Social Security Committee

Meeting date: Thursday, March 9, 2017

Official Report 569KB pdf

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Subordinate Legislation

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Council Tax Reduction (Scotland) Amendment Regulations (SSI 2017/41)

I welcome members back to the meeting. Item 3 is consideration of subordinate legislation, for which we are joined by two Scottish Government officials: Robin Haynes, head of council tax, and Dave Sorensen, statistician.

Before we hear from Mr Haynes, our clerk, Simon Watkins, wants to give us a small explanation about the regulations.

The Delegated Powers and Law Reform Committee reported on this instrument yesterday. We emailed its report to committee members; however, it did not go out with the original papers because it was not available then, and I just wanted to bring members up to date with the situation.

At its meeting on 7 March, the Delegated Powers and Law Reform Committee agreed to draw the Parliament’s attention to the order on the same basis as the previous Scottish statutory instrument on council tax reduction, which is that it believes that the regulations raise a devolution issue—that is, they might be outside the powers of the Parliament. This time, however, that committee also pointed out that, now that Parliament has new social security powers under the Scotland Act 2016, the Scottish Government could remove the issue by consolidating the council tax reduction SSIs and framing a new scheme under the 2016 act instead of under local government legislation as at present. I just wanted to bring members up to speed on that.

Thank you very much, Simon. Mr Haynes, do you want to say a few words before we move to questions?

I am not sure that I can, by way of introduction, add very much to either the policy note or the very comprehensive SPICe briefing. Uprating of the council tax reduction scheme amounts is now very much part of the annual routine. A significant addition to the regulations this year is a measure ensuring that council tax reduction cases in receipt of universal credit benefit from the increase in child premium that was part of the Government’s wider reforms to council tax and set in legislation in the latter half of last year.

The only other thing is to emphasise the contents of paragraphs 14 and 15 of the policy note. The regulations have been very much anticipated by the local authority revenue and benefits practitioner profession, and I assure the committee that we are always in very close contact with local authority revenue and benefits practitioners and their software suppliers, not just during the drawing up of the annual uprating regulations but throughout the year.

Thank you very much. I remember that some issues were raised about the previous instrument at one of the other committees. Obviously, I will ask committee members if they have any questions but, from reading the papers, I would say that the issues seem to have been resolved. I should also say that the instrument has to come to this committee, given that we look at social security powers.

Do members have any questions?

I just want to clarify a point. The note says that council bands E and F will get some assistance in certain circumstances. Is that correct?

The amending regulations that were laid last year to the council tax reduction scheme extended the scheme to provide relief with regard to the changes in the council tax charge for properties in bands E, F, G and H, which were part of a further statutory instrument that was also laid last year. Over and above that, a household’s entitlement to a council tax reduction is determined by the council tax reduction scheme more widely, and a property itself can be in any band—there is no restriction. The new bit that was created last year was an additional relief for low-income households in properties affected by the change to council tax that was created in legislation last year.

What is the Government’s response to the DPLR Committee report?

It will come as no surprise to committee members that the DPLR Committee came to that view. I think that that committee has held a wholly opposing view to the Scottish Government since the scheme was created back in 2012.

By way of response, I will point to three things. First, if we compare the council tax reduction scheme to the council tax benefit that it superseded, we will see that the council tax benefit operated through local authorities receiving specific amounts from the DWP in relation to individual council tax benefit claims. In effect, local authorities administered a benefit and DWP’s moneys. The council tax reduction scheme operates on a profoundly different basis, even though it was created to make the client journey very similar to the previous benefit. No payments are made to local authorities in relation to individual applications or reductions provided; instead, a global amount—which I think will be £351 million next year—is added to the local government general revenue grant. Local authorities bear the revenue risk of the reductions being different from that amount, and next year we expect that amount to come in below £351 million. That is a profound difference.

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It might be helpful to look at the powers under which the scheme was created, which are in section 80 of the Local Government Finance Act 1992. That section—which I should add is pre-devolution—says:

“The Secretary of State may make regulations as regards any case where ... a person is liable to pay an amount to a levying authority in respect of council tax”.

It then says:

“The regulations may provide that the amount he is liable to pay shall be an amount which ... is less than the amount it would be apart from the regulations; and ... is determined in accordance with prescribed rules.”

Those are the powers that the council tax reduction scheme is made under, and they seem to be very specific in allowing the sort of scheme that we have.

When the policy that is now the council tax reduction scheme was being developed back in 2012, the UK Government took a very keen interest in what we were doing, and I was party to many conversations with civil servants in the Cabinet Office, the Scotland Office, Her Majesty’s Treasury and the Department for Communities and Local Government. They are fully aware of how our scheme operates, and they have never suggested that it might raise a devolution issue. They have not suggested as much either in relation to the almost identical scheme that operates in Wales.

Are you saying that the effect is not to contravene the reservation of powers under the Scotland Act 1998?

Absolutely. The Scottish Government has always taken that view about the scheme.

And that includes reserved matters regarding taxation, in so far as there are any.

If I recollect correctly, the social security reservation of the Scotland Act 1998 expressly states that any benefit is beyond the powers of the Parliament. That is according to that version of the devolution settlement. That does not apply here, because the council tax reduction scheme is not a benefit. That is the key difference; this scheme is a means-tested schedule of reductions to household liabilities.

Going back to the issue that I raised earlier, I note that the Scottish Parliament information centre paper says:

“The new type of CTR will provide households with below median income who live in Band E to H properties, with an exemption from the increase in council tax due to the change to the way that council tax in the higher bands is calculated.”

According to that, bands E to H will be rebanded with a higher rate, but people will not pay relative to how their local authority increases their council tax. If a local authority increases the council tax by 3 per cent and a council tax payer in the household has below the median income, they will not pay the 3 per cent rise.

No. Your question relates to the regulations laid last year, which are now in force. They include a page of what looks like rather complicated algebra, the point of which is to ensure that the council tax reduction in the circumstances that you describe relates to the structural change to the council tax for the higher-band properties and not any locally determined increase.

I am sorry, but I do not understand that. What benefit do those people get? What does that mean? The SPICe paper refers to

“an exemption from the increase in council tax due to the change to the way that council tax in the higher bands is calculated.”

What relief do they get for that?

The regulations that changed the council tax last year changed the amount charged on properties in bands E to H. The way in which the council tax works is that those are fixed proportions of the band D charge; councils set the band D charge and the amounts that every other property will pay are set in law. Under the regulations that were set last year, if a household is entitled and meets the criteria, it will get a council tax reduction equivalent to the increase in the council tax that is caused by, for example, band H going up by 22.5 per cent.

I now understand.

I would like to clarify something. I think that we are talking about schedule 5 to the Scotland Act 1998, the interpretation section of which says:

“‘Benefits’ includes pensions, allowances, grants, loans and any other form of financial assistance.”

I understand that that section relates to reserved matters. Do I understand correctly that what you are saying is that, in effect, there is not a payment under the scheme, but a reduction in the liability in the person’s responsibility for housing rentals?

In relation to the council tax rather than rent, what you have described is correct. The council tax reduction scheme does not operate by making any payment to anyone. There is a reduction in tax liability.

So it is a reduction in liability as opposed to a payment out.

Yes, exactly.

As there are no more questions, I thank the witnesses very much for attending.

We will now consider the regulations formally. Are members content to note them?

Members indicated agreement.

The meeting will now continue in private session.

11:07 Meeting continued in private until 11:24.