SFHA warns Parliament of devastating ‘hidden’ benefit cut

Mary Taylor
Mary Taylor

Ahead of today’s Holyrood debate on ‘Dignity, Fairness and Respect and Disability Benefits’, the Scottish Federation of Housing Associations (SFHA) is highlighting the potentially devastating effects of little known changes to Housing Benefit by the UK government – as well as the action Scottish Government could take to head these off.

Currently, the Housing Benefit available to private rented sector tenants is capped at what is called the Local Housing Allowance (LHA) rate. If a private rented sector tenant’s rent is higher than the LHA, they have to find the cash difference from other sources.

In his 2015 Autumn Statement, Chancellor George Osborne announced that the LHA cap would also apply to new tenancies in the social rented sector created after 1 April 2016, and the LHA rate will also be frozen for four years. This poses a risk of shortfalls in money available to meet social rents across the board for some of Scotland’s poorest and most vulnerable tenants, but it especially threatens:

  • single people under-35 who live alone, who will have their rent capped to an LHA rate that assumes they are sharing, and could include women fleeing domestic violence, returning veterans and people with mental health difficulties; and
  • people in supported accommodation who receive expensive levels of significant intensive support, for example, because they are older or disabled.
  • Mary Taylor, SFHA chief executive, said: “This policy could hit some of Scotland’s most vulnerable people hardest of all. After a backlash from social housing providers across the UK, the UK government has temporarily suspended the introduction of the policy for supported accommodation but, so far, there are no guarantees as to what happens next, which is why we believe Scottish Government should set out its own policy on making up the shortfall should the future of Scottish supported accommodation be placed in jeopardy. Early estimates of the money lost to tenants run into millions of pounds annually.

    “The alternatives available if a vulnerable person cannot access supported accommodation are bleak. Individuals with complex needs may end up sleeping rough or some tenants, particularly older and disabled people, may end up in hospital.

    “Together with our members, we stand ready to work with Scottish Government and others to make sure that the most vulnerable people in our country continue to be treated with dignity, fairness and respect.”

    The SFHA warning has been backed by Citizens Advice Scotland.

    Policy spokesman Rob Gowans said: “Scottish CAB evidence clearly shows that Housing Benefit is a lifeline for many families on low incomes who would otherwise be homeless. Over the past three years, the Scottish CAB service has seen a rise in demand for advice relating to rent arrears. The proportion of cases where debt-related advice was sought in relation to rent arrears in 2014/15 was over a third higher (34 per cent) than it had been in 2013/14. And the demand for advice relating to homelessness increased by 7 per cent in Scottish CABs over the same time period.

    “While these changes don’t come into force until 2018, we are concerned that they will increase the risk of vulnerable people being made homeless. We would urge the UK and Scottish Governments to use this time to make sure that people who cannot afford to live anywhere without support are protected.”


    How can the Scotland Act 2016 powers be used to ameliorate the impact of the ‘LHA Maxima’?

    To date, the SFHA has established four potential uses of the Scotland Act 2016 in this regard:

    1. Section 29: Universal Credit: costs of claimants who rent accommodation
    2. The imposition of the LHA maxima would cap the housing cost element available to the social tenant to the local LHA rate. If the rent was more than this capped amount then the tenant would lose out. The Scottish Government could ‘determine’ that the housing element available to the tenant should simply be the same as the rent charged by that tenant’s Registered Social Landlord (RSL). The housing cost element available to the social tenant would change as the rent changed and would not therefore be subject to the LHA cap.

      This is possible because Section 29 subsection (2) (a) of the Scotland Act 2016 devolves to Scottish Ministers the ability to ‘determine’ and to ‘calculate’ the housing cost element of Universal Credit. Making the following regulations is a function ‘exercisable by the Scottish Ministers’:

      • “Regulations under section 11(4) of the Welfare Reform Act 2012 (determination and calculation of housing cost element), so far as relating to any liability of a claimant in respect of accommodation which the claimant rents”
      • The Welfare Reform Act 2012 section 11(4), regarding setting housing costs, reads:

        • “(4) Regulations are to provide for the determination or calculation of any amount to be included under this section.”
        • In support of the ‘no-detriment’ principle enshrined in the Scotland Act’s fiscal framework, the Scottish Government would need to pay the cash difference between the capped amounts paid over by UK Government and amount due to RSLs in rent.

          1. Section 28: Power to create other new benefits in devolved areas
          2. Scottish Ministers could use their additional powers to create a new benefit for those in supported accommodation and for single people under 35 years of age.

            However, the explanatory notes to the Scotland Act state that

            “as Social Security remains reserved, the Scottish Government would be required to engage with the UK Government if they wished to create new benefits that strayed into the reservation under Section F1 in Part 2 of Schedule 5 to the 1998 Act.”

            This means that Scottish Ministers could, only with the UK government’s agreement, create a new benefit to ameliorate the impact of the LHA maxima.

            Unfortunately there is not an established route of intergovernmental machinery in place to resolve any disputes between the UK and Scottish Government when ‘engaging’ about the Scottish Government creating a new benefit in reserved area.

            1. Section 24: Discretionary payments: top-up of reserved benefits
            2. The Scottish Government could potentially use the power to top-up reserved benefits to ameliorate the impact of the LHA maxima to those in supported accommodation. This depends on the definition of the term ‘housing costs’ used in Section 24 in the Scotland Act.

              Section 24 lines 13-14 state that:

              “This exception also does not except providing financial assistance to meet or help to meet housing costs”.

              If the above mentioned ‘housing costs’ are taken to refer to both rent and eligible service charges and not to ineligible service charges, SFHA seeks to know if Scottish Ministers could provide financial assistance to those with ineligible service charges? If so, this could go some way to mitigate the impact of the LHA maxima, particularly when considering that supported accommodation often has higher service charges due to the nature of accommodating or providing housing related services to people with support needs.

              1. Section 25: Discretionary Housing Payments
              2. The Scottish Government could increase the funds it puts into Discretionary Housing Payments which could be used, at last resort for the reasons identified in the SFHA’s LHA maxima report to fully mitigate the impact of the LHA maxima.

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