The Ombudsman's final decision:
Summary: The Council made a mistake when calculating the complainant’s council tax reduction. It then misdirected him by advising he appeal to the Valuation Tribunal, which did not have jurisdiction to address his appeal. The Council has accepted fault and acted to remedy the injustice.
- The complainant, Mr D complains that the Council:
- made a mistake when calculating his council tax reduction (CTR);
- wrongly demanded a sum of money from him to bring his council tax account back into line following its own error; and
- failed to deal with his review in the correct manner, directing him to appeal to the Valuation Tribunal for England (VTE), which did not have jurisdiction to deal with his appeal.
The Ombudsman’s role and powers
- 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 reviewed the complaint documentation, the Council response and corresponded with the VTE. I also researched the relevant law and guidance.
- In this decision, I use the phrase ‘overpayment’ when referring to some CTR downwards adjustments and ‘official error’ when that adjustment is due to fault by the council. I am aware that technically there is no such thing as a CTR ‘official error overpayment.’ But as what happens is the same as the housing benefit official error overpayment process, although under different legislation, I have used the same phraseology.
What I found
- Before April 2013 and the implementation of CTR schemes, those who could not afford their council tax could claim council tax benefit. If entitled to an award of benefit the claimants’ council tax would be reduced. Regulations existed for the calculation of an overpayment of council tax benefit, how it could be recovered and the appeal rights available to a claimant. The regulations limited the entitlement of a council to recover council tax benefit overpaid as a result of its own error (known as ‘official error’).
- A council could still recover most overpayments but if a person could not reasonably have been expected to have known of the overpayment and it was caused by council error, a council could decide not to recover the overpayment.
- If someone disagreed with a council’s decision they could ask the council to look again at its decision. If still unsatisfied, they could appeal to the Social Security Tribunal.
- Similar regulations applied to housing benefit claims where an overpayment was caused by official error.
What happens now
- After April 2013, the regulations for how councils should deal with official error housing benefit overpayments stayed the same.
- The Government abolished council tax benefit and replaced it by council tax reduction, which is a discount, not a benefit. Councils make their own CTR schemes and different councils have taken different approaches, as they are entitled to do.
- The Government produced a default CTR scheme, which many councils have used as a basis for their own schemes. The CTR Regulations and the default scheme make no mention of ‘official error overpayments’ of CTR.
- Some councils’ deal with ‘official error’ in CTR calculation, others do not.
- If a council’s CTR scheme is silent on ‘official error overpayment’ a council can discover an error in its benefits calculations and amend someone’s claims for housing benefit and CTR. This will create a housing benefit overpayment and a reduction in the CTR, with a resulting backdated increase in the claimant’s council tax bill.
- The council may decide the housing benefit overpayment was caused by official error, the claimant could not reasonably have been expected to have known of the overpayment and so the housing benefit overpayment is not recoverable. If the claimant is dissatisfied they can appeal to the social security tribunal.
- If there is no mechanism in the council’s CTR scheme to consider ‘official error’ there is no way for a claimant to challenge the decision they must pay more council tax following the CTR reduction.
- A claimant can appeal to the VTE about a council decision that they are liable to pay council tax and any calculation of CTR. But if there is no provision in a council’s scheme to deal with CTR ‘official error’, as I describe below, the VTE has no authority to deal with appeals about these complaints.
Council’s discretionary powers
All councils have to have a procedure for application of discretionary reduction of council tax. This is under section 13A(1)(c) of the Local Government Finance Act 1992. At the time of this complaint, the procedure setting out how to apply for discretionary relief was at page 102 of the Council’s 141-page scheme.
- The discretionary powers give councils a wide remit to reduce a council tax bill. Councils use their discretionary powers in other circumstances to reduce bills by 100%, for instance with business rates, and so should be familiar with the powers.
- If a council uses its discretionary powers in a way that a complainant feels is unfair, the complainant can appeal to the VTE.
- A council without a scheme which covers the issues around official error could look at a request for review of its decision under this section of the Act. After doing so if the claimant was dissatisfied with the discretionary scheme decision they could appeal to the VTE.
- A VTE appeal about a council tax discretionary reduction (SC and CW v East Riding of Yorkshire Council) found the VTE is not restricted to considering whether a council has used its powers lawfully and reasonably. It may substitute its view for that of the authority.
The Valuation Tribunal’s position
- The VTE Service is an independent body which adjudicates on disputes between taxpayers and councils.
- On 11 January 2016, the VTE examined the problem presented by CTR ‘official error overpayments’ in ‘DG v Liverpool City Council’ (VTE, 4310M140277/CTR). The VTE had received over 450 CTR appeals in respect of ‘overpayments’ of CTR and this case decided its approach.
- It noted that unless there is a provision in a council’s scheme to deal with official error in relation to council tax reduction, the appellant cannot appeal to the VTE on the basis that the Council should have granted a reduction in accordance with its scheme. The only way to challenge the scheme itself is by judicial review.
