terms of shrinking non-statutory services, using up revenue reserves or doing things to create an income.

What Sir Vince will definitely know is that councils have, since 2011, had the power to do anything an individual can do. If a council wishes to start a company, it can do. If it wants to buy and rent houses for profit, it can do it. If it wants to buy a building, wherever it is located, it can do. If it wishes to instruct contractors to start building a rocket ship without not quite knowing the purpose behind it, well, that one is probably out. There are plenty of things that councils cannot do- almost all cannot franchise buses (neither can an individual), raise new taxes (nor can an individual), print money (nor can an individual) or declare war (you get the idea).  Sir Vince will know all of this because he was the business secretary in the government that gave councils this power.

The thing that puts these powers in check is that councils, collectively and individually, are democratically elected and responsible for their actions. They can and will be held legally responsible, just like an individual, if the company pays below the minimum wage, if a building is poorly maintained and the tenant sues them, if a commercial building is empty and in void, or if the rocket ship falls into a ditch. Councillors of major authorities are not co-opted school governers choosing what colour the tea towels should be: they are elected politicians, often with slender majorities looking to make hard decisions in hard times.

Moving on the the public works loan board, this is a fund established by central government that loans to “major” local authorities (as well as town and parish councils) at rates similar to those the government can itself borrow at. There are guidelines to what councils can borrow, as set out in CIPFA’s prudential code (a steal at £260) but crucially this is really a decision for the local authority to ensure it is not breaking the code. As the PWLB website says:

“The PWLB does not require information on the purpose for a loan. Responsibility for local authority spending and borrowing decisions lies with the locally-elected members of the council, who are democratically accountable to their electorates.”

Precisely. Once again, the key players here are the councils themselves, those locally elected politicians making hard decisions based on officer advice. They have a source of credit for capital decisions and are empowered to decide what to do with this, subject to their local mandate and wish to remain in post. This isn’t dewy-eyed romanticism but the decision of central government to give powers to local government and, rightly, to expect them to be held to account if they use them poorly.

But why would councils wish to buy commercial property? It comes back to the financial question I started the blog with. You are unlikely to have got this far in this if you don’t know the difference between revenue and capital. So hopefully it won’t be a huge surprise to know that letting a commercial property generates an income. As long as that income is greater than the loan repayments (if indeed a loan has been taken) and other costs, then you can use that surplus income to pay for other capital spending. Things like repairing buildings, replacing broken machinery, improving physical infrastructure. Not having to fund capital spending from revenue means you can spend it on improving services, paying frontline staff, collecting bins, helping people. You know, the things we all (Sir Vince included) want to see councils doing.

Now if I was a private commercial landlord I might be a little nonplussed at this. Councils are able to borrow at a lower rate than them to compete for the same properties, isn’t that unfair? Well, it certainly isn’t a brilliant outcome of a complex system, but it also certainly isn’t bizarre. There are plenty of things councils can do, often because of economies of scale, that a smaller business cannot. But that certainly doesn’t add up to bizarre- there are certainly enough situations where a private company can outmanoeuvre or work policy, law or tactics in the other direction. If councils are investing in existing buildings then they are only competing against other rentiers and most likely doing something more worthwhile with the surplus. If they are investing before completion and helping the building come forward then they are helping bring investment to the area (whether it is in the region or not). Finished buildings with tenants pay business rates, which is doubly good for the council where the building is based.

An alternative approach would be for councils to use up their capital reserves to fund revenue expenses; selling off land and buildings and using up cash reserves quickly. You don’t need an advanced finance degree to know that would be a bad, temporary idea.

Perhaps this rankles more than it should, but in essence, Sir Vince is complaining that councils are looking for novel ways to safeguard services (using powers given to them by a government he was part of) in the light of huge cuts to spending power (forced upon them by a government he was part of). No, this wasn’t part of patronising the 50 ways to save document sent out in 2012; councils have tried to do something that would bring in much more money than opening a cafe in the library.

Nothing that I’ve said here means I would support every commercial property decision made by councils. There are risks, but they have to be managed and understood, not ridiculed out of hand before they have been considered. But that’s the point- if local authorities make mistakes they are responsible for it. To their auditors. To their audit committees. But mostly, to their residents.

Po-tay-to Po-taa-to, Letwin’s latest

Housing reports coming from all angles- how can a naptime blogger cope? Well, if you’ll let me, I think I will concentrate on the recent update from the Letwin review (or “build out review” as it is now apparently named). This is because it is the one commissioned by government and so the one with the highest potential for serious reflection from them.

If you’ve read my previous post on the launch of the review, you’ll know that my main concern was that we already had a welter of reports, reviews and recommendations from industry insiders, academics and politicians. What I would argue we haven’t had is the political will to redress the balance of power and financial flows between the different groups of people who are involved in the process, whether that is landowners, developers, housebuilders, prospective owners, prospective tenants, local communities or so on. This doesn’t mean that the state is being neutral, merely that it was not yet willing to actively change the existing rules; benefitting those who are already benefitting at the cost of those who were not.

So what is the latest from the review and what policies does it mean he might be coming out with in the budget? Is there a sea-change on the horizon or am I mixing my metaphors?

Sir Oliver has been to see some larger sites, including spending a trip visiting three locations in Cherwell. Indeed, outside the Ledsham Garden Village in Cheshire and a statistically fruitless trip to Solihull, the furthest north he went was Cambridge. I’m not one for drawing a random north south divide on a map, but that is pretty stark, justified by the draft report on the notion that the south east has the highest demand for housing.

There is a growing argument that different areas have different issues with regard to housing. What happens in London or South Oxfordshire might be different from what happens in Manchester, Bradford, Oldham or Gateshead- and they might even be different from each other.

Even with the same planning system issues relating to housing and land supply, skilled labour, incomes, access to financing (both for builders and prospective buyers) and so on will make a difference. The local planning system, especially as it is dependent upon supply (even more so if the housing delivery test comes in) makes this even more difficult to unpick. So staying almost wholly within spitting distance of London may make his statistical findings a little specific and mean he may have missed something going on elsewhere.  A big elsewhere, like almost all of the midlands and north.

Indeed, Sir Oliver is now fixed on the idea of looking almost wholly at improving delivery speeds larger sites. He’s been engaged in some pretty strong mythbusting- deciding that issues like utilities, most skilled trades and finances may make some difference, but they are not fundamental to slow build out rates. He has also batted away the suggestion that developers sit on sites with planning permission without building- holding sites as an asset to be sold rather than where they will build in the fullness of time.

Whether that means Sir Oliver has disproven (not at last, but once again) land-banking is taking place something else entirely. Indeed, he tries to unpick this, but it is understandably difficult because what people call “land-banking” is so flexible and fudgey that it can mean everything and nothing. I’ve had a quick check and I haven’t used it on this blog before now, despite writing quite a few times on housing supply issues and strongly on the actions of developers. It simply isn’t a helpful term because it is used so loosely. There’s a strong argument to be made that titles are swapped around before planning permission is given, but Sir Oliver feels that this is outside of his remit.

What Sir Oliver is convinced upon is that developers drip feed homes into the market in order to hold the price of properties level. This, he argues, is because they have paid for the site based on the current market rates for selling the eventual properties and need to recoup their money and expected profit levels. Call that land-banking or don’t, it is developers using the tools at their disposals to make a profit.

