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Wednesday, 25 September 2013

OUT FREEZE ED!

*** WARNING - the information below was updated and was accurate on 10 October 2013. But these deals can be pulled at any time.***


You can freeze your gas and electricity bills for the next four winters. That is two years longer than Labour leader Ed Miliband promised at his party conference this week.

If Labour wins the election in May 2015 he would freeze prices soon after and it would last until January 2017 when a new regime of price controls will begin. But three major energy companies are currently offering fixed tariffs which start now and end around the same time - one ends two months later than Labour's promise.

If you freeze now you will avoid price rises for four winters - including the one coming up. There was widespread speculation before Ed Miliband's speech that British Gas was preparing for a rise of around 8% (£100 on the typical dual fuel bill) and other suppliers would then follow suit.

The deals
Npower Price Protector fixes prices from when you take it out to 31 March 2017 - two months longer than Labour's plans and covering four winters. It costs a bit more than a current standard tariff - £84 a year more - but it will save you money over the next four years. If you're on a better deal than the standard tariff the extra cost of the fixed deal will be more expensive now. But it will almost certainly save you money over that period. There is no penalty for leaving early if a better deal comes along. It is the cheapest and longest lasting of the log fixes on offer. 

EDF Blue+price freeeeze also lasts until 31 March 2017. It is about the same price as the Npower deal and has no penalty for leaving. 

Scottish Power Fixed Price Energy (Help Beat Cancer) fixes to 31 December 2016 - a month before Labour's deal would end. You can leave the deal at any time but there is a penalty if you do of £50 for a dual fuel deal. It is currently almost £100 more than an average standard Scottish Power tariff. 

So what's the catch?
If you fix now with any of these deals you will be paying slightly more now. But as price rises are announced in the next few weeks - as is widely expected - you will beat that rise and may end up paying no more this winter than if you didn't fix. And over the next three winters you will almost certainly save money. Freezing your tariff also has the advantage that you know what you will be paying.

Fixing the price of your fuel is a gamble on future prices. If they go up you will be happy. If they go down you will be out of pocket. But you can leave these three deals at any time - only Scottish Power has a penalty for leaving and it is modest.

These deals are only available to credit customers not prepay customers and savings will be greater if you pay by monthly direct debit and do not get paper bills. They come with a 'dual fuel' discount discount for customers who take gas and electricity - not everyone can. 

Short term fix
If you are not keen on paying a bit more now to freeze your bills for four winters a short term fix may be better for you. First Utility iSave Fixed freezes prices until 30 April 2015 and is the cheapest for an average dual fuel bill user but has a £50 per fuel penalty for early leavers. Pioneer Energy No Worries Fixed lasts for 12 months from when it is taken out and has a £30 per fuel penalty. Scottish Power Online Fixed Price Energy lasts to 31 March 2015 with a £25 per fuel leaving penalty. Npower Online Price Fix lasts to 31 October 2014 (expect it to disappear before that date) and EDF Blue+ Price Promise lasts to 31 March 2015. Neither has a penalty. 

Other choices
In between those eight long and short-term fixes there are seventeen others currently on the market. Before switching do check out the customer service of the energy company you are switching to. Some large and some small have poor reputations. Which? has assessed them here http://www.which.co.uk/switch/energy-suppliers/energy-companies-rated

Price rise speculation

Before Ed Miliband's speech there was widespread speculation in the press that British Gas would shortly announce an 8% increase, adding around £100 to the average annual dual fuel bill. No announcement has yet been made and British Gas refuses to comment but it makes a statement to investors on 14 November and will probably announce any change before that. 

SSE - which owns the Atlantic, Southern, SWALEC, and Scottish Hydro and supplies the M&S Energy brand, has announced a rise of an average 8.2% from 15 November. Inevitably the complex changes mean some will see a lower rise than that and some considerably more. Smaller supplier Ebico also announced a rise from 15 November - in its case of 9.8%. Others are expected to follow suit. 

