Council finance fears over impact of welfare reforms

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Councils could be forced to cut spending on roads and care for the elderly in order to support households losing out through the Government’s welfare reforms, town hall chiefs have warned.

An in-depth study into the impacts of Iain Duncan Smith’s radical shake-up of the welfare system estimated less than a quarter of the 1.18 million English workless households affected by housing benefit cuts would be able to mitigate the impact of the reforms by moving to a cheaper property or finding a job, which could lead councils having to pay out to support them.

The report, commissioned by the Local Government Association (LGA), also cast doubt on the effectiveness of Work and Pension Secretary Mr Duncan Smith’s flagship universal credit scheme, aimed at ensuring claimants are always better off working, suggesting it was “unlikely to significantly increase employment”.

The study, carried out by the Centre for Economic and Social Inclusion, estimated that the income of households claiming benefit will be £1,165 a year, or £31 a week, lower in 2015/16 as a result of welfare reforms excluding the Universal Credit.

Overall 45 per cent of working age households receive one of the main benefits or tax credits and 59 per cent of welfare cuts will fall on households where someone has a job.

“The impacts of the reforms are likely to be most strongly felt in areas with the highest dependence on benefit – the North East, parts of London and a swathe of coastal towns and cities including Thanet, Tendring, Great Yarmouth, Scarborough and Torbay,” the report said.

According to the study the effect of housing benefit changes, including the overall benefits cap and the size criteria – the so-called ‘bedroom tax’ – will affect 1.71 million households, 1.18 million of which contain no-one in work.

The study suggested that just 155,000 workless households may mitigate the effects by finding employment, and 115,000 by moving.

In a series of announcements the Government has made around £185m available to councils for discretionary housing payments (DHPs).

But Sharon Taylor, chairwoman of the LGA’s Finance Panel, said councils would be forced to raid other budgets, which were already being squeezed, in order to help tenants suffering as a result of housing benefit changes.

She said: “In many areas welfare reform is not encouraging people into work as the jobs simply don’t exist, while the opportunities for people to downsize their homes to cope with reductions in benefits are severely limited by a lack of affordable accommodation.

“Unless more is done to create new jobs and homes, households will be pushed into financial hardship. Local government can help generate the necessary jobs and new homes but the Government has to give councils more influence over employment schemes and more freedom to borrow to build new houses.”