Without getting overly-detailed Sir Oliver is arguing that the current method of site valuation leads to the outcome of slow build out rates. If developers increased supply they would decrease prices, make less money and perhaps fail to break even. He also argues that a lack of diversity of both design and tenure means that builders are only working in one market (broadly: high value, repetitively designed, large-ish homes for sale) which means their actions affect this one small part of the wider economy.

I can happily agree with almost all of that. I’m not wholly convinced that increasing supply necessarily reduces price in the current housing market- it is a lot more complicated than a couple of intersecting curves in a perfectly competitive market. There’s a lot of pent up demand to get through first and people tend to borrow what they can (based on their deposit and lending rates) and bid based on what they can borrow. But here’s the thing, one person who is convinced of this is Dominic Raab, the Minister of State for Housing. He keeps referring to housing affordability and the panacea of increasing supply of housing for sale to resolve this. So is Sir Oliver advocating to change the method of valuation? Er, no.

Here we cut back to my concern from the earlier post– there seems to be an explicit worry that impacting on developer’s business cases (at least for their current homes) will send huge shockwaves through the economy. We have to accept this is possible, but we also have to consider if proposing to pay £110 million bonus to a single person is a sign of a well functioning economy? Is rebalancing away from a system with so much stacked in one direction so bad? I’ll put that another way, Sir Oliver seems intent on -at least in the short run- trying to improve build out rates whilst not significantly changing the existing relationships and hierarchies between those involved.

How likely is this to be successful? Well, that will depend on the policies he comes out with for the budget. The focus seems to now be on diversifying large sites. Not splitting them up, but making them able to attract a range of tenures and making more attractive, less cookie-cutter developments.

This weeks Onward report seems to be opening the door to much wider collective work- with councils taking a strong role in joining up the dots in large scale development. There is a sense I get from Sir Oliver’s report and the interviews he gave over the weekend that he may be minded to suggest something more collective in the long run- at least for very large sites. What that might be remains to be seen. It would most likely be welcome, but trying to square the circle of increasing delivery whilst defending builders margins may be impossible. On what side he falls could make the difference between a change and none.

It very positive to see Sir Oliver talking so openly about the role of social housing and the very high demand for this across the country. Clearly, somehow separating the speed of delivery of social homes from the slow delivery of market housing would be of huge benefit, both for society and general house building. How this is achieved is quite another matter, in particular if there is a wish not to see enclaves of social housing separate from the rest of a site. Local plans (or indeed government guidance) could have set percentages of different tenure types, with design matters being even more strongly part of local authority decision making. (Yay more long planning committees about brick finishes!) How likely this is to make any positive change will actually come about in appeal decisions. If the quantum of new homes outweighs any design or tenure issues -which is often how appeals decisions can be perceived- then it is more words for little effect.

One way to try and achieve additional quickly built social homes could be allowing the part payment of the Community Infrastructure Levy (or indeed a similar development tax) to be in land (valued at existing use) or completed properties (valued at affordable rates). Developers could pass over a section of the site to be built by the authority- or indeed sold to fund housebuilding elsewhere.

And finally, how much of this actually coming about is wholly dependent on quite a few different political processes. Will the current government still be here for the Autumn budget? Will legislative changes be passed given the amount of parliamentary time needed for Brexit? Will developers see whatever proposals coming forward as a threat to their margins, even if Sir Oliver has specifically designed them not to be? How in favour are developers right now? Will there be the focus and drive for accelerating delivery when it comes to the crunch? How will any changes to social housebuilding dovetail with the social housing green paper?

I have at least one comforting thought- land is the one thing that cannot really be taken off shore.

Universal creditors

It has been another terrible few weeks for the ministers and civil servants at the heart of the universal credit debacle, what with the release of the NAO report into the roll out, their own full service survey and the legal case which showed that they were discriminating against severely disabled people who moved between areas during the roll out period. I’m trying not to shed a tear, but it is pretty hard. Not for the politicians and civil servants, you understand, but for those on the receiving end of the clearly failing benefit.

There are plenty of reasons for this failure- the reports I have already linked to have more than enough detail, but to fully understand why this is so damaging (and to get some wider context into people’s lives rather than simplistic models often used by government) then you need to look no further than the JRF’s 2018 report on destitution in the UK.

Rather than rewrite a very sensible report, I want to try and unpick why people claiming universal credit might find themselves destitute in a bit more detail. If you want, all I’m doing here is fleshing out a couple of sentences closely and with some examples. Crucially I want to point out that this isn’t just “shocks” but in many ways the general running of the benefit that can lead to a spiral of debt and destitution.

The starting rates of universal credit are myriad, but a single person over 25 has a personal allowance of £395.20 a month, with any elements (including the housing element) paid on top. That’s £73.34 a week, roughly equivalent to other means tested benefits.

Private renters may find that their housing element doesn’t cover the rent, if this is seen as “too high” (ie. above the 30th percentile) in the area. Most under 35 year olds will be particularly hit by this, as they can only claim for a room in a shared house, no matter what their actual living circumstances are (or where they can reasonably move to). Social tenants will find their housing element may be reduced if the are seen to have a “spare” bedroom under the much loved bedroom tax. Homeowners will only be able to claim an interest only loan to cover some of their mortgage interest costs.

I’ve written elsewhere about the lack of a severe disability premium in universal credit. Needless to say, compared to the previous benefits system, those who live by themselves who have care needs are going to be significantly worse off.

As you can see, before we even get to the nitty gritty of people’s lives, the amount they receive is at or below a subsistence level. Those subject to the bedroom tax or living in higher rental properties (often because that was what was available when they moved and they could afford it) will be struggling to make ends meet from their remaining income.

So, let’s start at the beginning of a claim: the NAO report shows that 60% of people who claim universal credit also claim an advance. This is a loan from the DWP, that has to be repaid over the next 12 months (it used to be 6, but the government increased it last year following public outcry).  The NAO also stated that the average advance are around £43 a month, so that comes off before payment is made.

Of course the size of the debt (and therefore the size of repayments) is based on how long the household had to wait for the benefit. So it is worth pointing out that the NAO is expecting up to 338,000 households to be paid “late” (at the end of the first month-long assessment period) in 2018. So this is well over a month of having to rely on a DWP loan (or other begging/ borrowing) for a very large number of households.

Then payments get going, claimants might be paid in arrears, but they’ll spend it when they have the money. Payments will usually be based on the last month’s income (although woe betide anyone on very variable earnings subject to the surplus income rule) so what people get in one month and what they need in that same month may be two different things.

If people pay the rent (including any surplus bedroom tax or amount above the local housing allowance) then the money left after deductions and after rent may not be enough to see them through the month. They may be flush at the start, but even very careful spending is going to make the last weeks very difficult. So whilst the headline rates of universal credit may allow for a subsistence existence the sheer act of going through with the claim could be enough to push the household into destitution.

One way out of that trap, to smooth the curve, at least in the short run, is debt. Debt can happen in many ways- some less active than others. Households might not pay all of the rent. They may take out a short term, high cost loan. They might not pay their bills (those that they can not pay- prepayment meters abound).

They may get help from family or friends- a form of social debt. The ebb and flow of universal credit payments may mean that such support is reciprocal- if you’ve just received your payment and someone who loaned you £30 a week ago needs help, would you say no because you’ve got to get to the end of the month? They may also as a last resort look to the less friendly and scrupulous lenders you can find if you really need money quickly.

