MISLEADING WITH IMPUNITY

UPDATE 29 JANUARY 2015
The final bill for the compensation paid out was £450 million, about a third of the expected total, as barely one in three of those entitled replied to the letter they were sent. So the banks certainly did get away with it.

GETTING AWAY WITH IT
Banks and other card providers who misled their customers into calling sales lines where they were mis-sold expensive and unnecessary insurance are to escape punishment.

The card providers made up to £55 for each mis-sale. But the Financial Conduct Authority regulator has decided they will not be publicly censured for breaching any of the rules which they must follow such as treating customers fairly and providing information which is fair, clear, and not misleading.

Instead they will pay into a redress scheme of up to £1.3 billion to compensate the estimated seven million people who bought or renewed these products from 14 January 2005. Compensation will not be paid until April 2014.

The FCA Chief Executive Martin Wheatley said 

"We believe this will be a good outcome for customers who may have been mis-sold the card and identity protection policies. Subject to CPP’s customers approving the scheme, these policy holders will be able to claim a full refund of premiums with interest."

How it worked

The firm behind this insurance, CPP, was fined £10.5 million last year for mis-selling insurance and not treating its customers fairly. Chief Executive Paul Stobart told me this week that the size of the fine was a surprise and that the regulator (then the FSA) had wanted to make an example of his firm. CPP says that only around 5% of the sales of the product were made directly by the firm. The rest came through a complex deceit by thirteen credit and debit card providers.

When a credit or debit card expired or was replaced the new card had a sticker put on it inviting the customer to call a number to ‘activate’ it or confirm its safe receipt. When a customer did so they were put straight through to a sales agent for CPP. After going through a charade of ‘activating’ or registering the card the agent would then try to sell the customer insurance against card loss and a service called identity protection.

Card protection was sold for £35 a year. The insurance actually cost CPP just 60p. The £35 was then divided between CPP and the card providers who took up to £21 for each mis-sold policy.

Identity Protection was sold for £84 a year. The cost to CPP including the premium and a helpline was £16. The profit of £68 was shared with the card providers some of whom got as much as £34 per sale.

The insurance product was largely useless as any losses due to card fraud are reimbursed by the card provider. And in cases where that is refused due to carelessness on the part of the customer the insurance was unlikely to pay out either. The ID protection product was also of little value and what value it had was mis-stated or exaggerated.

The FSA found that CPP sold insurance part of which ‘its customers did not need’ and for the rest it ‘failed to explain the very limited circumstances in which customers would need the cover’. CPP also ‘overstated the risks and repercussions of identity theft’.

As a result in November 2012 CPP was fined £10.5 million which it was allowed to pay in six instalments up to December 2014. Some of these payments have now been deferred further. CPP says the fine, redress and administrative costs so far have cost it £54 million. Paul Stobart, the CEO of CPP told me that figure was ‘eye-watering’ and far more than he had anticipated. Advisors alone had cost the firm £14.5m.

Nine months after fining CPP the FCA has decided that the banks and card providers which colluded in mis-selling products to millions of customers by putting misleading stickers on new cards are not to be fined or found guilty of breaching rules about treating customers fairly or providing information which is clear, fair and not misleading. The card providers were able to approve the sales scripts used by CPP (which the FSA condemned in its judgement in November 2012). They were also able to listen in to the sales calls if they chose to do so. 

Redress

CPP will write to all seven million customers at their last known address inviting them to vote for the scheme of redress. There will also be adverts in national newspapers and a website and free helpline. If a majority of those voting agree with the scheme the High Court will be asked to approve it. The seven million people will then be invited to claim. There will be no need to prove you were mis-sold. There will be a deadline for claims to be made. No-one knows how many will make it through the whole process. But CPP’s Board estimates that "the rate of responses leading to successful claims will be less than 25 per cent. of the aggregate overall population of potential claimants". CPP says that refers only to the claims on the 350,000 direct sales. If it exceeds 25% the banks can call a default on the loans and CPP’s future could be in doubt.

