House of Commons - Communities and Local Government Committee

Select Committee on Communities and Local Government Committee Eighth Report

3 Council tax benefit take-up

36. Council tax benefit has the lowest level of take-up of any means-tested benefit and take-up levels have decreased significantly in the last decade. In 1997 estimated take-up was between 78 and 82 per cent of those eligible. By in 2004-5 this figure had fallen to between 62 and 68 per cent.[62] This means that some 2.27 to 2.95 million people are not claiming council tax benefit even though they are eligible to do so.[63] By comparison the latest figures on housing benefit show an estimated take-up rate among those eligible of between 84 to 91 per cent and for income support of between 83 to 94 per cent.[64]

37. The Government cites a number of factors to account for the decline in council tax benefit take-up since 1997. Above-inflation increases in threshold levels, particularly those affecting pensioners, have made more people eligible and the Government argues that this accounts for "around half of the observed reduction in take-up".[65] It acknowledges however that even without the effect of higher thresholds there would have still been a fall of around five percentage points.[66] The Government also suggested that people may not take up their entitlement because they think the amount of benefit they might receive would be too small to be worth the effort: national take-up estimates show that "44 per cent of entitled non-recipients of council tax benefit were entitled to less than £10 per week."[67] But the converse is also true: the majority of eligible non-recipients would receive more than £10 a week. Even for those entitled to less the amount may still be significant, particularly to those in poverty.

38. The type of accommodation people live in can affect the level of contact they are have with government agencies: those in social housing, for instance, are likely to have higher levels of contact with the local authority and therefore access to information about council tax benefit than those who own their own home.[68] Take-up rates are lower among owner-occupiers than among those holding any other form of tenure: 36 to 41 per cent of those entitled to claim, compared to 78 to 86 per cent for private sector tenants and 87 to 93 per cent for those in social housing.[69] The Government has suggested that recent increases in the levels of home-ownership may therefore be a further cause behind declining take-up.[70] Another possible factor behind the low take-up by owner-occupiers may be that a significant proportion of these are pensioner households: eligible pensioners have the lowest take-up of all groups at 53 to 58 per cent. Of non-pensioner groups, eligible couples with children have a take-up rate of 62 to 69 per cent, lone parents 87 to 95 per cent and those of working-age without children 71 to 82 per cent.[71]

Chart 2: Council tax benefit take-up by client group 2004/5

Data Source: Department for Work and Pensions, Income Related Benefits, Estimates of Take-up 2004/5, 2006, p 61, table 4.1

Increasing take-up

39. There are a number of possible barriers to individuals claiming council tax benefit. Those cited most frequently by our witnesses were a lack of awareness of entitlement; the complex, off-putting claims process; and a perceived stigma associated with means-tested benefits generally.

LACK OF AWARENESS AND INERTIA

40. There are different routes by which people may claim council tax benefit. They may contact their local authority directly or claim council tax benefit alongside other DWP benefits such as income support, jobseekers' allowance, and pension credit.[72] The less contact people have with these government bodies the less likely they are to be aware that council tax benefit may be available. Ms Pearson of Help the Aged argued that a related barrier preventing people claiming council tax benefit is a "degree of inertia".[73]As the Government suggested inertia may be compounded by perceptions that, for some people, the amount of benefit entitlement is insufficient to justify the effort of claiming.

REDUCING COMPLEXITY

41. The determination of council tax benefit eligibility depends upon a complex set of rules including the use of thresholds discussed earlier (see paras 15-19). These thresholds take account of personal allowances, which vary according to age and marital status, and any premiums which may apply because of extra needs.[74] Receipt of other benefits may also affect eligibility and entitlement to council tax benefit.

42. The complexity of rules to determine eligibility is not confined to council tax benefit. The Work and Pensions Committee has examined the complexity of benefits that the DWP administers and the problems of interactions between them in its recent inquiry into Benefits Simplification.[75] The DWP has acknowledged that there is a clear relationship between complexity and take-up, and that inevitably the more complex the benefits system, the lower the take up.[76] Complicated eligibility criteria make it difficult for potential claimants to work out whether they may receive the benefit and, if so, how much.

