THE ‘TRIPLE LOCK’ AND A PENSIONS RISE OF 1%

In April nearly two million of the poorest pensioners will see a rise in their state pension payments of £1.69 a week (£1.22 each for a couple). That will mean a rise in their income of barely 1%.

So does this break the Government’s ‘triple lock’ promise of raising the state pension by earnings, inflation, or 2.5% whichever is the highest?

The basic state pension paid to people who have paid enough National Insurance contributions is £110.15 a week and will rise in the second week in April by £2.95 to £113.10. That is a rise of 2.7% in line with CPI inflation in September 2013. So far, promise kept. Some get higher or lower amounts of state pension. Lower if their NI contributions were not enough for a full pension. And higher if they have SERPS or graduated pension on top. Their total state pension will also rise by 2.7%. Promise more than kept.

But the poorest 3 million pensioners get their state pension topped up by another benefit called pension credit. It can be claimed by any anyone aged 62 or more who has a low income below around £148 (single) or £226 (couple).  And people aged 65 or more can claim extra if their income is below £190 (single) or £278 (couple). All figures apply from 7 April.

These three million split in three –

Group 1: those aged 62-65 with weekly income up to £148 (single) or up to £226 (couple;  older partner that age).
Group 2: those aged 65 or more with weekly income up to £120 (single) or £192 (couple; older partner 65 or more).
Group 3: those aged 65 or more with weekly income £120 to £190 (single) or £192 to £278 (couple; older partner 65 or more).

From April their pensions will rise

Group 1: their total pensions – state pension and pension credit – will rise by £2.95 (single) or £4.45 (couple) a week. That is a rise of 2%.
Group 2: their total income – state pension and pension credit – will rise by £2.95 (single) or £4.45 (couple) a week. That is a rise of 2%.
Group 3: their total income – state pension, pension credit, and any other income – will rise by £2.95 (single) or £4.75 (couple) a week but their pension credit will fall by £1.26 (single) or £2.31 (couple) leaving a net gain per week of £1.69 (single) or £2.44 (couple - £1.22 each).  These are rises of around 1% (between 1.15% and 0.9%) in their total income. Calculations assume other income is flat, from earnings, pension, or savings for example.

TRIPLE LOCK
The triple lock applies only to the percentage rise in the basic state pension. And that is rising by 2.7%, the rate of inflation at September 2013 measured by the CPI. So the pledge is met in that narrow sense. Someone with £500 a week from work or a company pension will get a 2.7% rise in their state pension adding at least £2.95 a week to it.

But it is not being met in any sense for the poorest pensioners who rely on means-tested pension credit to boost their income. Their rise will be less than 2.7% - somewhere between 0.9% and 2%. And for many it will be less in cash terms - £1.69 instead of £2.95. For couples £2.44 (£1.22) each instead of what will be at least £4.75 on the state pension.

WHY
The Government wants to get rid of the means-tested pension credit. It is doing this in two ways. First, the basic state pension will be much bigger for those who reach pension age from 6 April 2016. It will be above the level at which pension credit starts and so groups 1 and 2 will not get any pension credit. The extra pension credit at age 65 will be scrapped from that date. So very few new pensioners will get pension credit.

People already getting pension credit at 6 April 2016 will continue to receive it. But the amounts will be restricted as the extra pension at 65 will be cut each year. Already in three years from May 2010 to May 2013 the cost of this part of pension credit has fallen by more than £780m a year - a fall of 23%. Altogether 320,000 fewer people claim pension credit and, as about 100,000 of those are couples, about 420,000 fewer people rely on it.

NUMBERS
Just under a million people claim the part of pension credit that guarantees to bring their income up to £148 (single) or £226 (couple). Adding in partners, that part supports 1,150,000 people. They fall into group 1 or 2 above and will get a cash rise of £2.95 (single) or £4.45 for a couple. That will be a rise of 2%.

Just under 1.5 million people claim the extra part of pension credit (called savings credit). Adding in their partners, that supports 1,780,000 million people. They are in group 3 and generally will get a cash rise of £1.69 (single) or £2.44 (couple - £1.22 each). That will be a rise of around 1%.

