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Response from CPAG to the Committees Letter on Council Tax Reduction (Scotland) Regulations 2021

Correspondence from Child Poverty Action Group (CPAG), 13 September 2021

CPAG in Scotland’s briefing notes for Social Justice and Social Security Committee Notes on the Council Tax Reduction (Scotland) Regulations 2021
September 2021

Key points:

• These regulations do make some changes to entitlement from the current working age council tax reduction (CTR) regulations. Therefore there will be some winners and losers. For example, some families who get child tax credit (CTC) will be worse off than under the current regulations. Without a robust assessment of the impacts of such changes, it is difficult for parliament to assess who are the winners and losers. Such assessments should also consider how to proactively reduce inequality – this does not appear to have been done. 
  
  
• Whilst the stated policy intention is largely met, we do not think that it was ambitious enough. For example, the Scottish Government has missed an opportunity to use these regulations to reduce child poverty by making the rules more generous for low income households. For example, disregarding CTC and the child element of universal credit (UC) would have made CTR more generous for low-income working households. CTC is already disregarded for people getting CTR who are over pension age. 

• Changes to the working age CTR scheme made by the regulations also reduce or remove some existing entitlements for both UC claimants and other CTR applicants. For example, they exclude EU nationals with pre-settled status and jobseekers from entitlement to CTR. This appears at odds with wider Scottish Government policy to support EU nationals to remain in Scotland.

Lack of guidance to local authorities results in different approaches in different areas, and means it is harder for individuals (and advisers) to understand the basis of decisions. This problem is exacerbated by the lack of an obligation to produce a detailed decision notice explaining how entitlement has been calculated.  

Have you been consulted by Scottish Government officials on these regulations? If so, do you have any comment on that engagement?

We have had several meetings with the relevant officials to discuss the regulations and this engagement is still ongoing. This has provided us with the opportunity to provide our view on various technical aspects of the regulations – a number of which are reflected in the drafting of these regulations. We are very grateful for this opportunity, and the willingness of officials to discuss the detail of the regulations. 

However, we are not aware of any public consultation on these regulations. Therefore, there may be interested groups who have not had a chance to comment on these regulations. Given the size of the investment in low-income families involved, it is striking how little consultation there has been in relation to CTR compared to the approach taken to types of assistance under the Social Security (Scotland) Act, for example. 

Do you consider that the regulations meet the policy intent, set out in the policy note that: “as far as practicable, a household in the same circumstances receives the same level of Council Tax Reduction whether it is on Universal Credit or not.”

Broadly, the regulations meet the policy intent.  These regulations align the treatment of UC claimants and other applicants more closely than the current regulations. However, there are several instances where families on ‘legacy benefits’ will be worse off than they are under the current regulations. 

In Reg 6(1) a ‘young person’ is defined as it is for UC. There is a difference between the definition of a young person for UC and CTC. For example, a parent of a 16 or 17 year old young person can continue to get CTC for the 20 week ‘extension period’ after they leave education. But CTC (which counts as income for CTR) will not be offset by a child premium, as it is in the current regulations, due to the amended definition of ‘young person’. Similarly, a parent may continue to get CTC for some periods during which a child is in prison or detention, but Reg 7(7) immediately brings the child premium to an end. Finally, the hard six month limit of treating a child or young person as part of a household during a temporary absence does not exist in CTC or the current regulations.

The new rules aim to provide equity ‘as far as practicable’ but will not do so in every single circumstance.  (See Scottish Government background paper sections 3.5 and 4).  Have you identified situations where the new regulations will not provide the same level of CTR on Universal Credit as on legacy benefits and does this give you any concerns?

Yes. Someone liable for council tax, can get a secondary form of CTR if they live with other adults on low incomes. This is known as a ‘second adult rebate’. Where the liable person is a student, and the property would be exempt from council tax but for the presence of a second adult, Sch 2 para 1(d) provides 100 per cent CTR if the second adult gets a DWP means-tested benefit other than UC. But if the second adult is in identical financial circumstances but gets UC, the reduction is only 25 per cent, or less if the second adult has any earned income.

Earned income is treated differently for some UC claimants and people without an award of UC. In essence the approach has been to maintain the current rules for people without an award of UC, and mirror the UC rules for people who do have an award of UC.

The main difficulty with this approach is that where someone’s earnings fluctuate they may move in and out of UC entitlement. And if a UC award ends due to an increase in earnings the DWP keeps the UC account active for six months. So the local authority will still be able to see the calculation of employed earnings made for UC, but will be required to treat those earnings differently, in relation to pension contributions, for example (compare Reg 49(6) and Reg 50(3)). CPAG are aware of local authorities currently ignoring the rules about how earnings should be treated, and using the figures provided by UC for periods where there is no UC entitlement.