The other options are of course going without essentials (which is about as clear as destitution can be) or relying on charities or other non-reciprocal social giving.

Any debt taken on of course has to be paid off and if that comes with interest then you’ll have to pay more next month, leading to exactly the same (or worse) situation again in the next month. Give it a few months and reputable organisations (landlords, utility companies, council tax, etc.) can take repayments straight from your universal credit entitlement, meaning at least they get paid, but the amount the household receives gets smaller and smaller and the challenge of making ends meet becomes harder and harder. Just about managing becomes occasionally struggling becomes struggling all the time.

The point I’m trying to make is that whilst the actual allowances for universal credit are arguably slightly above the minimum level, the way that the system works means that households will actually be paid (or have after housing costs) puts them below what they need to fund their necessary expenses. Attempts to even stay afloat in those conditions is destined to make the situation worse in the long run.

This isn’t necessarily about monthly payments, but it is clear that on such a low daily income it is hard to manage a budget over a month. It isn’t also necessarily about paying rent to tenants- but again paying an amount less than their living costs including rent means that they have to make a hard choice-like it or not rent arrears are a choice people make to put food on the table for another week.

It also isn’t necessarily about shocks such as sanctions or payment hold-ups, but these no doubt cause destitution themselves. A sanction is enough to put many people into destitution and even if a hardship payment is authorised this is itself a debt, which has to be paid back- reducing payments when they do return.

So sanctions are one way into the destitution-spiral that can happen under universal credit, but it isn’t the only way by a long shot. According to the survey commissioned by the DWP, only a quarter of people say they do not struggle with financial commitments (a further 2% do not know). The rest, some 73% say that they struggle in one way or another. 35-36% of those surveyed stated that they were in housing arrears.

There is a contradiction at the heart of the DWP’s responses to all this. On waiting for payments they argue that advances are available, and they are- as a loan. On sanctions they argue that hardship payments are available, and they are- as a loan. On ‘extra’ housing costs such as the bedroom tax or above local housing allowance rent they argue (inaccurately, mostly) that people make a choice and can pay for this through their standard allowances. Finally, on payment amounts they argue that they are enough to cover basic living expense- and they possibly are unless there are other deductions, such as loan repayments or payments towards rent.

In very few cases are all of these things true at the same time- indeed, it needs someone not to have the first three for the fourth to be right. And that is why people end up somewhere below the safety net, wondering how the heck to get out.

The wood from the trees

If a tree falls somewhere other than a leafy lane, does anybody hear it? That’s a question I’ve been asking myself for a day or so, since the Sunday Times uncovered their “investigation” into municipal tree felling. I use the word investigation because they did, although I’m not convinced an FOI followed by a few interviews and statements actually counts.

Much like my earlier post on empty homes, I am easily frustrated by this kind of thing. You see, I’m really not sure what the numbers they have provided and the comparisons they have made really mean in context. At least the Sunday Times tried to give a bit of proportion by also asking for an estimate of the number of trees each council is responsible for. But after that it falls down quite a bit, leaving me scratching my head in trying to work out what they want to prove. Whatever it was, I’m not sure they have achieved it.

Councils are responsible for lots of trees. Trees at the side of the road, trees on school playing pitches, in parks, on unused land, on farms, in woods, between homes, on housing estates and some common land. Trees where it isn’t clear who owns them, but someone has definitely got to do something about them. So when we talk about big numbers (such as the number of trees felled) we also have to give the bigger number (how many tree there actually are). The report gives this for individual councils, but not the country as a whole, or even for those councils who replied to the FOI.

Councils are not an equal size and they don’t look the same. One might have lots of street trees but no woodland, another might have lots of woodland but no street trees. One might have sold off bits of their woodland to build houses years ago and so may not be felling many trees- keeping them out of this survey. Another might be using a patch of ill-kept land to build their own council housing, which will add to their number of trees felled but have a greater social benefit. Without greater context we don’t know.

Diseases can ravage areas and don’t (as you’d expect) respect local authority areas. But that doesn’t means they spread nationwide. So one area might be fighting a disease that others don’t currently have to worry about. The article even mentions Edinburgh are having just this issue with dutch elm disease.

So what are we really meant to understand by the outcome of the investigation? Councils -who have a responsibility for a huge number of trees- fell a large number but small proportion of those trees, with some felling more than others, as you would expect given the heterogeneity of landscapes, local authority boundaries, exposure to disease and previous policies. That’s a sentence with a lot of commas that doesn’t add up to much, let alone a scoop.

The accusation of the piece, which isn’t proved by the numbers (and I doubt can be proved by numbers) is that some councils are felling trees that others would not in order to save money. Well, there is quite a lot to unpack there as well. But let’s take a step back and think how we would actually try and look at that, given a numbers-first approach isn’t going to work.  This is where we actually get to looking at policies, not through a proxy like numbers, but by actually looking at the policy.

You see, guidelines for tree management are not usually hard to find. Keeping away from the controversial ones, here’s the one for Leeds, another for Worcester and here is Rutland’s. Of course there is plenty of wriggle room in there and that’s where implementation comes in. The person with the policy making the decision, whether they work for the council or a contractor. But if the Sunday Times wants to do some proper investigative work it would need to try and speak to people making the decisions or getting to the bottom of differences between areas, not just stating numerical differences as if they must mean something.

Hanging over all of this is Sheffield and whatever else it is quite clear that Amey and Sheffield City Council have not covered themselves in glory in the way they have approached dealing with local communities and the media over their tree felling antics. But the crude way of trying to assess if this is a national problem doesn’t help either. Indeed, it can tar other areas with someone else’s brush either by having an active tree management policy or a large number of trees under their care to begin with.

Of course the cheapest thing would be to do nothing and hope dangerous or dying trees don’t fall on individuals or property. I’m sure that’s not something anybody is agitating for, but that would have course kept a council out of the Sunday Times list.

What’s more, the issue of finances is danced over in the report, as if councils are choosing to save money for the kicks. In reality, councils have seen such significant reductions in finances that all decisions are hard. Try to nurse a potentially mortally wounded tree back to life for £3,000 or fell it and plant 3 replacement trees for £1,000 (these numbers are made up)- but know that for every 10 trees you “save” the local library has to close for an hour a week. How do you make those decisions?

That doesn’t matter for your one-issue-at-a-time journalist or single-issue pressure group. Everything can be seen in the context of this one matter. Next week, when you’ve sent around an FOI on how many children’s centres have been closed, you can mourn that there isn’t money from somewhere else. But balancing the books week in week out is exactly what councils have to do. Some do it better than others. Clearly, Sheffield is learning that outsourcing may not be the silver bullet they hoped it would be.

For all the words and bluster, it looks pretty clear to me that the central issue of the report is actually street trees- or at least trees in “more ‘leafy’ residential areas” as the representative from the Arboricultural Association calls them. So it is affluent people in affluent areas worrying that their are not seeing a full return on their council tax.

I suspect one popular answer (in those areas) is to throw more of the limited council resources at street trees. Another, perhaps more reasonable response is to try and do something about council funding- not only slowing the pace of cuts but reversing them and sorting council tax out in the process. Saving vital services like the childrens centre and library should come first, but if prime quality tree works can afforded after all the truly urgent spending then why not? To be blunt, given the regressive nature of the current council tax system any change should mean people in affluent areas paying more.

