Benefits Administration

Transcription

1 CHAPTER 9 Benefits Administration INTRODUCTION Benefits administration has been an expanding activity for local authorities for a number of years now. Responsibility for benefits administration was sometimes split between two departments finance and housing but the service is now run mainly by the finance department, especially since the large-scale voluntary transfer of council houses by many local authorities. This chapter considers the administration of housing benefit (HB) and council tax benefit (CTB) for private and council tenants. The chapter covers the significant changes to subsidy for , Ministers plans for a radical change to HB and the proposed changes to local services inspection. It also updates progress on the Local Housing Allowance (LHA); the Verification Framework; and the Fraud Referral and Intervention Management System. HOUSING BENEFIT ADMINISTRATION Local authorities are responsible for the administration of both HB and CTB. The Department for Work and Pensions (DWP) sets the rules and regulations governing both benefits. It is also responsible for providing funding for the costs of benefit payments to council tenants, private tenants and council taxpayers, along with a contribution to administration costs. The ODPM formerly subsidised the benefit payments made to council tenants, but the DWP took over this expenditure from April HB is a means-tested benefit intended to meet the reasonable costs of housing and to enable people on low incomes to live in decent homes. There are two types of HB: rent rebates for council house tenants rent allowances for tenants of the private rented sector and registered social landlords (RSLs). The HB scheme is complex and its administration has been a difficult area over the years for many of the metropolitan and non-metropolitan districts, London boroughs and unitary authorities which have responsibility for it. The costs of HB are an important part of LA expenditure. Between 1988, when the current arrangements began, and 2005, expenditure rose nationally from 3.8 billion PAGE 193

2 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION to an estimated 14.3 billion for , mainly as a result of increasing rents. This equates to over 8% of the total social security budget. Eligibility and Claims HB is paid in respect of the family unit occupying the home, although deductions are often made for other adults aged 18 and over, known as non-dependants, in the household. Claimants may be single, living as a couple or lone parents, unemployed, employed or retired. As long as they have a commercial liability to pay rent, claimants may live in a variety of types of accommodation, such as houses, flats, bedsits, shared accommodation, hostels or bed and breakfast establishments. They may even occupy caravans on a registered site or be liable for mooring charges for a barge or boat. Most importantly, they must be living in the accommodation as their normal home. The Civil Partnership Act came into force on 5 December 2005 and as a result, same-sex couples will be able to make a claim to social security benefits. Some people are not eligible to claim, such as most students, most people from abroad, people living in registered residential care homes and those with more than 16,000 in savings or investments. However, since the introduction of Pension Credit in October 2003, pensioners who have entitlement to Guarantee Credit, which is like Income Support for pensioners, have no capital limit. Claims for HB must be made in writing by one of three routes: at the DWP s Jobcentre Plus offices as part of a claim for Income Support or Jobseeker s Allowance by completing a form sent by the Pension Service following a claim for Pension Credit by completing a form designed for the purpose by the LA, but any written request to the LA can start the claim process. Where the claimant is entitled to Income Support (IS), Income-based Jobseeker s Allowance (JSA/IB)) or Guarantee Credit (GC), the claimant is entitled to maximum HB on their eligible rent, less any standard deductions for each non-dependant adult sharing their home. HB is normally paid from the Monday following the date the claim is received at either the Jobcentre Plus or the LA, whichever is the earlier. However, if there is a new rental liability, and the claimant makes a claim in the first week of the tenancy, HB will start on the Monday of that week for weekly/multiple weekly rents and on the actual day for monthly rents. An LA may backdate claims for up to 52 weeks from the backdate request, if it is satisfied the claimant has shown continuous good cause for not having claimed earlier. PAGE 194

3 The Calculation of Housing Benefit There are five elements to the calculation of entitlement to HB based on an assessment of: the level of the claimant s weekly net income the claimant s capital (savings and investments) the claimant s needs, as defined by the Government (applicable amount) the claimant s eligible rent any non-dependant deductions. Where the claimant is entitled to IS, JSA(IB) or GC, either the Jobcentre Plus or the Pension Service assesses the first three of the above elements. The LA remains responsible for assessing the remaining two elements. The LA is responsible for assessing all five elements where the claimant is not entitled to IS, JSA(IB) or GC. However, where a claimant is 65 or over and has applied for or is entitled to Savings Credit, the savings-only part of Pension Credit, the Pension Service assesses the weekly income and capital and sends the LA an Assessed Income Figure. This may have to be modified by the LA, as there are differences in the way weekly income is calculated. Assessment of Income Income for HB calculation purposes is the total earned and unearned income of the claimant and any partner, including an amount for savings. Earned income is calculated by taking the gross figure, less any tax or National Insurance contributions and half of any contribution to an occupational or private pension scheme. A further amount is disregarded, the level depending on whether the claimant is single, a member of a couple, a lone parent or disabled. Certain childcare costs are also disregarded. Unearned income is made up of other social security benefits, pensions, savings credit, tax credits, maintenance, rental income, etc. Again, some of this income is disregarded, such as some disability benefits and part of the rental income. There have been one or two recent changes to the assessment of income: From April 2005, the treatment of Tax Credits is as follows: LAs should use instalment amounts shown on the award notices instead of annual amounts LAs can use rates as shown on the award notices even if they are provisional rates LAs should treat one-off payments as capital PAGE 195