- However, the VTE said that, if unnoticeable ‘official error’ could not lawfully justify a reduction under section 13A(1)(c), it would create a “striking disparity” with housing benefit cases, where unnoticeable overpayments caused by ‘official error’ that has not been caused by the claimant and could not have been known about by the claimant, are “always” unrecoverable and decisions about those overpayments can be challenged on appeal.
- The VTE confirmed that if a council chose to address cases which historically would have fallen under the category of ‘official error’ by considering them under its discretionary powers, the decisions it made could be subject to appeal to the VTE.
- In summary, the only way the VTE can consider cases where complainants felt there had been an CTR ‘official error’ which had caused a readjustment to their council tax bill, is if either:
- The council’s CTR scheme includes a process for deciding on ‘official error adjustment’, or
- A complainant specifically applied for discretionary relief from a council under section 13A(1)(c) of the Local Government Finance Act 1992. If the complainant was not happy with this decision, the complainant could then appeal to the VTE, or
- A council chose to look at a complaint under section 13A(1)(c) of the Act whether a complainant had mentioned that ground or not. If the council made a decision the complainant was unhappy with, the complainant would then have a right of appeal to the VTE.
- Mr D received CTR from the Council. To qualify for the correct amount of support, Mr D had to fill out a form which would provide the Council with the details necessary for it to assess the claim.
- On 10 July 2015 Mr D handed his council tax support review form to the Council. Mr D says he clearly indicated in the form that he was not in receipt of childcare. He says this was confirmed by the review officer in a review meeting. But, childcare costs were still included in the Council’s assessment. This meant that Mr D received a greater CTR than he otherwise should have done.
- On 7 March 2016, the Council wrote to Mr D setting out his new award from 1 April 2016. Within the letter, the Council stated:
“The £109 childcare costs you pay have been deducted from your earnings before working out your total weekly income.”
- The letter also asked Mr D to alert the Council if there had been any changes to his circumstances.
- After this period, the Council wrote to Mr D on a number of occasions asking more questions about his partner’s self-employed income and other questions in order to reassess his claim. On 2 June 2016, the Council referred to childcare costs as “disregarded income”’ in a breakdown. The letter again stated that Mr D should contact the Council if there had been any change in circumstances.
- In July 2016, the Council realised the error and readjusted Mr D’s CTR to reflect that he did not have childcare costs. This meant Mr D was asked to make a payment of £514. He said he had to pay this using a credit card as the family did not have enough funds to make the payment otherwise.
- Mr D asked for this decision to be reconsidered. He did not believe the sum was recoverable because the mistake or ‘overpayment’ had been caused by ‘official error’.
- On 1 August 2016, the Council informed Mr D that “there is no such thing as an overpayment”. It argued that while payments for childcare were not referred to in the assessment in July 2015, equally, Mr D had not actually informed the Council that payments for childcare had stopped.
- The Council advised Mr D that if he disagreed with the Council’s decision, he should submit an appeal to the VTE. He could appeal within two months of the date of the Council’s decision.
- Mr D appealed to the VTE. On 19 October 2016, the VTE sent him a notice of intention to strike out proceedings.
- The VTE explained that it did not have jurisdiction to hear this type of appeal. It suggested that he might need to start the process again, this time asking the Council to look at his application under a section 13A(1)(c) of the Local Government Finance Act. It advised Mr D that if he asked the Council to consider his appeal under that section of the Act, it may then be able to consider his appeal if he was still unhappy with the Council’s decision.
The Council’s response to our enquiries
- After making enquiries we sent a draft report to the Council, questioning why it had failed to correctly use its section 13A(1)(c) discretionary powers.
- In response, the Council explained its council tax discretionary scheme was aimed at preventing hardship or crisis. It said its policy in the case of a CTR downward adjustment was to:
- Consider the reasonableness of recovering the additional council tax and either write off the amount or issue a bill for the increased amount.
- If the decision was taken to issue a revised bill and the customer complained about the reasonableness of having to pay the increased amount, follow the complaints procedure;
- If the decision was taken to issue a revised bill and the customer complained that payment would cause hardship or the Council had evidence to suggest payment would cause hardship, consider use of the S13A(1)(c) discretionary powers.
- It is now clear the Council has a procedure to consider CTR ‘official error overpayment’. It should have used this policy when considering Mr D’s case. Failure to do this was fault. This caused Mr D an injustice because he was put to unnecessary time and trouble in pursuing an appeal to the VTE and had difficulties when a large sum of council tax was demanded in one payment.
- To remedy the injustice identified in this report we recommended the Council should, within two months of my final decision:
- Apologise to Mr D for the inconvenience caused and review his case immediately using its CTR ‘official error policy’;
- Pay Mr D the sum of £200 to reflect the time and trouble he has experienced in trying to appeal the Council’s decision and to reflect the difficulties he and his family went through when a large sum of money was demanded back in one payment.
- There was fault by the Council which caused injustice to Mr D. The Council has taken the action identified to remedy that injustice.
- I have therefore completed my investigation.
Investigator's decision on behalf of the Ombudsman