HISTORY
The last time there was a fuss about a small rise in the state pension was 2000. A low rate of inflation in September 1999 led to an increase in the basic state pension of 75p taking it from £66.75 to £67.50. The low rise was opposed in the House of Commons by Steve Webb, the young Liberal Democrat MP, who was spokesman on Social Security matters. He said "Pensioners I talk to are insulted by being offered 75p next April" He added that it was "inadequate". Others pointed out that 75p was not enough to buy three first class stamps - then just raised in price to 27p each.

Steve Webb is now the pensions minister in the Coalition government and responsible for this year's increases and the plans not phase out pension credit. The £1.69 a week rise or less for 1.8 million on pension credit is not enough to buy three first class stamps - which rise to 63p each on 31 March. I wonder if he will notice this time?

Source: DWP statistics. My calculations. Weekly amounts rounded down to nearest pound.

Version 1.00 13 March 2014

£135 OFF YOUR WINTER ELECTRICITY BILL

THIS BLOGPOST IS OUT OF DATE AND THIS SCHEME NO LONGER APPLIES

Two million people can get at least £135 off their electricity bill this winter. It's called the Warm Home Discount. Some will be paid automatically. Others have to claim or they will not get it. The sooner you claim the better.

Core Group

The biggest group – called the ‘core group’ – are more than a million older people who get pension credit and fulfill other conditions. The ones who qualify fall into two categories depending on their age on July 20, 2013.

•    Those under 75 who get the guarantee part of pension credit but not the savings credit. That means their income before the pension credit will normally be no more than £115.30 if single or £183.90 if a couple. Some with a disability may get more but the key test is they get guarantee credit and NOT savings credit.

•    Those aged 75 or more can have a higher income and get the discount. Their income before pension credit will be less than £145.40 a week (single) or £222.05 (couple). Some with disabilities can qualify with a higher income. As long as they get some guarantee credit they will qualify even if they get savings credit as well. 

Pensioners who ONLY get savings credit part of pension credit will not qualify under this Core group category.

The qualifying date is 20 July 2013. You must be getting the pension credit on that date and it is your age on the date that counts. For couples it is the age of the older partner which counts.

People in the core group should not have to claim. Suppliers will use information from the Department for Work and Pensions to pay them automatically. However, some who qualify may not be identified. If you have heard nothing by Christmas and you think you qualify, contact your energy supplier. Some of the smaller suppliers do not pay the discount and if your energy is supplied by one of them you will not get it. Details below.

Broader Group

The broader group who qualify are low income households where there is a young child or someone with a disability. With some suppliers pensioners not in the core group can qualify as part of the broader group. People in this broader group have to make a claim.

Unfortunately the energy suppliers all have different rules for qualifying. They range from the most generous which is British Gas to the least which seems to be EDF.

If your income is low and there are young or disabled children or disabled adults in the household or you are over pension age (and are not in the core group) you may be entitled to the discount. Around half a million qualified last year in this group.

If you think you may qualify contact your supplier and say you are asking about the Warm Home Discount. Or look online on your supplier's website and search for Warm Home Discount. There is a list of the suppliers who are in the scheme here www.gov.uk/the-warm-home-discount-scheme/eligibility. The links there take you to the Warm Home Discount details on each website.

Claims should be made as soon as possible. Suppliers have a fixed amount of money for this group and when that runs out the supplier will close its scheme. Last year some closed their scheme by the end of December. 

People in the broader group should not switch supplier until the discount is made. They could be disqualified if they do.

Payment

The discount is normally taken off your winter electricity bill which could mean waiting until March 2014. People in the core group who have moved supplier since July 20, 2013 will be sent a cheque by their old supplier. Broader group customers who move supplier before the discount is made will probably lose it. All discounts should be made by the end of March 2014. People on prepayment meters will have the credit added to their key. Some will be sent a voucher to take to the Post Office to credit the key. Other suppliers will update the key automatically.

Supplier

The big six electricity suppliers are legally obliged to offer the Warm Home Discount. They are British Gas (including Sainsbury’s), EDF Energy, E.on, npower, Scottish Power and SSE (that includes Atlantic Energy, Scottish Hydro, Southern Electric, and Swalec). SSE also operates the scheme for Ebico, Equipower, and M&S Energy. First Utility and Utility Warehouse are also in the scheme. If you get your electricity from another small supplier you will not get the Warm Home Discount.