The regulations also give local authorities discretion to depart from a number of the UC rules about earnings (see for example the use of ‘may’ in Reg 47(2), and Reg 56(1) and (3)). In principle, this discretion could be a useful safeguard. However, applicants will not be able to challenge a failure to amend their award where there is a discretion to do so if it has been more than two months since the most recent determination of entitlement (as the time limit in Reg 93(3) cannot be extended).

Even if a CTR award is amended, it is vital that an applicant is able to understand the basis of the award. Like the current regulations, there is no requirement to notify a determination of entitlement to CTR in writing, or explain the basis on which it was made. Some local authorities provide as little as a single annual figure on the council tax demand notice, with no explanation of the level of entitlement for different weeks during the year. Combined with an increased discretion around treatment of earnings this risks applicants (and advisers) being unable to establish the basis of an award, and so not being able to challenge it effectively.

Finally, Reg 64(4) allows local authorities to average out a fluctuating award of UC itself. Changes to that award are in turn most likely to result from fluctuating earnings. Particularly as this is a new provision, it appears to be a situation in which guidance to local authorities setting out how they may wish to use their discretion would be particularly useful. It is our understanding that it will continue to be the case that no guidance to local authorities on how to administer the CTR scheme is made publicly available. 

Do you have any suggestions that would further reduce the occurrence of different levels of CTR support for those on Universal Credit compared to legacy benefits?

Yes. If CTC and child elements of UC were removed from the list of unearned income in Reg 57, this would resolve the problems caused by differences between the way these benefits define being responsible for a child. 

There are also ways in which these regulations could be amended to either improve entitlement for both universal credit and legacy benefit claimants, or remove provisions that make them less generous than the current regulations are for both groups. The issues that we have identified in the regulations include the following provisions.

1. Reg 90 provides for a ‘non-dependant deduction’ - reducing the amount of CTR where the applicant lives with another adult. No deduction is made for certain non-dependants, and these regulations have missed an opportunity to improve those rules. In particular, if a non-dependant has no income at all they are currently expected to pay £4.30 a week towards council tax. This is particularly common when there is a young adult who has left school, turns 18 and has yet to make a claim for benefits in their own right. As the young person has no income the liable person has to pay the shortfall. These regulations could have removed deductions for non-dependents who have no income, to align with the lack of deduction for those who get a means test benefit (see Reg 90(8)).

2. The definition of ‘blind’ in Reg 4 does not cover children with visual impairment in Scotland – they are no longer certified. An alternative definition, and one that is used for disability assistance, is found at vincyp.scot.nhs.uk/access-to-services-and-support-for-children-with-vi . Most visually impaired children will get disability living allowance or child disability payment, but for those who don't, access to the 'disabled child premium' will be lost.

3. As noted above Reg 16(4) and (6)(i) exclude people whose only right to reside is as a jobseeker or due to their pre-settled status from CTR. This is a change from the current regulations. Whilst there is an ongoing court case in relation to pre-settled status, it is worth noting that both groups are able to access pension age CTR. There is also a missed opportunity to make provision for family members of refugees and people with humanitarian protection (who may later separate and need to claim CTR themselves).

4. Statutory maternity pay counts as earned income, so partially disregarded. Maternity allowance, often claimed by mothers whose earnings are too low to be entitled to statutory maternity pay, is treated as unearned income so none of it is disregarded. Therefore mothers who claim maternity allowance are worse off than those getting the same amount of statutory maternity pay. 

5. These regulations exclude a person with capital over £16,000 from qualifying for a second adult rebate. This is not the case at present, and it is not clear if this is a policy decision or an oversight. 

6. There are no explicit provisions to withdraw a claim for council tax reduction after it has been awarded. There are specific circumstances where this could be important, and as a general principle claimants should have a right to withdraw a benefit claim. 

7. We welcome the continued inclusion in Reg 21 of provisions to prevent local authorities from recovering overpayments of CTR that were due to official error. However, to ensure that this policy intent is fully met, Reg 21(2) could be redrafted to provide clarity that an overpayment cannot be recovered because the local authority later explains how it occurred. s64(4)(b) of the Social Security (Scotland) Act 2018, is an example of an ‘avoidance of doubt’ provision that would prevent this from happening.

8. The ‘notional capital’ rules widen the circumstances in which a local authority can treat someone as having failed to apply for capital (compare Reg 71(4) with Reg 48(2) of the current regulations). Whilst the general approach to assessing capital in the regulations is closely aligned to that taken by UC, the UC regulations contain no provision to treat someone as having capital that they have failed to apply for. 

Do you have any concerns about the changes to local authority systems that will be required as a result of the new rules in these regulations? 

As noted above, we remain concerned by the fact that local authorities are not required to provide decisions and adequate explanations in writing. It is unclear how local authorities will use their discretion and whether they will always pick up on changes to how income must be treated at different times.

A further concern is around the lack of publicly available guidance on how CTR should be administered. This would be of assistance to those administering the scheme, designing systems, and most importantly those who receive CTR and with to understand their rights.