If you bought or renewed Card Protection or Identity Protection products from CPP at any time from 14 January 2005 watch for a letter from the firm and for adverts in case the letter does not reach you. Call the free phone number 08000 83 43 93 to update your details.

The scheme will cover everyone who bought or renewed one of these products from 14 January 2005 through one of the thirteen business partners. If the initial sale was before that date but it was renewed after that date the compensation will only cover the period from 14 January 2005. If the business partner is not in the scheme then a direct claim to that firm or to CPP can be made.

The redress will be the full amount of premiums paid since 14 January 2005 less any payouts made plus interest at 8% a year added on to the sum due.

The scheme website is www.cppredressscheme.co.uk but it isn't currently very helpful. The free phone number 08000 83 43 93. If you have not received a letter by 20 September ring the number to find out what is happening. 

If the scheme goes ahead, redress is expected to start from spring 2014.

If you were sold one of these products  before 14 January 2005 and did not renew it after that date then you can complain to CPP or the bank which introduced you to CPP and pursue the claim  to the Financial Ombudsman.

CPP CEO Paul Stobart told me he apologised and “we are sorry for any inconvenience and if customers were misled they should apply through the scheme and get redress.”

The firms involved

The thirteen card providers who colluded in misleading their customers and are part of the scheme are

• Bank of Scotland Plc (part of Lloyds Banking Group)
• Barclays Bank Plc
• Canada Square Operations Limited (formerly Egg Banking Plc)
• 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

Other business partners, who accounted for a tiny percentage of sales, are not in the scheme. Complain direct to the firm or CPP and if that fails go to the Financial Ombudsman http://www.financial-ombudsman.org.uk/consumer/complaints.htm 

CPP continues to trade as a ‘life assistance” business and now sells access to airport lounges, storage of spare keys, and a service to cancel and replace lost or stolen cards. It is still allowed to renew the mis-sold card protection and ID products if customers want them to continue. It is not allowed to market them tonew customers nor to put any barriers in the way of cancellation for existing customers. The card protection product has been changed slightly to conform with FCA rules. This year about 71% of all CPP’s customers renewed their policies.

Information

The redress scheme website www.cppredressscheme.co.uk

The free phone number 08000 83 43 93. Use that to update your address or details to make sure you will get the letters.

The FCA press notice 21 August 2013 http://www.fca.org.uk/news/consumer-redress-agreed-for-mis-sold-cpp-insurance

The FCA consumer information  21 August 2013 http://www.fca.org.uk/news/compensation-for-card-and-identity-protection-policyholders

CPP financing deal 31 July 2013 http://www.cppgroupplc.com/pdf/130731-funding-plan-rns-final.pdf

CPP half yearly figures 22 August 2013 http://www.cppgroupplc.com/pdf/CPPGroup-plc-2013-Half-Year-Report.pdf

The FSA decision on CPP 15 November 2012.

Press notice http://www.fsa.gov.uk/library/communication/pr/2012/102.shtml

Final Notice http://www.fsa.gov.uk/static/pubs/final/card-protection-plan.pdf

Version 1.02 28 August 2013.

CAP INTEREST RATES

Attention class – today’s topic is payday loans. We all acknowledge something must be done, but what?

Problem with payday loans is they are very expensive. Solution?

“Ah, ummm, could it be...no too simple. Er, no, you've got me there.” *class shrugs*

Oh come on class it's not that difficult! Welby, what do you think?

“Er, might competition work if we sort of bolstered it? Just a thought.”

Anyone else? Wheatley?

“I've powers to limit the cost but I'm not at all sure using them to, er, limit the cost would, er, limit the cost?”

You at the back, Gibbons, thoughts?

“Please sir, could we cap the interest rate, making the cost lower and driving usurers out of business?”

Class rolls on the floor with laughter.

“Cap interest rates! Gibbons u fule, that would and end the problem! Then where would we all be??”

