Agenda item

Implementation of Universal Credit

 

Councillor Leslie Ayoola asked the following question of the Deputy Leader/ Portfolio Holder for Finance, Resources and Commercial Services:

 

Does the Deputy Leader agree with the conclusion of National Audit’s Office report that Universal Credit is not value for money and is pushing additional costs onto councils? Can the Deputy Leader also tell the Chamber what steps Nottingham City Council is taking to help mitigate the damage Universal Credit will cause to people in Nottingham?

 

In the absence of Councillor Graham Chapman, Councillor Jon Collins replied as follows:

 

Thank you Lord Mayor, and can I thank Councillor Ayoola for his question. The National Audit Office’s (NAO) recent report, ‘Rolling out Universal Credit’ has found a number of issues with the new welfare system. First, the report found that Universal Credit has current running costs of more than £699 per claim. DWP’s ambition is for this cost to be reduced to £173 per claim by 2024/25. Earlier this month it was announced that the migration of existing benefits claimants onto Universal Credit is not due to be completed until 2023. The report also found that the DWP cannot measure whether Universal Credit will lead to its economic aim of getting an additional 200,000 people into work. As a result, the NAO’s report stated that the issues outlined above lead them to conclude that, and I quote: “the project is not value for money now, and that its future value for money is unproven”.

 

Secondly, the NAO report found that Universal Credit is creating additional costs for local organisations that help administer Universal Credit and support claimants. This of course includes additional costs for local authorities. The DWP has said it will pay councils for additional costs incurred to administer Universal Credit, but the NAO report found that the DWP, and I quote: “places the burden of proof on the local authority”, so in this instance, councils have to spend additional time providing evidence of the support they have provided in order to get compensation.

 

When conducting its research the NAO spoke to local authorities in different areas of the country, and identified a number of issues they were facing. That includes an increase in rent arrears which can often take up to a year to be recovered, a greater demand for advisory and advocacy services, in increase in administrative requirements for Universal Credit claimants including processing Housing Benefit stop notices, and an increase in Council Tax arrears. The NAO also found a number of local authorities are using their Housing Revenue Account to top up funding lost through the introduction of Universal Credit. So for those who don’t know of course, the Housing Revenue Account is the account which holds the rents paid by all council tenants, and so just to reiterate, some councils were then choosing to use that rent payers money effectively to substitute for money lost through the introduction of Universal Credit.

 

Nottingham City Council has conducted its own research with its tenants ahead of the Universal Credit rollout, and found that, notwithstanding the requirement that all claims have to be made online, 23% of Nottingham City Homes tenants are not able to use the internet, therefore will require additional support making and maintaining their claim, while a further 24.5% of tenants had no internet access, so will need to be supported in getting access to the internet through a computer. The NAO’s report found only 54% of claimants reported that they were able to make a claim online without help, meaning a large proportion of the population require some kind of support.

 

Moving on, during discussions with landlords and letting agencies, the NAO were told, and again, I quote: “from a business perspective there is an increasing reluctance to rent to Universal Credit claimants”. Now we’ve already heard from Councillor Urquhart about the challenge of meeting the needs of growing numbers of homeless families in Nottingham, simply put, if individuals and families lose their home due to rent arrears or are unable to find somewhere to live because landlords will not accept them as they are claiming Universal Credit, it will fall on local authorities to support people when they present as homeless. The NAO concluded that the DWP will have, in quotes: “no means to assess the full monetary impact that Universal Credit is having”.

 

So what steps is Nottingham City Council taking to help mitigate the damage Universal Credit will cause to people in Nottingham? Well the City Council is supporting the people of Nottingham in preparing for Universal Credit in a number of ways. First, officers are making preparations and are mapping the available support so claimants know where they can go for advice and guidance if they are worried, or if they need help to claim Universal Credit. The Council is mapping the location of public access computers across the city to ensure people are able to access a computer, get online and make their claim. A working group has been formed which includes representation from the Department for Work and Pensions, Welfare Rights, Advice Nottingham, Customer Services, Finance, Library Services and NCH.  This group is working to ensure people in Nottingham have the best possible support ahead of the rollout in October. We’ve started to advertise the preparations that are being made for the introduction of Universal Credit, and an article was placed in The Arrow in June to let people know what they need to do before they move onto Universal Credit. This will ensure people who are yet unaware of the requirement to claim online, and the requirements for information for information that they will need as part of that process, begin to understand what this change will mean to them personally. A social media campaign will follow, reiterating some of these points.

