Social Security Committee

Meeting date: Thursday, March 22, 2018

Official Report 441KB pdf

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Subordinate Legislation

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Council Tax Reduction (Scotland) Amendment Regulations (SSI 2018/69)

Agenda items 2 and 3 are on a negative instrument, the Council Tax Reduction (Scotland) Amendment Regulations. I welcome Robin Haynes, who is the head of council tax at the Scottish Government. I invite Mr Haynes to set out the purpose of the regulations.

Good morning. Thank you for inviting me.

The larger part of the regulations provides for the annual uprating of the various allowances and premia in the council tax reduction scheme. The Scottish Government has introduced such legislation each year in order to maintain the original policy intention of the CTR scheme, which is to ensure that nobody will be worse off as a consequence of the abolition of council tax benefit in 2013.

Historically, the entitlement criteria for housing benefit and council tax benefit were almost identical. Broadly continuing to track the United Kingdom Government’s changes to the entitlement criteria for housing benefit—even though the legislative underpinnings of the two policies are profoundly different—helps to ensure that the CTR scheme continues to fulfil that original policy intention.

That said, the Scottish Government recognises that there a few ways in which things now diverge but, in the main, the continuing alignment of the two policies also has the additional advantage of keeping things a bit easier for those who have to navigate the council tax reduction and housing benefit policies—that is, people who have to apply for either or both and those who administer them. Indeed, there is one such divergence in the regulations that are in front of the committee this morning. Regulation 7, which is on page 3 of the instrument, would allow an application by someone of working age for a council tax reduction to be backdated—if good cause is shown—by up to six months, whereas the equivalent provision for housing benefit remains one month.

The Scottish Government is introducing the change to address circumstances that seem to be arising as a consequence of the roll-out of universal credit by the Department for Work and Pensions. In essence, difficulties seem to be arising with ensuring that those who make a claim for universal credit are made aware that they need to make a separate claim for council tax reduction and informed as to how they might set about making that application. As a consequence, in some areas, and most especially where universal credit full service is being rolled out, there is evidence that the number of council tax reduction applications is lower than might be expected. In other words, there is evidence of people who have little or no means of paying their council tax not applying for the reduction to which they are entitled, and consequently their council tax accounts fall into arrears. That is in nobody’s best interests, and regulation 7 is intended to help such individuals and councils prevent that situation from arising.

The committee will also note that regulation 3 introduces a new provision for applicants who are in receipt of universal credit. The effect of the new provision is to allow local authorities to estimate a person’s council tax reduction over a period if that person’s income is subject to frequent change. That is intended to allow a local authority to be pragmatic when a person earns different amounts each week or month. A very similar provision is in the principal scheme regulations for other categories of applicant.

As the law currently stands, any change to earnings, and thus to a universal credit award, requires the recalculation of council tax reduction and a consequent recalculation of residual council tax liability. Universal credit links to Her Majesty’s Revenue and Customs’ real-time information system, which means that local authorities now know far more about changes to such circumstances than they ever did before. That can result in a person’s council tax bill being recalculated and re-issued every month—and sometimes corrections are entered into the system more than once a month. As a result, it is simply unclear to that person how much they are expected to pay. If I were in that situation—particularly if my monthly finances were precarious—I am not sure that I would be content to allow my council tax to be collected by direct debit, given that I would have no idea how much would be taken be each month.

If the account falls into arrears because the person does not know what they owe, the local authority cannot initiate any recovery proceedings because the account is subject to incessant rebilling. However, if it were possible for a representative figure to be identified for that person’s earnings, a universal credit award could be estimated and thus their net council tax liability could be calculated over a certain period, enabling both the applicant and the local authority to avoid the uncertainties of the relentless re-billing and recalculation that currently happen.

That is all that I have to say, but I will be pleased to answer any questions as best as I can.

Good morning, Mr Haynes. From what I understand, backdating can go back six months for working-age applicants, who have to provide continuous good cause, whereas older people can apply for backdating of one month only, but they do not have to show continuous good cause. Why is there a discrepancy between working-age and older people? Was any consideration given to equalising that and making it simpler for all applicants?

