FOI request shows local authorities would be liable for huge compensation claims for cancelling private contracts

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Millions of pounds will be wasted in compensation if government plans to centralise housing benefit force local authorities into cancelling private contracts and axing staff.

The warning comes from UNISON following Freedom of Information (FOI) requests, which reveal 21% of housing benefit services are currently provided under private contracts or shared service arrangements with other authorities, and a further 8% of councils are in the process of tendering new contracts.

The move to merge six benefits under a new, centrally run, Universal Credit will lead to local staff offering face-to-face contact being replaced by call centres and online forms.

Many of the private contracts will still be in place when Universal Credit is due to be introduced in October 2013, so councils will be left paying around £50million-a-year in contracts for a service they no longer provide.

General secretary Dave Prentis said: “Many families are struggling to make ends meet and more children are living in poverty. Losing the help and advice of local benefits’ experts under the new Universal Credit, will hit the six million poorest people hard.”

UNISON is also concerned that 98% of councils have merged revenues and benefits systems, including council tax collection and council tax benefit, so splitting off the housing benefit will lead to a loss of economies of scale and additional knock-on costs.

The union predicting up to 20,000 housing benefit administration jobs stand at risk of being axed in England, Scotland and Wales. There is no provision in the Welfare Bill for these staff to transfer from councils to the Department for Work and Pensions, so local authorities could be left picking up a £150 million redundancy bill.

Dave Prentis said: “Many councils have long-term housing benefit contracts with companies such as Capita. These companies will want millions in exit costs when their contracts are cancelled early and a huge number of jobs will be axed.

“The Bill could lead to up to 20,000 more workers being consigned to the dole queues and ending up having to use the new Universal Credit themselves. If the service is moved centrally, claimants will lose all the one-to-one expertise of local face-to-face support.

“There will be real equality challenges for those with disabilities, or claimants who do not have access to online resources.  This is on top of councils picking up a £150 million tab for redundancy costs.

“Local Authorities must continue to have a role helping with housing costs under the new Universal Credit to deliver the best quality, efficient service and ensure families do not suffer.”


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