Another possibility would be for areas to volunteer to adopt their street trees, taking financial responsibility and collective risk. This will allow consenting areas to manage their own affairs will mean they can have checks as often as they like and decide what interventions to make with their own money. I’m sure councils will look to win the contract any work that they decide needs doing and if they want to give a tree palliative care instead of a quick coup de grace, then that can be their choice (and their risk). Of course councils will have to act (and charge for it) if there is damage to their property or a risk to pedestrians or road users. Perhaps as part of the process they could detail the historical costs of maintenance and repairs so that the areas know what they might have to pay in an average year.

This could end up being expensive for the individuals involved (it could be more than making council taxation much more sensible and progressive), but it would at least give them an option between what they think is a second rate service and what they would do themselves. I do wonder if it would turn out to be that different when it is their own money and their own opportunity cost to consider instead of council’s. Could they end up spending more of their own money to give themselves the same level of service?

Khan we fix it everywhere?

Yesterday was a busy day for housing all round, but the happiest news was in the capital; where Mayor Sadiq Khan has announced a huge investment in new council housing. This can only be a good thing, but it is worth looking through what is actually being proposed and, perhaps crucially for anyone interested in housing outside of London, see if this can be replicated elsewhere.

The document, Building Council Homes for Londoners is actually quite readable, for a technical briefing, so if you are interested it is worth having a look through. I will do my best to summarise, but it is rare I can suggest a general reader looking at a document like that, so feel free to.

There are two main legs to the funding side, a not-insignificant block of money (£1.67 billion) given to the capital from the Chancellor in the Spring Statement and an interesting wheeze about right to buy receipts.

Coming to the £1.67 billion first- I know I have mentioned seemingly big bits of money before and pleaded for people to understand them in context. But we can do that a little bit with this- compare this amount to the £2 billion added for all of England earlier this year. I was critical of the size of latter because per area because it didn’t actually amount to all that much. Spread thinly across the country (or even in centered on particular areas) it wasn’t going to amount to a huge amount of extra housebuilding. Plus as it was for both Council and Housing Association house building and it is the government at the end of the day who will be deciding who gets funds and who does not.

The Mayor has been given much more freedom with his (per head) much larger allocation of cash and the announcement yesterday shows how he is going to use it. He is choosing to spend this money unequivocally on Council housing. This isn’t just traditional social rent, but could also be London affordable rent, London living rent or shared ownership. What it clearly isn’t is affordable rent. Housing Associations aren’t completely out of the picture as there is another funding mechanism similar to the affordable housing programme for them to bid for.

In terms of what the Mayor will consider funding with this cash, for rents below the London affordable rent levels he will pay £100k per property. This looks positive compared to the “average” £80k paid under the affordable housing programme (although you’d expect London properties to be above average in that programme). For the other rental or shared ownership schemes he will pay £38k per unit for quick wins (started before April 2020) or £28k per unit for later starts. There is an emphasis on a programme approach, so we are talking about each borough putting in a sizable application and, if the worked example is anything to go by, a mixture of rent types.

So this looks like a more generous scheme than central government’s direct scheme focused on delivering only Council homes. It exists because:

  1. the government has decided to give a large block of capital funding to London
  2. the Mayor has the power to decide what to do with the money
  3. being directly elected he has a strong personal mandate and
  4. he has decided to do something linked wholly to council homes with it.

Without any of these rungs the scheme would not look like this. Other authorities, for example the metro mayor areas, may have the personal mandate but usually any funds they get from government are limited and very prescriptive. Just look at the housing deals announced for the West Midlands and Greater Manchester. They are both having to up their overall housing supply numbers just to get significantly smaller agreements from government and would be unlikely to be allowed to do anything like spend all of the extra cash on council housing.

Non metro-mayor areas (which we do have to remember is the vast majority of the country) will just have to take their share of the affordable housing programme, use up any housing revenue account headroom they have (and any extra they can grub from the government) and try to use up right to buy receipts as best they can.

Which brings me on to the second part of the Mayor’s announcement- the use of right to buy returns. This is a very clever little bit of circulating cash -I won’t go so far as to say laundering it- but certainly relies heavily on London having a different arrangement to the rest of the country.

You’ll probably know the issues relating to right to buy receipts- homes are sold at a discount, the Treasury takes some costs back straight away and, after all this, the money can only be used to fund 30% of a new housing association home. All this and councils have to use the money within 3 years or it disappears off to the Treasury.

But what happens then? For everywhere except London the money goes to the Homes and Communities Agency, who plough it back somewhere across the country- who knows where? In London the money goes to the GLA, who until now have been giving it out as part of their affordable housing programme.

What the Mayor is now proposing is London councils that wish to opt-in can give right to buy money back to the Treasury, who pass it on the GLA. So far, so the same. But then, the GLA will ring-fence the money to be spent in the council’s area and will allow the council to make the funding decisions. There will still be rules with this- the 30% rule and the housing association rules look like they will be the same. But it looks like the Mayor’s office will be much more flexible and open-minded about how this money can be shared out, particularly with regard to mixed sites (ie. where one house is funded through right to buy and another through a grant). It will also give councils more freedom to (within limits) move money about whilst construction is ongoing in order to deliver more homes.

The total amount of funding for this is much smaller than the £1.67 billion- London councils have so far given back to the Treasury £50 million. But the key issue is that instead of losing money because of a strict set of rules, councils in London will be able to in effect keep money to replace (to an extent) right to buy homes. With the government-enforced rules still in place it remains to be seen if 1:1 replacements can be achieved (I suspect not quite) but this is still much likely to be a better, friendlier scheme than the one overseen by the Treasury.

Again, this clever little circulation of cash can only works because of the powers held by the London Mayor and GLA. Nowhere else in the country has this arrangement and I doubt the HCA are going to suggest something similar for every other council.

So what the Mayor is doing is using his significant and unique powers (and personal mandate) to mitigate against what he (and I) see as central government’s failures. But it isn’t replicable elsewhere without those powers being devolved, something that was unlikely the day before yesterday and is perhaps incredibly unlikely now. I’m sure central government are smarting slightly at his actions, but the point is he alone is able to do this.

One of the challenges of devolution, particularly the uneven and deal-led devolution preferred by the government since 2010, is that different areas will have different agreements. London is always likely to do well out of this, especially if they have an activist Mayor who is unconcerned about his popularity with the Westminster government of the day. London has a huge number of challenges, especially in the provision of affordable housing, but it is also in a position of power. It is doing far better that other areas on insisting on affordable housing proportions through section 106 (again, due to the powers of the Mayor) and has the ability to gain investment from around the world.

So this is great news for London, but without rule changes it doesn’t mean much for anywhere else. That isn’t a criticism, it’s just a point to be made when celebrating the scheme. As discussed enough times here already, what would make the difference everywhere is a lifting of the HRA borrowing cap and further investment in council housing as a genuine alternative to the other tenure types available in the country. Labour’s green paper goes some way to moving ahead with that- if they were in power. We continue to wait for the government’s social housing green paper.

Presenting and incorrect?

Would you like a new job? The hours might be difficult, but you will get to meet judges, doctors and people with experiences of disabilities. You might have to get used to severe, crushing blows and knocks in your confidence for things that are not your fault. You may have to get used to judges, doctors and people with experience of disabilities justifiably haranguing you for the actions of others.