 

Discussions are being planned with wider partners, including the Private Rented Sector, about how they might be affected and what we can do to minimise the impact on landlords and therefore reduce the risk of rent arrears and evictions. Links are being made with local authorities where Universal Credit has already been rolled out, including for example Newcastle, to see what support they offered and whether it was sufficient, and what they have then subsequently been able to do to mitigate the impact of this move. And Nottingham City Council will be attending the Nottingham Financial Resilience Steering Group to keep up to date with citywide activity and support around the introduction of Universal Credit.

 

Finally, I want to raise the issue of hardship caused by the late payment of benefit. During 2017, around a quarter of new claimants were not paid Universal Credit on time, with an average delay of four weeks. From January to October 2017, 40% of people waited a total of 11 weeks or more before receiving their money. In March 2018, when the waiting time had been reduced to five weeks and changes announced during the 2017 Autumn Budget had been implemented, 21% of people did not receive their full payment on time and 13% received no money at all. Incredibly, the NAO stated that the DWP, in quotes: “expected most claimants would have enough money to cope” during the initial waiting period, but they found that 60% of people, so that’s 56,000 each week, received an advance payment to help them cope before their first official payment was received. Finally, four in ten claimants surveyed by the DWP confirmed that they were experiencing financial difficulties.

 

So in conclusion, despite this Council facing cuts in its Revenue Support Grant from £126,000,000 in 2013/14 to what will be £25,000,000 in Revenue Support Grant next year, and with a further expectation that in future years that will dwindle to nothing, this Council continues to fund services which will support Nottingham people affected by Universal Credit. At the same time, we will all continue to press the government to suspend implementation of this ill thought out and ill-considered scheme until they can guarantee that nobody will lose out under the new arrangements.

 

Sustainability of Right to Buy

 

Councillor Jackie Morris asked the following question of the Portfolio Holder for Planning and Housing:

 

What lessons does the Portfolio Holder for Housing and Planning think there are in the Local Government Association’s ‘Sustainability of Right to Buy’ report that will help deliver more affordable homes for Nottingham people?

 

Councillor Jane Urquhart replied as follows:

 

Thank you Councillor Morris, and thank you Lord Mayor. Of course, this really continues the theme, because of course what we want to do in Nottingham is build more homes so that we can house more people in houses which are of good quality, and where their security of tenure is assured. However, in April 2012 the government decided to increase the discounts available to tenants wishing to exercise Right to Buy on their Council homes, and those increased discounts went up to £75,000. This has obviously led to an increase in Right to Buy sales in Nottingham, which is causing a significant reduction of the number of such homes available in the city. Last year the number of homes sold under Right to Buy was higher than any of the preceding 6 years and in total we have lost almost 1,600 affordable homes since the 2012 changes.

 

At that time, we entered into discussions with government about the receipts from Right to Buy sales and how they would be used to deliver replacement homes, on what the government referred to as a “one for one” basis. However the number we have been able to deliver has been nowhere near the number that have been sold. The reasons for this are that firstly, we are only allowed to use Right to Buy receipts to fund 30% of a new build scheme, so much for “one for one”, it’s one for one third. The remainder had to be funded through borrowing on the Housing Revenue Account which of course is itself limited by central government. Also we are only allowed to spend that one for one third money on a very narrow range of housing types. So it can’t be used for shared ownership, which in some places might be the most appropriate thing to deliver. It cannot be given to Nottingham City Homes, to support them with the costs of homes they are building, nor can it be given to their Registered Provider arm. There is also a very limited timescale for use of this money. If it is not used within three years it has to be repaid to government – so this is money from the sale of our houses, that goes to government, they give us back a third, and if we can’t spend that third within three years they want it back again to them, with punitive interest. That is of course particularly unhelpful because as all of us know, development sites can take some time, both to acquire, to prepare, to plan and then to develop. And of course as there has been such a large increase in sales, the amount to spend over the forthcoming years has grown too, but still with those same restrictions.