4 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION LAs can use the rates from April 2006 Guidance on the treatment of Tax Credits can be found in DWP Bulletin G1/G3/ U2 and Circular A5/05. HB/CTB Circular A9/2004 gives details of the Lone Parent In Work Credit (LPIWC) scheme and states that this credit is fully disregarded for HB/CTB purposes. From 4 April 2005 the LPIWC scheme will be extended to all the London districts except London North East. From this date, two differing schemes will be implemented for those parents living outside London and those living inside London. There are amendments to the income and capital disregard schedules which take account of the commencement of the Adoption and Children Act 2002 in December HB/CTB benefits still pay for children, unlike Income Support/Jobseeker s Allowance. If the child, for whom the adoption allowance is being paid, is treated as a member of the family, LAs can disregard any amount over and above the personal allowance for that child plus any disabled premium if awarded. Adoption allowances can be paid where a child has not yet been placed with a family and in these cases the allowance would be fully disregarded. Following the terrorist attacks in London on 7 July 2005, the London Bombings Relief Charitable Fund (LBRCF) was set up to provide relief for those directly affected. From 12 December 2005, all payments made by the LBRCF are fully disregarded. The disregard applies equally for both current and future benefit awards. As announced in the Budget 2006, the income threshold above which the Working Tax Credit is tapered will be 5,220 for It was announced in the 2006 Prebudget Report that the Government would raise the earnings disregard in housing benefit and council tax benefit in line with inflation to in April 2007, ensuring that claimants gain from increases in the rate of Working Tax Credits. All charitable, voluntary and personal injury income payments are already disregarded in Pension Credit and pension-age HB and CTB. To further simplify the tax and benefit system, the Government will from October 2006 provide a 52-week grace period for lump-sum personal injury payments when assessing eligibility for working-age HB and CTB. Assessment of Capital Capital means all savings and anything with a monetary value acquired as an investment. This may include savings held in a bank or building society, the value of shares or other stock market investments, National Savings Certificates, premium bonds and the value of property or land held in or outside the UK. PAGE 196

5 All Claimants, except Pensioners Once the total value of capital holdings is assessed, the first 3,000 (it was announced in Budget 2005 that from April 2006 this would increase to 6,000) is ignored in the calculation of entitlement. A weekly amount, known as tariff income, is worked out at the rate of 1 for every 250 or part thereof, of capital between 3,000 and 16,000. This is added to the total of all other earned and unearned income. Actual income from capital is ignored in the calculation. Where a claimant possesses over 16,000, there is no entitlement to HB or CTB. Pensioners If they are entitled to Guarantee Credit, there is no upper capital limit for pensioners. For all other pensioners, except those on IS or JSA(IB), the first 6,000 is ignored in the calculation of entitlement. Weekly tariff income is worked out at the rate of 1 for every 500, or part thereof, between 6,000 and 16,000 and applied as above. The Needs Assessment The next step is to determine the minimum needs of the claimant given their circumstances. This needs assessment is known as the applicable amount. It is made up of a series of personal allowances in respect of general needs, based on the number and ages of the family unit, and premiums which target additional help for families and the disabled. A single pensioner s personal allowance is much higher than a single claimant s aged under 25. A lone parent also qualifies for a higher amount. The applicable amount is compared with the total weekly income, including tariff income. A claimant with income equal to or less than the applicable amount qualifies for maximum HB. Any income greater than the applicable amount means the claimant will have to pay some money towards their rent. The Assessment of Eligible Rent HB is paid based on the level of eligible rent as determined by the LA, which may be different from the actual rent paid by the claimant. The eligible rent includes all charges associated with the fabric of the dwelling and charges associated with providing adequate accommodation, but excludes most charges for services provided to the tenant or services the tenant may choose to receive. From April 2003 people who live in supported accommodation, where general counselling and support, warden and emergency alarm services are provided, are entitled to claim HB for rent only. Their support services are paid by Supporting People. Charges for the provision of heating, hot water, cooking, water services, meals or any care provided to the tenant are not eligible for HB. PAGE 197