43. To receive council tax benefit it is necessary to submit a completed claim form to the relevant local authority together with a number of personal documents to verify their position. Entitlement is then assessed by the local authority and liability to pay adjusted accordingly. Each local authority issues its own claim form based on good practice guidance issued by the DWP. Even this 'best-practice' form is 26 pages long.

44. The Government has already taken some steps designed to make the claims process more straightforward and to increase take-up. It has encouraged local authorities to issue joint housing benefit and council tax benefit claim forms to reduce the amount of paperwork for those claiming both.[77] This may also serve to increase the take-up of council tax benefit as those claiming housing benefit can be assessed for council tax benefit at the same time. In December 2005 the DWP introduced a shortened council tax benefit claim form of only three pages for those in receipt of pension credit. This form is completed by Pension Service staff during a home visit or over the telephone and then given to the client to check, sign and send on to the relevant local authority.[78]The Government believes this measure has resulted in a further 65,000 council tax benefit claims.[79] As Help the Aged pointed out, however, "50 per cent of those simple forms are not being returned to local authorities".[80]This suggests that simplification of the claim form, although welcome, is not on its own sufficient to improve take-up significantly.

45. Despite these efforts to simplify the claims process, our evidence suggests that complexity is still a significant barrier to take up. All non-pensioners and a proportion of pensioners still need to complete the longer form: the shorter is only available to those claiming pension credit.[81] Both Help the Aged and Citizens Advice agreed that many people find the length of the main claim form off-putting.[82]

STIGMA

46. A belief that there is a stigma attached to means-tested benefits may also stop some people claiming council tax benefit.[83] The Audit Commission told us "it is widely recognised that the term 'benefit' may deter some eligible people from submitting a claim".[84] IndependentAge told us that its research indicated that "one in seven pensioners would not undergo means-testing, even if this meant foregoing benefits".[85] The IRRV argues that older people may be put off claiming council tax benefit if they perceive it as state aid rather than a legitimate tax saving.[86]

REBATE

^47.In 2004 our predecessor Committee recommended that council tax benefit should be rebranded as a rebate rather than a benefit in order to improve take-up and to reflect accurately its true nature.[87] At the time the Government was not persuaded that this change alone would be effective in increasing take-up, but agreed to "consider" the proposal, alongside other measures.[88] Sir Michael supported the Committee's original recommendation as well as the reasoning behind it. He pointed out that under the old domestic rates system take-up of the associated rebate was around 75 per cent of all those eligible and was some 90 per cent among eligible pensioner households and therefore significantly higher than current take-up rates for council tax benefit.[89]

48. There was much support for renaming among our witnesses, several of whom argued that it would help to overcome the perceived stigma attached to council tax benefit.[90] The Audit Commission told us that using the term rebate would be consistent with the existing 'Second Adult Rebate' which is already administered by councils and provides a reduction in the council tax bill for some people.[91]

49. Using the term rebate rather than a benefit would also reflect more accurately council tax benefit's true nature as a reduction in tax liability.[92] As the Low Incomes Tax Reform Group pointed out, "no-one suggests that income tax should be based on a flat rate charge and then every citizen should put in a claim for allowances and reliefs in order to receive a rebate".[93] The NPI also argued that rebranding council tax benefit is worthwhile in itself if it "is the linguistic key that allows Government to see council tax benefit as part of the tax system rather than the benefit system".[94] Northgate Information Solutions, a technology services company, questioned whether there was sufficient evidence to demonstrate whether a name change would have a significant impact.[95]

50. Although the Government has not formally responded to Sir Michael's recommendation to call council tax relief a rebate the Minister for Local Government and Community Cohesion told us that the label 'council tax benefit' should be changed "to something that is not 'benefit'".[96] We agree. Removing the erroneous label of 'benefit' from reductions in council tax liability would not only be more accurate but could also reduce any stigma associated with entitlement and therefore serve to increase take up. We recommend an immediate change to describe all reductions in council tax liability as the rebates that they actually are.

