THE BEDROOM TAX

UPDATE (2) 6 MARCH 2014
A tenant who was born 5 April 1952 or earlier or has a partner of that age is exempt from the reduction. See paragraph 47 of this official guide. They may also qualify for more housing benefit due to their age. They may also be able to claim pension credit and or get more help with their council tax through Council Tax Support.

UPDATE 6 MARCH 2014
The loophole in the law which allowed thousands of tenants to escape the excess bedroom reduction has been closed. From 3 March 2014 people who have been in their homes continuously from 1 January 1996 and claimed housing benefit for that entire period will now be subject to the rules. They can still claim a refund of any housing benefit deducted from 1 April to 2 March. That 48 week refund will average nearly £700. But from the week of 3 March 2014 they will be subject to the reduction. Any Discretionary Housing Payment made before the change in the law can kept. The regulations to close the loophole were debated in parliament on 26 February and approved by 304 votes to 253.

The DWP sticks by its estimate that around 5000 tenants were wrongly charged. But the Labour Party has used Freedom of Information requests to get the figures of those affected from every local council in Britain. 209 out of 378 have responded and the total at 5 March was 22,941 implying an eventual total of more than 40,000. The Government disputes those figures saying local councils gave "the numbers of people who might be affected and the numbers of cases they were investigating but the Opposition had added them together". Labour stands by its figures.

UPDATE 1 MARCH 2014
Tribunal decisions on housing benefit reductions for excess bedrooms are coming in thick and fast. The 'Nearly Legal' blog keeps an updated list of them here.

UPDATE 21 FEBRUARY 2014
The Court of Appeal has rejected a claim by some disabled tenants whose housing benefit was cut. They argued that the law discriminated against them as disabled people and was therefore unlawful. The Court held that it did discriminate but that the discrimination was justifiable and the Secretary of State had fulfilled his obligation to consider that. Read the judgement.

UPDATE 14 JANUARY 2014
A judge in a First Tier Tribunal in Liverpool has held that the regulation which specifies how many bedrooms are allowed 'pre-supposes that to be classified as a bedroom, a room should be large enough to be appropriate for use as a bedroom by an adult or by two children" The judge also said "that under-occupancy can be seen as the flipside of overcrowding" and "having regard to the legislation governing overcrowding that sets out statutory space standards " "the two disputed rooms are too small to be classified as bedrooms". Read the judgement. 

UPDATE 9 JANUARY 2014
The DWP has confirmed that tenants who have claimed some Housing Benefit continuously from 1 January 1996 or earlier and who are have lived in the same property since 1 January 1996 should never have had the excess bedroom reduction made. The officials who drafted the 'bedroom tax' law forgot to include them in it. They can reclaim money deducted back to 1 April 2013. The rules will be changed to include them in future but the DWP seems in no hurry to do that and I understand any change will not be retrospective. It may be changed from April this year. Estimates of how many will be due a refund vary. Unnofficial guidance puts it in the low thousands, perhaps 2000 to 4000 households. Others believe it will be a lot more. The details of the error and action to be taken are set out in DWP Circular HB U1/2014. More here http://goo.gl/jReHjq

UPDATE 25 SEPTEMBER 2013
The DWP has issued an Urgent Circular about what it now calls 'Removal of the Spare Room Subsidy (RSRS)' and recent tribunal decisions. The DWP says it will seek permission to appeal against these decisions. 

Meanwhile it says that overcrowding laws which specify the size of bedrooms are not relevant in assessing what is a bedroom. Nevertheless a bedroom must be "large enough to accommodate at least a single bed". Rooms classified by the landlord as bedrooms cannot be discounted just because they are habitually used for something else such as storage. See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/244604/u6-2013.pdf

UPDATE 12 SEPTEMBER 2013
A Tribunal in Scotland has decided that rooms that are too small and rooms used for other essential purposes should be ignored when the 'bedroom tax' is assessed. See http://paullewismoney.blogspot.co.uk/2013/09/four-out-of-fife.html 

UPDATE 30 JULY 2013
The High Court held today that the regulations introducing the housing benefit restrictions for people in social housing with more bedrooms than specified for their household did discriminate against disabled people. However, it held that the discrimination was lawful in the case of adults as it was justified. But it held the discrimination was unlawful in the case of disabled children who were unable to share because of their disability. At the moment the rules about the bedrooms needed by children are waived by concession for households with a disabled child, following earlier court action. The Court ordered that regulations to implement that change be made speedily to ensure that there is “no deduction of housing benefit where an extra bedroom is required for children who are unable to share because of their disabilities.” 

Lawyers for the ten families who took the case to the High Court say they will appeal the ruling. The DWP which has already accepted the position regarding children has said regulations will be made. 

At the same time the DWP announced another £35 million to ease the transition to the new rules. Welfare Reform Minister Lord Freud said of the judgement 

"Reform of housing benefit is essential. The removal of the spare room subsidy means proper support for the household remains, but the taxpayer does not pay for people’s extra bedrooms.

DWP release here http://goo.gl/3qzcFQ 
Leigh Day (solicitors for some of the applicants) statement here http://goo.gl/msjGIm
Hopkin Murray Beskine (solicitors for some of the applicants) statement here http://goo.gl/Zix9QO 
The judgement itself http://goo.gl/mWMnny

UPDATE 14 MARCH 2013
The bedroom tax isn't really a tax. It is a reduction in the help you get with your rent if you have a spare bedroom. The shortest accurate way to describe it is an ‘under-occupation charge' or an 'excess bedroom reduction'. I call it simply ‘the charge’ in this note – or sometimes the bedroom tax.

The charge only applies to tenants of a council or housing association. It does not apply to people who rent from a private landlord. They face separate and different restrictions on the size of their home and the rent they can claim for.