Dry, thorough, balanced, and inconclusive - 2010 OFT paper on evidence for and against credit cap worth reading http://goo.gl/xpa2ix

FORCED TO CHANGE BANKS

Nearly five million customers of LloydsTSB and C&G will be moved to a new bank this summer when the bank splits into Lloyds and TSB. The change has been forced on Lloyds by the European Commission as the price for approving £17 billion of state aid in March 2009 after Lloyds bought the loss making HBOS.

A total of 631 branches are to be hived off into a separate company. The branches come complete with 4.6 million customers, eight million accounts and 7500 staff. A sale of all the branches to Cooperative Bank for £750 million was planned but fell through in April 2013. The branches are all to be rebranded TSB and will now be floated on the stock market as a separate company called TSB Bank plc. The rebranding will happen from September 2013 and the sale is expected to start in the middle of 2014.

You can check if your branch is going to TSB here www.lloydstsbtransfer.com/documents/transferring_branches.pdfand check which local branches will remain as Lloyds or become TSB here www.lloydstsbtransfer.com/search

The bank has written to all its customers – those who will move to TSB and those who won’t – explaining the changes and what they mean. But there remains some confusion. Hence this blog.

My branch is changing to TSB

Your account will shortly become a TSB account on exactly the same terms and conditions. Your sort code, account number and Internet login details will remain the same. Payments into or out of the account will not be disrupted and you will not have to inform anyone of the change.

However, you will be getting a new debit card and if you have a Lloyds credit card that will be replaced too. The new cards will have entirely new 16 digit numbers and expiry dates. The first four digits indicate the new bank TSB. The cards will not be branded TSB until after the brand is formally launched in September 2013. The newly branded cards will be rolled out as they expire or are replaced.

Some people have reported problems using these cards. That should not happen but a new bank identity can sometimes cause confusion especially abroad until systems have all been updated. Lloyds says it is working with Visa to resolve this problem. Take a second card with you at all times (a good general tip anyway).

If you have booked a holiday or a ticket with the old card you may be asked for it to validate the purchase when you collect the tickets or go to a hotel. Banks generally advise destroying old cards for security reasons. But you could keep the old card and take it with you as well even if it no longer works – about four weeks after the new one was issued. Make sure you have photo ID with you. If you are expecting to collect tickets from a machine allow more time to find a human and try to explain.

Loans and mortgages associated with the account will move too and become TSB branded. Again, the Terms and Conditions should not change. A couple who had separate LloydsTSB accounts could find one is with a branch that moves to TSB and the other may be with a branch that does not. A joint loan or account or mortgage would go with the branch where it was opened jointly.

My local branch isn't my home branch

Your LloydsTSB branch will normally be the one where you first opened your account. Since then you may have changed address – people move house far more often than they change banks. At the moment you can use any local LloydsTSB or Bank of Scotland branch to do your banking including paying in cheques, arranging finance, or making enquiries. In future that may not be possible.

1.       If your original branch becomes a TSB and you continue as a TSB customer then you will not be able to use Lloyds or Bank of Scotland branches once TSB has fully separated and been sold. Some people will find that there is not a TSB local to them and may have to travel a lot further to do face-to-face banking. But all C&G branches will become TSB and are now available to TSB customers.

2.       If your original branch is staying as a Lloyds you may find the local Lloyds you have been using will become a TSB. You will not be able to use that branch to do Lloyds banking once TSB has been sold.

In both cases Lloyds says you will be able to use the same branches as you do now for a while – even after TSB branches are separately branded later in 2013. But once TSB is sold the inter-operability of Lloyds or Bank of Scotland with TSB will end. That is expected to happen after the middle of 2014. It is still possible that Lloyds and the new owners of TSB will agree that customers can do some things at each other’s branches. Lloyds customers may be able to use C&G branches until the final transfer to TSB occurs in 2014.