Some politicians have suggested the SSE rise is to pre-empt Miliband's promised freeze. That is not true. First, we knew prices would rise this winter. Second, it is too long before the May 2015 General Election. Pre-emptive rises next winter cannot, of course, be ruled out. 

The wholesale price of gas - which affects the price of electricity too - has risen since last winter. And wholesale prices make up half the cost of your bill. The cost of transmission (the pipes and wires) is a fifth of your bill and it is also rising. So too is the cost of going green(er) and helping low income families. So the pressure on prices is only upwards. Since 2008 there have been 93 price changes - 72 have been rises.

Switch and save
If you just want the cheapest deal now and don't want to fix, then go to one of the accredited switching sites like Switch with Which (www.which.co.uk/switch/) or www.energyhelpline.com which gives you £15 cash back. The best guide to switching is Money Saving Expert www.moneysavingexpert.com/utilities/you-switch-gas-electricity. It also runs the Cheap Energy Club which helps with the switching process and lets you know if a cheaper deal comes along. 

If you have  never switched and are on a standard tariff then you will always save by switching - on average nearly £200 a year. If you have switched before you will probably be able to find a cheaper tariff though the saving will not be as great.


You will also save more than 5% on your bill by changing to a monthly direct debit if you do not already pay that way. The disadvantage is that the energy company charges you each month on estimated use and you can end up in credit. You should be refunded any surplus once a year – and more often if you ask for it.

Other circumstances
If you are a tenant you can still switch supplier. Ofgem has a guide to that 
https://www.ofgem.gov.uk//publications-and-updates/switching-supplier-quick-guide-tenants

If you are on a pre-pay meter then you can still switch though the choices are more limited and the savings not as great. If you can it is best to change to a credit meter and pay by monthly direct debit. 


If you have a poor credit record or are in debt to your supplier switching may be more difficult.

Friday, 20 September 2013

SWIFTER SWITCHING

The new swifter switching system for current bank accounts was launched this week. But I was very sceptical when the Money Advice Service said that some people could save hundreds of pounds by changing their current account. The MAS (you may have seen its ‘ask MA’ adverts) was set up by Government but is (reluctantly) paid for by the financial services industry.

To mark the start of swifter switching MAS has taken on the difficult task of comparing current accounts and producing a league table of the costs and benefits. It uses information provided daily by the banks to work out the amount of interest – if any – paid and the charges for overdrafts.

The online system allows you to input details of your current account use – how much goes in each month, the typical balance at the end of the  month, and how often you slip into an unauthorised overdraft or exceed an approved overdraft limit. MAS then produces a list of more than 60 current account ranked from the most expensive to the cheapest for those circumstances. 

The results surprised me.

For example, if you pay in £2000 a month, typically have a £250 overdraft at the end of the month and slip six times a year over your overdraft limit the cost can range from nothing (in the first year) via around £150 to £400 with various accounts in major High Street banks to a whopping £1268 with the most expensive. So if you are with the wrong bank moving to the best could save you hundreds of pounds.

And if you are the kind of person who is always in credit with £3000 a month going in and a balance typically of £5000 then the best account will be worth £181 a year minus a £24 fee and the worst – which is most of them – will pay you nothing and charge you nothing.

Of course the results are just a guide and it is hard for anyone to predict what the pattern of their current account use will be in the future. But the tables certainly show just how much better off switching can make you. Try it http://compare.moneyadviceservice.org.uk/currentaccounts/Step1

If you are worried more about ethics than making money then another list provided by the not for profit group Move Your Money may prove useful. It ranks around 90 banks and building societies that provide current or savings accounts using measures which it calls honesty, customer service, culture, supporting the economy, and ethics. On current accounts three building societies take top places with scores of more than 75 out of 100 and two smaller branch-based banks are also in the top ten. At the bottom of the list are the main High Street banks with Barclays taking the worst spot with a score of just 4 out of 100. Try it out at http://moveyourmoney.org.uk which also explains how the scores are worked out and why each bank or building society gets the score it does. 

