Decision : Upheld
Decision date : 10 Feb 2020
The Ombudsman's final decision:
Summary: There was fault in the way the Council assessed Ms C’s income and treated her representative’s refusal to apply for a ‘support for mortgage interest’ (SMI) loan as notional income. The Council has agreed to apologise in writing and to refund Ms C’s interest payments that could be covered by SMI until the point it formulates a policy on SMI and reassesses Ms C’s finances.
- Mrs B complains about the Council’s decision to treat her refusal to apply for a ‘support for mortgage interest’ as notional income.
The Ombudsman’s role and powers
- We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
- If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)
How I considered this complaint
- I have discussed the complaint with Mrs B. I have considered the documents that she and the Council have sent, the relevant law, guidance and policies and both sides’ comments on the draft decision. I have obtained the Court of Protection’s view and legal advice.
What I found
Law, guidance and policies
- The Care Act 2014, the Care and Support Statutory Guidance 2014 (updated 2017) and the Care and Support (Charging and Assessment of Resources) Regulations 2014 set out the Council’s duties towards adults who require care and support and its powers to charge.
- Councils must assess a person’s finances to decide what contribution he or she should make to a personal budget for care.
Minimum income guarantee
- After charging, a person must be left with the minimum income guarantee which is set out in the regulations.
- The purpose of the minimum income guarantee is to promote independence and social inclusion and ensure that they have sufficient funds to meet basic needs such as purchasing food, utility costs or insurance. This must be after any housing costs such as rent and council tax net of any benefits provided to support these costs – and after any disability related expenditure.
- The guidance says that in some circumstances a person may be treated as having income that they do not actually have. This is known as notional income. This might include for example income that would be available on application but has not been applied for, income that is due but has not been received or income that the person has deliberately deprived themselves of for the purpose of reducing the amount they are liable to pay for their care. In all cases the local authority must satisfy itself that the income would or should have been available to the person.
- There is no definitive list of what notional income is.
- The regulations say:
- An adult is to be treated as possessing income of which the adult has deprived themselves for the purpose of decreasing the amount they may be liable to pay towards the cost of meeting their needs for care and support, or their needs for support.
- The adult is to be treated as possessing any income which would be treated as income possessed by a claimant of income support under the Income Support regulations.
- Mrs B complains on behalf of Ms C who lacks the mental capacity to make decisions about property and finance. Mrs B is Ms C’s deputy.
- Ms C lives in a bungalow and receives 24-hour care and support funded by the Council. Ms C pays a contribution from her income (benefits) towards the cost of the care package.
- The bungalow is a shared ownership property partly owned by a housing association.
- Ms was granted a mortgage through a mortgage company which was sponsored by the government to lend money to people with disabilities. The mortgage covers Ms C’s 50 % share of the property and the housing association owns the other share.
- Ms C pays rent to the housing association and pays interest to the mortgage company. In the past, the rent was paid through housing benefit and the Department for Work and Pensions (DWP) paid the interest.
- In March 2018, the government stopped the payments of interest towards mortgages and introduced a new measure called ‘support for mortgage interest (SMI)’. The main idea behind SMI was that property owners would use the equity in their property to pay the interest so that this would no longer be provided by public funding.
- The government’s website explains SMI and says:
- SMI is paid as a loan. You will need to repay the money you get with interest when you sell or transfer ownership of your home.
- You will not be asked to sell your home in order to repay your SMI loan.
- You will pay back the SMI loan from what’s left after the mortgage (and any home improvement loans) have been paid. If there is not enough to pay some or all of the loan, you will not have to pay it back and it will be written off.
- I contacted the Court of Protection for its view. It said:
- Mrs B did not have the authority to take out the SMI loan in Ms C’s name under the current court order. She would need to make a new application to the Court of Protection for permission to take out the loan.
- Its legal team did not feel that the SMI loan should be construed as a benefit as a benefit was not repaid whereas a loan was. However it would be for the DWP to give the definitive answer.
- It could not comment on whether the Council was acting appropriately or not in terms of its interpretation of notional income.
- I have investigated whether there was fault in the way the Council carried out Ms C’s financial assessment.
- The Council’s main reason for treating Ms C’s failure to apply for SMI as a notional income is to say that SMI is a benefit. I do not agree. SMI is a loan and therefore a liability, not a benefit. Repaying the loan means Ms C will lose equity on an asset.
- Of course, the legal test is not whether SMI is a benefit or not but rather whether refusal to apply for SMI can be treated as a notional income. This is a grey area and the Council has not properly addressed this question in its financial assessment of Ms C.
- I am also of the view that, to conclude that there is notional income, it must be certain that Ms C is entitled to SMI if she were to apply. There is no certainty in this case as Ms C cannot apply for SMI because she lacks the capacity to do so. Mrs B would have to apply on Ms C’s behalf and would have to obtain the Court of Protection’s consent to make the application first. It is not certain what the Court’s decision would be.
- Therefore, I have concluded there was fault in the way the Council considered the SMI issue when it carried out Ms C’s financial assessment.
- Added to this, the Council lacks a policy to say that members of the public must take out the SMI. Although I appreciate this issue affects only a small amount of people, there may be others in a similar situation as Ms C’s. As the law and guidance are unclear and open to interpretation, it seems sensible that the Council should form a policy position on this, to aid consistent decision making.
- Ms C has suffered an injustice as the Council has not included her housing costs in her financial assessment which meant her contribution was higher than it should be. I recommend the Council refund Ms C’s interest payments that could be covered by SMI until the point it formulates a policy on SMI and reassesses Ms C’s finances.
- The Council has agreed to take the following actions within one month of the final decision. It will:
- Apologise in writing to Ms C and Mrs B for the fault.
- Refund Ms C’s interest payments that could be covered by SMI until the point it formulates a policy on SMI and reassesses Ms C’s finances.
- I have completed my investigation and found fault by the Council. The Council has agreed the remedy to address the injustice.
Investigator's decision on behalf of the Ombudsman