Subordinate Legislation
Council Tax Reduction (Scotland) Regulations 2012 (SSI 2012/303)
Agenda item 4 is an evidence-taking session with the Scottish Government and the Convention of Scottish Local Authorities on the council tax reduction scheme that will operate from April 2013 to April 2014. I thank officials from the Scottish Government for coming along to outline the basis of the scheme. After they have made some introductory comments, I will invite questions from members.
Robin Haynes (Scottish Government)
Good morning. We are very grateful to the committee for inviting us to come and talk about the regulations that were laid last week. First, I should confirm the need for the regulations to be brought before Parliament. The committee clerk’s note refers to the abolition of council tax benefit from April 2013; from then on, assisting the vulnerable in meeting their council tax liability will cease to be part of the social security system and will become part of the local taxation system.
Subject to Parliament’s will, the regulations will provide the legal basis for implementing the policy response that Scottish ministers and COSLA agreed in April and create a scheme of council tax reductions that will result in individuals having the same net council tax liability—assuming, of course, that their circumstances are otherwise unchanged—upon the abolition of council tax benefit. In other words, if the regulations do not come into force, local authorities will have no alternative but to bill everyone for the full amount of council tax due. The regulations relate to people of working age; an equivalent set of regulations for people of pension age will be introduced very shortly.
It might be helpful—feel free to stop me if it is not—if I offered a very brief description of how the system of council tax reductions compares with present council tax benefit. In drafting the regulations, we sought to adapt where appropriate or possible the present entitlement criteria in the Council Tax Benefit Regulations 2006, partly to fulfil the policy objective of ensuring that entitlement to a council tax reduction replicated as much as possible existing entitlements. It is fair to say, though, that it is also a recognition that the timescale that was imposed on us meant that there was no other realistic alternative.
The most fundamental difference between the regulations and the present council tax benefit is that they reduce an individual’s council tax liability. It is actually a profound point of principle: this is not about entitlement to a social security benefit. It means that local authorities on the ground will cease to manage access to public funds; instead, they will be managing variations on their own council tax base.
That means that somebody who has applied for and is entitled to a reduction will still receive a council tax bill, but it will reflect the fact that their liability has been reduced. By way of comparison, someone who currently receives council tax benefit receives a council tax bill that has been reduced to reflect the fact that the DWP has paid some or all of it. There is a profound difference between the current arrangements and the regulations that we are considering, but a lot will be deliberately familiar to the delivery community and those who are currently entitled to council tax benefit.
I will pause there. If it would be helpful, I can give a brief description of how entitlement to a council tax reduction would be deduced or calculated.
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I will allow members to ask questions that are in their heads; we might then get to that clarification. If the clarification is still outstanding at the end, it might be useful to get it.
I will ask a very simple question. Does COSLA think that the matter is as simple as how it has just been explained?
Jonathan Sharma (Convention of Scottish Local Authorities)
Obviously, we are looking for a scheme that matches as far as possible the current provision for benefit recipients. Robin Haynes has gone to lengths to explain to us why the scheme has to be different, because one of the questions was why we could not just replicate exactly what existed before. We understand that there will not be a benefit and that there will be a transfer purely to the council tax side of things, and machinations are required around that. I hope that Robin Haynes can give more detail about that, if that is needed.
Obviously, we welcome the fact that the regulations have been laid in Parliament. That gives a great deal of confidence and certainty to the local government community, which has had to deal with implementation while waiting for the regulations to come into place. Therefore, there has been a little bit of trust on that. We are greatly encouraged that the regulations have been laid. That pretty much allows the councils to get on and get them implemented.
So you are confident that the regulations that have been laid before the Parliament are workable, functional and deal with the issues that were set before the Government.
I think that we are as confident as possible in that regard. Local government practitioners have been involved in considering the regulations. Obviously, we can see how things are only when they come to be and we are operating the scheme, but the local government practitioners have fed back and have, I hope, given Robin Haynes many pointers to help the Government in bringing about workable regulations.
I would like to hear from the front line in that regard. I want to know what Ms Deans has to say about it all. That is no disrespect to COSLA, but I know that Ms Deans is at the coalface. What does she think of the regulations?
June Deans (Glasgow City Council)
I echo what Jonathan Sharma said. The most important thing for us is having something in place for 1 April. If we did not have a scheme in place by February or March, when we usually do our annual billing and council tax exercise, things would be very difficult for us. We have been working on having contingency planning in place if that did not happen, but we have some faith in the regulations being ready, so we are preparing in the same way that we would normally prepare for council tax billing.