If you will forgive me, I would like to correct one thing that you said. For applicants for council tax reduction who have reached pension credit age, backdating can go to three months, rather than one month. There is no requirement for those applicants to demonstrate good cause.

When the scheme was originally created in 2013, it allowed, for working-age applicants, backdating for six months with good cause and, for pension-age applicants, three months without good cause, which was a straight lift from the entitlement criteria under the council tax benefit regulations, which I referred to earlier. In 2016, as part of the change that was intended to reflect the housing benefit changes, amending regulations were introduced that changed the backdating period from six months to one month for people of working age, while people of pension age were unaffected.

As I said in my opening remarks, that is proving to be a bit of a problem. In effect, we have left the pension-age backdating provisions unchanged from the original 2013 scheme. For persons of working age, we are suggesting a measure to fix a known problem. One could say that that is the Scottish Government acting to fix a problem.

We have had no evidence that the differing criteria for persons of pension credit age cause any problems. I can say that we have had no evidence on that because we engage with welfare advice and rights groups, as well as practitioners at the Convention of Scottish Local Authorities and the Institute of Revenues Rating and Valuation. Much has come to light through ministerial correspondence following people’s visits to members’ constituency surgeries. We have had no evidence in any of that that the three-month backdating provisions for individuals of pension credit age are a problem, whereas it was brought to our attention that a problem was emerging for people of working age.

I emphasise that it is not the same. There is a good cause provision in the working-age provisions and there is a lot of case law that determines what “good cause” is. For example, at one extreme, someone who could not be bothered is not showing good cause, but someone who has material difficulties in navigating the system might be. If individuals of pension age were entitled three months ago, their CTR application would be automatically backdated.

How are the changes to the rules around backdating for working-age applicants being communicated? How are people being made aware of them?

The easy bit is the practitioner community. We have good communications through COSLA and directly with local authorities, as well as through the professional organisation, the IRRV, which has an active and well-read forum.

Communicating the changes to individuals, for example through job centres and universal credit journals, takes us straight into the terrain that I described, in which somebody who has made a universal credit application falls through the cracks. People do not know that they have to make a separate council tax reduction application to their local authority. At present, that is a problem and we are trying to identify a means to address it. Some local authorities have different approaches, and there even seem to be different approaches between job centres. Moving it to six months provides a safety net for cases that fall through the cracks.

The regulations are extremely welcome and, when applied, they could make a great deal of difference.

I want to ask about a complicated aspect in regulation 3, which is on estimating the income of universal credit claimants. The new regulations would allow a local authority to make its own estimate of an applicant’s household income if it was

“subject to frequent change during a period of entitlement”.

The first question is obvious. Will guidance be issued on how local authorities interpret what is meant by “frequent”?

No. There is no guidance to local authorities on how they should or should not apply council tax reduction. That sounds quite blunt, but it is a contrast to council tax benefit, which was based on local authorities managing the DWP’s money. The same case persists for housing benefit: the DWP gives local authorities any amount of guidance and instruction, and there is a sense of DWP control over what local authorities do. However, council tax reduction is, intentionally, very different. The law is the law, but how local authorities interpret it is a matter for them, although, ultimately, there are legal tests around that.

To give a crumb of comfort, we hope—rather, we expect and know—that local authorities have some experience in applying the equivalent provision for other applicants, which is in regulation 29(3) of the principal regulations. The cohort that we are talking about usually comprises people who are on tax credits. Allowing local authorities to estimate council tax reduction by averaging income over a period of time is very much a measure to give them scope to fix a known problem. It is about allowing local authorities to administer such cases more sensibly than the current law requires them to do. As I explained, at present, whenever a change of circumstance is communicated to a local authority, it has to crank the handle and rebill, so the regulations give local authorities a pragmatic means of managing the council tax reduction scheme.

That could result in local authorities applying the measure slightly differently.

Absolutely. The law is the law and it is open to interpretation, and it might be that local authorities apply other elements of the CTR scheme slightly differently.