6 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION PAGE 198 In HB/CTB G2/2005, dated 17 February 2005, the DWP advises that it has become aware of potential problems in identifying ineligible support charges, particularly when the customer is receiving assistance with personal housing-related support charges via the Supporting People programme. The DWP emphasises that it is essential that general counselling and other ineligible support charges do not creep back into HB. It is equally important that it is not assumed that other funding streams, such as Supporting People, can or will pick up ineligible charges. The DWP highlights two main difficulties: the quality and detail of information on the service charges provided to HB teams a lack of consistency in decision-making regarding what is and is not an eligible charge. The DWP asked the ODPM to do all it could to encourage service providers to give clear and detailed information regarding general counselling and support services and the charges associated with them, so that HB teams could make clear and consistent decisions. In the private rented sector, complex rules exist to avoid paying HB on unreasonably high rents, to discourage landlords from charging excessive rents or claimants from living in unreasonably expensive accommodation. Before 15 January (2 January in Scotland) 1989, rents were regulated and could be registered with the independent Rent Service. However, not all landlords subscribed to this method and the Government introduced threshold rents for each LA to place a cap on spending. Any HB paid out using an eligible rent above the threshold resulted in lower subsidy for the LA, even though regulations allowed LAs to pay above threshold to vulnerable claimants, such as the elderly, disabled and those with children. From April 2004, the DWP removed thresholds and subsidy penalties in this area of HB. Any claimant with a tenancy which started prior to 15 (or 2) January 1989 still falls under these regulations, regardless of when they claim HB. From 1989, rents were deregulated and the Rent Service became involved in setting rents for HB assessments. The terminology has changed several times since then, but the current system involves referring the contractual rents to the Rent Service, which provides the maximum rent levels on which HB may be assessed. These are based on the lower of two amounts the market rent for the property (Claim Related Rent) or the average market rent for the size of the property in that area (Local Reference Rent). As long as a claimant lives in the same property and remains entitled to HB, the maximum eligible rent falls under the regulations in place at the time of their original claim. As there can be substantial differences between the contractual, claim related and local reference rents, it is important for claimants to be aware of the rules. Continuous claims starting between 15 (or 2) January 1989 and 1 January 1996 have a maximum rent set as the market value of the property claim related rent but this

7 may be increased to the contractual rent if the claimants are classed as vulnerable, such as the elderly, disabled and those with children. They are also allowed a fourweek break in claim and still fall under these regulations. Continuous claims starting between 2 January 1996 and 5 October 1997 have a maximum rent assessed at half-way between the claim related and local reference rents, known as the 50% top-up. However, since 7 October 1996, claimants under the age of 25 living alone have had their eligible rent restricted to the level of the rent officer s single room rent determination. This is based on the average charge for a single room in shared accommodation and is applied regardless of the actual accommodation occupied by the single young adult claimant. From 6 October 1997, the maximum rent used to assess HB is the lower of the rent officer s determinations of claim related and local reference rents. Where the LA considers rent restrictions would lead to exceptional hardship for the claimant, it may make additional payments from a cash-limited discretionary housing payment (DHP) fund. The DWP provides a grant for each LA, which can also contribute from its own funds to a total of 2½ times the grant. Although this money is not HB or CTB, the benefits section normally administers it. DHPs can be paid to anyone receiving HB or CTB to help with housing costs. However, a person cannot get help with their rent if they qualify for CTB only and they cannot get help with their council tax if they qualify for HB only. LAs should advertise DHPs as widely a possible, as any grant they do not spend must be returned to the DWP. LA and most RSL tenants are not affected by Rent Service rules, as housing regulations control their rents. However, if an RSL property is too large or expensive, LAs may refer the rent. Local Authority Pathfinders Between November 2003 and February 2004, nine LAs became Pathfinders in a new scheme for the payment of HB to private tenants called the Local Housing Allowance. This is the biggest structural change to HB since 1988 and involves the Rent Service in setting Broad Rental Market Areas (BRMAs) for each LA. Instead of valuing each property, eligible rent is linked to the size and location of the property, along with the size of the household. The Rent Service updates the BRMA rates every month. This process should speed up the time it takes to assess HB claims. Both tenants and landlords know in advance the maximum HB which can be paid. In theory, a claimant may move into a smaller, cheaper property and keep the difference that will be paid in HB. It remains to be seen how many landlords will charge rent that is below the nominated amount for their area. PAGE 199

