Policy in Practice recommendations lead to key Welsh council tax reforms

Policy in Practice is delighted to see the announcement by the Welsh government (August 2024) of forthcoming changes to the Welsh council tax reduction system. The changes were announced following consultation and were two of the key recommendations by Policy in Practice in 2024 in a feasibility study for the Bevan Foundation. This study examined how data could be used to move towards a common benefits system in Wales.

The two changes recommended in the report and announced by the Welsh government were:

1. That a person in receipt of Universal Credit may be recognised by a council as having made an application for a council tax reduction
2. That non-dependant deductions are simplified

On the face of it, these may appear to be minor administrative changes yet they go a long way towards removing application barriers for residents, simplifying administration for councils and optimising the use of data provided to councils by the DWP.

A Feasibility Study of a Common Approach to Welsh Benefits; our recommendations

The Bevan Foundation, funded by a group of partner organisations , commissioned Policy in Practice to evaluate how data can support the process of developing greater commonality across Welsh benefits. Our research identified several positive features of the existing Welsh system that would support greater uniformity.

These included:

• The Welsh government sets the regulations governing Welsh benefits. It is within its power to introduce regulatory amendments which facilitate greater uniformity
• The rollout of Universal Credit (UC) provides an opportunity to use verified data on households in receipt of Universal Credit to support a common approach to Welsh rights-based benefits

The Welsh government can introduce the necessary changes to breakdown barriers to application, and therefore increase take up of benefits across Wales. The report examined how data can be used to make change in both the long term and the short term.

A number of the recommendations specifically focused on how the Welsh Government could create greater uniformity of council tax reduction (CTR) administration across Welsh Councils and ease application. These are the recommendations that the Welsh Government is putting into practice and are examined further below.

A person in receipt of Universal Credit may be recognised by a council as having made an application for a council tax reduction

When a person makes a claim for Universal Credit they are asked if they intend to claim Council Tax Support from the council. If they indicate that they do intend to claim, the DWP shares their data with their local council through the daily UC data share (UCDS).

Currently, there is a lot of variability in how councils treat this notification:

• Some councils treat the DWP notification as an application for CTR and apply Council Tax Reduction from the date of the UC claim and will assess CTR based on DWP data
• Some use the notification to issue an invitation to apply for CTR. If an application is received, some councils will backdate CTR to the UC start date whilst others will take the date of application as the start date for CTR
• Other councils will take no action and await a claim from the resident and, in these cases, will usually apply CTR from the date of CTR application.

This variation in approach is seen across both England and Wales. The decision on whether to treat an intent to claim as an application is made by each council’s legal team, and results in a variety of interpretations.

The Welsh government’s announcement that the CTR regulations for Wales will be amended so that the intent to claim can be viewed as having made a claim for council tax support, will mean that this burden of interpretation is lifted from Welsh Councils, and allows for uniformity of approach across Wales.

Using the Universal Credit application as a proxy for a Council Tax Reduction application will not only have a significant impact on working-age CTR take up in Wales but is likely to also reduce uncollectable Council Tax arrears. The report we wrote for the Welsh government in 2020, The impact of Universal Credit on Council Tax Reduction in Wales, highlighted that residents were at risk of arrears accumulating in respect of the period following an application for Universal Credit and prior to making a separate application for council tax reduction.

The change announced by the Welsh government will benefit low-income households across Wales as they will no longer need to apply for two separate benefits and risk accruing Council Tax arrears due to late application to councils. It also benefits Welsh Councils as it simplifies administration and prevents the need to administer uncollectable arrears.

Non-dependant deductions are simplified to two income bands

The default CTR regulations in both England and Wales contain provision for non-dependant deductions (the amount adult relatives living in a property should contribute to council tax) to be based on the income of the non-dependant. This creates complexity for both the resident and the council.

A CTR applicant may be required to notify their council of their own income (and any change in income) and that of all adult relatives living in the household. Every change in income for a household member results in a re-assessment of support and risks creating an overpayment if the change is not notified promptly to the council. Information on the income of adult relatives is not included within the data provided by the DWP to the council through the UCDS, so each council needs to collect this separately from an applicant.

The UCDS does however contain information on whether the non-dependant is in work or not. Our recommendation was to use this data for simplified deductions, for example a single flat rate deduction, or one for non-dependants in work and one for non-dependants not in work. Many English councils have already made this change in order to align their schemes with the UC data, reduce complexity for residents, and to simplify administration.

Ease of application increases benefit take up

The changes being introduced by the Welsh government will ease application for benefits and make best use of the data provided by the DWP to councils to administer benefits.

Our Missing out 2024 report into unclaimed benefits revealed that £23 billion of support is unclaimed by millions of people each year, £3.4 billion of which is council tax support. Our recommendations to policymakers include reducing complexity by addressing the benefits system as a whole, and raising awareness by changing the message around benefits.

Reduce complexity: Address the social security system as a whole

Universal Credit was brought in to simplify the social security system, but more needs to be done to ensure the safety net is not left with holes in it and to make the benefit system easier to navigate.

Technology is outpacing policy, creating a stagnant infrastructure. Better use of data can bring benefits to claimants and efficiencies to taxpayers alike. This can include greater sharing of data across government, enabling data to be used to link entitlements and passport claims, joining up application routes, and allowing claimants to give their consent for data to flow between organisations. The system is not yet greater than the sum of its parts, but it can be.

Be proactive: Share data across the social security system

We already see the benefits of sharing information systematically. For example, real time information on earnings is passed from HMRC to DWP to support the assessment of Universal Credit without placing the onus on the applicant to update their income every month.

But more data can be shared between organisations, and more can be done to act upon the information. For benefits such as social tariffs or Free School Meals, unlocking the proactive power of data to consolidate applications can be transformative, easing the burden for applicants whilst streamlining administration.

One simple move to ensure data is shared proactively with local government would be for the Universal Credit application form to set the default to people ‘opting in’ to express interest in claiming council tax support. This would increase the flow of data to local authorities and reduce complexity for claimants and administrators. Regulators could work harder to ensure data is shared across utility companies and bring social tariffs together into a national
programme of support.

By introducing these new provisions within the Welsh CTR regulations, the Welsh government goes some way to addressing the barriers identified in our Missing Out 2024 report – complexity and awareness.

Next steps

• Read report: A common approach to Welsh Benefits – a feasibility study
• Read report: Making the case for a Welsh Benefits System – people’s experiences

Barnado’s Cymru, Citizens Advice Cymru, Home Start Cymru, NEU Cymru, Oxfam Cymru, Save the Children, Trussell Trust, Wales TUC, Welsh Local GovernmentAssociation