The charge does not apply to people over the age at which women can claim the state pension. When the bedroom tax begins that was around 61y 6m. By April 2014 it will be 62. On 1 April when the new rules start they will not apply to any tenant if they or their partner was born on 5 October 1951 or earlier. People who reach women's state pension after that will no longer have the charge imposed.

The charge applies to England, Scotland, and Wales. It will be introduced at some point in Northern Ireland but may only apply to new tenants not to existing ones.  

Bedroom needs

You are allowed one bedroom for each

• Single adult – including a boarder or lodger
• Couple
• Foster child - subject to certain conditions (this change was announced 12 March) 
• Child of yours, but
• Two children of yours under 10 will be expected to share a room and
• Two children of yours under 16 of the same sex will be expected to share a room
• A carer or carers from outside if someone in the household needs night-time care every night.

Foster children

In a concession announced on 12 March approved foster parents will be allowed a room for a foster child if they are fostering a child, have fostered one in the last 12 months, or have been approved in the last 12 months. It is not clear yet if the room sharing rules will apply to foster children.

Severely disabled children
Severely disabled children should be allowed a room of their own if their condition makes it unreasonable for another child to share with them. A Court of Appeal judgement on 15 May 2012 decided that to make such children share a room was indirect discrimination on grounds of disability. On 12 March 2013 the Government announced that it would not appeal against the decision so it is now the law and overrides the regulations on the under occupation penalty. The appeal was dropped six days after PM David Cameron told Parliament 'people with severely disabled children are exempt'. They weren't then. They can be now.

Disabled people

If a home has been adapted for a disabled person and there is a spare bedroom used for equipment or other purposes it will NOT be exempt. You will have to apply to the discretionary fund. The Gorry ruling only applies to disabled children. It does not apply to an adult couple who cannot share a room due to a disability. Though it could be used to argue for that. Other cases are pending. 

What is a bedroom?

There is no definition of a bedroom. It is defined in the tenancy agreement and Parliament was told on 11 March the charge "will take account of the number of bedrooms as designated by the landlord. The number of bedrooms within a property is a matter between the landlord and tenant."

Knowsley Housing Trust in north west England has decided to redefine 566 homes from 2 and 3 bedroom to 1 and 2 bedroom so tenants are not subject to the charge. The DWP has told me it intends to make no changes in the law following Knowsley’s action.

The Housing Act 1985 lays down the minimum number of rooms and the size of rooms required before a dwelling is overcrowded. Section 326 specifies that a room of less than 70 sq ft (6.5sq.m.) is not suitable for one person. A Tribunal in Scotland has said that similar Scottish legislation can be used to establish that a room that is too small on these criteria should NOT be counted as a bedroom and should be excluded from the number when the deduction is assessed. See http://paullewismoney.blogspot.co.uk/2013/09/four-out-of-fife.html 

A tribunal in Liverpool has made a similar finding and held that the regulations must assume that a room counted as a bedroom is big enough to be one. .

Reduced rent

The charge reduces your eligible rent when your housing benefit is worked out. There are two rates. If you have one extra room the charge is 14% of your eligible rent. If you have two or more extra rooms it is 25% of your eligible rent.

The effect will be that 40,000 lose all their housing benefit and 620,000 lose an average of £15 a week. Almost two thirds of those affected will be disabled or have a disabled partner.

The DWP has told me recently the policy will save an estimated £505 million in 2013/14 and £540 million in 2014/15, slightly more than its initial assessment in 2012.

No move possible

One purpose of the new rule is to encourage people with more bedrooms than they need to move to smaller accommodation. But that will often not be possible as there is a shortage of smaller homes in many areas. Even if no smaller accommodation is available the charge will still be made. And it will still be made even if the council originally allocated the tenant to the accommodation that is now deemed to be too big. For example single people are sometimes put in two bedroom high rise flats because councils would rather not put families with children in them.

Parliament was told on 12 March "There are 249,000 overcrowded households in the social sector, while nearly 1.5 million under-occupy." 

So fewer than half of the 660,000 affected by the under-occupation charge could, even in theory, free up a home for an overcrowded family. 

The Government has promoted a national social housing home swapping service run by organisations such as www.homeswapper.co.uk. If a move is possible then an application should be made to the local council for moving costs. It may not be successful.

Separation

If a couple separate but continue to live in the same home the DWP tells me they will be counted as two separate adults - that will apply whether they were originally married or civil partnered or not. If they live in separate homes the parent who is the primary carer will get the bedroom allocation. If the parents genuinely share the care of the children then the one who gets the child benefit will get the allocation. If they have more than one child and they each get child benefit for at least one child it is possible they may each get a bedroom allocation for those children.

Grown up children

Once a child of the family reaches 16 he or she can have a room of their own. If they stay in education and normally live in the family home then their room will not be counted as spare. If they go away to study then their room will not be counted as spare for 52 weeks. But if the local council decides that the family home is not the student’s main residence and they will not return there then their room will be counted as spare.

Once they a child leaves education and looks for work or gets a job or claims jobseeker’s allowance then different rules apply. If they still live in the home an amount known as a non-dependant deduction will be taken off the housing benefit. That deduction is between £13.60 and £87.75 a week depending on their income.

If a room is left empty by someone on active military duty it will not be counted as spare and the non-dependant deduction will not apply when they are not living there. This concession was  announced on 12 March 2013.

Normally if a room is left empty it will count as a spare room after 13 weeks. However, if someone dies and that leaves the home with a ‘spare’ room it will not be counted as spare until 12 months after the date of death. 

Shared ownership

Where a home is part rented and part being purchased the charge will not apply.

Recently unemployed

Someone who has recently become unemployed and begun a claim for housing benefit may not have the charge applied for 13 weeks.