I want to stay with Lloyds

Some people are not happy about the forced move and want to stay with Lloyds. They can do so but not easily. If your branch is transferring to TSB you can fill in a form to let Lloyds know you want to stay as a Lloyds customer. You will have to apply to Lloyds almost as if you were a new customer. Lloyds will take account of your previous history with the bank but in theory it could reject you if your credit rating has changed for the worse. Lloyds says that is very unlikely.

You will have to choose a current account from the present range. That could mean paying for an account which at the moment you get free. Of course, Lloyds does have fee-free accounts. But if you get insurance or overdraft deals on your present Lloyds account you may find that you have to pay for a current account to get similar deals once you become a new Lloyds customer.

If you do become a Lloyds customer again, you will have a new sort code and account number and will have to register afresh for online banking. Lloyds will transfer direct debits and standing orders. But you will have to give the new account details to an employer, pension provider or anyone else who pays into your account. Any ‘credit footprints’ due to the change will be removed from your credit history.

I am with C&G

As a C&G customer you will already find your branch is offering more services such as current accounts. As C&G is changed to TSB it will become part of a fully independent bank offering loans and credit cards as well. You are in a different position from a Lloyds customer and can only move to Lloyds by becoming a completely new customer.

I live in Scotland

All Lloyds branches in Scotland are becoming TSB. That will leave some people hundreds of miles from their nearest Lloyds. If you are remaining a Lloyds customer – because your original branch is in England – then you can use Bank of Scotland as your local branch and will be able to do so in future. If your original branch is becoming TSB then you can use the TSBs in Scotland. But after TSB is sold you will not be able to use Bank of Scotland branches.

I want to leave Lloyds

If your own branch is not moving to TSB but you live near a Lloyds branch that is changing to TSB you may find it easier to move your Lloyds account to TSB. Again, you will be treated pretty much like a new customer but the bank will take account of your history with Lloyds. You will have to choose from the range of accounts TSB then offers. Your sort code and account number will change. Any ‘credit footprint’ due to the change will be removed from your credit history.

Others may choose to move their account to another bank altogether. Now may be the moment to forget loyalty and choose your bank from scratch – because of what it offers, its customer service record, its charges, or its business principles. You would be able to make the move and keep your Lloyds credit card.

When to move

If you do decide to move your current account it may be worth waiting a little while. In September it will become a lot easier to move your current account from one bank to another. The new Current Account Switch Service will guarantee that the move will happen within seven days and payments into your account will be moved as well as those out of it. There will also be a free redirection service which will capture any payments into the old account and divert them into the new one for 13 months. The Switch Service is expected to start mid-September. More here www.paymentscouncil.org.uk/switch_service

I live abroad

If you live outside the UK you may still have a bank account in a UK branch of Lloyds. If it is converting to TSB your account will be moved to the new bank and everything will remain the same. People who live abroad with no UK address cannot open a UK bank account so you will not have the option of remaining with Lloyds or moving your account to another UK bank.

Who chose?

Lloyds Banking Group did not want to give up more than 600 branches and nearly five million customers. No bank would. So the European Commission laid down strict rules about which branches it chose and how it dealt with the customers in them. The branches chosen could be no worse than the ones left behind. Their location was spread out geographically. Their position in the town or village and their size had to be no worse than those Lloyds kept. Their customers also had to be at least as good quality as a typical sample of LloydsTSB customers. Many permutations were tried until this list – once called Project Verde – was agreed.

All the 185 LloydsTSB branches in Scotland will move to TSB, all the 164 C&G branches (which Lloyds bought in 1997) will change to TSB. And 282 of the remaining LloydsTSB branches in England and Wales will become TSB.

A branch includes all its customers and their accounts. Lloyds is very constrained by European rules about what it can do with customers who want to remain with the bank. The arrangements described above have been agreed with the European Commission and Lloyds cannot deviate from them in any significant way.