8 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION The flat-rate Local Housing Allowance (LHA) was introduced in a further nine areas from April The evaluation process, which considers the effects of the LHA on claimants, landlords, stakeholders, HB administration and the housing and labour markets, was due to be completed by March The Government target for national rollout to all LAs is March Ministers plans in relation to LHA, including piloting it in the social sector, are detailed in a Green Paper published in January 2006, which is described at the end of this chapter. The Assessment of Non-Dependant Deductions A person who lives in the claimant s home but who is neither the partner nor a dependent child of the claimant is known as a non-dependant. Most non-dependants are assumed to make a contribution to the claimant s rent and CT payments and a deduction is therefore made from the claimant s HB and CTB entitlement to reflect a notional contribution from each non-dependant. Differing levels of deduction are made depending on the circumstances of the non-dependant and, where the nondependant is working 16 hours or more per week, the level of the non-dependant s total gross income. Gross income includes actual interest from savings. A couple s income is added together and only one deduction made. Where the claimant does not, or cannot, supply details of the non-dependant s circumstances or income, the maximum deduction is usually made. Where rent is low, this can remove all HB entitlement. No deduction is made from a claimant s HB if the claimant or partner is: registered as blind, or receiving Disability Living Allowance care component, or receiving Attendance or Constant Attendance Allowance. No deduction is made from a claimant s HB if the non-dependant is: under 18, or under 25 and receiving IS, JSA(IB), or receiving Guarantee Credit, or a student or on a training scheme, or in prison, or in hospital for 52 weeks or more. No deduction is made from a claimant s HB for 26 weeks if the claimant or partner is aged 65 or over if: a non-dependant moves in with them, or a dependant becomes a non-dependant (from April 2005). PAGE 200

9 No increased deduction is made from a claimant s HB for 26 weeks if the claimant or partner is aged 65 or over if: there would be an increase in a non-dependant deduction due to an increase in their income, or there would be an increase in a non-dependant deduction due to a change in circumstances (from April 2005). The Calculation of Housing Benefit Entitlement Where the claimant is not in receipt of IS, JSA(IB) or GC, the calculation is: STEP 1 Deduct the applicable amount from the assessed income STEP 2 Multiply the result (excess income) by 65% (the taper) STEP 3 Deduct the tapered amount from the eligible rent STEP 4 Deduct the total of any non-dependant deductions. The result is the weekly HB entitlement. If a claimant s applicable amount is more than their assessed income, they are entitled to maximum HB and may be entitled to IS, JSA(IB) or GC. Decisions and Notifications LAs are required to make the decisions regarding eligibility to HB, including the levels of income, capital, applicable amount, eligible rent and the level of non-dependant deduction. LAs must also decide who should receive payment the claimant, landlord, agent or appointee. The LA must notify the claimant, and anyone else who receives payment of HB, in writing of the various decisions. The content and form of HB notification letters are prescribed in the regulations. As they contain so much benefit terminology, it is not easy to make the letters simple enough for people to understand, which results in LAs spending time explaining to claimants and landlords. The Appeals Process HB and CTB claims are subject to the Social Security appeals system. Any person affected by a decision may request a revision of the decision or appeal against it, provided they do so within one month of notification of the decision. An affected person is normally the claimant, but it may be a landlord where payments are made to the landlord, or an appointee where the claimant or a court has appointed one. The LA must then reconsider the decision and notify the affected person of the result of reconsideration. It must also refer any appeal to the Social Security Appeals Tribunal, unless it can revise the disputed decision in the claimant s favour. Where an affected person or the LA is dissatisfied with the ruling of the Tribunal, they may seek leave to appeal further to Social Security Commissioners within one month of notification of the PAGE 201

10 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION Tribunal s decision. Decisions of a Social Security Commissioner are binding on both the claimant and the LA, as well as setting a precedent for all subsequent look-alike cases. The only further course of action remaining to the person affected is to seek leave to appeal to the Court of Appeal. Payment of Benefit Rent rebates are credited directly to the claimant s rent account. The tenant then pays the difference, if any, between their HB entitlement and the gross rent. Rent allowances are paid by cheque, direct bank transfer (BACS) or giro, either to the claimant or directly to the claimant s landlord. Since 7 October 1996 new claimants must be paid in arrears. Payments to landlords are made four-weekly in arrears, but claimants may be paid two-weekly. Payments made by Pathfinder LAs under the LHA scheme are normally to claimants, not landlords. However, payments will still be paid to landlords where the tenant has difficulty in coping with the responsibility or where the tenant has rent arrears greater than eight weeks. The first payment must be made within 14 days of receipt of all evidence required by and acceptable to the LA. Where the LA cannot make a decision on the proper level of payment (for example, when awaiting a reply from the rent officer or employer), it must make a payment on account. Recovery of Overpayments PAGE 202 Most overpayments of HB are recoverable. Only those arising as a result of an official error on the part of the LA or an agency of the DWP are not recoverable, and even then, only where the claimant, or the person in receipt of the payment, did not contribute to the overpayment or could not reasonably have been expected to know they were being overpaid. Recoverable overpayments may be recovered in a variety of ways: by deduction from ongoing benefit at a rate which takes into account the claimant s circumstances, with a maximum deduction set annually by the DWP for those on IS, JSA(IB) or GC by deduction from a schedule of payments made to a landlord where the overpayment was paid direct to the landlord by issuing an invoice to the claimant or landlord, including the cost of any follow-up action in the courts by deduction from other social security benefits paid to the claimant, if the claimant is no longer getting HB