Discretionary Housing Payments

People who will suffer hardship as a result of these changes can apply for a payment from the local council’s discretionary housing fund which is being increased by £25 million for this purpose. People with disabled children are expected to be the main group helped. A further £5 million on the discretionary fund to help foster parents was withdrawn on 12 March when the change was made to allow them a room within the rules.

Renting

People affected may be able to rent out the spare bedroom if they get permission from their landlord. Any rent received would be counted as income – though the first £20 would be ignored – and that would reduce housing benefit still further and affect other means-tested benefits as well. No tax is due on renting out a spare room unless the rent exceeds £4250 a year (£81.73 a week).

Universal Credit

The introduction of Universal Credit has been very delayed though a very few people are now being put on it. Under-occupation rules will still apply but they are slightly different and the details are not covered in this blogpost. In particular a couple will both have to be over women's state pension age to be exempt from the rule. And the bereavement concession of 12 months will be reduced to three. 

Further information

Housing benefit circular from DWP setting out the new rules http://www.dwp.gov.uk/docs/a4-2012.pdf

Concession on foster parents and armed forces http://www.parliament.uk/documents/commons-vote-office/March-2013/12-3-13/6.WorkandPensions-HousingBenefitreform.pdf

DWP Impact Assessments http://www.dwp.gov.uk/docs/social-sector-housing-under-occupation-wr2011-ia.pdf and http://www.dwp.gov.uk/docs/eia-social-sector-housing-under-occupation-wr2011.pdf which includes information on family type and disability

Renting out a room http://www.dwp.gov.uk/docs/hb-factsheet-renting-spare-room.rtf

Discretionary housing payments http://www.dwp.gov.uk/docs/hb-factsheet-claiming-dhp.rtf

Earning more to pay the charge http://www.dwp.gov.uk/docs/hb-factsheet-additional-income.rtf

Redefining homes to have fewer bedrooms http://www.insidehousing.co.uk/tenancies/tenants-avoid-bedroom-tax-after-knowsley-reclassifies-homes/6525752.article

Gorry case – and Burnip and Trengrove http://www.cpag.org.uk/content/disability-and-discrimination-court-appeal-upholds-rights-disabled-people

The Housing Act 1985 s.326 http://www.legislation.gov.uk/ukpga/1985/68/section/326

Bedroom definition http://www.publications.parliament.uk/pa/cm201213/cmhansrd/cm130311/text/130311w0004.htm#13031160000084

Overcrowding figures http://www.publications.parliament.uk/pa/cm201213/cmhansrd/cm130312/text/130312w0003.htm#13031273000072

An updated list of Tribunal decisions is kept on the nearly legal blog http://nearlylegal.co.uk/blog/bedroom-tax-ftt-decisions/

Version 1.65
6 March 2014

HMV BOUGHT BY HILCO 141 SHOPS AND 2,643 JOBS SAVED

UPDATE 5 APRIL 2013
Administrators Deloitte have sold the HMV retail business as a going concern to Hilco. 141 shops (list below) and the group head office and distribution functions are transferred to Hilco safeguarding 2,643 jobs. 

The 141 stores included in the sale are:

Aberdeen, Ayr, Banbury, Bangor (Wales), Basildon, Basingstoke, Bath, Belfast Donegall Arcade, Birmingham Bullring, Blackpool, Bluewater, Bournemouth, Bradford, Brighton Churchill, Bristol Broadmead, Bristol Cribbs, Bromley, Bury, Bury St Edmunds, Cambridge, Canary Wharf, Canterbury, Cardiff, Carlisle, Chelmsford, Cheltenham, Chester, Chichester, Colchester, Coventry, Crawley, Cwmbran, Darlington, Derby, Doncaster, Dundee, East Kilbride, Eastbourne, Edinburgh Fort Retail, Edinburgh Ocean Terminal, Edinburgh Princes Street, Exeter, FOPP Bristol, FOPP Cambridge, FOPP Covent Garden, FOPP Edinburgh, FOPP Glasgow Byres Road, FOPP Glasgow Union Street, FOPP Gower Street London, FOPP Manchester, FOPP Nottingham, Gateshead, Glasgow Argyle, Glasgow Buchanan, Glasgow Fort, Gloucester, Grimsby, Guernsey, Guildford, Hanley, Harlow, Harrogate, Hastings, Hatfield, Hereford, High Wycombe, Horsham, Hull, Inverness, Ipswich, Isle of Man, Isle of Wight, Islington, Jersey, Kettering, Kings Lynn, Kingston, Leamington Spa, Leeds Headrow, Leeds White Rose, Leicester, Lincoln, Liverpool One, Livingston, Llandudno, Maidstone, Manchester 90 Market Street, Manchester Trafford, Mansfield, Merry Hill, Middlesbrough, Milton Keynes, Newcastle, Newport (Wales), Northampton, Norwich Gentlemans Walk, Norwich Chapelfield, Nottingham Victoria, Nuneaton, Oxford, Oxford Circus, Peterborough Queensgate, Plymouth Drake Circus, Poole, Portsmouth Commercial Road, Portsmouth Gun Wharf Quay, Preston, Reading Oracle, Romford, Selfridges Oxford Street, Sheffield High Street, Sheffield Meadowhall, Shrewsbury, Solihull, Southampton, Southend Victoria, Southport, Speke Park, Staines, Stevenage, Stirling, Stockport, Stratford upon Avon, Stratford City Westfield, Sunderland, Sutton, Swansea, Taunton, Thanet, Thurrock, Truro, Tunbridge Wells, Uxbridge, Westfield London, Wimbledon, Winchester, Wolverhampton, Worcester, Worthing, Yeovil, York.