 

In Nottingham, we are of course committed to building new affordable homes. We have embarked on the biggest new Council housing programme in a generation and have created award winning developments in communities across the city in partnership with Nottingham City Homes. Nottingham City Homes built more new homes than any other Arm’s Length Management Organisation in the country last year. So we have tried to maximise our use of our so called “one for one” receipts by both building new homes and also acquiring properties on the open market, but our efforts to make full use of that money have been hampered by those things I’ve already described.

 

So the recent report commissioned by the Local Government Association and carried out by Savills which looked at how that “one for one” replacement funding has worked nationally, it’s no surprise that that report finds a similar picture to that which we have seen in Nottingham. The report finds that two thirds of councils will have no chance of replacing homes sold off under Right to Buy in five years’ time unless a significant restructuring of the scheme takes place. Nationally, around 12,220 homes were sold under Right to Buy last year, and faced with the ongoing borrowing restrictions and based on the levels of sales remaining consistent, their analysis estimates that in 2023 councils would only be able to replace about 2,000 of those homes sold. Less than a third of councils would be able to sustain any kind of replacement of homes sold under the scheme in five years’ time because of the restrictions that the government places on borrowing.

 

So the government has introduced, or announced, a review of the Right to Buy replacement receipts spending rules because they have manifestly failed to deliver anything close to the level of replacement homes that have been sold. It is welcome that the Savills report recognises the inadequacies and failures of the current policy in its current form.

 

At the same time, the government is making things worse, not better. So because those receipts can only be used to meet a maximum of 30% of the costs of replacement homes, the Council is reliant on using its Housing Revenue Account borrowing to build the remaining amount, and that borrowing has been capped, and that cap has been fixed since 2012. We expect we may well reach that cap within the next three years. So last year the government said they would consult and introduce ways where they would allow local authorities with demand for new homes to raise that cap, so we would be able to borrow more apparently but, in only the last week, the government announced that Nottingham would not be allowed to apply to raise that cap. You may wonder why? We’ve heard this sort of thing before. The set of criteria that government have used seem to be somewhat perverse. They appear to us to have nothing to do with demand or affordability, simply relying on a crude comparison between housing association rents and private rents. It’s a methodology which has led to the extraordinary situation where only 104 Councils will be able to extend their borrowing cap. 91 of those are in the South, and the vast majority of them are Conservative controlled councils. Where have we heard this before I wonder? We’ve heard it in this Chamber of course, in terms of the allocation of transitional funding to some authorities and not others. Councillor Chapman has been tenaciously seeking to expose the unfair outcomes of this, and I will be investigating this next decision with equal zeal.

 

So locally we are left with a situation where Rushcliffe are able to extend their cap, despite the fact that we have four times the number of people on our housing waiting list and over seven times the number of homelessness acceptances than Rushcliffe, and the fact that Rushcliffe don’t own or manage any Council houses anymore because they’ve transferred them all to a housing association, so it’s hardly likely that they are going to make use of this headroom anyway. But they have the ability to raise the cap, and we do not. So in summary, the so called one for one programme is not a one for one programme. Nor is it sustainable to deliver more affordable homes. The government needs to change the rules of the scheme to give greater flexibility to councils to use the money, and it also needs to reconsider the rules on the borrowing cap.

 

It is worth noting that in its recent report following its “Rethinking Council Housing” exercise, the Chartered Institute of Housing called for the suspension of the Right to Buy entirely, in order to support the delivery of the affordable homes that this country needs. Instead, we will also have very soon the voluntary Right to Buy for housing association tenants, a pilot of which is coming to our region soon, potentially leading to further loss of social homes which again won’t be properly replaced. In the present housing crisis, how can the government make these kinds of decisions? They must consider the impact that Right to Buy is having, and at the very least review the rules for the expenditure of Right to Buy receipts, if not go far further than that.

 

Closure of Basford Hall Nursery

 

Councillor Linda Woodings asked the following question of the Portfolio Holder for Education and Skills:

 

Does the Portfolio Holder for Education and Skills agree that Nottingham College’s proposal to close Basford Hall Nursery would mean the loss of an important community facility and could see some potential college students put off accessing education?