11 by adding a rent rebate overpayment to the claimant s rent account, provided the overpaid amount is separately identified from and treated separately from any rent arrears. Extended Payments Where a claimant who has been in receipt of IS or JSA(IB) for more than six months finds work which is expected to last at least five weeks, they may claim an extended payment of HB at the same rate for a further four weeks until they receive their first payment of wages or salary. In addition, any subsequent in-work claim must be given priority, to ensure HB payments are not interrupted following a return to work. Subsidy Penalties and Incentives Most payments of rent allowance attract subsidy at the rate of 100% from April 2004, although incentives and penalties exist in areas of discretion such as identifying and recovery of overpayments. The subsidy payable in these areas is as follows: overpayments due to LA error 0%, 40% or 100% * overpayments due to claimant error 40% overpayments due to claimant fraud 40% overpayments due to DWP error 100% From April 2004 subsidy for rent allowance payments increased from 95% to 100% and for backdated periods from 50% to 100%. * Also from April 2004, subsidy for LA error overpayments is linked to performance. The DWP set upper and lower thresholds for LAs and subsidise based on the value of all HB and CTB LA error overpayments compared with the value of correctly paid benefit, as follows: up to lower threshold 0.48% of correctly paid benefit 100% between lower and upper thresholds 0.54% of correctly 40% paid benefit above upper threshold 0% Other incentives exist for identifying overpayments due to claimant error or fraud, as follows: less than 5 per week No reward between 5 and 20 per week 15 over 20 per week 70 From April 2004, these incentives, known as Weekly Incorrect Benefit Scheme (WIBS), reduced substantially, as they are payable in the following circumstances only: PAGE 203

12 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION where the LA has intervened in some way which identifies that the claimant has been overpaid, or where the LA receives a report from a third party, who is not the claimant, Jobcentre Plus or Pension Service, which identifies that the claimant has been overpaid, or from Royal Mail Do Not Redirect post. Incentives are also payable for fraud investigation work resulting in obtaining hard evidence of fraud sufficient for prosecution action to be considered, as follows: administration penalty accepted 1200 formal caution applied 1200 case accepted for prosecution 2000 case successfully prosecuted 2000 The value of additional subsidy payable under the Weekly Incorrect Benefit (WIB) element of the Security Against Fraud and Error (SAFE) scheme, announced in HB/ CTB Circular F10/2004, was held into From , the funding for this scheme has been replaced as upfront funding within the administration subsidy distribution. Payments for identifying Jobcentre Plus or Pension Credit overpayments and for sanctions and prosecutions activity that is, formal or administrative cautions, administrative penalties, summonses, prosecutions and orders of the court will also remain unchanged from As a consequence of the changes proposed for (discussed later in the section), payment of separate amounts of additional subsidy for WIB and sanctions and prosecution ceased from 1 April Therefore, only SAFE activity completed by 31 March 2006 will be eligible for additional subsidy payments under the SAFE scheme for the financial year. Claims for SAFE payments will still be accepted as normal, in arrears, into the first quarter of , but this can only be in respect of activity completed in the financial year. HB/CTB Take-Up Project The HB/CTB take up project was set up in May 2005 to tackle the under-claiming of HB and CTB by existing Pension Credit customers and to increase take up rates for new Pension Credit customers. The Chancellor announced that Age-related Payments would be made in Households containing a person aged 70 or over in receipt of Pension Credit guarantee credit would receive 50 towards living expenses. Most other households containing a person aged 65 or over who did not receive Pension Credit guarantee would receive up to 200 towards council tax bills. The payment would be made with winter fuel payments. PAGE 204

13 The HB/CTB take-up project has two phases dealing with existing Pension Credit recipients new Pension Credit customers. All existing Pension Credit recipients who were householders, not in receipt of HB/ CTB, but who might be eligible, would be contacted by the Pensions Service during September 2005 March 2006 and invited to claim HB/CTB using a simplified claims process. There was a prototype exercise undertaken from 11 July 2005 to 31 August 2005 to enable the project to confirm timings, volumes and identify any areas for improvement prior to the September to March exercise. Twelve volunteer LAs took part. Priority would be given to contacting those Pension Credit recipients who were in receipt of the guarantee credit who would be excluded from receiving the Age-related Payment of 200. From December 2005, if a pensioner makes an application for Pension Credit via the application line and answers Yes to whether they would like to claim HB/CTB, they will be asked additional questions to enable a shortened three-page claim form to be completed by the operator. The completed form will then be sent to the pensioner who will only have to check, sign and date it before sending it to their local authority. Additionally the pensioner will only need to supply verification of their income to the DWP. From July 2006, as part of the Pensions Transformation Programme this enhanced claims process will also include State Pension. From December, the Pension Service will operate the same short claim process with customers newly claiming Pension Credit. This new simplified process will mean that customers claiming Pension Credit only have to provide information once the income and savings information supplied for the Pension Credit application will be used for the CTB and HB, if appropriate. ADMINISTRATION OF Council Tax Benefit Although a separate set of regulations governs the administration of CTB, most of the rules are very similar, if not the same, particularly the calculation of income, capital and applicable amount. Anyone who is liable to pay council tax may claim CTB. Claims are made in the same way as for HB and most LAs have a combined claim form for HB and CTB. PAGE 205

