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A new way to help council tenants hit by welfare reform? Matthew Warburton - 18/04/2013

money_jar_300Swindon Council has been given approval by Housing Minister Mark Prisk to establish a £420,000 fund within the HRA to help tenants affected by welfare reform, it was reported this week. Some councils may wish to explore the option of similar action where they find their allocation for discretionary housing payments (DHP) is inadequate to meet local need.

DWP announced DHP allocations to councils in January. The national DHP budget for 2013/14 is set at £155 million. The 2012/13 budget of £60 million has been increased to reflect the impact of the reforms coming into effect this year - £30 million for the bedroom tax and £65 million for the benefit cap. Councils may claim subsidy on DHP payments made up to their allocations, and are free to make additional locally-financed DHPs up to a further two and a half times their allocations. These payments normally have to be financed from the General Fund.

Councils may face two difficulties with these arrangements. Firstly, allocations may be insufficient to meet local need. The national DHP budget is equivalent to only six per cent of the expected saving in benefit, or 21 per cent if councils were to use their full discretion to make locally funded payments. The second problem is that locally-funded payments are a solution councils may be unable even to contemplate given overwhelming pressure to make savings in spending supported from the General Fund.

Given this, the option of funding discretionary payments from the HRA may be attractive to some councils. It seems that the Swindon fund is intended as an alternative to General Fund-financed DHPs, not additional to them, and presumably payments from the HRA will be restricted to council tenants so DHP payments to private and housing association tenants would still fall on the General Fund once the DHP allocation is used up.

Ring-fence purists may argue that it is inappropriate in principle for help for some council tenants to be paid from rent provided by other tenants, rather than raised from general taxation. In an ideal world this would be right; if the only choice available is between HRA-funded help and no help at all, it may sometimes be better to waive the principle and provide the help.

In considering whether to follow Swindon's example, councils will need to consider the long-run business plan impact of using a proportion of rent income in this way. However, if the fund is targeted on cases where tenants are in real hardship, it seems likely that making a relief payment and writing off an amount of that tenant's rent as uncollectable come down to much the same thing - albeit entered differently in the accounts. Some may see the alternative of a calibrated response to rent arrears accumulating because of benefit withdrawal as a better response, which also has the advantage of not requiring Ministerial approval.

Other councils may wish to follow Swindon's example. In giving his approval to the Swindon arrangement, Mark Prisk is quoted as saying he found Swindon's case for establishing their fund "compelling". This should mean that he is open to equally compelling arguments from other councils.

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