If you’re feeling twitchy about switching these two websites can at least give some guidance over what you might gain – in cash and a warm fuzzy feeling.

Details of the current account switching service which moves your account in around nine days (seven working days) and promises a refund of any fees or penalties if things go wrong http://www.paymentscouncil.org.uk/switch_service/

The future
Although the new switching service is better than the longer and less certain process we had, it is not what a truly competitive market needs. The only real solution to the lack of competition is full bank account number portability so your unique sortcode+account number would stay with you when you switched from one bank to another. No-one who paid money in or took it out would even know you had changed banks as they would use the same number. But your account on that number would simply be looked after by your new bank. It would be similar to the portability of mobile phone numbers which allows means you to change provider but keep the same number. 

And if another two digits were added to the 14 digit sortcode+account number - making it the same length as a credit card number - then it could contain what is called a checksum digit. That checks that any number is genuine and would end the misery of mistyping a recipient's bank account number and finding your money had gone to a stranger who might resist its return. 

The banks have rejected number portability several times. But one day....

Thursday, 12 September 2013

FOUR OUT OF FIFE

UPDATE 25 SEPTEMBER 2013
The DWP is seeking leave to appeal against the Fife decisions. In an Urgent Circular, which now calls the policy 'Removal of the Spare Room Subsidy (RSRS)', it tells local authorities that overcrowding laws which specify the size of bedrooms are not relevant in assessing what is a bedroom for the purposes of these benefit reduction rules. It does concede that a bedroom must be "large enough to accommodate at least a single bed". But warns that rooms classified by the landlord as bedrooms cannot be discounted just because they are habitually used for something else such as storage by the tenant. 

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/244604/u6-2013.pdf


The Fife decisions
Four council tenants have had their full housing benefit restored after challenging the definition of 'bedroom' in regulations which reduce housing benefit where a home has more bedrooms than the rules allow.

A judge ruled that a room which was too small to be a bedroom or which was being reasonably used for another essential purpose could not be counted as a bedroom.

Background
The cases are among the first to be decided under the controversial 'bedroom tax' rules which lay down how many bedrooms a household needs. If they have more it reduces the help the tenant gets with their rent. The government calls it ‘ending the spare room subsidy’. It is more accurately referred to using words from the Regulations as the housing benefit excess bedroom reduction. Others call it social rented sector size criteria. But that phrase is of little merit.

The policy began on 1 April 2013 for working age tenants who rent their home from a council or housing association. The rules specify how many bedrooms a household can have - one for an adult or a couple, one for a child aged 16 or more, one for two children under 10, one for two children of the same sex aged 10-15, one for an overnight carer. A foster child and some disabled children can also be allowed their own bedroom.

Those rules are fairly precise. But in contrast the Regulations do not define ‘bedroom’ at all. It is left to the local authorities which pay housing benefit to decide what is or is not a bedroom. DWP guidance - which is not binding - says "It will be up to the landlord to accurately describe the property in line with the actual rent charged". (Housing Benefit and Council Tax Benefit Circular HB/CTB A4/2012 para. 12) https://www.gov.uk/government/publications/hb-circular-a42012-housing-benefit-size-criteria-restrictions-for-working-age-claimants-in-the-social-rented-sector-from-1-april-2013

Typically the housing benefit office asks the rent office or the housing association how many bedrooms there are in a property and uses that number to apply the excess bedroom rules. But SG Collins QC sitting as a judge in the Social Entitlement Chamber of the First-Tier Tribunal in Kirkcaldy found that such a procedure was inadequate.

Five appeals by tenants against decisions of Fife Council to reduce their housing benefit were presented to him by solicitor Graham Sutherland of Fife Law Centre. Each of the five was examined on its own facts and in four of them the Tribunal held that a room which had been assessed as a bedroom was in fact not one. It the fifth case the Tribunal ruled that a room used as something other than a bedroom could in fact be counted as one.