20 February - HMV administrators have announced a further 37 store closures affecting 464 staff - expected to close in 4-6 weeks. They are 

Ashford, Basildon, Bolton, Cheltenham, East Kilbride, Enfield, Folkestone, Glasgow Argyle, Gloucester, Grimsby, Hatfield Galleria, Heathrow T5 Departure Level, Heathrow Terminal 1, Heathrow Terminal 3, Heathrow Terminal 4, Hemel Hempstead, High Wycombe, Isle of Wight, Lancaster, Leadenhall, Mansfield, Middlesbrough, Newbury, Newcastle Silverlink, Newport, Nuneaton, Redditch, Salisbury, Scarborough, Southport, Stafford, Staines, Stockport, Swindon, Taunton, Torquay, Woking.

The 66 stores already identified for closure - announced on 7 February - are:

Ashton-under-Lyne, Ballymena, Barnsley, Bayswater, Belfast Boucher Road, Belfast Forestside, Bexleyheath, Birkenhead, Birmingham Fort, Blackburn, Boston, Bournemouth Castlepoint, Bracknell, Burton-upon-Trent, Camberley, Chesterfield, Coleraine, Craigavon, Croydon Centrale, Derry, Dumfries, Durham, Edinburgh Fort, Edinburgh Gyle Centre, Edinburgh Ocean, Edinburgh Princes Street, Edinburgh St James, Falkirk, Fulham, Glasgow – Fort, Glasgow – Silverburn, Glasgow Braehead, Huddersfield, Kirkcaldy, Leamington Spa, Leeds White Rose, Lisburn, Loughborough, Luton, Manchester 90, Moorgate, Newry, Newtonabbey, Orpington, Rochdale, Scunthorpe, South Shields, Speke Park, St Albans, St Helens, Stockton-on-Tees, Tamworth, Teesside, Telford, Trocadero, Wakefield, Walsall, Walton-on-Thames, Wandsworth, Warrington, Watford, Wellingborough, Wigan, Wood Green, Workington, Wrexham.

PAYING FOR CARE - THE COALITION PLANS

UPDATED JANUARY 2015

UPDATE 17 MARCH 2013
The Chancellor announced on the BBC's Marr show on Sunday 17 March 2013 that the reforms would be brought forward and start in April 2016. The 'cap' of £75,000 will be £72,000 to reflect the earlier date. No other changes were announced but the other figures may be refined downwards too.

Coalition plans
On Monday 11 February 2013 the Coalition Government published the details of its plans to reform the state subsidy for long-term care of the elderly in England. The Government says It has three main elements

• A cap of £75,000 (which will now be £72,000) on the cost of care anyone would be expected to pay.
• An increase to £123,000 (now to be £118,000 for those with a home being taken into account and £27,000 for those without a home being taken into account) (from £23,250) in the amount of savings someone can have and still get some contribution to the cost of care.  
• A guarantee that no-one would have to sell their home in their lifetime to pay for care

The scheme will cost an extra £1 billion a year by 2020 and help an extra 100,000 people with the cost of long term care in old age.

What's not to like? 

WITH UPDATED FIGURES 
The £72,000 cap
The cap on care costs of £72,000 is in fact not a cap of £72,000 on care costs. 

1. The figure of £72,000 only covers the cost of the care given in the residential care home. It does not cover the hotel costs of accommodation and food. That will capped at £230 a week or £11,960 a year. Those costs will have to be met even when the Government meets the cost of the care itself.

2. The figure of £72,000 is not the amount the individual has spent. It is the amount of care that could be bought at the rate paid by the local authority. For example, if a local authority was willing to pay £411 a week for the care then £72,000 would buy about 175 weeks of care. So to reach the cap an individual would have to buy 175 weeks of care - whatever price they paid. To buy that same care privately the cost would be more - probably around £530 a week. For the cap to come into play the individual would have to spend 175 weeks at £530 - a total of  £92,750 on care. In addition throughout the 175 weeks - about 3 years 4 months - they would have spent £12,000 a year on hotel costs, another £39,600. So altogether the individual would have paid out £132,350 before the '£72,000' cap was reached. After that the £12,000 a year hotel costs would continue. Because the cost of care varies throughout England, the actual cost that has to be met before the cap is reached will different in every local authority area. Find out what you will need to spend in your area with the BBC Care Calculator. 

3. If the person reached the cap in their £530 a week care home the local council would still only pay £411 a week. If the home refused to renegotiate a lower figure then the individual would have to find another £119 a week towards their costs. At the moment a top up cannot be paid by the resident themselves, only by relatives or friends. Care Minister Norman Lamb has indicated that rule will be changed to allow the resident to pay. With the hotel charges that would mean an annual cost of £18,148 even after the cap was hit.

Savings limit increased to £118,000
The £118,000 savings limit means that anyone who has capital including an empty home which exceeds that figure will have to pay all of their care home costs, until of course the cap is reached. Below that figure a sliding scale will determine the contribution they make. Based on figures given by the Department of Health someone with £100,000 savings would have to pay £330 a week towards their fees. Someone with £50,000 would have to pay £130 a week. Only if savings fell below £17,500 would the local council pay the whole bill. The income means test will however take almost all the resident's income leaving just £24.40 (2014/15 rate; it will be higher in 2016/17) a week personal expenses.

Your home is safe
This claim is perhaps the most disingenuous of them all. No-one – I repeat NO-ONE, again NO-ONE – can be forced to sell their home to pay for their care at the moment. Some of the estimated 19,000 who do so each year are deceived into it by cash-strapped local councils who wrongly tell them they must, aided and abetted by false headlines in the press. But some of the 19,000 choose to use the value of their home to pay for better care than the local council will give them. And why not?

Instead of selling their home a resident can enter into a deferred payment arrangement, which was introduced by the last Government in October 2001. It was “to ensure that people…are not forced to sell their homes as soon as they enter residential care.” It would “help…people who do not want to have to sell their homes in their lifetimes to pay for their care by making loans more widely available”.