A recent parliamentary question has confirmed that the Department for Work and Pensions are recruiting presenting officers- those long fabled people who will turn up at tribunals to represent the decision making power of the Secretary of State. When I was a welfare rights worker the chance of a presenting officer turning up to appeal was somewhere lower than zero. Indeed, the answer confirms that not one presenting officer was recruited between 2012 and 2017, with more than 200 now recruited in 2017.

Now, if you’ve read my blog you’ll know I’ve shown a strong interest in this process and have suggested that the DWP need to be fronting up for appeals- so in a very limited way I support this change. What I want to look at this time is what impact it will have and whether the presenting officers will be allowed the kind of changes that will allow a real impact on decision making across the health related benefits.

But what will the role of presenting officers be? They’re very lucky (in one way) in that their role is government by a statutory instrument (a piece of secondary legislation) setting out their duties (and everyone else’s) in an appeal. There’s also, for universal credit and personal independence payments, a whole chapter on the decision makers guide which goes into great detail about what they should be doing. Let’s try and precis them!

Presenting officers aren’t lawyers- but they don’t necessarily need to be. What they need to have is a very good understanding of the benefit system and the operation of the tribunal. Their job is to:

  1. Check that the original decision was right in light of the evidence in hand. If it isn’t (and do remember than two thirds of ESA decisions are overturned at Tribunal) then they can and should change the decision- at the very least sending it back to the decision makers. For universal credit and personal independence payments the decision makers guide is very clear that the presenting officer must satisfy themselves that the decision is right before they attend the appeal.
  2. Attend the appeal and put explain the Secretary of State’s decision, including how the evidence has been weighed. The presenting officer can ask questions of other people present (including the claimant) but these shouldn’t be combative and should be focused on understanding any disagreement in the written submissions. In benefit appeals people aren’t there to win or lose, but to find the truth through collaboration. I know that sounds otherworldly, but it is an important point- if you do a victory dance at the end of an tribunal you are likely to be rebuked pretty quickly!
  3. After the appeal- reflect, consider and think on what happened and what could have been done better. In a way, this is simply number 1 restated- the next time they have a similar case they have to ask themselves if they should be taking it at all to appeal.

Now, anyone who has spent any time working with benefit claimants will know that there is often a gap between what the legislation and guidance says and what actually happens on the ground. If you’ve ever had to sit there (usually on the phone) whilst a decision maker pulls up the guidance (trying to talk legislation on the phone is often pointless), turns to the page you are talking about, looks at the paragraph you are talking to, reads it through, tries to justify their existing argument then grudgingly accepts you are correct will know that what happens on paper and in real life are two different things.

So what am I worried about? Primarily, that 1 and 3 above won’t happen. The presenting officers will not use their powers to spot cases that don’t stand a chance of winning, will go to the appeal, the decision will be overturned by the tribunal and they won’t learn anything about why this was. This is perhaps unfair, or even cynical. Perhaps I should give it a chance before I predict doom?

Well, in any case it won’t be long. For ESA alone the number of appeals attended by a presenting officer has shot up since April 2017. The number of attendances between April and December last year is nearly 10 times the total number for the year before, which we know again due to a parliamentary question! Perhaps in their early months presenting officers are there to comprehend and understand, but you’d hope that pretty soon they will get to grips with which cases have a chance at having the decision upheld and which should be overturned quickly now to save the bother of a failed appeal.

As they get better at this you would hope that the original decision makers understand which decisions are unlikely to get past the presenting officers (ie. those people who have to try and make the case) and start amending their decisions. You’d also hope that presenting officers would get better at spotting marginal cases (where their presence may make a difference) and start attending these- rather than being sent on fools errands either by decision makers or even worse an algorithm telling them which to attend.

If this change to the system worked perfectly it could have a huge impact. When I look at the stats in the next few months I’ll be looking for some big changes. If decision makers know they have to make fully reasoned cases then a lower proportion may be turned down in the first place, followed by a lower proportion of appeal cases making it to the tribunal (as they have been sent back by presenting officers) and finally a higher proportion of decisions being upheld (ie. staying the same) rather than overturned as the unwinnable cases have been weeded out and presenting officers have been able to argue the case in some cases successfully.

If the system doesn’t work perfectly the presenting officers will be receiving payment for turning up and being told off, which isn’t fair on them or anybody else. I’ll be looking through the stats as soon as they come out, and so should you.

What I’d prefer to see, instead of a separating out decision making into different sections is decision makers having responsibility for the whole process, holding onto a case and having to present it at appeal. As I’ve spoken about before, the process of decision making is becoming incredibly mechanistic. Indeed, some good soul has been able to winkle out of the DWP their set lines for appeals. Yes, we all knew they existed, but how can individual people with their individual health needs be reduced to set words? If decision makers actually saw what happened in cases that go to appeal they may think twice before making a sloppy decision a second time.

But, as a final point, all of this is essentially moot because of one thing. Mandatory reconsideration still means that a huge proportion of people being turned down for health related benefits are not formally appealing them. Whilst this is the case we won’t know if these claimants are genuinely entitled to benefit. I have no reason to believe those decisions aren’t as second rate as those getting to appeal.

So let’s hope the presenting officers make a big difference, far bigger than their relatively small numbers may show. But that will only happen if they are empowered to act and able to get the department to understand how obvious the failures of decision making are to tribunals and independent observers.

The first green paper of spring

Labour got there first. Their social housing green paper is out, with a not at all connected to the local elections launch at the LGA’s offices.

Anyone reading my blog over the last few months will not be surprised that much of what is in the paper is very welcome. But as a serious and relatively complete policy document there is always going to be some critique (rather than criticism, I hasten to add) to undertake in order to understand it fully. This is especially true as the paper reads like a set of policies that are, in a sense, shovel ready. So this critique is meant as a compliment- this is exactly what I would do if it was a green paper from a government.

I suspect that much of this has been due to the forensic and policy-focused approach of John Healey, who has both always been impressive in housing and has had the brief (on and off, slightly) for long enough time to really get to grips with it. There is an argument for giving ministers (and their shadow counterparts) long periods in posts in order to understand the deeper issues and John Healey is the proof that it can work. Perhaps the government should take note.

There is a huge amount of detail in the paper, so I want to pick out a few bits. Firstly I’ll look at some of the major positives (of which there are a few!) and then look at where there are gaps or opportunities to do things a little bit differently than suggested.

So, the positives. Labour have set a clear (if amazingly round) target for the delivery of new social housing. The government’s social housing green paper has mostly been framed around improving matters for existing tenants, not creating new tenants. That’s why the JRF have been so clear in trying to push for new homes alongside other changes- a battle I’m not sure they are winning with the current government.

Delivering 100,000 new affordable homes a year will be a challenge for any government and it will take a significant effort from local authorities, housing associations and other providers of social housing to achieve. I believe the will is there, even in areas not wholly committed to large scale housebuilding, but a target like this will require a herculean effort from the social and building sector to see through.

Moving on to the definition of “affordable housing”, the green paper suggests getting rid of the 80% of market rent test. Good. What replaces it is slightly more interesting. Whilst trumpeting a new average income based living rent the “core” of the affordable homes programme will be the good old formula rent. That’s not a bad starting place, but the formula only has loose ties with affordability, so it is worth considering if there are other options available.