Too small
The judge ruled in three cases that a bedroom for an adult had to be at least 70 square feet (6.5 sq. metres) in size. He relied on a law about overcrowding which specified that a room under 70sq ft was inadequate for an adult and between 50 and 70 sq.ft. could only be used by one child under 10 (see Housing (Scotland) Act 1987 s.137). There are similar provisions in England and Wales (Housing Act 1985 s.326). It has never been clear until this judgement whether these rules could be used to define a bedroom in these housing benefit excess bedroom reduction cases.

But Mr Collins was in no doubt "Under-occupancy is the flip side of overcrowding...the disputed room does not properly fall to be classified as a bedroom". He added that a smaller room may be adequate for a carer who occasionally had to stay overnight but not otherwise.

Used for other things
In other cases the judge considered whether the fact the room was used for something else other than as a bedroom meant it could not be counted a one.

Here he laid down clear rules. First that there was 'a well established alternative use of the room' and 'that alternative use is in reality not a matter of choice for the occupant but reasonably required for their continued occupation of the property as their home'.

In one case the Judge ruled that using a room to store gardening equipment such as a strimmer was not reasonable as it could be stored outside in a small shed. The tenant lost his appeal.

In another case he decided that a downstairs room which was the only available space for a wheelchair was a reasonable use and restored the tenant's benefit. And in a third case - which was won by the blind tenant because she was in fact exempt from the rules - he considered that a Braille machine, computer and other equipment to do with her disability may have been a reasonable use of a spare room but he needed more evidence.

Future guidance
The decision of a First-Tier Tribunal is not binding on other cases. But these judgments set down general principles that other lawyers and at least one QC agree with. Because 'bedroom' is not defined in the Regulations, a council which decides on Housing Benefit cannot just rely on a statement from the landlord that the property has a certain number of bedrooms. Each case must be examined on the particular facts to check that a particular room is suitable as a bedroom and, if it is, to consider if it is being reasonably used for something else.

Only if it is physically suitable and is not reasonably being used for something else can it be counted as a bedroom.

Tenants whose housing benefit has been reduced on the grounds they have excess bedrooms could consider if they could appeal on similar grounds to those accepted by Mr Collins’s Tribunal. To do so they may need help either from the local Citizens Advice office or a Law Centre if there is one.

Govan Law Centre has a guide to help tenants challenge the housing benefit excess bedroom reductions http://www.govanhilllc.com/brtax/

Government response
The Department for Work and Pensions says that it is looking into these decisions but they do not alter its policy which is to prevent housing benefit from being paid for a spare bedroom in social housing. That policy is part of its attempts to reduce the £24 billion a year housing benefit bill. It will also help make better use of the available housing stock by encouraging people with spare rooms to move to a smaller property.

The DWP also says it has provided £65 million this year for local councils to support vulnerable residents who are affected by this policy. Tenants can apply to their local authority for a Discretionary Housing Payment to cover the shortfall caused by an excess bedroom reduction. They may not get it.

More information
For my earlier guide to the bedroom tax see http://paullewismoney.blogspot.co.uk/2013/02/the-bedroom-tax.html

Is 'Bedroom Tax' a Tax? http://paullewismoney.blogspot.co.uk/2013/09/is-bedroom-tax-tax.html

And Government attempts to rename 'bedroom tax' 'ending the spare room subsidy' http://paullewismoney.blogspot.co.uk/2013/03/naming-and-blaming-over-bedroom-tax.html

IS 'BEDROOM TAX' A TAX?

UPDATED 25 SEPTEMBER 2013

You all know what I mean by the phrase 'bedroom tax'. It is the reduction in the help with rent given to council and housing association tenants who have more bedrooms than the rules say they should have. The phrase has been used tens of thousands of times since it was first used in early December 2011. One question that seems to worry many people is whether it is an accurate description of the rules.