NAMING AND BLAMING OVER (COUGHS) BEDROOM TAX

UPDATE 16 MARCH 2015
Grant Shapps's use of different names himself (see below) has been confirmed as true by the Conservative Party 

UPDATE 4 JUNE 2014

It's taken a while and a Freedom of Information request and a review of the original response to that request but the political origin of the phrase 'spare room subsidy' as in 'removal of the SRS' (which campaigners call the 'bedroom tax') has at last been officially confirmed.

As revealed originally in this blog the phrase 'Spare Room Subsidy' was first used in public by Conservative Party chairman Grant Shapps on 17 February 2013 - see UPDATE 31 January 2014 below. 

Now the DWP has confirmed that the first use in DWP documents was 28 March 2013.

"The earliest public use of the phrase “removal of the spare room subsidy” in official Departmental publications issued to local authorities can be found in A11/2013 dated 28.3.13.

Housing Benefit or Subsidy Circulars issued prior to A11.2013 used the phrase “social sector size criteria” or “size criteria” which mirrors what is specified in the relevant legislation dealing with the introduction of the policy."

The DWP goes on to confirm it was first used by a DWP Minister a month before that on 27 February 2013

"The first use of the term “removal of the spare room subsidy” by a Minister of the Department for Work and Pensions, namely the Minister of State for Pensions  was during an opposition day debate on the 27 February 2013 about “Housing Benefit (under occupation penalty)”. [27 February 2013, Official Record, Column 334].

"There are no references to this phrase prior to this date in electronic or word documents. This term was later formally adopted as the name for the policy within Departmental publications after this public statement in Parliament by a Minister of the Department."

So what of the use ten days earlier by Grant Shapps MP on 17 February 2014 - see below.

"The Department would not be aware that the term was used by the Right Hon Member of Parliament for Welwyn Hatfield in his political capacity as [Conservative Party Chairman and Minister without Portfolio] in a Radio Interview at an earlier date.

This would be regarded as a party political issue..." 

So there we have it. The phrase 'Spare Room Subsidy' is party political and was first used by the Chairman of the Conservative Party 'in his political capacity' ten days before being adopted by DWP Pensions Minister Steve Webb and then a month later in official departmental documents.

Read the full FOI review response

UPDATE 21 FEBRUARY 2014

The BBC set out its policy over being neutral on terminology in this advisory note

"The official name for the 'bedroom tax' is the 'under-occupancy penalty.' It is not 'the spare room subsidy.'

Like 'bedroom tax' this is a politically-loaded term so shouldn't really be used without attribution in headlines. Something more neutral -eg 'housing benefit changes' might be better as 'under-occupancy penalty' is not a well known and instantly understood term. And of course if we say 'what Labour call the bedroom tax' or 'what the coalition refer to as the spare room subsidy' in the body of any report, then of course the more familiar terminology can be used. The key is attribution - as both terms are contested and contentious."

UPDATE 31 JANUARY 2014
Here is the transcript of the first public use of the phrase Spare Room Subsidy by Conservative Chairman Grant Shapps on BBC Radio 4, The World at One, 17 February 2013 at 13:12:10

"Labour have very cleverly deemed this to be a tax of course it’s exactly the opposite to a tax…. It’s a spare room subsidy that’s being paid through the benefits system on a million empty...bedrooms which makes no sense…we’re not using the housing that we have in this country in a proper way…it’s accurate to call it a spare room subsidy that’s the point." 

The earliest written reference to the phrase spare room subsidy has been identified. It was Conservative Chairman Grant Shapps who first used the phrase in writing in a tweet timed 13:04 on 17 February 2013 anticipating his appearance on The World This Weekend on Radio 4. Interestingly Shapps - himself no stranger to changing names - put the phrase in inverted commas and used cap initial letters thus 'Spare Room Subsidy'.

Having lost the bedroom tax vs spare room subsidy language argument in the real world, the Government takes powers to censor council publications which use the unpolitically correct phrase!  