Over the years the scheme has become compulsory. In 2009 the Department of Health issued a circular LAC (DH)(2009)3 which said Ministers expected councils to offer deferred payment schemes and “it is the Department’s view that if a local authority were to have a policy of never exercising its discretionary powers to make deferrals, it is likely the courts would find this to be unlawful.”

The most recent figures showed that 8,500 people are currently in such schemes with a total debt of £197 million – an average of £23,000 each. Lawyer Lisa Martin of Hugh James confirms that in her long experience anyone who asks for a deferred payment arrangement – and insists they have a right to it – will get one. But even if they don’t all they have to do is refuse to pay. The local council still has to provide care and take a charge against an empty home so the bill is paid after death. That power was given thirty years ago in s.22 of the Health and Social Services and Social Security Adjudications Act 1983 (HASSASSA).

In either case no interest is charged on the debt while the resident is in care and that concession lasts for an extra 56 days after death with a deferred payment scheme.

Those are the rules now and they apply throughout the UK. The Government plans to replace them in England by a universal deferred payment scheme that local councils will have a legal duty to apply. So far so good. It will take hassle away. But under the new scheme interest will be charged on the debt from the moment it begins. And the backstop provision under HASSASSA will be repealed. That new scheme will begin in April 2015, one year before the other reforms. 

The price
The extra cost of the new scheme will be around £1 billion a year in 2019/20 though official figures show it at almost £2 billion by 2025/26. It will be paid for by two sources of money. 

1. The Chancellor has done a u-turn and reversed a promised rise in the threshold at which inheritance tax becomes payable. It will now not rise by £4000 in 2015/16 but will stay frozen at £325,000 until the end of 2017/18. That will pay for about a fifth of the cost. It will be an extra tax of £1600 on estates in 2015/16 and £7120 or more by 2019/20 compared with an increase in the threshold in line with inflation.
2. The other four fifths will come from the extra revenue generated by changes to National Insurance which are part of the state pension reform announced on 14 January. Then it was said to be revenue neutral year by year. In other words extra costs would be balanced by extra income or savings. Now, three weeks later, there is what is called 'headroom' to fund four fifths of the care reform package. No figures have been given to justify this claim.

The changes to inheritance tax and national insurance apply throughout the UK. So unless some specific provision is made, the tax generated from Scotland, Wales, and Northern Ireland will be used to fund the care reform package in England. 

The gainers
The new expenditure will go mainly to the richest. Department of Health analysis shows that in 2025/26 the extra cost will be nearly £2 billion and of that about £710m will go to the richest fifth of the population and an extra £640m to the second richest fifth. So that richest 40% of people will get more than two thirds of the extra money. About £420m extra will go to the middle fifth, and £210 million to the second to poorest fifth. That 40% of the population get just under a third of the extra subsidy between them. The poorest fifth will get no more money spent - their care costs are met in full already. NB these figures are my estimates from a Dept of Health graph. The figures behind it are being kept a state secret. FOI is in. 

Conclusion
The new scheme will still be a highly complex mixture of a means-test on income and assets topped off by a cap fixed in terms of care provided which will differ in amount in every local authority area. The biggest share of the extra cost of the new scheme will go to the better off - more than a third of it will go to the richest 20% of those in care. The new scheme for protecting the value of a home will in fact cost individuals more than the present scheme. And English care costs could be subsidised by extra taxes raised in Scotland, Wales, and Northern Ireland. 

What's not to like?

£130 OFF YOUR WINTER ELECTRICITY BILL

The big six energy suppliers are spending £1 billion over four years to give some low income customers a discount off one winter electricity bill. This year the discount is £130 and around two million households are eligible.

Pension age – ‘core group’

People over pension age on pension credit qualify for the discount if their income is below around £143 single or £218 (couple). That has to be true on 21 July 2012. People already 80 on that day qualify with a slightly higher income – below £161 (single) or £241 (couple). Some people with disabilities or carers can have higher incomes and still qualify. There are reckoned to be more than a million in this ‘core group’ and they should get the discount automatically – the energy supplier will match their details to a list provided by the Department of Work and Pensions.

Low income

Low income households can qualify for the discount if they apply for it. This is called the ‘broader group’. Each of the big six energy suppliers has its own rules about who qualifies in this group. Generally it is households on a low income where the customer or their partner or child is disabled or they have a child under 5. But each supplier has its own detailed rules and they are all different from each other. Some suppliers also include people over pension age on pension credit who do not get the automatic ‘core group’ payment. See 'Details' below for the six different schemes.

Apply

You apply to your energy company. Find it online or call the customer number no your bill. Ask about the Warn Home Discount. See 'Details' below for contact numbers for each scheme.  

Prepay

You can get the discount however you pay your bill. So it includes people on prepayment meters as well as those who pay quarterly or by monthly direct debit. People on prepayment meters will get a credit to put no their key. Some may get a cheque. More here http://cfe.custhelp.com/app/answers/detail/a_id/6709

PROBLEMS

Big six only

Only the big six energy suppliers are part of the scheme. People with smaller suppliers and those in Northern Ireland will generally NOT get the discount.

The big six are:

British Gas (includes Sainsbury’s Energy), EDF Energy, E.on, npower, Scottish Power, SSE (includes Atlantic Energy, Scottish Hydro, Southern Energy, SWALEC, Ebico, Equipower, M&S Energy).

Utility Warehouse and Equigas give the discount to those in the core group only. People with the other smaller energy companies and those in Northern Ireland will NOT get the Warm Home Discount.

Social tariffs

Before 2011 people on low incomes could pay less for their energy through what were called ‘social tariffs’. They included schemes like Energycare Plus, Energy Assist, Essentials, Fresh Start, and Spreading Warmth. These schemes are closed to new applicants and are being phased out. But some people may still get them and they cannot get the Warm Home Discount as well.