In one sense of course it's not. It's a two word phrase and the policy itself runs to many paragraphs. Some people including Government Ministers prefer the five word phrase ‘ending the spare room subsidy’. One even gave it the status of initial capital letters recently as ‘ending the Spare Room Subsidy’! More of that phrase later. And now - 23 September 2013 - the DWP has also added the capital letters to the policy which is now referred to in an Urgent Circular to local authorities as 'Removal of the Spare Room Subsidy (RSRS)'. See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/244604/u6-2013.pdf

In fact the policy can be accurately and objectively described in five words taken from the Regulations that introduced it - housing benefit excess bedroom reduction. 

But is ‘bedroom tax’ accurate so far as it goes?

No-one disputes the policy is about bedrooms. The number of those is at the heart of it. A single person in a two bedroom flat has one more bedroom than the regulations specify and their housing benefit will be reduced by 14% as a result.

The argument is whether that 14% reduction is correctly described by the word 'tax'.

The definitive guide to the meaning of English words is of course the Oxford English Dictionary, the OED.

tax, n.
1.a. A compulsory contribution to the support of government, levied on persons, property, income, commodities, transactions, etc., now at fixed rates, mostly proportional to the amount on which the contribution is levied.

That doesn't seem too far off describing the housing benefit excess bedroom reduction. It is compulsory for those to whom it applies as it is laid down in Regulations. It does support government because it is part of attempts to cut the £24bn annual cost of housing benefit and itself is estimated to save government about £500mn of that. The rate is fixed and at 14% of the rent (or 25% for two excess bedrooms) so it is certainly proportional to the amount on which it is levied.

So on the face of it the reduction is a 1.a. tax.

Hang on hang on, critics say. A tax has to be levied on one's own money. This is not levied on money these people have earned but is just a reduction in the money society gives them. Taking less off the government is not the same as giving it money! So it is not a tax. That initially plausible argument is completely undermined by the fact that removing child benefit from high earners is a tax. Details below.

And in any case 1.a. is just the start.

1.b. The rate at which anything is charged.

Even though it has not been used since 1455 (that's the OED for you!) that certainly could describe the rates of 14% and 25% which are after all the reduction itself. But there is more.
 
2. fig. Something compared to a tax in its incidence, obligation, or burdensomeness; an oppressive or burdensome charge, obligation, or duty; a burden, strain, heavy demand.

So if anyone commonly compares the housing benefit excess bedroom reduction to a tax in those ways then it is, well, a tax. That's how language works. And many of those whose benefit is reduced say that it is oppressive, burdensome, a strain and a heavy demand. You may not agree with them. But under this definition it is a tax, both ways.

Now, how does the OED define 'subsidy'. Oh!

subsidy, n.
2.a. A tax...

I think I'll leave it there! But no you say tell us more. OK. The more common modern usage of ‘subsidy’ is

3.a. A donation of money or other property, usually made to provide assistance.

So. If housing benefit is a subsidy then it's a donation. And taking part of it away after it has been given (and that is how the regulations work) seems to get us back to the 1.a. tax.

OED? More like QED!

Child Benefit analogy
Housing Benefit is not the only benefit which is taken away from people. Child Benefit is taken back if the income of either partner in a household exceeds about £50,000 (full details of this in my blogpost here http://goo.gl/dU850w

The reduction of child benefit, which can be between 1% of the benefit and 100% of it, is done through income tax. The rules are set out in the Finance Act 2012 Schedule 1. It inserts a new section in the Income Tax (Earnings and Pensions) Act 2003 which reads 

              681B                 High income child benefit charge
(1) A person (“P”) is liable to a charge to income tax for a tax year if—
(a) P’s adjusted net income for the year exceeds £50,000, and
(b) one or both of conditions A and B are met.

(2) The charge is to be known as a “high income child benefit charge”.

More conditions follow. But this law clearly says that taking away child benefit is done through income tax - and collected through self-assessment. If taking away child benefit is a tax than by analogy so is the housing benefit excess bedroom reduction. 

Or perhaps Ministers will start referring to the child benefit charge as 'ending the high income progeny subsidy'! We shall see.