NAMING AND BLAMING OVER (COUGHS) BEDROOM TAX

FIRST PUBLISHED IN MY MONEY BOX NEWSLETTER 9 MARCH 2013

It was the week the so-called 'bedroom tax' got political. Which is why I have placed the phrase in inverted comments AND preceded it by 'so-called'. Just to make it clear that I am not someone campaigning against it or who believes that the new social housing size criteria are in fact a tax. Though they are of course to do with bedrooms.

Last week Pensions Minister Steve Webb devised a new way of expressing the, ahem, 'bedroom tax'. He preferred to stand it on its head and told MPs he was happy to "discuss attempts to end the spare room subsidy". The DWP claims Steve Webb invented the phrase and he gave it a first outing in the House of Commons just after 1.30pm on 27 February. It came of age a week later when the Prime Minister took it up with enthusiasm at Wednesday's PM Questions. David Cameron used the phrase seven times during tetchy exchanges with Labour Leader Ed Miliband and others over what they called, if I may, 'the bedroom tax'. 

The Government has now taken the line that the use of the phrase, forgive me, 'bedroom tax' marks the speaker out as a person who is against it. And the BBC is coming under pressure to balance the phrase, pardon me, 'bedroom tax' with a reference to the Government's preferred formulation.

It is reminiscent of the debate in the late 1980s and early '90s over whether the replacement for the rates in Britain was called the community charge or the poll tax. It was literally a poll tax - a flat charge paid to the state on the head (or poll) of every adult - but the law called it the community charge. So poll tax opponents and community charge supporters hugged their phrases in opposite corners of the ring and shouted abuse at each other for using the wrong words. 

The problem with today's spat is that 'spare room subsidy' is not a synonym for, I abase myself, 'bedroom tax' but in fact its opposite. Which appeared to escape the PM's notice when he told Ed Miliband "anyone with disabled children is exempt from the spare room subsidy". What he meant, of course, was they would continue to get the spare room subsidy. Except they won't. Because the rules make no exemption for severely disabled children from, begging your presence, the 'bedroom tax'. But that is a separate point.( If you are curious about it Google 'Burnip and Gorry' (other search engines etc etc) to find the court case which allows exemption from a different law and which the Government is seeking to overturn.) [NB In order to preserve the PM's dignity the Government announced on 12 March 2013 that it would not appeal Gorry and the ruling of the Court of Appeal became uncontested law].

So to balance, soorrreeee, 'bedroom tax' one needs to refer to 'ending the SRS' (my fingers are tired) in fact I'll use ETSRS as an acceptable alternative for, I am prostrate, the bedroom tax (TBT). 

Indeed when I reported on this PMQs row [on Breakfast TV on 7 March 2013] I was upbraided when I came off air by a DWP press officer for, among other things, not including ETSRS as well as TBT in the cue. 

The whole thing is descending into acrimonious acronymity which I for one will have NTDW. 

Meanwhile the Government says approaching a million social housing bedrooms are spare. And estimates it will save £1 billion over two years by trying to bring them into use by cutting the housing benefit paid to 660,000 people two thirds of whom are disabled. This one will RAR (run and run).

Meanwhile my guide to Housing Benefit: Size Criteria for People Renting in the Social Rented Sector aka TBT/ETSRS is here http://paullewismoney.blogspot.co.uk/2013/02/the-bedroom-tax.html

BREAKING NEWS: on 7 March Steve Webb came up with a new phrase, and a genuine synonym, for TBT "the social sector under occupation charge". Perhaps we could abbreviate that accurately to 'spare bedroom charge' without fielding too many complaints. Editors please note. 

FOOTNOTE 18 MARCH 2013

Now that the House of Commons has passed 35 pages of law without a vote http://goo.gl/c1jv1 to control the press in England and Wales I must say I am much less inclined to do anything but use the clear, simple, and well understood phrase 'bedroom tax. And just hope someone tries to tell me not to.

THE BEDROOM TAX

UPDATED 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'. 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 will be around 61y 6m. More precisely, 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. Similar changes are being made in Northern Ireland but have not yet passed the Northern Ireland Assembly and it will not commence there on 1 April. 