See my new post on why the bedroom tax is, in fact, a tax  


FIRST PUBLISHED IN MY MONEYBOX 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. [NB I hve changed my mind on the second point].

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  gave its 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 see my guide to Housing Benefit: Size Criteria for People Renting in the Social Rented Sector aka TBT/ETSRS.


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. 

Now that the House of Commons has passed 35 pages of law without a vote 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

UPDATE (2) 6 MARCH 2014
A tenant who was born 5 April 1952 or earlier or has a partner of that age is exempt from the reduction. See paragraph 47 of this official guide. They may also qualify for more housing benefit due to their age. They may also be able to claim pension credit and or get more help with their council tax through Council Tax Support.

UPDATE 6 MARCH 2014
The loophole in the law which allowed thousands of tenants to escape the excess bedroom reduction has been closed. From 3 March 2014 people who have been in their homes continuously from 1 January 1996 and claimed housing benefit for that entire period will now be subject to the rules. They can still claim a refund of any housing benefit deducted from 1 April to 2 March. That 48 week refund will average nearly £700. But from the week of 3 March 2014 they will be subject to the reduction. Any Discretionary Housing Payment made before the change in the law can kept. The regulations to close the loophole were debated in parliament on 26 February and approved by 304 votes to 253.

The DWP sticks by its estimate that around 5000 tenants were wrongly charged. But the Labour Party has used Freedom of Information requests to get the figures of those affected from every local council in Britain. 209 out of 378 have responded and the total at 5 March was 22,941 implying an eventual total of more than 40,000. The Government disputes those figures saying local councils gave "the numbers of people who might be affected and the numbers of cases they were investigating but the Opposition had added them together". Labour stands by its figures.

UPDATE 1 MARCH 2014
Tribunal decisions on housing benefit reductions for excess bedrooms are coming in thick and fast. The 'Nearly Legal' blog keeps an updated list of them here.

UPDATE 21 FEBRUARY 2014
The Court of Appeal has rejected a claim by some disabled tenants whose housing benefit was cut. They argued that the law discriminated against them as disabled people and was therefore unlawful. The Court held that it did discriminate but that the discrimination was justifiable and the Secretary of State had fulfilled his obligation to consider that. Read the judgement.

UPDATE 14 JANUARY 2014
A judge in a First Tier Tribunal in Liverpool has held that the regulation which specifies how many bedrooms are allowed 'pre-supposes that to be classified as a bedroom, a room should be large enough to be appropriate for use as a bedroom by an adult or by two children" The judge also said "that under-occupancy can be seen as the flipside of overcrowding" and "having regard to the legislation governing overcrowding that sets out statutory space standards " "the two disputed rooms are too small to be classified as bedrooms". Read the judgement. 

UPDATE 9 JANUARY 2014
The DWP has confirmed that tenants who have claimed some Housing Benefit continuously from 1 January 1996 or earlier and who are have lived in the same property since 1 January 1996 should never have had the excess bedroom reduction made. The officials who drafted the 'bedroom tax' law forgot to include them in it. They can reclaim money deducted back to 1 April 2013. The rules will be changed to include them in future but the DWP seems in no hurry to do that and I understand any change will not be retrospective. It may be changed from April this year. Estimates of how many will be due a refund vary. Unnofficial guidance puts it in the low thousands, perhaps 2000 to 4000 households. Others believe it will be a lot more. The details of the error and action to be taken are set out in DWP Circular HB U1/2014. More here http://goo.gl/jReHjq

UPDATE 25 SEPTEMBER 2013
The DWP has issued an Urgent Circular about what it now calls 'Removal of the Spare Room Subsidy (RSRS)' and recent tribunal decisions. The DWP says it will seek permission to appeal against these decisions. 