Our job has been made a little bit more straightforward because the intention of the scheme is to replicate the entitlement levels as they are. We are not really bringing in something that is fundamentally different for the person in the street; their council tax bill will look similar, and they will see the change as a reduction rather than a council tax benefit. Provided that the regulations act as we expect them to, there should be no significant change for local authorities at the customer front end.
However, there is a change for local authorities on the systems side. We and other local authorities, along with the Scottish Government and COSLA, have been engaging with the software suppliers for the main revenues and benefits systems, who have been planning for the replacement scheme for a while. The change affects the whole of the UK, so we have been feeding back requirements for the scheme to our suppliers. The information technology implementation will involve a bit of activity and cost on their side, and we are working towards having that system available to us in January or February so that we are ready for our council tax billing.
There is not uniformity across the board on the IT side. Are you aware that any of the software systems that are currently being used by Scottish local authorities might make it difficult to make these changes? I often hear the word “patching” being used in relation to some of those systems. Is there any one system with which we may find difficulty?
I am aware that there are differences in the systems, and I am most aware of the system that we use in my authority. I cannot speak for all the software suppliers or all the local authorities, but I am fairly confident that the suppliers with whom we are dealing have a track record of delivering that type of change.
The calculations for housing benefit and council tax benefit are intertwined in the current systems and have to be disengaged. That will allow us to pay the new council tax reduction separately, so it will be quite a significant difference. Peculiarities in some of the IT systems will make it more difficult for some suppliers than for others. We may well not be able to do some things automatically in the first instance, so we might have to put some manual processes in place. That might be the case across the board, or in one or two particular systems. We do not have all the answers yet, but from a broad calculation my understanding is that most of the software suppliers will be able to deliver the change.
I wonder whether Jonathan Sharma is aware of any problems in any local authorities.
We have not received any feedback that suggests that councils will have difficulties with their software suppliers. The key issue that is coming back to us from councils is effectively the question of who is going to pay for the change. That is still a pretty moot point. We have discussed the issue with the Scottish Government and ministers, and the key for us is that the money should come from the UK Government, which has made the policy change. What causes the most anxiety is not the implementation, but who is going to pay for it.
My question was on IT in general. It may be a bit unjustified, but I am always filled with horrible thoughts when I think of those big IT changes. Kevin Stewart has beaten me to it.
June Deans said that she had been working on contingency planning in case there was not a replacement scheme. Do you have a contingency plan in case the computer systems do not work?
Yes, that is the same thing. We have all those levels in place. The plans are not especially detailed, because we have enough confidence that things will be in place on time—
We will remember that. This is going on the record.
We have outline plans in place in the event that we are not able to have a scheme or to facilitate a scheme through our systems. It would be a very serious consideration for local authorities if they had to send out council tax bills that did not contain the council tax deduction. There are a number of different avenues that we might go down, but there would be difficult decisions to make, and each local authority might take a different approach.
I want to pick up on what June Deans said about the need for housing benefit to be disengaged from council tax benefit. We all understand the reasons for that, given our session earlier this morning on the impact of the new housing benefit changes. In light of all the difficulties that we heard about, not least of which is the proposal to pay housing benefit directly to the recipient, where is all this useful information about housing benefit going? It seems that the lack of information will cause various organisations—including, I imagine, Glasgow City Council and housing associations the length and breadth of Scotland, as well as supported accommodation providers—enormous problems, but what happens to this information? Does it just go into the ether? June Deans said that the council tax benefit information will need to be disengaged from housing benefit information. Where will the housing benefit information that is currently in the system go? Has it just gone?
Looking at 2013-14, I think that the increasing likelihood is that there will not be a huge amount of change in how councils administer what will, in effect, be their joint housing benefit and council tax support arrangements. The Government is obviously committed to bringing in universal credit, but it looks as though that will happen just a little bit slower than was originally intended, which probably comes as some relief to us. The key point is that the changes—whether we consider the systems aspect of the changes, the wider implications of housing benefit being moved to universal credit, or the various other changes that will reduce the amount of housing benefit for individuals—all carry major implications for our local authorities and we do not have the sort of answers on those that we would like to have.
I will take universal credit as an example. Although we can say that universal credit has been delayed and so may not have such an impact in 2013-14, we do not have a migration timetable for its introduction. We do not know how the disaggregation, if you like, will take place, so we are pressing the DWP for answers on that. Major changes such as the rules on underoccupancy will affect the systems that our councils operate, so councils will have to look at different processes for identifying those people who are affected. Councils will also need to look at processes for supporting and managing those people, because if people start to fall into arrears, that will be a major issue for our councils.