The paper is positive about the role of housing associations, both as a not for profit service for their tenants and as one of the ways to create new social housing. There have been previously been concerns about Jeremy Corbyn’s support for housing associations, so it is good to see real inclusion of them in these plans. Yes, that comes with some additional requirements, inclusion in freedom of information legislation for one thing, but that seems to be a small price worth paying so that they can play a part in large scale social house building.

No-one will be surprised that suspending right to buy (preferably off a cliff) and scrapping the bedroom tax are welcome. Both create significant issues and cannot sensibly be justified- as the paper suggests- social housebuilding is likely to reduce the overall benefit bill.

Moving onto something the paper doesn’t do- I’m certainly relieved that it doesn’t try to reinvent the wheel when it comes to funding new social homes. The key issue is not that new homes are too expensive to be built by local authorities; they usually make a surplus over their lifespan. It is that there is an arbitrary limit on the amount councils can borrow, even though they are sat on huge assets (the very homes they currently let out!).

The current government has repeatedly, maddenly, tried to put forward different ways to fund selective council house building, usually through one off loans or grants, whilst keeping the purse strings themselves. This allows them to appear to be the ones making the decisions whilst touting a very big number (usually £X million, so not actually that big in housing terms!) and simultaneously refusing to allow local authorities to borrow off their existing assets. So it is great that the paper suggests the main way for new council homes to come about is through borrowing up to the prudential limit. That is, in a way, all that is required for stock owning local authorities with a desire to build.

Helping councils that have transferred their stock to a housing association to build a new generation of council housing is positive. Government loans will allow them to build up (literally) assets which they can then borrow against. What might be needed is provisions or guarantees that this new stock won’t itself be transferred at some point in the future, negating the whole process.

In terms of wider financing, the paper is sensible (but brief) in suggesting other sources of funding, including institutional schemes like pension funds, could be harnessed for housing associations. There is nothing wrong in any of that, but it is worth remembering that pension funds will put money where they can make money- if there is another, better opportunity for them then they will go elsewhere. Certainly funding affordable housebuilding is likely to be low risk, but will it have the returns of other investment opportunities?

Which brings us to things with (in my view) slight alternatives to the policies laid out. Firstly, the paper is looking to set targets for local authorities building social housing, almost as a subset of the objectively assessed need I’ve spoken about before. They’ve not outlined how that would take place and I worry that trying to force councils who don’t want to build affordable housing will take focus, time and money away from providing for councils who do. If they try and split the 100,000 a year based on some affordability calculation (as with the government’s proposed OAN measure) then areas who may be less able to find sites, have less recent experience of building to date and overall willing to build quickly may have a higher target.

It is unclear what the sanction would be for authorities that don’t meet their targets. The paper (rightly) talks more about incentives than threats, but if they are serious about every area delivering social housing then threats may eventually have to be issued, much as they are currently over local plan adoption. What the mechanism for this will be remains to be seen.

The best alternative for me, at least to begin with, is to work with those who want to build. Get up to scale with social house building in those areas who will relish the opportunity and hope that those remaining will be converted either by showing it can be done or by political pressure from their own residents who see it happening elsewhere.

The green paper is also a touch vague on how a Labour government would actually close the viability loophole. There’s talk about boosting support for councils to prove schemes are viable with affordable housing with independent viability experts to sweep in. I’d worry how liable those independent experts will be to regulatory capture, especially as you would expect that they will be drawn from and potentially looking for work from, existing builders.

It is worth remembering that the government has threatened (however idly) that it could go further and set affordable proportions or payments centrally. There is an opportunity for Labour to outmanoeuvre them and promise to shut the viability door once and for all. Perhaps there were concerns about appearing to knock big builders (something it is counterintuitively easier for the conservatives to do) but the outcome looks less like closing the loophole and more like bolstering one side against the other whilst keeping the rules by and large the same.

The clawback clause does do a bit of work to cover this, but balance sheets are often malleable to what the company creating them wishes to show. It would take either extremely well written rules or forensic auditing to check whether companies have made additional profits on individual sites or not.

Another way the paper is vaguer than I would like is on supported housing reform. Yes, the government’s current plans don’t have the support of the sector and yes, a period of talking to them again might be required. But we have been in this limbo for years and the can does keep being kicked down the road. I think any government has enough options laid out infront of them, it needs to make a decision and see it through. That’s going to annoy some people- potentially older people who may have to pay more either in life or in death. That’s politics.

Finally for this (short!) section on alternatives, the paper is clear that it wishes to see different households knitted together into a mixed community, but is short on a mechanism for how this is achieved. For private sites there are plenty of opportunities to achieve this, mostly around the rules governing how the affordable homes do not differ from the other homes and are not located in one cluster away from prying eyes. For new social housing sites, which will clearly be a growth industry if the society seen in the paper comes to pass, it is a little bit less clear.

Yes, having a range of the affordable tenure types mentioned in the paper will do a bit as will a supply of new council homes being available not just to those who desperately need a home, but without a mechanism to achieve mixed communities I think it is potentially over-optimistic to think they will appear organically. How this will be achieved, how large scale council or joint built sites can be attractive enough to want potential owner occupiers to move into will be a challenge and one that needs to be considered deeply before the concrete is mixed.

So, overall, lashings of positives and much for a future government to get their teeth stuck into. You can only hope the government are looking over their own draft social housing green paper and wondering if it matches this one in terms of its ambition and clarity (prediction: it won’t). Whilst deliverability is key I think there is enough substance in the paper to make many of the proposals possible and, frankly, aiming high is better than not aiming at all.

And still high rise

High rise blocks. For good or ill they are on the agenda. The tragedy at Grenfell has highlighted that at least some recent re-furbs have been done poorly and in a way that increases fire risk. But many thousand people live in high rise blocks across the country and, whatever some Birmingham Conservatives might think, the buildings are likely to be here to stay in the long run.

So, getting away from the need to ensure they can contain fires (something bare concrete blocks are actually quite good at!) what is the issue with high rises, particularly council and housing association blocks? Firstly, we have to admit that a minority of blocks were poorly designed and constructed and that no amount of refurbishment apart from complete gutting or demolishing will make them adequate to live in. Those blocks should not stand the test of time. Bodged refurbishments need to be improved and if risks have increased by refurbishment (as it appears they were at Grenfell) then this need to be reverse quickly.

Moving on from this, the upkeep of blocks is best described as “hit or miss”- some communal areas in blocks are well looked after, both by the tenants and the housing management and some, well, aren’t. Crucially, the need to foster both an active community spirit and adherence to fire regulations in communal areas is key to making blocks livable and safe.

Next, when blocks were built there was fewer qualms about families with children living high up. Most point blocks were built with at least two bedrooms with the expectation that a family would be living in them. Nowadays families with children quite rightly won’t usually seek this kind of accommodation and are likely to reject it if they are offered it, or stay there for a short time before moving to somewhere more appropriate. To be fair to the Brum Tories, it does sound like there is an issue with children being accommodated at height in the second city, but their approach seems to be knock them down and start again, rather than relocate and consider what else can be done with the blocks.