POLICY FOCUS ON PENSIONER TAKE UP

51. The Government says "pensioners on low incomes are the most vulnerable people in our society" and that its priority is therefore to increase take-up levels among this group.[97] The Government's basis for the claim of 'most vulnerable' is not obvious but it is clear that take-up rates among pensioners are low and that many are as a consequence paying more council tax than they should. Between £1 billion and £1.4 billion of council tax benefit to which pensioners are entitled to is left unclaimed each year. This equates to around £600 per pensioner household, per year.[98] The Government's efforts to improve take up among pensioners include improvements to the work of the Pension Service and the administration of council tax benefit as well as enhanced data-sharing between the government agencies involved.[99]

THE ROLE OF THE PENSION SERVICE

52. The Pension Service helps pensioners to claim pension-related benefits, the main ones being the state pension and pension credit. It operates through a network of local pension centres and a telephone service. At present those who contact the Pension Service and are eligible for pension credit are also assessed for council tax benefit but telephone customers who are ineligible for pension credit are not, and nor are those who contact the Pension Service to claim state pension only.

53. The Government has taken a number of steps to improve pensioner take up through the Pension Service. In 2005 the Pension Service identified customers in receipt of pension credit but not council tax benefit and passed their details to the relevant local authorities. In a separate exercise the information required to complete the shorter claim form was gathered from the same group of people by telephone. From September 2007 onwards customers who ring the Pension Service to report a change of circumstances will also be asked whether they would like to claim council tax benefit and, if they do, the shortened form will be used.[100]

54. These measures have focused on increasing council tax benefit take up among those eligible for pension credit. As Sir Michael pointed out they do not "simplify the process for up to 1.2 million pensioners who are not eligible for pension credit but are entitled to, and not claiming, council tax benefit. At present those people cannot claim council tax benefit via the Pension Service since telephone calls are terminated at the point at which pension credit eligibility is ruled out.[101]Although much of the information needed to claim council tax benefit is taken in the course of the call these details cannot be retained by the Pension Service's IT systems and are not used. Sir Michael recommended that the Pension Service adapts its IT systems to enable it to act as a portal to rebates for all callers, regardless of pension credit eligibility.[102] Citizens Advice stated that this "would seem eminently sensible".[103]

55. In its written evidence the Government did not favour extending the Pension Service's telephone service to act as a portal for all of its existing callers. It argued that customers who contact the Pension Service to apply for the state pension only are not asked for income-related information as it is not required to determine entitlement to the state pension. If these customers were to be assessed for council tax benefit entitlement as well the duration of each telephone call would be extended, adding to the Pension Service's costs. Doing so could also, according the Government, "raise customer expectations unfairly" as many would not be eligible.[104] The Minister, James Plaskitt MP, appeared to offer a slightly different opinion. In response to our questions on whether the Pension Service should act as a portal for council tax benefit for all callers, he said "Broadly, yes", adding that "I will use any method I can to try and improve the take-up".[105]

56. Requiring the Pension Service to assess all telephone callers for council tax benefit eligibility may be a disproportionate response as a large number may not meet the criteria. It would be less burdensome to extend its council tax benefit portal function just to those who ring to claim pension credit. This would mean not terminating the assessment process where ineligibility for pension credit was established but continuing until council tax benefit eligibility could be determined. The Government stated that an estimated one million pensioners are entitled to council tax benefit but not pension credit but of these some 800,000 do not receive it. Based on these figures we estimate that a^round 80 per cent of the Pension Services' existing callers (a total of 41,185 pensioners whose applications are discontinued) who are not eligible for pension credit may be eligible for council tax benefit and may directly benefit from this extension to the Pension Service's role. We recommend that the Pension Service acts as a portal to council tax benefit for all telephone customers calling to claim pension credit.

57. Anecdotal evidence suggests that there may be room for the Pension Service to improve take up through more marginal measures as well. Citizens Advice reports that its local bureaux find that Pension Service staff visiting pensioners to help them claim pension credit do not always identify those who may be eligible for council tax benefit and therefore calls for all Pension Service staff involved in home visits to be better trained.[106] Improvements could also be made to standard pension credit entitlement letters which at present do not provide information about other benefits. Doing so could improve take up.[107] Any suitable opportunities for signposting pensioners to council tax benefit should be fully exploited, especially where the costs involved are marginal.