 

Councillor Neghat Khan replied as follows:

 

Thank you Lord Mayor, and can I thank Councillor Woodings for her question. The planned closure of the nursery at the college in Basford is a serious concern to me as well as local representatives and the hundreds of local people who want to stop it. The nursery at Basford Hall College is well used, it’s well rated and it removes barriers to further education to those with childcare needs. The communities that Basford Hall College serves are amongst the most deprived in the UK, among the bottom 10% of all areas in the UK in terms of multiple deprivation, and in the bottom 10% in terms of educational achievement. Despite this, Nottingham College are planning to close this vital provision, which provides crucial childcare for students and staff while they learn and teach. I am disappointed that this decision will ultimately be to the detriment of learners needing this kind of support in the north of Nottingham. Nottingham North is ranked eight highest out of 624 constituencies for adults with no qualifications.

 

During this past month I have met with representatives from the College to discuss the planned closure and despite efforts from local elected members, there appears little willingness to withdraw this proposal. The Council has always been keen to build a consensus between the College and local representatives about how best to provide further education in Nottingham and how the full range of learners can be supported to achieve their potential. This will only happen if partners like Nottingham College reconsider the support offer it makes to those city learners who need it the most.

 

Robin Hood Energy Surplus

 

Councillor Steve Battlemuch asked the following question of the Portfolio Holder for Energy and Environment:

 

Does the Portfolio Holder for Energy and Environment welcome the news that Robin Hood Energy has a made a surplus in the last financial year?

 

Councillor Sally Longford replied as follows:

 

Thank you Lord Mayor and can I thank Councillor Battlemuch for his question. As I’m sure those of you who keep up to date with the news are aware, last week Robin Hood Energy’s independently audited accounts were submitted to Companies House and showed a trading surplus of £202,000.00 for the last financial year.

 

This is excellent news which I’m sure will be welcomed by everyone here in the Chamber today and across the city. It is a notable achievement to reach this point after just three years of trading as most energy companies take at least five years to get to this stage. I’m particularly pleased to hear that this surplus will be used to voluntarily enter into arrangements to offer the Warm Home Discount for older people and people on low incomes.

 

Within three years of trading the company has acquired over 115,000 customers and has recently been independently valued at around £30,000,000.00 – well in excess of the original investment of £20,000,000.00 by the Council. Customers have saved an average of £150 per annum compared to the big six standard tariffs and the company has led the way in reducing prices for pre-payment customers who tend to be the most vulnerable, thereby helping to tackle fuel poverty. Over 170 local jobs have been created and over 20,000 smart meters have so far been installed.

 

On top of this, I’m delighted with the announcement, also made last week, that Robin Hood Energy will go green. Shortly all of the electricity will be supplied from renewable sources, certified as being provided by UK wind and solar projects. Setting up a local energy company has been one of Nottingham City Council’s top priorities. After just three years, Robin Hood Energy is shaking up the energy market and is now making a surplus that can be used to tackle fuel poverty, which was its aim.

 

It’s creating local employment, protecting prepayment tariffs for Nottingham citizens and going green to protect the planet. Clearly, Robin Hood Energy is delivering a good deal for Nottingham people. That’s something we should all welcome. Thank you.

 

Corporate Governance of Council Owned Companies

 

Councillor Andrew Rule asked the following question of the Deputy Leader/ Portfolio Holder for Finance, Resources and Commercial Services:

 

Would the Deputy Leader comment on what steps the Council is taking to improve corporate governance in the Council’s wholly and majority owned companies; and would he give serious consideration to placing them into a holding company which would be solely responsible for scrutinising their performance to ensure they meet their desired objectives?

 

In the absence of Councillor Graham Chapman, Councillor Jon Collins replied as follows:

 

Thank you Lord Mayor, and can I thank Councillor Rule for his question. Companies have their own boards which are themselves responsible for their own governance. They are regulated by the Companies Act, UK Corporate Governance Code and the Financial Reporting Council. Whilst there’s always room for improvement, corporate governance in the Council’s wholly and majority owned companies is effective, with an annual review of governance arrangements, annual company assurance statements, annual accounts and reports, and regular external audit reports undertaken. Controlled companies may also have officer and councillor representatives on boards who report back formally and informally to the council, and who are individually governed by the Code of Conduct.