Thirdly, if families aren’t going to use the blocks then who will? Recognising the problems relating to families quite a few councils started putting single people into two bedroom high rise flats, but along came the bedroom tax and put anyone in this situation claiming benefits at a disadvantage. Who knows how long the bedroom tax will be in existence. Unlike the blocks themselves they are simply legislation- a government could overturn it very, very quickly if it chose to. But until that happens single claimants of working age are rightly pretty concerned about creating a liability they cannot afford.

Next and on to a more general point, but amplified by people living cheek by jowl and with communal spaces in high rises, is that with significant demand for affordable housing someone (usually under choice based lettings a computer) has been deciding who qualifies for the next available house. In many areas, this means most if not almost all lettings are to people with one form of priority need or another. Filling a dense space with people who, for one reason or another, have a vulnerability and many of whom who have experienced homelessness (in one form or another) is possibly not always great housing management.

Finally for this sketch, quite a few of the older high rise blocks were built in the middle of larger council estates. If people are tempted to move into them they either have to have no issues with that or overcome those issues, potentially by experience of the area at its best.

Over time these issues have interacted in order for some blocks to see a vicious circle. Families moved out and only those topping the housing queue could get a house. Those bidding (or, pre-CBL, those being placed) were likely to be relatively desperate for a home. Communal areas were neglected or vandalised, if not cleaned up then they would get worse. The sort of tenants who may act with community spirit eventually became and exasperated and moved out. Most flats were filled, but with the advent of the bedroom tax it became hard for working age people to consider moving in, so some were left empty. Empty flats led to concerns from neighbours, some of whom moved out. And so on.

It is worth remembering that a significant amount of money has been spent on many high rise blocks, firstly to get them up to decency standard and then to make them nicer places to live. But the logic I have until now outlined potentially shows that there is a need to treat high rise blocks as a bit of a special case that needs some special answers.

What I’m about to say next isn’t new and I certainly don’t want anyone thinking it is my idea. But there is an answer staring us in the face for at least some of the blocks. If households with children and single working age people cannot be accommodated, who does that leave?

I’ll ask another question: who is sitting in larger properties that could be used by families, perhaps as they have children who have moved out, who may have gardens they want to maintain but struggle, who would like to take part in communal activities close to their home and would by and large respect and maintain shared spaces? Who doesn’t need to worry about the bedroom tax?

Indeed there are plenty of examples of councils and housing associations using recently refurbished blocks as general accommodation for older people. Absolutely fundamentally, what doing this means is that you have to ensure the lifts keep going at all costs (lift engineers can be expensive!) and maintain communal spaces so that people can live and socialise under the same roof.

This shouldn’t be about forcibly moving people out of their homes, rather creating exactly the kind of private living space with communal facilities that many private providers are showing many older people want. If you can make high rise blocks desirable to live in for older people then you can free up other homes, provide a decent and long term place for people to live and ensure the co-location of services around those who need them and social activities for those who want to take part in them.

Another option (again, not my idea) is to let people be a bit more free with who will be renting with them. Allowing house-shares for younger people actually fits with what the government were trying (badly) to achieve with the bedroom tax. Yes, this doesn’t necessarily get away from some of the issues I’ve listed above but it does offer another opportunity rather than letting blocks dwindle away until a politician decides it is time to knock them all down and start again.

So let’s be clear, there are clear opportunities for what to do with high rise blocks that break the vicious circle. Just because they are not suitable for families doesn’t mean that they need to come down and be replaced. With a bit of lateral thinking and investment early in the process high rise blocks (excepting those too poorly built to last) can be something to be saved, lived in and cherished.

Since you are doing sensible things…

And hooray! The 18-21 year old restriction on housing costs in Universal Credit is gone! This seems to be a big win for common sense, backed up by major charities and other sensible folk who knew it was a ridiculous policy.

I worked for a young person’s charity a while back (when this possibility was first mooted) and it was clear even then what a nightmare it would cause. In fact, it was not only obvious, we had first hand (daily) experience of trying to convince the DWP that people were estranged from their families in order to claim income support whilst in education. This was usually young people who had been kicked out (sometimes literally) by their parents.

Sometimes getting these decisions made in the young person’s favour was easy, sometimes it was hard. But we almost always were successful. Why? Because a young person doesn’t swan off to a hostel, get accepted for housing association or council housing or sleep on the streets for no reason. They certainly didn’t do it for the pittance paid by income support, although that money meant that they could continue with their education and seek to overcome the challenges they’d met in their life so far.

I suspect this particular Easter present is a one-off, but in my own optimistic way, I hope this could be a time of government accepting sensible changes to policies for young people.

So here are some suggestions on what it can do next:

  • Increase the under 25 rate of universal credit to the same as the 25 and over rate. What happens when you reach 25 that suddenly means your expenses go up? Beats me, but the under 25/ 25 and over distinction in benefits has been around for ages. Too long. In 2018/19 the standard allowance for a single person under 25 is £251.77 a month. For someone 25 or over it is £317.82 a month. That’s £66 a month. The couples it is £103. This is for no other reason than tradition (well, and saving money, and some nonsense about needing to provide an incentive and the rates of national minimum wage). Which brings me on to…
  • Remove the minimum wage distinction for under 25s. The escalator on the minimum wage is about trying to allow companies to invest in new (young) staff. However, it can also look like a way to pay younger people less, even as they take on more and more responsibility. So having the same floor of post mandatory education income for all would be a great way to help young people get a start in life. And you know what- higher incomes means less dependency on benefits like universal credit and means potentially more taxes for the government: win win.
  • Restore the work allowances in universal credit for everyone, including young people in order to, in the words of someone I vaguely remember repeating ad nauseam, make work pay.
  • Remove the shared room rate cap for single private tenants under 35. Did you/ do you want to live in a shared property until you are 35? I thought not. The most worrying thing about this policy is that it forces young(ish) people to live cheek by jowl even if they are very vulnerable. This creates its own knock-on issues for landlords, social care, police etc. etc. The rate used to be 25, but the government made it 35 for reasons perhaps not related to sheer spite. It could be changed so the amount paid relates to the actual accommodation the person is living in- perhaps with a bedroom tax type reduction for young people on benefits who somehow convince a landlord to let them rent an 8 bedroom mansion to themselves. Oooh, someone mentioned the bedroom tax…
  • Get rid of it [the bedroom tax, weren’t you reading the last point?]. Of all the silly, pointless, nonsensical policies ever imagined, forcing people to pay because social landlords had historically not built one bedroom properties is about the worst. Or forcing them to pay because they have health problems and need to use a different bedroom to their partner. Or so on. Social landlords didn’t give young people (or not-young people) bigger homes because they were frittering away their stock, they did it because that was all they had and there was a housing need to be met. If the government wants people to live in the right size houses it could build some.
  • Get rid of the 2 child limit. Yes some younger people have more than two children. Do we even need to discuss this one? The one with the form to tell the government that your child is the outcome of a rape? No, good.
  • And the benefit cap. And the other benefit cap. Yup, both of them.
  • Do you have any you want to add? Let me know and I’ll think about putting them in.

Now, here comes the punchline. With the exception of the minimum wage change (which, I repeat may save the government money) each of these would end up costing the government -or at least the benefit budget- money. The thing about the under 22 housing rule was that it was so poorly thought through and so few people actually were caught in it that it most likely cost more to administer than it saved. It certainly will have cost more when looked over the whole of government’s budget, especially when social care, homelessness, family support, etc. budgets are considered.