WORKING AGE HOUSEHOLDS

58. The NPI and Dr Orton questioned the Government's prioritisation of pensioners over those of working age in its efforts to improve council tax benefit take up. Overall non-pensioners do have a much higher rate of take up than pensioners—76 per cent compared to 53 per cent—but a more detailed breakdown reveals low levels of take up among groups such as couples with children who have a take up rate of between 62 to 69 per cent.[108] Action to increase take up among these households would assist the Government in meeting its objective to eradicate child poverty as well as increasing take up rates across the board.

DATA-SHARING AND AUTOMATIC ASSESSMENT

59. Sir Michael argued that take-up for pensioners would be improved if the Pension Service were able to send automatically information on potentially eligible claimants to the relevant local authority.[109] Local authorities could then use this information to target more effectively efforts to improve take up.[110] They would, for instance, be able to tell potential claimants how much benefit they could receive. The NPI argued that enhanced data-sharing between agencies could also assist with increasing the take up of council tax benefit by non-pensioner households. It called for HM Revenue and Customs (HMRC) to share the data it holds on those that are potentially eligible for council tax benefit with local authorities, arguing that it must hold data for those claiming tax credit.[111]

60. The Government has conducted some research on enhanced data-sharing and the Minister told us that the DWP was "exploring" the potential for further data sharing between departments including HMRC.[112] There are nevertheless still concerns: one argument against greater data sharing centres on privacy issues. Dr Michael Orton, however, said "I do not think members of the public share such fears about data protection".[113] Similarly Help the Aged said "many pensioners we speak to assume that their data is already being shared" between public bodies and therefore did not understand the need to provide data again.[114] The Audit Commission stated that changes would be required to ensure that Data Protection Act requirements were fully met when agencies share data.[115]

61. We recommend that the Government accelerate efforts to promote inter-agency data-sharing, particularly between the Pension Service, HMRC and local authorities, as a means of increasing council tax benefit take up. Supporting research should include an examination of the impact of data protection legislation on the potential for greater data-sharing and options for maintaining privacy for individuals who do not agree to their data being shared.

AUTOMATIC ENTITLEMENT APPROACH

62. As Dr Kenway said "there is an argument, given the difficulties with take up and the expense of take-up campaigns, at least for considering whether one should do something more radical".[116] Other witnesses agreed, some suggesting as one option the introduction of automatic assessment of eligibility before bills are issued to householders.[117] This would remove the need for customers to claim council tax benefit. Sir Michael called for the Government to pursue work on automation "as a matter of urgency" as he believed that automatic entitlement to council tax benefit was essential to increasing take-up rates significantly.[118]

63. Help the Aged argued in favour of an automatic system exclusively for older people. It believes that "the only way the current property based system of local taxation can be made fair for older people is by introducing a system which pays council tax benefit to older people automatically".[119] It justifies limiting automatic entitlement to older people on the grounds that it is easier to do for this group as their incomes tend to vary less than those of working-age people.[120] The IRRV supported consideration of an automatic entitlement for older people.[121]

64. There are, however, a number of difficulties in moving towards automatic entitlement either for pensioners only or more widely. For entitlement to be determined automatically, before bills are issued, the Government would need to have accurate data on incomes. Even in the case of pensioners, as Mr Herbert of Citizens Advice acknowledged, the Government may not have the required information: many do not complete a tax return.[122] The Audit Commission stated that "the more automatic the process the greater risk of fraud, so councils would need to risk assess claims and perform additional security checks".[123]Age Concern agreed that "there are some risks with automatic delivery" although it thought these were "more than outweighed by the real need to make the council tax system fairer for those on low incomes".[124]

65. The Minister, James Plaskitt MP, said that a fully automated system for all potential claimants of council tax benefit would be "very difficult, frankly", particularly for owner-occupiers about whom benefits agencies were unlikely to hold data.[125] He recognised however that it would be easier for other particular client groups such as lone parents who were already in the benefit system.[126] The Pension Service Solution Centre in Glasgow studied the feasibility of introducing an automated payment of council tax benefit as a means to reduce the complexity of the claims process from the perspective of the individual recipient.[127] The Government should publish the findings of the Pension Service solution project on the automated payment of council tax benefit. We recommend that the Government investigates further the feasibility of introducing automatic assessment and billing, starting with those groups for which it could most easily be achieved. Its research should extend to an analysis of the risks of fraud.