14 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION The Calculation of CTB Entitlement Claimants in receipt of IS, JSA(IB) or GC are entitled to maximum CTB less any nondependant deductions. Maximum benefit is the total eligible liability for a claimant s property. Where the claimant is not in receipt of IS, JSA(IB) or GC, the calculation is: STEP 1 Deduct the applicable amount from the assessed income STEP 2 Multiply the result (excess income) by 20% (the taper) STEP 3 Deduct the tapered amount from the eligible council tax STEP 4 Deduct the total of any non-dependant deductions. The result is the weekly CTB entitlement. Second Adult Rebate A single person liable for CT living in their home with another adult (non-dependant) who has a low income may claim a second adult rebate (2AR) amounting to 7½%, 15% or 25% off their CT bill. There may be more than one second adult. Even couples may qualify if one is disregarded for CT purposes, for example a carer. The percentage reduction is based on the gross income of the second adult(s). 2AR can also be paid to CTB claimants whose own CTB entitlement would be less than the 2AR based on the non-dependant s income often called Better Buy. Budget 2005 announced that, from April 2006, the Government would protect student households from council tax liability if a non-student receiving an income-related benefit joined the household. The Appeals Process This is the same as for HB. Where a claimant s appeal affects both HB and CTB decisions, an Appeals Tribunal or Social Security Commissioner may consider both issues at the same time, provided the claimant agrees. Payment of Council Tax Benefit CTB and second adult rebate is credited to the claimant s CT account and the claimant is responsible for paying the difference between the total annual CT and their annual CTB entitlement. Overpayments and Excess Council Tax Benefit Overpayments of CTB are known as excess benefit. The regulations for recovery of excess benefit are the same as those for HB. Any recoverable excess benefit, however, PAGE 206

15 is normally debited to the CT account and recovered following the normal CT recovery procedure through the CT enforcement process. Extended Payments These are applied in the same way as for HB. Council Tax Benefit Awareness Campaign The DWP undertakes publicity to raise awareness of CTB, eg: a flyer in mailings for winter fuel payments to people aged 60 and over distribution of leaflets and posters, including a display in doctors surgeries national and regional press advertising. Council Tax Benefit Subsidy Subsidy is normally payable by the DWP at a rate of 100% of all qualifying expenditure on CTB. Subsidy Incentives and Penalties These are similar to those which apply to rent allowances. The same subsidy rates exist for excess benefits as for overpaid HB. From April 2004, subsidy changes have applied to CTB in the same way as to HB. The Social Security Administration (Fraud) Act This Act provides powers for LAs in respect of the prevention and detection of benefit fraud. These powers are as follows: Councils can appoint officers authorised to use powers to enter business premises and interview persons found working there. The DWP, tax authorities and the Home Office are all specifically empowered to pass information they hold to the LA for use in the prevention, detection, investigation and prosecution of HB and CTB fraud. Information may also be requested for these purposes from commercial organisations, such as utility companies, banks and credit reference agencies by designated authorised officers. Claimants are required to provide National Insurance numbers, as well as sufficient information to verify National Insurance numbers, as a condition of entitlement to benefit. The Post Office can be instructed not to redirect HB and CTB mail by the use of special Do not redirect envelopes for payments especially. PAGE 207

16 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION An offence of dishonest representation for obtaining benefit has been created which carries a penalty of up to seven years imprisonment, a fine, or both. Administrative penalties exist as an alternative to prosecution. Penalties are set at 30% of the overpayment amount and can be recovered along with the overpayment. Overpayments in respect of a previous tenant of a landlord may be recovered from an ongoing schedule of payments to the same landlord in respect of current tenants. LA staff have access, via a computer terminal, directly to information held on the DWP computer system. The Verification Framework Prior to April 2006 the DWP funded two additional subsidy schemes, the Verification Framework (VF) and Security Against Fraud and Error (SAFE), to drive down the amount of fraud and error in the HB system. Compliance with the VF was voluntary. LAs that adopted one or more modules of the scheme were entitled to claim additional subsidy payments to assist with the cost of its administration. The SAFE anti-fraud incentive scheme provided LAs with additional subsidy payments for identifying and correcting fraud and error in the administration of HB and CTB. HB/CTB Circular S4/2005 (Revised) announced changes to the distribution of administration subsidy from April All LAs would receive all available VF funding that would have been paid if they were fully compliant with all three modules of the VF. Local authorities would also receive an amount of funding, based on the value of their claims made in accordance with the SAFE scheme in The DWP commented that combining the funding elements previously paid as VF and SAFE subsidy, and distributing them with HB/CTB administration subsidy using a single formula, would allow LAs the opportunity to know their funding level in advance of the financial year. This would provide LAs with more financial stability and provide the first step towards more stable three year funding settlements. Details of the main administration of HB/CTB subsidy are given below. Administration of Housing Benefit and Council Tax Benefit in HB/CTB Circular S4/2005 announced changes to the distribution of subsidy in HB/CTB S4/2005 (Revised) provides full details. Following the Chancellor s Pre-budget Report on 5 December 2005, it was agreed that a further 3 million administration subsidy should be available to local authorities for in addition to the 552 million already earmarked. The additional funding was provided to further authorities in reducing fraud and error in the system. The funding PAGE 208