This policy was one of those that was created to meet a perceived problem, not a real one. The government could say they were doing something about the legion of indolent young people who could simply just move home, without recognising that this was actually a tiny to non-existent part of the overall number of claimants.

So let’s celebrate that the government has seen sense. But the sense that they have seen is that this policy was costing them money. Until they start working their way through the list above I’ll not be convinced they have suddenly decided to support young people through the benefit system.

WRAGs or riches

What do you mean you don’t check the government’s statistical publication lists every few days? Well, you should be glad I do!

I was having a quick check through the most recent quarterly benefit summary release (as you do) and was reminded of an odd fact. Currently (well, August 2017- the closest we have to currently), about two thirds of people who receive Employment and Support Allowance (ESA) are in what is known as the support group, with 17% in the work related activity group (WRAG). I’m going to argue that this is pretty telling about decision making- I’ll explain why in a minute, but perhaps first I should remind everyone what I’m talking about.

[Skip to “Now, here” if you’re already more aware of ESA than you’d like to be]

Employment and Support Allowance tries to separate out claimants into three groups based on their symptoms:

  1. Those who are fit for work- who need to go back to work or claim another benefit like jobseekers allowance.
  2. Those who are not fit for work, but with some help may be able to move in that direction. This is the ‘work related activity group’.
  3. Those who are not fit for work and also cannot undertake activities to move them closer to being able to work. This is the ‘support group’.

There are different rates of payment between the bottom two groups, whereas the only option to stay on ESA for first time claimants put in the first group is an appeal, which whilst it is going through the motions comes with a rate of pay equal to jobseeker’s allowance.

People who made a new claim, or people who had made an appeal and were waiting for it to be heard were bundled together into something called the ‘assessment phase’, a sort of limbo where they waited for an outcome.

ESA has changed significantly, mostly via a series of incremental tweaks, in the 10 years it has been up and running, but these points have stayed the same.

Now, here (to me at least) is the interesting bit. When the government originally created ESA it thought that the number of claimants in the work related activity would be higher than the number in the support group. I’ll put that another way, the work related activity group was going to be the main group, with the support group being just for the smaller number who were too unwell to engage in classes and tutoring to get people closer to the labour market. The focus of policy making, the thing that made ESA different from the previous sickness benefits was this group.

Here’s what the explanatory memorandum to the legislation said:

Screenshot 2018-03-15 at 2.57.57 PM

I’ve had a little play on stat-xplore to show what actually happened- here are my sheets, which is all derived from the stat-xplore info.

Screenshot 2018-03-18 at 1.57.50 PM

Reliable information started coming out from early 2010. To begin with there were more people in the work related activity group, but the numbers placed into the support group started soaring through 2011 all the way up to late 2015 where, potentially as a result of the number of migrations moving to a trickle, it has now plateaued. The numbers in the work related activity group rise at first, but have been on a slight downward trend since the middle of 2013.

The number in the support group passed the number in the work related activity group in February 2013 and have never looked back.

If you look at the total caseload stacked together we can see that the growth of the support group really underpins the whole of the benefit:

Screenshot 2018-03-18 at 1.59.38 PM

This isn’t what it was supposed to look like. But what can be the cause of it?

This issue was actually flagged in the Year 5 independent review of the benefit from Dr Paul Litchfield. He was particularly interested in the number of young people coming forward with very high mental health needs, a situation he accepts ESA results will only reflect rather than necessarily being able to solve.

Following his report the government looked at the data. Their view was that a big part of the issue related to the widening of who was included in the support group. By incremental changes the scope of the support group has widened, but it still does not cover the vast majority of illnesses and disabilities people have when they claim a benefit.

A second issue pointed to by the government was due to the delays in assessments. The government got into a hole where they couldn’t process claims fast enough (this is an understatement), leading to claimants being in the assessment phase for far longer than originally planned. According to the government, many claims were closed in this period (ie. the people got better or stopped sending in sicknotes) which they believed was skewed towards claimantrs who would have failed the ESA. I don’t know on what evidential basis they have decided this- almost all welfare rights professionals I know have seen claimants with very strong cases having claims closed on them.

Finally and in connection with the delays, the government claimed that to clear the backlog they were making decisions on paper in some cases. Where this happened, the only things they could decide was to put someone in the support group or to let their claim continue on to a full assessment. The argument was that this inflates the proportional size of the support group whilst those who will eventually end up in the work related activity group linger in the assessment phase.

I’m not saying that any of these responses is inaccurate, but they don’t seem to capture the issue fully. The second and third issues relate to delays in assessment and we are not quite in the same place with this anymore. So if the delays and paper processing aren’t happening at the same rate, why are double the number of assessments leading to the support group than to the work related activity group- a circumstance the DWP’s own explanatory notes state is stabilising?

There are other possible explanations and I’m not surprised that the government aren’t dwelling on them. The first possibility is that the scheme was, or has become, badly designed for the purpose it was intending. I’ll put that another way- whilst the intention was for a majority of people to end up in the work related activity group, the actual scheme didn’t achieve this. Many claimants may have been more afflicted than was predicted- people had symptoms that placed them in the support group. Alternatively, and especially with the medical descriptors (the points-based test most claimants go through to quality for ESA) becoming harder over time, claimants who were originally envisaged to qualify for the benefit are turned down.

Another set of explanations relate to the application of the medical test by health care professionals and decision makers. We know that the majority of people who take their claim to appeal are successful. We know there are serious, long-lasting concerns about decision making and the medical assessments. I’d argue that a significant proportion of people turned down for ESA would, on balance (perhaps once they’ve sat down with a welf to talk it through), argue that they should be in the work related activity group. So is decision making part of the reason people aren’t getting into the work related activity group in the numbers originally predicted?

Add into this changes to manual reconsiderations, stopping many people from receiving payments if they apply again following a refusal and paying those in the work related activity group the same as jobseekers allowance and you start to see something that looks a lot like a squeeze on exactly the groups of people who might eventually end up in the work related activity group. With regular(ish) reviews of claims for people in the work related activity group (and less often in the support group) placement in this group looks difficult to achieve and then precarious once it is achieved, even if the claimant’s symptoms are unchanged.

Finally, the government did change the rules for people receiving the contribution based ESA, in order to limit the amount of time they could claim it. I thought this might be part of the issue but when you look at it, the numbers receiving contribution based ESA have been fairly stable over a long period (this doesn’t mean it is the same people claiming) so it’s not quite clear if this is a factor.

Maybe there’s another way to put all this. The original intention of ESA was to figure out who could, with support, move more towards work and provide them with extra help. In one sense it doesn’t matter whether this is a majority of claimants or not. But what does matter is whether or not people receive support relevant to their needs.

At the start of the post I referred to the difference between the intention and reality as “telling”. What I mean is it looks exactly like restricted and temporary access to the work related activity group seems to be the outcome the system as a whole produces. Having people with health conditions claim jobseekers allowance with all the expectations that entails isn’t necessarily helpful. Similarly, putting people on a carousel of assessment, reassessment and appeals isn’t helpful either.

So a system operating (by design or implementation) to exclude marginal cases means a significant skew towards those cases where there is no argument. A system intended to help people get closer to employment doesn’t work if it excludes precisely those people who would benefit most. I’d argue that’s exactly what we are seeing and that these statistics are just further evidence that something has gone very wrong with ESA.