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. But it is not clear how this standard affects the rules about the under-occupation penalty. 

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

From October 2013 (and in a areas of northern England from April 2013) new claimants for help with housing costs will get Universal Credit not housing benefit. 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. 

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

Version 1.27
14 March 2013

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

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 on the cost of care anyone would be expected to pay.
• An increase to £123,000 (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? 

The £75,000 cap
The cap on care costs of £75,000 is in fact not a cap of £75,000 on care costs. 

1. The figure of £75,000 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 £12,000 a year. Those costs will have to be met even when the Government meets the cost of the care itself.

2. The figure of £75,000 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 £430 a week for the care then £75,000 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 '£75,000' 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. 

3. If the person reached the cap in their £530 a week care home the local council would still only pay £430 a week. If the home refused to renegotiate a lower figure then the individual would have to find another £100 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 £17,200 even after the cap was hit.

Savings limit increased to £123,000
The £123,000 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. No changes were announced in the income means test which takes almost all the resident's income leaving just £23.50 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.”

We know 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, two years 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 9 JANUARY 2013

If you get child benefit and you or your partner has an income over £50,000 a year some or all of your child benefit will be taken back in extra tax. It is called the Child Benefit High Income Charge.

The rules are complicated and may seem illogical.

The Charge
The 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 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 £2449.20 a year. So the extra tax will also be £2449.20. 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 now estimates that 300,000 more people will have to fill in a self-assessment form as a result of the charge.

If the partner with the higher income gets between £50,000 and £60,000 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 £1224.60

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 £50,000 no charge is made even though their household income is £100,000.

The charge began on 7 January 2013. If it applies to you then you will need to inform HMRC by 5 October 2013 and register for online self-assessment and submit your form online by 31 January 2014. It will be charged pro rata for the three months of the tax year 2012/13. If you are en employee and the total amount due under self-assessment is £3000 or less then it can be paid through your tax code. The charge itself will be more than £3000 if you have four children or more.

HMRC estimates that 1.1 million people will have to pay the charge. It identified about 800,000 of them and wrote them a letter explaining the charge before it began. HMRC failed to find the other 300,000. If you did not get a letter but believe the charge may apply to you, then you must contact HMRC by 5 October 2013.

Cohabitation
If someone who gets CB lives alone then it is their income which is assessed. If they live with another person as husband and wife or as civil partners the partner with the higher income is assessed and – if their individual income is more than £50,000 – charged. It does not matter whether two people are married or in a legal civil partnership. If they live as if they were 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 £1752.40 a year in child benefit. Her income is below £50,000 so the tax charge does not apply to her. She meets Charles Wright. After a few months they start living together. He earns £60,000 and has to inform HMRC and pay the extra tax charge of £1752.40 even though the children are not his and he contributes nothing to their upkeep. On the other hand their biological father James Smith, 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.

Marginal tax rates £50,000 to £60,000
A person liable to the charge whose income is between £50,000 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 24.5%. That means for every extra £100 they lose two thirds of it to tax and keep just £33.50. 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 £75.50 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 10.6% to the tax rate. For two it is 17.5%, three children is 24.5% and four adds 31.5%. Five children adds 38.4%. If there are eight children it is 59.3%, taking the total tax take to more than the money earned. For every £100 earned the total tax is £101.30. And if graduate tax is paid then a partner in a seven child family will pay £103.40 on every £100 earned. In other words they will be better off not earning the extra money.

The child benefit tax charge means that anyone with even one child and an income between £50,000 and £60,000 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 52.6% in tax for each extra £1 earned. That is a higher rate than the 52% income tax and NI charged in 2012/13 on those with an income above £150,000. That rate is being cut to 47% from April 2013 in order to boost incentives among high earners to earn more. But the marginal rate for those on £50,000 to £60,000 with children is much higher and will not be cut.

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. 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.

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. 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 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.

The Revenue estimates that about 270,000 people had given up their child benefit before the charge began on 7 January 2013.

More information
This brief guide covers the basics. Always get advice and study official documents before making changes in personal circumstances. HMRC has comprehensive but hard to follow information on its website http://www.hmrc.gov.uk/childbenefitcharge/index.htm