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Local authorities and housing associations in England meeting welfare reform challenges...

...but predict that worst is yet to come

A new report by leading financial adviser Grant Thornton UK LLP suggests that local authorities (LAs) and housing associations (HAs) in England have so far been active in addressing the impact of welfare reform, but predicts the full extent of the challenges are yet to be felt.

The Welfare Reform Act, which received royal assent in March 2012, introduced a number of significant changes to the way welfare is funded and administered in the UK. These measures are to be phased in over time, with some already in effect from 1 April 2013. Grant Thornton's report, Reaping the benefits – first impressions on the impact of welfare reform, takes stock of the steps taken by local authorities and housing associations to deliver reform, the initial effect of these changes and the associated financial implications.

Findings show that local authorities and housing associations have so far been managing the financial constraints of welfare reform, with the best performing organisations taking a holistic view of their operational needs and how to deal with the impact in their local areas. This includes local authorities, housing associations, the NHS and other stakeholders working in close partnership to develop joined-up solutions to ensure homelessness and other forms of social disruption are minimised.

Its authors suggest, however, that the true impact of these reforms are yet to be fully realised. Early signs of distress could further intensify pressures and the direct and indirect impact of reform needs to be closely monitored. In particular, the report identifies a number of early concerns, including:

  • a rise in rental arrears reported by some LAs and HAs
  • signs that direct payments may be contributing to benefit money being used for other purposes, resulting in increased arrears
  • LAs reporting a rise in homelessness, potentially linked to rent rises and benefit reductions
  • a lack of evidence that bedroom subsidy reform has brought about a significant movement to smaller properties, compounded by the lack of alternative housing in some areas, and therefore adding to household financial pressures
  • the take up of central government funding for Discretionary Housing Payments has been slow in the initial stages. However, rather than a sign that there is a lack of demand, it seems more likely that it is because the full impact of welfare reform has yet to be felt. The need for LAs to ensure that these payments are part of a long term solution, rather than a short term fix, is also a key factor

Paul Dossett, Head of Local Government at Grant Thornton UK LLP, commented: "The early indication is that the impact of reform felt by local authorities and partners has not been as great as expected and councils have so far acted in a fiscally responsible manner in planning ahead for the reforms. However, this could be the calm before the storm. Some worrying signs are emerging, particularly around rising rental arrears, homelessness and reliance on food banks, which may be linked to the reforms and could put further pressure on authorities as the reforms are phased in."

Jenny Brown, Head of Social Housing at Grant Thornton UK LLP, added: "Given that welfare reform is such an crucial area for HAs, it's interesting to note that the way forward appears to be for agencies and authorities to work more closely together to deliver the support that's needed. Importantly, due to the wide variety of experiences going on at the moment, it is unreasonable to expect that there will be a 'one size fits all' approach to this."