I suppose that what I am saying—I hope that I have answered your question—is that the council tax support is being introduced not in isolation but at a time when other systems, such as the new social fund, are also coming into place. There are impacts across the board, so we must look at all that. Our feeling is that we will need to do some more work to clarify the practical aspects—we will have a further discussion with the Scottish Government on any areas that need to be ironed out—but I think that we can bring in the council tax support without too much disruption to our local authorities and communities. The point is that that is not being done in isolation.
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I am not sure whether any of you can answer this question, but I will ask it anyway. Are you working towards the assumptions that were made by the DWP? They appear to have been based on the May statistics, which show projections of a 2 per cent decrease in the pressure on council tax benefit. Since May, there has been a lot of redefining of the economic expectancy for the year that the system has left to run, so are you still working to the projections that were made in May or are you working to your own assumptions and projections?
The UK figures show decreases in unemployment, but the employment figures appear to be being bolstered by part-time employment, which would mean that a number of people will stay on benefits. In addition, last month’s figures indicate an increase in unemployment in Scotland that might mean that our growth figures will not match the UK projections. Are you working to your own figures, or are you relying on the DWP to get all this right?
I assume that you are referring to the quantum of money that will be transferred to the Scottish budget upon the abolition of the council tax benefit. As I understand it, the final amount to be transferred will be based on forecasts that were made by the DWP and endorsed by the Office for Budget Responsibility for the cost of council tax support next year, minus 10 per cent. The final forecast will be published when the Chancellor of the Exchequer makes his autumn statement, which, if memory serves, will be on 5 December.
We are aware of the issue that you mentioned, which has been raised at official level and political level with Whitehall and Westminster counterparts. Nevertheless, the OBR is as definitive a provider of forecasts as anyone. We do not have any forecasts of the cost of support for next year, but there is a clear political agreement to maintain a dialogue between Scottish ministers and local authorities as the scheme operates next year.
That is helpful. We will not ask any more questions, but you said that you would give the committee some technical information on implementation. Do you want to do that now, and we will wrap up the meeting with that?
Would the committee find it helpful if I tried to give a brief overview of entitlement?
That would be helpful.
It would certainly help to explain why members have 130 pages in front of them.
Entitlement to a reduction in council tax will be means tested and three key elements of each application will require to be determined. First, the applicant’s total council tax due will need to be identified. That sounds quite simple, but some of the provisions in the regulations exist to identify other people in the household who might be expected to make a contribution to paying the council tax. Such deductions are referred to as non-dependant deductions. Secondly, the applicant’s income and savings need to be defined. Part of the regulations defines the income of someone who is self-employed, and schedules refer to which income is treated as income and which is disregarded.
Lastly, the applicant’s living expenses need to be determined. In council tax benefit and council tax reduction parlance, that is called the applicable amount. It is about determining whether the applicant is single or lives as part of a couple, whether they have dependants, whether they have children, whether they have a disability and what the extent of that disability might be, whether they have caring commitments, and so on. The requirement to nail those elements contributes to the complexity and length of the regulations.
If the net income is less than or the same as the applicable amount, the applicant is entitled to a reduction of 100 per cent of their weekly council tax. If their income is above the applicable amount, the amount of reduction is tapered by 20 pence for each £1 that the applicant’s income is over the applicable amount. There is no entitlement to a reduction if the residual income is five times or more greater than the council tax liability.
Entitlement criteria to certain benefits, specifically jobseekers allowance, income support, income-related employment support allowance, and guaranteed pension credit are such that recipients are automatically entitled to a 100 per cent reduction of their eligible council tax. That is sometimes referred to as passporting.
As I have said, much of the complexity and length of the regulations derives from the need to define the income, savings and allowable living expenses of the applicant. Once those figures are reached, the actual calculation is quite easy. I have a list of the differences between council tax benefits and reductions. Would it be helpful if I left that with the clerks?
That might be useful. It would be good to have a record of that.
In broad-brush terms, are the differences between the old and the new substantial or, if not substantial, technically relevant?
The policy intention is that if someone is entitled to council tax benefit at the moment, and their circumstances are unchanged, their net council tax will be the same. There are a couple of minor differences. One example is the treatment of income from war pensions and ex-servicemen’s pensions. At present, local authorities have some discretion about how much of that income is disregarded in the assessment of the applicant’s income. All local authorities in Scotland choose to disregard the entirety of income from war pensions, but the legal powers under which the regulations are made mean that we cannot reproduce that discretion. The regulations therefore reflect what happens in Scotland, in that they compel local authorities to disregard all war pension income.
That has been really helpful. Thank you all for coming this morning. No doubt you will continue to consider the situation as it progresses.
Good luck.
If you have any other technical information that you think might be of use to the committee, it would be helpful if you could send it to the clerks. Thank you for your time.
We will take the final agenda item in private.
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Meeting continued in private until 12:29.