Deadlines

The discount has to be made by 31 March 2013 and applications in theory can be accepted up to that date. However, some suppliers have earlier deadlines. British Gas says you have to apply by 31 December and E.on will only accept applications up to 24 January but both may be flexible. If you qualify it is best to apply as soon as possible.

Run out of cash

Even if you fulfil the conditions you may not get the discount. There is a fixed amount of money for the broader group scheme and once that runs out no one else will be paid. However, no supplier has run out yet.

Not paid automatically

If you are in the ‘core group’ of people on pension credit but have not been sent a letter you should contact your supplier and ask why. It is possible that the information held by the DWP is slightly different from the details held by the energy company and you are in what is called an ‘unmatched’ group. Call 0845 603 9439 to get it sorted out.

MORE DETAILS

The core group is defined as people on pension credit who get ONLY the guarantee credit and do NOT get any savings credit. However, people born 21 July 1932 or earlier qualify even if they get guarantee credit even if they also get some savings credit.

In general the date when you have to fulfil the conditions for the Warm Home Discount was 21 July 2012. If you have moved supplier since then it can get complicated. Ask your existing supplier what to do. Remember it is your electricity supplier who pays the discount. That is because everyone gets an electricity bill but not everyone has piped gas.

The broader group is defined differently by each of the six energy companies. You can read the details of each six and how to apply here

British Gas http://cfe.custhelp.com/app/answers/detail/a_id/6622

EDF Energy http://cfe.custhelp.com/app/answers/detail/a_id/6641

E.on http://cfe.custhelp.com/app/answers/detail/a_id/6643

npower http://cfe.custhelp.com/app/answers/detail/a_id/6642

Scottish Power http://cfe.custhelp.com/app/answers/detail/a_id/6644

SSE http://cfe.custhelp.com/app/answers/detail/a_id/6623

Thanks to Consumer Focus for that information.

There is a Warn Home Discount helpline on 0845 603 9439

CPP FINED BUT BANKS IN THE FRAME

When I appear on BBC Breakfast I write a cue and notes of what I am going to say. I never read it but it is a useful aide memoire for me. And where there are allegations it ensures I get them right and am fair and balanced.

This morning my spot on BBC Breakfast was stood down for some breaking news. These things happen. But here are the script and notes I wrote about CPP and its mis-sold insurance products.

CUE: A firm which sold millions of people insurance against ID theft and loss of their bank cards has been fined more than £10 million by the financial regulator and told to pay compensation to customers.

CUE: The Financial Services Authority revealed that CPP had told customers untruths and misled them while selling the insurance, which was unlikely to pay out in any normal circumstances. Paul Lewis is in our London studio

Q: What did CPP sell and why was it mis-sold?

PAUL: Two products were mis-sold. What CPP called card protection plans which were supposed to pay out if you had money stolen from your account – but of course if you do the banks pay out in almost all circumstances so the insurance was generally useless. The FSA revealed CPP charged around £35 a year for it but the product cost it just 60p. The other was ID theft insurance. It was more expensive at £84 a year but it cost CPP just £16. Both products were mis-sold by sales staff who, to put it bluntly, lied. They used false statistics, made misleading claims, exaggerated the value of the insurance – which as I said would almost never pay out – and they gave advice which in the later years they were banned from doing. Their contracts also contained unfair terms.

Q: How did it manage to sell so much?

PAUL: Altogether it sold more than £840m of new and renewed business to 4.4 million people between 2005 and 2011. CPP sold about 10% of its products directly. But the bulk of them – about 4 million new policies – were sold as a result of a partnership with four High Street banks – Barclays, RBS, Santander, and HSBC. In some cases the bank put a phone number on newly issued cards with the instruction to call it to ‘activate’ the card. In fact you got straight through to a CPP sales person. So some banks at the least colluded in this mis-selling to 4 million people.

Q: And have the banks also been censured?

PAUL: No. Not yet. I understand the FSA is in discussions with the banks and other CPP partners. CPP has been fined £10.5m for direct sales and is expected to pay out £14.5m compensation. But ten times as many policies were sold through the banks – so will the fines and compensation be ten times as big? We won’t know that for some time. But it is more bad news for the reputation of those banks.

Q: What compensation will customers get?

PAUL: Anyone mis-sold these products – and the FSA report makes it clear that was widespread, so it may be most or almost all of those with them – will get their premiums refunded plus interest. CPP has been banned from selling these products – in fact its whole website is down at the moment – but those who have them are allowed to renew. Anyone who is offered a renewal should think very carefully about whether it is good value for money. And should prepare to make a claim for compensation when the scheme is announced in the New Year.

Q: What does the company say?

PAUL: In a long statement it apologised, said this was all in the past, it would pay the penalties, and move on to a better future.

You can call CPP in office hours free from a landline on 0808 156 0199

CHILD BENEFIT HIGH INCOME CHARGE

UPDATED AND AMENDED 6 AUGUST 2015

If you get child benefit and you or your partner has an income over £50,099 a year some or all of your child benefit will be taken back in extra income tax. It is called the Child Benefit High Income Charge. If the income is over £60,000 you may prefer to give up the child benefit than pay the charge. But there are alternatives - see 'Avoid the charge' below.

The rules are complicated and may seem illogical and unfair.

The charge
The tax charge began on 7 January 2013. No-one has their child benefit itself taken away. Instead the partner with the higher income pays an extra income tax charge. If their income in a tax year is £60,000 or more the tax charge will equal the child benefit. For a household with three children child benefit is worth £2549.30 in the year 2015/16. So the extra tax will also be £2549.30 (confusingly there are 53 child benefit payments in the tax year this year). It will be collected through self-assessment. If you do not already fill in a self-assessment form you will have to in future. The Revenue estimates that an extra 350,000 people will have to fill in a self-assessment form as a result of the charge. But 45,000 of them may have failed to do so.