There are 32 local authorities, and there are four information technology platforms that they can choose to use to help them operate the council tax reduction scheme. I surmise that there are already granular differences, but the prevailing policy is one that should apply across Scotland. It is the interpretation of the law that may differ. Again, it is about local authorities using that law to manage their tax base and ensure that no one in their communities is disadvantaged.

09:15  

I think that you said that local authorities already apply regulation 29(3), which is a similar principle.

Yes, and it has been in place since 2013—

You would expect most local authorities to follow that, would you, or do they not have to?

You put it well there—they do not have to. The aim is to give scope for a pragmatic approach. As I tried to explain, it is no one’s interest if someone does not know how much council tax they owe, but if the local authority is able to apply the law and reach an accommodation with an applicant that seems sensible to both parties, everyone wins. However, the letter of the law at present requires that council tax account to be recalculated for every single change in earnings.

What information gathering will take place? Will dealing with the frequency of changes in income place additional burdens on applicants or local authority staff?

The principal council tax reduction regulations are absolutely not prescriptive about the evidence and information that a local authority can say that it requires. However, paradoxically, one of the reasons why the problem has manifested itself comes from the information flows from the universal credit system to local authorities. There is almost too much information, if you like.

My question is about the same regulation, on estimating income. I totally get that the regulation is pragmatic and fixes something. I am thinking about constituents who might need that, and about what will happen if the estimate is wrong and a constituent receives too much. You mentioned tax credits. There are quite a lot of examples in which people have been put in quite difficult financial situations because they have had to repay money. I would be interested to hear your comments on that.

The best response that I can give is that local authorities seem to manage the present council tax reduction scheme pragmatically. I would be wrong to say that everything in the garden is rosy—I am sure that all of you would find plenty of cases in your constituencies where things have not gone quite right.

I will take one performance metric, which is the number of appeals that the council tax reduction review panel sees. The panel’s case load is something like one fifth of what it was for council tax benefit. That would suggest that, while the circumstances that you describe would be undesirable, and, as I said, I am sure that there are plenty of cases where things are not going quite right, the generality is that local authorities seem to be able to take a pragmatic approach.

You said that some people on universal credit are falling through the cracks. If we increase the number of people who receive council tax reduction, there is more chance of overpayment happening. Maybe that is unfair—maybe there is not more chance of it happening. Will it be down to individual local authorities to decide how to recoup overpayments? Is there anything in the regulations about that?

It is up to local authorities—we are not prescriptive about that. As I said, I would hope that pragmatism would prevail. The point of the regulations is to give scope for that pragmatism and allow sensible conversations to happen, as they must already happen for legacy benefits cases. I am not aware of overpayment being a widespread problem. There are instances of it, but there is no evidence to suggest that it is a widespread problem for legacy benefits cases.

Mr Griffin has a brief supplementary question.

It is about estimating income that is subject to frequent change. The income of someone who is self-employed is likely to be subject to frequent change. Under the regulations, will local authorities be able to disregard the minimum income floor for self-employed people? I feel that is unfair. Under the minimum income floor, it is assumed that a self-employed person earns a certain level of income, but their income might well fall below that. Will local authorities be able to disregard that rule and look at self-employed people’s actual earnings when they estimate income?

That is a good question. The fact that we have not yet been made aware that there is a problem with the circumstances that you describe reflects the fact that, to date, the roll-out of universal credit in Scotland has largely been about new applications relating to fairly simple circumstances rather than complex circumstances such as those involving self-employment with varying income. The council tax reduction scheme calculations of entitlement have benefited from the fact that the case load to date has been made up of less complicated cases.

However, it looks as though the interaction between universal credit and self-employment could well be a complex problem. The regulations do not seek to address that, but I and my colleagues, and people who are more expert than I am, are already giving some thought to how we might be able to deal with such circumstances.

Throughout the process of our consideration of the Social Security (Scotland) Bill, we have focused on a shared desire to ensure that people access the benefits to which they are entitled. There has been a welcome focus on ensuring that we increase uptake, and benefit uptake campaigns have been run to make sure that that is the case. Making sure that people have their council tax reduced, where that is appropriate, is an important part of that process. It would seem remiss not to focus on that at the same time.