GOVERNMENT PERFORMANCE AND INCENTIVES IN RAISING TAKE UP

66. Although council tax benefit payments are made by local authorities, the costs are met in full from central sources. The Government currently spends £3.9 billion on council tax benefit payments each year but, as Sir Michael reported, "up to £1.8 billion per year in council tax benefit entitlement" remains unclaimed.[128] The Government has estimated that a 10 per cent increase in take up (taking the overall take-up figure to 74 per cent) would lead to additional expenditure of £0.4 billion.[129] The perverse incentive is obvious: the more the Government does to increase take up, the more it has to pay out in council tax benefit. Although this is true of all benefits paid by central government, it is particularly noteworthy with council tax benefit, owing to the scale of the savings—£1.8 billion.

67. There is no public service agreement target (PSA) relating to council tax benefit take-up although the DWP does have a PSA target focused on raising pension credit take-up. The Public Accounts Committee noted that the DWP "is currently considering a more general target relating to pensioner poverty and benefits for pensioners in the context of the 2007 Comprehensive Spending Review".[130] A more general target that encompasses council tax benefit and take-up would be a useful way to focus Whitehall's attention on increasing take-up. It would also mitigate at least partly the effects of any perverse incentive. We recommend that the Government encompasses in any general PSA target related to benefits and pensioner poverty promotion of council tax benefit take-up.

Local action on take up

68. Several witnesses highlighted the role of local government in increasing take-up. The IRRV told us:

if the Government is serious about increasing council tax benefit take-up and indeed the take-up of other welfare benefits available to pensioners, it needs to put local authorities at the forefront of that strategy: after all local authorities have a proven track record of managing and delivering change, including major IT projects. They are innovative and have greater flexibility and speedier decision-making processes than the larger government agencies.[131]

Similarly the Audit Commission has found that take-up campaigns are most effective when based on local intelligence and knowledge. [132]

69. Local councils, primarily those responsible for the administration of council tax, pursue a variety of local take-up campaigns. The Local Government Association pointed out that many councils run these campaigns as part of local authorities' overall responsibility for well-being in their areas.[133] Some councils have been very effective in increasing take up either through individual action or with the support of Citizens Advice.[134] In Kent, for instance, different councils' IT systems have been linked making it easier to target support to pensioner owner-occupiers.[135] Kirklees Council introduced a financial incentive, a small council tax reduction, to encourage pensioners to have a 'benefit check'. This resulted in an additional 1,000 council tax benefit claims.[136] Halton Borough Council introduced a 'Benefits Express' service to customers. Mr McCann of Halton Borough Council explained:

we have taken the service to the person's home and we have filled the forms in there with them and processed the claims on-line in the person's home, which removes a great barrier for claiming benefit.[137]

This service has reduced the processing time for claims from an average of eight weeks to less than 48 hours.[138] Local authorities are best-placed to lead on local measures to increase council benefit take up.

MEASURING LOCAL AUTHORITIES' PERFORMANCE

70. Citizens Advice argued that despite some examples of good practice in local action to increase take up, overall performance was "patchy and examples of poor practice continue to be reported by bureaux on a regular basis".[139] It believes that local authorities should be required to take positive steps to identify who should be eligible for council tax benefit.[140]The DWP stated that "it encourages local authorities to undertake take-up activity" through benefit performance standards and good practice guidance".[141] These performance standards are used by the DWP to assess each local authority with responsibility for council tax benefit administration.[142] The performance standards used to focus on administrative efficiency but were extended in 2005 to include take up[143] The current standards now include two 'enablers' (or indicators) encouraging local authorities to promote take up, although the majority of indicators still focus on administrative performance.[144] The Minister for Local Government, Phil Woolas MP, agreed that there was scope for a greater emphasis on outcomes over administration in monitoring local authority performance, although he pointed out that there is a correlation between administrative improvements and increasing take-up—slow and complex systems deter potential claimants.[145] The current performance standards for local authorities should be revised to increase the focus on raising council tax benefit take up not just administrative efficiency.