If the partner with the higher income gets £50,100 to £59,999 a year the tax charge is less than the child benefit. It will be 1% of the CB for every £100 by which income exceeds £50,000. So if income is £55,000 the tax charge is 50% of the CB. For a household with three children that would be £1250.60 in 2015/16. Work out the charge for earlier years on the official calculator. See 'Avoid the charge' below.

The charge is assessed on the partner with the higher income. If one partner has an income of £60,000 and the other partner has no income then the full tax charge will be made and every penny of the Child Benefit will be taken back in tax. On the other hand if both partners have an income of £50,099 no charge is made even though their household income is more than £100,000.

Paying the charge
The charge began on 7 January 2013. If it applies to you for 2012/13 then you should have informed HMRC by 5 October 2013 and registered for online self-assessment. If the charge begins in subsequent tax years then you must tell the Revenue by 5 October in the next tax year. Click here to tell HMRC. You then have to submit your form online by 31 January in the next tax year. If you are an employee and the total amount due under self-assessment is £3000 or less then it can be paid through your tax code. The full charge itself will be more than £3000 in a tax year if you have four children or more.

If you miss the 5 October deadline then HMRC may charge a penalty as well as the tax when your self-assessment is worked out. The penalty can be up to 100% of the tax due on the child benefit. But HMRC says it only want to charge the big penalties to those who have deliberately avoided paying the tax charge. You can appeal against a penalty.

HMRC estimates that 1.1 million people will be subject to the charge.

The charge is due from the date your first child is born or the date one partner or the other has an income over £50,099. You can choose not to claim child benefit for the child. Otherwise the partner with the higher income will have to pay the tax charge.

Cohabitation
If someone who gets child benefit lives alone then it is their income which is assessed. If they live with another person as a married couple or as civil partners then the partner with the higher income is assessed and – if their individual income is more than £50,099 – charged. It does not matter whether two people are married, including a same sex marriage, or in a legal civil partnership. If they live as if they were in one of those relationships then they are counted as partners. And it does not matter whose children the child benefit is paid for.

This rule can lead to anomalies when relationships begin and end.

• Amanda Smith is divorced and has two children. She earns £35,000 a year and gets £1823.20 in 2015/16 in child benefit. Her income is below £50,099 so the tax charge does not apply to her. She meets Charles Wright. After a few months they start living together. He earns £61,000 and has to inform HMRC and pay the extra tax charge of £1823.20 even though the children are not his and he contributes nothing directly to their upkeep. On the other hand their biological father James Smith, who pays maintenance for his children and who earns £95,000 a year, pays no extra tax.

The rules about living together are the same as those used for tax credits. If two people have a relationship but have two separate homes HMRC can still decide they are living together as partners.

If you live together for part of the year then the higher earner only has to pay the charge for that part of the tax year. That can get very complicated especially if both partners have an income above £50,099.

If your partner will not tell you if they get child benefit or what their income is then you can ask HMRC. It will answer two questions - 'Does my partner xxx receive child benefit?' and 'Is my partner xxx's income higher than mine?'

Marginal tax rates £50,100 to £59,999
A person liable to the charge whose income is between £50,099 and £60,000 faces very high rates of tax on each extra pound they earn. They pay income tax at 40%, National Insurance at 2%, and then the child benefit charge. If there are three children that charge is 25.5%. That means for every extra £100 they lose two thirds of it to tax and keep just £32.50. If they have a student loan and pay the graduate tax of 9% they will keep less than a quarter of any extra earnings, losing £76.50 of every £100 to tax.

The more children there are in the household the higher the child benefit tax. If there is one child it adds 11% to the tax rate. For two it is 18.2%, three children is 25.5% and four adds 32.8%. Five children adds 40%. If there are eight children it is 61.8%, taking the total tax take to more than the money earned. For every £100 earned the total tax is £103.80. And if graduate tax is paid then a partner in a seven child family will pay £105.50 on every £100 earned. In other words they will be better off not earning the extra money.These calculations use the 53 week child benefit year for 2015/16.

The child benefit tax charge means that anyone with even one child and an income between £50,099 and £59,999 will pay a higher marginal rate of tax than someone with an income of £1,000,000. Everyone with even one child will pay at least 53% in tax for each extra £1 earned. That is a higher rate than the 47% income tax and NI charged on those with an income above £150,000. And even higher than the 52% that was due in 2013/14 before the additional rate was cut to 45%.

Income
The income which is assessed is called 'adjusted net income’ though in fact it is more like gross income before tax. It is your total taxable income from all sources including earnings, rent, dividends, and savings interest before any tax allowances are deducted. However, you do adjust it by deducting pension contributions, gift aid donations, and salary sacrificed for child care vouchers or a cycle to work scheme. So someone who earns £60,000 and would face the full 100% tax charge could pay £10,000 gross into a pension scheme and avoid the charge altogether. As most of the contribution would be tax relief that would be a very good deal. But check that the pension tax rules allow you to make that contribution.

For people with simple tax affairs who are employees then the key figure is on their P60 form. That is given to every employee after the end of the tax year. Find your P60 for 2014/15 and look at the pay box 'total for year'. If that is £50,099 or less and you have no other income then no tax charge will be due and you do not need to register for self-assessment. If it is more than £50,099 then you may have to pay the tax but you can deduct the gross amount of any Gift Aid payments or pensions you pay into separate from your job. If you have more than one job or you get a pension and pay then you will have to find all your P60s and add up the total income boxes.

You can check your net adjusted income using the official calculator. Put the P60 figure in the 'Salary before tax' box. Assume that includes taxable benefits and deducted amounts like work pension contributions, cycle to work scheme and childcare vouchers. Then put in other income including income from savings and any pension contributions or gift aid donations. Gross amounts in both cases. That should give the correct figure for your adjusted net income.

