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In 2001, a small scale form of discretionary support was introduced to assist those on housing benefit who were unable to afford their rent: discretionary housing payments (DHPs). The numbers of awards were modest, reaching approximately 2,000 in 2002/3, and representing just £21million of expenditure per annum as recently as 2008/9 (source). This same scheme – administered by Local Authorities – now makes more than 390,000 awards per annum and the July budget of 2015 has allocated £800million for their use across the course of this Parliament.

The rapid growth of DHPs is a symptom of how the welfare reform agenda has been delivered in the UK following the Welfare Reform Act 2012, and soon to include the Welfare Reform and Work Bill 2015. Instead of relying on statutory forms of exemption for flagship policies – such as the benefit cap and the ‘social sector size criteria’ (SSSC) – the government has largely “devolv[ed] responsibility” down to local authorities to decide how best to mitigate the impact of reforms. Far from being confined to housing benefit, the closure of the Independent Living Fund and the abolition of Council Tax Benefit demonstrate two further instances where central government funding has been cut, and the responsibility for providing alternative provision pushed down to the local level.

The Government – and many others – argue that this form of localised mitigation is more effective than centrally determined edicts on who should and should not be exempted from policy reforms. It is articulated as an approach which avoids both “standing back and imposing something” and the (politically fraught) problem of defining the “precise groups you really want to exempt.” Within the confines of this short blog post, however, I argue that this localism-and-austerity hybrid, which has become a feature of welfare reform in the UK, can be problematic when not adequately implemented.   Given that they are emblematic of this problem, DHPs will be used as a case study to illustrate this point.

An outline of the DHP scheme

Local Authorities are given a broad amount of discretion when making DHP awards – indeed, “the key is in the title” – but it is worth concisely outlining the two key areas of statutory control stemming from the Discretionary Financial Assistance Regulations 2001. First, significantly for a discretionary scheme, DHPs are paid from a centrally allocated, cash-limited pot provided to each local authority at the discretion of the Department for Work and Pensions. Currently this allocation is calculated in line with a formula based on welfare reform impact measures and previous baseline DHP expenditure, and local authorities can only top-up this fund with their own finances to 2.5 times this original amount.

Second, the regulations only allow payments to be awarded to those receiving housing benefit (or Universal Credit) to cover housing costs, and cannot exceed the eligible rent for the property or cover certain exempted areas (such as service charges). Despite general guidance being issued by the DWP, Local Authorities are otherwise left largely to their own devices when deciding how to make DHP awards, bound only by the general principles of public law.

Panacean payments: Four key problems with a reliance on local mitigation

There is a recognition that the welfare reform agenda is more than just a conduit for austerity; DHPs therefore become justified in light of these other more loosely defined aims – such as localism, the “social and political” aspects of the austerity agenda, and their “flexibility” in responding to changing needs (such as variability in severity of disability).

The first issue with the use of the localised mitigation to deal with the impact of centrally introduced budget reductions, is that the DHP pot is cash-limited and not demand-led. Localising the mitigation of reforms in this way invariably leads to a large amount of variance between authorities. Even a cursory glance at the DWP statistics on DHP expenditure demonstrates the wide geographical variation in the willingness or capacity to make awards, with some local authorities spending as little as 13% of their total DHP allocation in 2014/15 and some up to the maximum allowed by the regulations of 250%  (source). This is in the context of the DHP pot itself being a “small fraction” of total shortfalls. By way of illustration, there are approximately 300,000 tenants affected by the SSSC who suffer from disabilities – this represents a total shortfall of £218million – far less than the money earmarked for mitigation from the SSSC annually of £60million (source).

Secondly, the devolution of responsibility does not end at the Local Authorities; there is an implicit assumption with such as scheme that all tenants who require assistance will naturally apply for it. Data on current levels of applications underscore that many affected by welfare reforms – particularly the SSSC – who may be eligible for assistance, are not always effectively utilising the availability of local, discretionary payments. Applying for a DHP was described by Clarke et al as a “middle-ranking response” to the imposition of the SSSC, as only one-in-five claimants made an application, with an average success rate of 49%. The most likely group to appeal a DHP decision were the long-term sick or disabled, but this was at a rate of just 26%, and the Social Security Advisory Committee raised their concerns that many tenants – particularly families – did not know about the existence of DHPs at all. This raises serious concerns about the effectiveness of the payments in operating as an effective mitigating mechanism.

In addition to these two practical issues, the role cast to these payments is problematic in the context of legal appeals. Particularly in judicial review challenges to the SSSC, the payments are central to the ongoing legality of the policy. Indeed, Dyson MR in R. (On the Application of MA) v Secretary of State for Work and Pensions indicates that “if read in isolation and without regard to the DHP scheme [the SSSC] plainly discriminates” against the disabled. The cases have turned principally on familiar arguments around discrimination using the Art.1.Pt.1 right to property, which is now well established as including housing benefit, or Art.8 right to respect for the home, to leverage the Art.14 prohibition of discrimination. The acceptance of the reform agenda being “unquestionably” sited within the rubric of “high policy,” which leads to the application of the deferential “manifestly without reasonable foundation” test in these cases, which means to find incompatibility the Court has to be satisfied that there is a “serious flaw” in the scheme which produces a discriminatory effect.

The case law has developed to ascribe a role for DHPs which echoes the features of a statutory – rather than discretionary – exemption, with recent judgments in Rutherford, Cotton and A, making clear that the justification of discrimination caused by the SSSC’s current formation is dependent not only on the existence of the DHP scheme itself, but also on adequate assurances of the stability of its mitigation. This position is best reflected by Stuart-Smith J, when he suggested that “the use of DHPs as the conduit for payment may be justifiable, [but] it will not be justified if it fails to provide suitable assurance of present and future payment in appropriate circumstances.” In other words, the DHP scheme has to reflect some characteristics of a statutory exemption from the SSSC, giving an element of longevity and predictability, despite the clear financial inadequacy and variance between authorities outlined above.

The difficulty for DHPs to meet the expectations ascribed in the case law compounds the final problem: the sheer difficulty of appealing DHP decisions. Although the regulations provide a right to a written decision with stated reasons and to seek review, the payments fall outside of para.6 of schedule 7 to the Child Support, Pensions and Social Act 2000 and are therefore outside of the jurisdiction of a First-tier Tribunal. Consequently, those seeking to appeal decisions are reliant on judicial review, and the associated (heavily) limited legal aid funding available.

Following the Welfare Reform and Work Bill, the already stretched DHP scheme and the Local Authorities which administer it will have to deal with new reforms – particularly the sizable reduction in the benefit cap. The continued reliance on these locally administered, discretionary payments will come under further pressure as authorities attempt to mitigate the impact of centrally imposed cost-cutting measures. The expectations the Courts have placed on the role of such a cash-limited scheme may often be misplaced, but the presence of a DHP award has proved fatal to a number of high profile appeals. The heavy burden carried by DHPs, and problems with assumptions made by the Courts on how they function, demonstrates the problem with cutting budgets centrally, but devolving responsibility for the mitigation down to individual local authorities.

Jed Meers is a PhD student at York Law School, looking at housing law and welfare reform.

(Suggested citation: J. Meers, ‘The Localism-and-Austerity Hybrid: The case of Discretionary Housing Payments’ U.K. Const. L. Blog (21st Oct 2015) (available at https://ukconstitutionallaw.org/))