71. The Government has estimated figures on national council tax benefit take-up rates. These figures are based on data from two sources—the Family Resources Survey and the number of council tax benefit recipients. The Family Resources Survey is a nationally representative sample and cannot be used for local estimates.[146] Local authorities monitor the number of council tax benefit recipients in their areas but they do not know the number of people who are eligible and not claiming. The absence of any local data on council tax benefit take up presents a difficulty in developing performance measures focused on outcomes.

72. A local authority may be very successful in increasing the number of recipients but there could still be a large number of eligible people who are not claiming. Mr McCann of Halton Borough Council explained that "if somebody is at home and not claiming benefit but paying council tax there is no way we would know that those people should be claiming council tax benefit".[147] Similarly, without knowing how many people in an area are eligible for but not claiming council tax benefit it is difficult for local authorities to judge whether local campaigns to promote take up are justified or on which parts of the community they should be targeted. The IRRV has called for the provision of better, more detailed data to local authorities.[148] We recommend that the Government gathers the information required to provide estimates of the numbers entitled to but not claiming council tax benefit by local authority area.

FINANCIAL SUPPORT AND INCENTIVES FOR LOCAL AUTHORITIES

73. The Government provides funding to local authorities to administer council tax benefit. The Local Government Association has argued that it is important that the council tax benefit administration grant is not cut by the Government. It pointed out that the DWP had previously proposed to cut this grant by five per cent.[149] It also stated that the current administration grant does not automatically increase alongside the numbers of recipients because of the lagged nature of the data on benefit recipients. This means that "there is no immediate incentive for authorities to increase take-up" as it will lead to a short-term rise in their administration costs.[150] The Government has provided some limited additional funding to local authorities to increase council tax benefit and housing benefit take-up through a Performance Standards Fund, allocating £2.2 million to 38 local authorities in awards ranging from £5,000 to £300,000.

74. Dr Kenway was "slightly uncomfortable" with the idea of giving a local authority a financial incentive to do "what it ought to do" anyway.[151] The Minister, Phil Woolas MP, argued against introducing direct financial incentives for local authorities to increase take up. We find no justification for financial incentives for local authorities to increase council tax benefit take up.

62 Department for Work and Pensions, Income Related Benefits, Estimates of Take-up 2004/5, 2006, p 62 Back

63 Department for Work and Pensions, Income Related Benefits, Estimates of Take-up 2004/5, 2006, p 62 Back

64 Memorandum from the Department for Communities and Local Government and the Department for Work and Pensions, CTB 15, Annex 7 Back

65 Memorandum from the Department for Communities and Local Government and the Department for Work and Pensions, CTB 15, Annex 7, para 12 Back

66 Memorandum from the Department for Communities and Local Government and the Department for Work and Pensions, CTB 15, Annex 7, para 12 Back

67 Memorandum from the Department for Communities and Local Government and the Department for Work and Pensions, CTB 15, See also Q 89 Back

68 Memorandum from the Department for Communities and Local Government and the Department for Work and Pensions, CTB 15, para 12 Back

69 Memorandum from the Department for Communities and Local Government and the Department for Work and Pensions, CTB 15, Annex 6, Back

70 Memorandum from the Department for Communities and Local Government and the Department for Work and Pensions, CTB 15, para 12 Back

71 Department for Work and Pensions, Income Related Benefits, Estimates of Take-up 2004/5, 2006, p 61 Back

72 Memorandum from the Department for Communities and Local Government and the Department for Work and Pensions, CTB 15, para 10.1.1 Back

73 Q 3 Back