 

Whether adding another formal level of governance by creating a holding company for our controlled and influenced companies would offer anything other than an additional layer of bureaucracy to current arrangements is questionable. Council companies are in different stages of development and operation, and they undertake a wide variety of activities, each with its own purpose, objectives, and performance criteria. Ensuring appropriate knowledge and expertise within a single holding company to ensure appropriate accountability in such circumstances would appear problematic. However, as Councillor Rule has asked the question, I will ensure his suggestion is looked at when we next review our company governance arrangements.

 

Redevelopment of Central Library

 

Councillor Andrew Rule asked the following question of the Leader:

 

Could the Leader of the Council update the Chamber on what progress has been achieved to date with the plans for the redevelopment of Central Library on Angel Row?

 

Councillor Jon Collins replied as follows:

 

Thank you Lord Mayor, and can I thank Councillor Rule for his question. I’m happy to assure Councillor Rule that progress is being made on plans for a new central library and, that as I promised, we will consult with the public on those plans once they are finalised.

 

Recovery of Capital Investment in Robin Hood Energy

 

Councillor Jim Armstrong asked the following question Deputy Leader/ Portfolio Holder for Finance, Resources and Commercial Services:

 

Notwithstanding the welcome news that Robin Hood Energy has reported a profit, albeit down to a potentially one off tax refund; could the Leader comment on the prospects for the City Council recovering the additional capital injected into the company over the last 12 months; and on the timescales upon which he believes this recovery will be made?

 

In the absence of Councillor Graham Chapman, Councillor Jon Collins replied as follows:

 

Thank you Lord Mayor and can I thank Councillor Armstrong for his question, and for his recognition that contrary to his previous comments, articles in Conservative election literature, and the nonsensical social media posts of ill-informed members of his own party, Robin Hood Energy has recorded a surplus on operations and after tax for the last financial year. Indeed, and as Councillor Longford has already mentioned, in doing so Robin Hood Energy has moved into surplus faster than any other start-up energy company, and will now be able to decide whether to pay down the company’s start-up loans early or invest to the benefit of customers. However, let’s be clear before I respond specifically to Councillor Armstrong’s question, that Robin Hood Energy isn’t, and never has been a cost to the Council Tax payer. Indeed, because the company’s start-up capital is loaned at commercial rates, but borrowed by the Council at much lower Local Authority interest rates, the authority has financially benefitted for each year that Robin Hood Energy has been operating.

 

As for the financial support provided over the last 12 months, £2,500.00 of loan was offered under the existing loan arrangement set up in 2015. This will be fully repaid under the terms of that loan by 31 March 2027 or before. An additional £5,000,000.00 facility was agreed in July last year to help the company make longer term arrangements for the purchase of energy. Any draw down of that facility will be fully repaid under the terms of the loan agreement by 31 December 2024.

 

Lord Mayor, despite the ill-informed criticism of some, and the determination to talk down Robin Hood Energy by others, the company is operating successfully, has brought real benefit to its customers, and as it moves into surplus will build on that with the voluntary introduction of the Warm Home Discount for older customers and 100% renewable electricity generation from the end of this month. I’m glad that our Conservative colleagues are beginning to see that, and look forward to them becoming customers and advocates for the company with their party members and constituents.

 

Nottingham City Council Loan to EnviroEnergy

 

Councillor Jim Armstrong asked the following question of the Portfolio Holder for Energy and Environment:

 

Could the Portfolio Holder for Energy and Environment please tell the citizens of Nottingham why EnviroEnergy is not paying a commercial rate of interest on the loan of nearly £14million loaned to it by the City Council per its published accounts; and does this not break European rules on state subsidies?

 

Councillor Sally Longford replied as follows:

 

Thank you Lord Mayor, and thank you Councillor Armstrong for your question.

 

There is a small outstanding loan balance on which residual interest is paid. This is below the de-minimis level set out in the EU regulations for State Aid.