We have been informed by the Scottish Parliament information centre that uptake statistics are not collected for the council tax reduction scheme. Do you think that there is enough information on why uptake of the scheme might not be as high as expected? Why did the scheme cost £20 million less than was allocated to it in 2016-17?

The first part of your question was about scheme uptake. There is no data on the proportion of people who might be entitled to a council tax reduction but are not in receipt of one. I could share some of our pain: we know a great deal about the CTR case load, but we do not know a huge amount about the people who are not within the CTR scheme. Although we can do some modelling based on various surveys, that will always have limitations.

The issue comes down to promotion. In January 2017, when changes were made to council tax, we agreed with COSLA some text to promote the council tax reduction scheme that councils would insert in every council tax bill. In addition, work to promote benefits take-up was undertaken in autumn last year, which was marshalled under the banner, “You’ve earned it”—there was a television campaign behind it—and the CTR scheme was part of that. That pointed towards a financial health check that citizens advice bureaux were running. We are giving some thought to how we might build on that.

You mentioned that the total income foregone from the council tax reduction scheme is at present less than the amount that is in the local authorities’ general revenue grant in recognition of their operation of the scheme. I think that that is a reflection of the fact that, because council tax reduction is not a benefit—it is not the case that the amount by which individuals’ bills are reduced gets added on to the general revenue grant; there is no such one-on-one match—local authorities bear the revenue risk.

When the scheme was first established, in April 2013, the revenue risk for that year went the other way and local authorities were not fully compensated, but in subsequent years the case load has gone down. The case load for the CTR scheme very much tracks the wider labour force, and claimant count unemployment is actually going down as the CTR case load has gone down, and the revenue risk at present is therefore in local authorities’ favour. That is the £20 million or so that you referred to.

Going back to the estimate of the applicant’s income, has any research been done across the 32 local authorities to see whether there are differentials, or has any evidence been given to the Scottish Government by the third sector to show whether there are any major discrepancies between certain local authorities?

There has been no formal piece of research. I cannot point to a particular document that exists in our filing system, but there has been a lot of information intelligence gathering, in that my colleagues and I work quite closely with the practitioner community in local authorities, and there is also a more formal engagement with COSLA, which introduced more senior practitioners to those forums. We find that each person we speak to recognises that some degree of interpretation is required and that they have to be instructed by the case law that exists around that. I am also aware that the Institute of Revenues Rating and Valuation can sell everyone a very good course on how to approach those circumstances.

It has not been brought to our attention that there are extremes, but I am sure that there will be variation across the 32 local authorities, and indeed across individual cases managed by those authorities. However, nothing has been brought to our attention to suggest that there are disparities that would be worrying.

With regard to new income disregards, will the carers allowance supplement be taken into account as income for working-age CTR applicants?

That does not feature in the amending regulations, for two reasons. The first is that ministers have yet to reach a view, and it is our job as civil servants to produce a suitable analysis to ensure that any decision that is made is an informed one. The second is that, even if ministers had made that choice, the carers allowance supplement does not yet exist in law, and making reference in regulations to something that does not exist yet is not quite possible.

Thank you. I just wanted to close that off.

Within the next year, the carers allowance supplement may well come in. What will happen in the period between then and any new regulations being made? Will new regulations have to be made once the carers allowance supplement is in place and ministers have come to a view on it?

That is a good question. If ministers take the view that they wish the carers allowance supplement, and any other future devolved benefit, to be treated in a particular way, we would have to make further amending regulations.

Would the supplement be included in those regulations?

The council tax reduction for persons of working age treats everything as income unless it is specifically disregarded, so to disregard the carers allowance supplement we would have to introduce regulations that specifically excluded it from the calculation of income.

Are you content, Mr Balfour?

I have no further questions.

Are members content to note the instrument rather than make recommendations and report on it?

Members indicated agreement.

I thank Mr Haynes for his attendance at committee this morning. I suspend the meeting briefly to allow for a changeover of witnesses.

09:30 Meeting suspended.  

09:30 On resuming—