17 was to ensure that all local authorities could take steps to reduce housing benefit fraud by reviewing or visiting at least 50% of their claimants each year, in line with best practice. For , the planning assumption should be that 555 million subsidy will be available for administering HB and CTB and reducing fraud and error. The total allocations for were made up of the following elements: Core administration subsidy, which integrates the amounts previously separately identified as additional payments of administration subsidy in respect of workload increases arising from Tax Credit and Pension Credit Additional subsidy, previously paid/available to LAs participating in the VF Additional subsidy, previously paid under the SAFE scheme. DWP Specific Grants for Local Authorities Administration Costs in From administration subsidy will be announced as a single annual figure for individual LAs and payments will be made by monthly instalments across the financial year. For the total distributed amount of administration subsidy is 555 million. The new distribution includes all the available Verification Framework (VF) funding that would have been paid if all LAs were fully compliant with all three modules of the VF. The combined funding gives LAs the flexibility to fund their administration and security of benefits in accordance with local circumstances. However, as a guide, the DWP expects LAs to direct around a third of their total allocation to security of benefits through effective reviews, visits and counter-fraud investigations. The DWP considers that the new distribution formula: is a fairer system of distribution as it provides for turnover of cases and recognition of different costs for different aspects of LA claim maintenance enables LAs to know in advance the level of funding for counter-fraud work is based on more up-to-date data than the previous distribution. Combining the funding elements previously paid as VF and SAFE subsidy and distributing them with HB/CTB administration subsidy using a single formula allows LAs the opportunity to know their funding level in advance of the financial year (which was not possible under previous arrangements for SAFE), thus providing more stability than under the previous schemes. This provides the first step towards more stable three-year funding settlements that only change in line with new data. The distribution formula uses claimant numbers, unlike the previous formula which looked at the number of claims, because research has shown that the extra work inherent in a joint claim does not seem to merit both the HB and CTB element being PAGE 209

18 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION considered separately. The formula also includes an element to reflect the numbers of new claimants, providing for the extra work associated with more fluid caseloads. Distribution Methodology for HB/CTB Administration Subsidy The new distribution for is based upon two main elements: caseload of live claimants annual volumes of new claimants. The data used for volumes and make-up of live claimants has been taken from the Housing Benefit Matching Service (HBMS) extracts submitted by each LA, using the extract that was closest to 30 June The data used for annual volumes of new claimants has been derived from the HBMS extracts submitted by the LAs from June 2004 until June The volumes were derived by looking at the number of claimants present on the first and last extract of each quarter across that period and an estimate was made for each LA individually as to the expected number of new claimants that would not have been captured by those extracts. Since the HBMS data only covers successful claimants, the expected volumes of unsuccessful new claimants has been added on to those volumes, by taking the proportion of unsuccessful to successful claims for each LA reported in the MIS Stats 124 data. Validation of the data was undertaken by comparing the data provided with that from other sources. In some cases, the data was not wholly reliable, and so estimates have been made where appropriate. It is important, therefore, for LAs to ensure that their data returns are accurate in order to avoid receiving incorrect payments of subsidy in future years. The new distribution takes into account the research carried out by Risk Solutions into the administration costs to LAs of the HB and CTB schemes. From this research the weightings were derived for different tenure types, and applied to the relevant caseload figures. The formula also makes provision for any future national roll-out of the Local Housing Allowance. Further research will be needed to calculate the weightings for such cases, but this variable can be included as additional case types into the formula. In previous years, weightings have been applied to reflect the different labour costs that exist in England, Scotland and Wales. These weightings were derived from figures on average labour costs for clerical workers from the New Earnings Survey. This survey is no longer being conducted, but has been replaced by a similar survey, also conducted by the Office for National Statistics, called the Annual Survey of Hours and Earnings (ASHE). This has been used to derive the indices to represent a split between England, Scotland and Wales. PAGE 210