Avoid the charge
You can avoid the tax charge and the hassle of self-assessment if the person who gets the child benefit tells HMRC they do not want to receive it. The child benefit will stop and the tax charge will not be due for subsequent tax years - though if any child benefit is received in a tax year (6 April to next 5 April) then the higher earner will still have to be in self-assessment and pay the tax on the child benefit received for that year.

Although child benefit is not received, entitlement to it will continue. So it can be reinstated if circumstances change and National Insurance credits will continue to be available for the person entitled to it. Those credits build up entitlement to state pension if National Insurance is not paid at work.

Giving up child benefit should not affect a current or future entitlement to widowed parent's allowance as you will still be 'treated as entitled' to child benefit even if your late spouse/civil partner or you have given it up.

If you give up child benefit but it turns out that the tax charge is not due you can reclaim it for up to two years.

Giving up child benefit is only sensible if the higher earner has an income well above £60,000 and the relationship between them and the person entitled to child benefit is stable. Even then there are good reasons for keeping the child benefit. It can be put into a savings account where it will earn interest and the money in the account can be used to pay the tax charge up to 21 months later leaving a small profit on the interest. If the account is an ISA no tax will be due on the interest.

In 2015 the Revenue estimated about 800,000 people have given up their child benefit to avoid the tax charge.

More information
This brief guide covers the basics. Always get advice and study official documents before making changes in your personal circumstances. The Government has some information here.

Version 2.0
5 August 2015

AUTO-ENROLMENT ENDS THE 20TH CENTURY

Parliament.uk now provides records of parliamentary debates in the future – prospective Hansard – as well as historic Hansard from the past. A quick search finds this interesting insight into how auto-enrolment will end means-testing, and see the state pension and National Insurance phased out.

Wednesday 11 December 2052, 2.30pm.

The Secretary of State for Savings and Longer Life (Mr. John Potter): Mr. Speaker, may I first pay tribute to the noble Lord, Lord Webb of West Bromwich, who is still, I believe, an active member of the other place, and whose foresight and vision led us to the happy situation we are in today. The latest Real Time Information from His Majesty’s Revenues show that in 2051/52 90% of all eligible people in work are paying in to a workplace pension scheme. And that of those retiring last year three quarters had a workplace auto-enrolment pension worth an average of £1083 a month.

At this time of year it is traditional for the Secretary of State for Savings and Longer Life to stand here and tell this House how much he – or, more often, she [hon. Members: Hear, hear] – plans to increase the state pensions paid to the generation who suffered greatly in the early 21^st century recessions and whom, we will all agree, deserve our gratitude for the hardships they bore to pull us out of the quagmire of deficit and debt which was left – and I say it quite frankly – by successive governments of all colours and of none.

That is why the state pension on which many older pensioners relied has been raised of late – after years of neglect by other parties – by more even than the 2.5% a year guaranteed by the triple lock, originally introduced by the noble Lord, Lord Webb and cleverly inverted by the Rainbow Alliance government in 2033.

But today I am pleased to announce that this ancient safeguard is no longer needed. The auto-enrolment system has been so successful that I can call a halt to these yearly, unfunded bonuses paid by hardworking families. And Mr. Speaker I can go further. The strength of the auto-enrolment scheme and the more than £1000 a month it provides – and for many it is of course a lot more than that – the £1000 and more a month it provides means that the Government can maintain the state pension at its current level of £1512 a month without decreasing the real incomes of pensioners overall. And those aged 72, now looking forward to their first pension payment, can do so knowing that they will be getting more in total than their older siblings got last year.

I can also announce that means-tested help with rates, rents, living costs, travel, prescriptions, 6G comms, and winter fuel, will also be phased out. Now that most pensioners rely on their own thrift, it would be unfair on them to provide a similar income for those who deliberately chose again and again to un-enrol from the pension opportunities first provided forty years ago.

At the same time I can announce a reform which has been many years – too many years for some – in the making. The old-fashioned and so 20^th century National Insurance scheme is to be wound up and its funds passed to the Chancellor to absorb in the national accounts. ….I give way to my hon. Friend

The Chancellor of the Exchequer (Ms Eloise Transom): If it is helpful Mr. Speaker I can inform the House that from 6 April 2053 the 14% National Insurance contributions paid by employees will be added to the general rate of income tax and the 15% paid by employers will be similarly subsumed into corporation tax.

The Secretary of State for Savings and Longer Life: I am grateful to my hon. Friend for that timely intervention. Because, Mr. Speaker, I can go further. In future years the increasing income of pensioners will be provided by the growth in the average auto-enrolment pension. By 2062 – in ten short years – that pension which they have proudly earned for themselves will exceed the value of the state pension until now generously provided by others.

Mr. Speaker, by the end of this century, which I hope I, if not Lord Webb himself [hon. Members: hear, hear, hear], may live to see, we can look forward to the time when the crushing and humiliating dependency on the state of our older people is but a distant 20^th century memory and the pension system of our great country is ready for the second half of the 21st century pride and self-reliance. A time in which our older people can stand tall and retire on an income which, even when it is less than they have now, they will at least know is all of their own making and not paid for by younger hard working families.

Mr. Speaker, my officials tell me that on the 200^th anniversary of the state pension, in 2108, this House – though probably not even I! – will also be able to celebrate its burial. That will be the ultimate achievement of auto-enrolment and the Noble Lord, Lord Webb [Hon. Members: hear, hear, hear. Cheers. Rowdy stamping].

Mr. Speaker: Order. The Motion is that in view of the success of self-reliance and auto-enrolment the state pension be frozen forthwith with a view to phasing out by 2108; the National Insurance Fund be wound up and the surplus absorbed in the national accounts; and National Insurance contributions be added to general taxation at their present rates from 2053/54.

Question put and agreed to.