British Gas is adding £60 to the Warm Home Discount for dual fuel customers or £20 for electricity only customers. It is paying £40 for customers who only get gas from it if they were on the Essentials social tariff. Scottish Power is sending an extra £50 to the 140,000 customers who got the warm home discount last winter. This money is a fine imposed on the firm by the regulator Ofgem for mis-selling its services.

More information

www.gov.uk/the-warm-home-discount-scheme/eligibility lists the suppliers who give the Warm Home Discount  involved with links to their schemes.

The Home Heat Helpline 0800 33 66 99 can give advice about the Warm Home Discount and other schemes to help with heating bills. You could also contact the Energy Savings Trust www.energysavingtrust.org.uk or the Cntre for Sustainable Energy www.cse.org.uk They can give advice about local help with insulation as well as national schemes.

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. 

http://www.npower.com/home/electricity-and-gas/products/fixed-long/

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. 

http://my.edfenergy.com/gas-electricity/blue-plus-price-freeeeze

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. 

http://www.scottishpower.co.uk/cancer-research-uk/help-beat-cancer-offer/

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.

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....

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.

CPP COMPENSATION – HOW TO CLAIM

UPDATE AUGUST 2015
CPP Compensation can no longer be claimed through this scheme. If you had a similar product from Affinion and have had a letter from AI Scheme Limited see my Affinion blogpost and see Exceptions below to see if there is another way you can claim compensation.

UPDATE 3 October 2014
CPP compensation can no longer be claimed through the scheme except in the most exceptional circumstances. The deadline for those claims is 28 February 2015. The normal closing date of 30 August 2014 is long past and the Financial Conduct Authority has published the outcome of the scheme. It paid out only £450 million to just under 2.4 million customers, an average of £190 each. That is about one third of the number who were entitled to compensation and who were contacted by the scheme. And it is about a third of the £1.3 billion compensation bill that was expected. So the banks and other providers have once more got away with mis-selling profitable rubbish and keeping most of the proceeds. See my blogpost Misleading with Impunity.

UPDATE 3 FEBRUARY 2014
The Financial Conduct Authority formally launched the compensation scheme on 3 February 2014.

It admitted to me that 140,000 people bought these products from a firm that has not joined the compensation scheme. And the scheme does not include premiums paid before 14 January 2005. In both cases you can still make a claim to get them back through other channels. That process is explained below.

Although the FCA says it is 'compensation' in fact no compensation is being paid. You will just get back the premiums you were tricked into paying and taxable interest at 8%. So far no firm that colluded with CPP to to mis-sell these products has been fined. See my blogpost Misleading with impunity

CLAIM COMPENSATION
If you paid a firm called CPP to insure your credit or debit card against loss or fraud you are almost certainly due compensation. And if you paid the same firm for ID theft protection you should also get money back. These products may have been sold under different names. But they will all have come through CPP.

Seven million people could be due up to several hundred pounds each. If you are one of them it is well worth claiming.

Compensation will normally be due if you bought or renewed either product from 14 January 2005. To qualify you will have to say you were mis-sold the product. The form you are sent will tell you what to say. The sales process was so bad that everyone was mis-sold.

You should NOT use a claims management firm to help you. They will just take a share of your compensation but will do nothing useful.

A few people may not be entitled. Details of who may not get compensation are set out later.

TIMETABLE

The CPP Redress Scheme should have written to you last autumn to let you know you had one of the products. You may not get this letter if you have moved and it does not have your up to date address. You can call 08000 83 43 93 to let the CPP Redress Scheme know about your change of address. This number is free from landlines but from a mobile you could be charged a lot. You can also call that number if you are not sure if you had a policy. If you have moved you should insist that it checks your details.

The High Court approved the redress scheme on 14 January 2014 and it formally begAn on 31 January 2014 and the Financial Conduct Authority formally launched it on 3 February 2014

In February 2014 the Scheme will send you a form to claim compensation for being mis-sold. You will get two forms if you had both credit card protection and ID theft protection.

On this form there will be a box asking why you think you were mis-sold. The paragraphs above the box explain the reasons why it was mis-sold. All you have to do is copy one or more of those reasons into the box. The products were sold so badly that everyone should get compensation.