Meanwhile it says that overcrowding laws which specify the size of bedrooms are not relevant in assessing what is a bedroom. Nevertheless a bedroom must be "large enough to accommodate at least a single bed". Rooms classified by the landlord as bedrooms cannot be discounted just because they are habitually used for something else such as storage. See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/244604/u6-2013.pdf

UPDATE 12 SEPTEMBER 2013
A Tribunal in Scotland has decided that rooms that are too small and rooms used for other essential purposes should be ignored when the 'bedroom tax' is assessed. See http://paullewismoney.blogspot.co.uk/2013/09/four-out-of-fife.html 

UPDATE 30 JULY 2013
The High Court held today that the regulations introducing the housing benefit restrictions for people in social housing with more bedrooms than specified for their household did discriminate against disabled people. However, it held that the discrimination was lawful in the case of adults as it was justified. But it held the discrimination was unlawful in the case of disabled children who were unable to share because of their disability. At the moment the rules about the bedrooms needed by children are waived by concession for households with a disabled child, following earlier court action. The Court ordered that regulations to implement that change be made speedily to ensure that there is “no deduction of housing benefit where an extra bedroom is required for children who are unable to share because of their disabilities.” 

Lawyers for the ten families who took the case to the High Court say they will appeal the ruling. The DWP which has already accepted the position regarding children has said regulations will be made. 

At the same time the DWP announced another £35 million to ease the transition to the new rules. Welfare Reform Minister Lord Freud said of the judgement 

"Reform of housing benefit is essential. The removal of the spare room subsidy means proper support for the household remains, but the taxpayer does not pay for people’s extra bedrooms.

DWP release here http://goo.gl/3qzcFQ 
Leigh Day (solicitors for some of the applicants) statement here http://goo.gl/msjGIm
Hopkin Murray Beskine (solicitors for some of the applicants) statement here http://goo.gl/Zix9QO 
The judgement itself http://goo.gl/mWMnny

UPDATE 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' or an 'excess bedroom reduction'. 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 was around 61y 6m. By April 2014 it will be 62. 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. It will be introduced at some point in Northern Ireland but may only apply to new tenants not to existing ones.  

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. A Tribunal in Scotland has said that similar Scottish legislation can be used to establish that a room that is too small on these criteria should NOT be counted as a bedroom and should be excluded from the number when the deduction is assessed. See http://paullewismoney.blogspot.co.uk/2013/09/four-out-of-fife.html 

A tribunal in Liverpool has made a similar finding and held that the regulations must assume that a room counted as a bedroom is big enough to be one. .

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

The introduction of Universal Credit has been very delayed though a very few people are now being put on it. 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. And the bereavement concession of 12 months will be reduced to three. 

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.pdfand http://www.dwp.gov.uk/docs/eia-social-sector-housing-under-occupation-wr2011.pdfwhich 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

An updated list of Tribunal decisions is kept on the nearly legal blog http://nearlylegal.co.uk/blog/bedroom-tax-ftt-decisions/

Version 1.65
6 March 2014

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

UPDATED JANUARY 2015

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 (which will now be £72,000) on the cost of care anyone would be expected to pay.
• An increase to £123,000 (now to be £118,000 for those with a home being taken into account and £27,000 for those without a home being taken into account) (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? 

WITH UPDATED FIGURES 
The £72,000 cap
The cap on care costs of £72,000 is in fact not a cap of £72,000 on care costs. 

1. The figure of £72,000 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 £230 a week or £11,960 a year. Those costs will have to be met even when the Government meets the cost of the care itself.

2. The figure of £72,000 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 £411 a week for the care then £72,000 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 '£72,000' 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. Find out what you will need to spend in your area with the BBC Care Calculator. 

3. If the person reached the cap in their £530 a week care home the local council would still only pay £411 a week. If the home refused to renegotiate a lower figure then the individual would have to find another £119 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 £18,148 even after the cap was hit.

Savings limit increased to £118,000
The £118,000 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. The income means test will however take almost all the resident's income leaving just £24.40 (2014/15 rate; it will be higher in 2016/17) 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.”

The most recent figures showed 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, one year 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?