19 The DCLG s Labour Cost Adjustment (LCA) ratios from the Environmental, Protective and Cultural Services (EPCS) aspect of the Local Government Finance Settlement have been applied to the English LAs. Transitional Protection Scheme It was agreed that a Transitional Protection Scheme would apply over the three-year period to to provide a buffer to those authorities who would otherwise sustain a subsidy reduction under the new distribution formula. To calculate a netting figure, a baseline has been constructed. This baseline figure is based upon the latest available data of the following elements: Administration Subsidy paid under the old formula for VF funding allocation for for all modules (excluding set-up funds). For most LAs this will be the amount paid out for VF ongoing funding; for others it represents what they would have received had they been fully VF compliant and is therefore a higher amount than actually received. Unaudited SAFE subsidy claims for The Administration Subsidy distribution reflects the application of a 0% net to the overall baseline figure constructed for each authority. The net ensures that no LA receives a reduction of their previous year s allocation. In order to achieve this netting, a cap has been imposed which has restricted gain from the new formula to a maximum of 2.4% for Costs of Administering Housing and Council Tax Benefit, DWP, 2 March 2006 The above research, published in March 2006, looked at the costs to local authorities in England, Scotland and Wales of administering housing and council tax benefit. The main findings were as follows: The total direct cost of administering HB and CTB (largely employment costs) in was estimated at 461 million. The total cost including indirect costs was estimated to be 801 million. At the GB level, average overhead was estimated to be 74% of the direct costs. The size and volume of caseload and average employment costs of assessors were the main determinants of the costs of administering HB and CTB. If volume information for the caseload was unavailable the size of caseload was also a very good predictor. The average costs of assessors were largest in London but the average employment cost of assessors was about the same across the regions with more variations found within regions than across regions. PAGE 211

20 COUNCILLORS GUIDE TO LOCAL GOVERNMENT FINANCE 2007 FULLY REVISED EDITION Private sector rent claims were found to be more expensive to process but the differences in types of claims did not have much bearing on the total costs of administering HB and CTB. There was a bigger difference in costs of processing different types of claims between LAs than the difference in tenure types for an individual LA. The other significant impact on costs of administering HB and CTB were due to individual features of the LAs studied. Looking at costs in terms of workload areas revealed unsurprisingly that the processing of new claims and changes of circumstances was the largest accounting for 46% of overall workload costs. This was followed by proactive reviews which accounted for 12% of workload costs and other fraud-related work a further 9% of workload costs. The research found that overall the cost of processing a change of circumstance (CoC) was less than half of the cost of processing a new claim. The cost of processing a new claim was estimated to be around 33, whilst the cost of processing a CoC was 13. Additional Grants and Performance Standard Funding Major changes in legislation relating to Child and Working Tax Credits as well as Pension Credits resulted in additional administrative grants being paid to LAs since More significantly, the Government invested 200 million over three years ( 40m in , 70m in and 90m in ) in LA benefits in its aim to improve standards. LAs had to put in bids for the funding, either individually or as part of a joint project. Priority was given to those LAs with the poorest performance or which faced the biggest barriers to improvement. Targeted areas included the speed and accuracy of processing claims and the prevention and recovery of overpayments. Successful bids were received from more than 300 LAs. As at January 2006, the DWP had awarded over 170m from the Performance Standards Fund. When Performance Standard Funding ends in 2006, there should be continued investment from the HB Reform Fund. (As announced in the 2004 Pre-budget Report, a Housing Benefit Reform Fund worth 180 million will be launched during to help the DWP roll out flat-rate allowances and to improve the administration and structure of the Housing Benefit system.) PAGE 212

21 Fraud Referral and Intervention Management System The Fraud Referral and Intervention Management System (FRAIMS) is a new IT system launched in Spring It incorporates a national referral system that allows employees, LAs, the DWP and members of the public to report suspected fraud and error via a standard intranet/internet-based form called a Programme Protection Query (PPQ). The PPQ form will be available to LA staff and the general public via the internet and to DWP staff via the intranet. FRAIMS will provide, for the first time, a single national database of fraud/compliance and risk cases and an automated referral and case management system for a full range of programme protection activities. FRAIMS will support investigators in managing and progressing individual cases. FRAIMS will replace many smaller management systems, reducing duplication of work and re-keying of data across multiple databases. It will enable comprehensive information to be collected to better inform analysis and assessment of fraud trends and potential new changes to risks. The Benefit Fraud Inspectorate and Comprehensive Performance Assessment The Benefit Fraud Inspectorate (BFI) was set up under the Social Security Administration (Fraud) Act It has powers to inspect councils and it has rights of access to documents, information, procedure manuals and staff involved in the administration of benefit claims. Although the Comprehensive Performance Assessment (CPA) comes under the umbrella of the Audit Commission, a BFI questionnaire forms part of the LA s corporate CPA inspection. The BFI has confirmed that it considers VF to be the minimum standard for benefits administration, whether or not the LA being investigated has signed up to the voluntary code. The full BFI inspections focus on four areas of benefits administration, as follows: claims initiation assessment and decision review of claims payment and accounting. Inspections also focus on four areas of counter-fraud activity: deterrence prevention detection investigation. PAGE 213