The sooner your return the form the sooner you will be paid. The first payments will be made from late March or early April 2014. You must return this form by 31 August 2014. If it arrives after that your claim will not be considered unless you have a very good reason for the delay.

If you claim compensation and you are still paying for the product your policy will be cancelled and any future payments will stop. The consensus is that these products offered little that was of use and were not worth the high premiums charged. Card protection insurance cost CPP 60p but it sold the product  for around £35 a year. ID Theft insurance was sold for £84 a year but cost CPP £16.

If you are refused compensation or disagree with the amount there will be a way to challenge it. 

COMPENSATION

All the premiums you paid from 14 January 2005 will be refunded. Interest at 8% a year will be added to those premiums from the date they were paid until the date of your settlement around the middle of March 2014. Tax at 20% will be deducted from the interest but not from the compensation. People who do not pay tax can reclaim the tax deducted from HMRC. People who pay a higher rate of tax will have to pay extra. Any money you have already had paid out on the insurance will be deducted from the compensation.

The CPP card protection product was sold under various names such as CardGuard, Card Safe, Card Protection, Cardholder Protection and Egg Emergency Cover.  The ID theft product was sold under the name CPP Identity Protection. Most people bought the products after calling a number on a new or replacement credit or debit card to ‘activate’ it or report its safe delivery. Those cards will have come from your bank or card provider but the product was supplied by CPP.

Apart from CPP itself the firms in the scheme are

·                 Bank of Scotland (part of Lloyds Banking Group)

·         Barclays Bank

·         Canada Square Operations Limited (formerly Egg Banking)

·         Capital One (Europe) Plc

·         Clydesdale Bank Plc (part of National Australia Group Europe)

·         Home Retail Group Insurance Services Limited

·         HSBC Bank Plc

·         MBNA Limited

·         Morgan Stanley Bank International Limited

·         Nationwide Building Society

·         Santander UK Plc

·         The Royal Bank of Scotland Plc

·         Tesco Personal Finance Plc

So if you were encouraged to buy the product by any of those firms you will be in the compensation scheme.

EXCEPTIONS

Some people who have one of these products may not get compensation through this scheme. But they can still claim compensation through the usual channels – put in a formal complaint to CPP or your bank or card provider and if it is refused go to the Financial Ombudsman Service.

The card protection product was changed in 2011. If you bought it for the first time after it was changed you will not be covered by the scheme. The date of change varies depending on your card provider but it is between 1 March 2011 and 18 September 2011.

The ID theft product was not changed and is covered for all dates. However, CPP Identity Protection is not covered if it was bought face to face or online. Only telephone sales are covered.

Other things that are not covered:-

• Premiums paid before 14 January 2005 are not covered by the scheme. That's because insurance was not regulated by the Financial Services Authority until that date.
• Similar card protection or ID theft insurance from other companies is not covered.
• Some CPP products were sold by firms that are not one of the 13 firms in the scheme which are listed above. They may be included later but it is best to put in a separate claim now and if it is refused go to the Financial Ombudsman Service. 
• If your CPP product was sold as part of a packaged bank account.

Even if your sale is not covered, you can still try to get compensation by putting in a formal complaint to the bank or card provider or the firm involved and if it is refused go to the Financial Ombudsman Service.

YOU DO NOT NEED TO USE A CLAIMS MANAGEMENT FORM FOR THIS PROCESS EITHER. 

ALREADY CLAIMED
If you have already claimed compensation and been paid then you cannot claim under the Scheme. If you claim was rejected then you still have a claim if you fulfil the scheme criteria. You should be sent the claim form. But if you have not received letters about the scheme late last year then contact the Scheme and make sure you are included.

If you claimed compensation on 22 August 2013 or later then your claim will not have been processed and you should have been told that by letter. You will be sent the claim form in February and should fill it in including the box about why you were mis-sold. It will be processed with all the others.   

MORE INFORMATION
The CPP redress scheme

My blogpost Misleading with Impunity explains how the banks and card providers have got away with their part in this mis-selling.

The FCA statement on CPP redress scheme on 22 August 2013

The original FSA notice about the fine on CPP issued 15 November 2012

The full findings of the FSA on the misselling 15 November 2012

CPP claims 2.12

28 August 2015