A major investigation by MoneySavingExpert.com reveals 10,000s of the most vulnerable people in England, Scotland and Wales are being overcharged up to £400 a year due to a council tax postcode lottery.
Our new research – based on data obtained under the Freedom of Information Act and a mystery-shopping exercise – concludes up to 100,000 people who are entitled to a 25% council tax discount could be missing out, with a massive variation in uptake.
This is likely due to inappropriate information being given about the discount by local councils. Two-thirds of those councils we mystery-shopped gave incorrect info, while some frontline staff were apparently unaware of the existence of the discount.
Council tax rules state that, like students, those diagnosed as 'severely mentally impaired' – which covers conditions such as dementia, but also many others – and who are eligible for certain benefits, are 'disregarded for council tax purposes'.
This means if they live with one other person, usually their carer, the household is entitled to a 25% council tax discount. Those living alone are entitled to a 100% discount, so they don't pay council tax at all.
What did MSE's investigation find?
The key findings from our investigation, which included data obtained under the Freedom of Information Act from 265 councils, a mystery-shopping exercise across 100 councils and separate mystery shopping of some of the councils with the highest and lowest uptake, are:
- This is a postcode lottery. We found a staggering difference in the proportion of households claiming the discount in different areas. Uptake in Renfrewshire is 77 times higher than just 40 miles away in East Ayrshire – which is unlikely to be accounted for by demographic differences alone.
- Two-thirds of councils provided incorrect information. During the mystery-shop exercise, council tax staff were unable to clearly explain to the MSE 'applicant' the criteria for eligibility or how to submit a claim for the discount.
- Five call handlers were unaware of the existence of the SMI discount, with some confusing it for a means-tested benefit.
- Sixty-nine out of 100 gave out some form of incorrect information – eg, that the form to make a claim was not available online, even though it was, or that the claimant needed to be in receipt of rather than just eligible for certain benefits – potentially deterring someone from making a claim in the first place.
- Just a quarter (26) provided advice that was completely correct.
- There is some correlation between low uptake and poor information. In a second mystery shop, 35% of the councils with the highest uptake of the SMI discount correctly told the 'applicant' how to make a claim, vs just 5% of the councils with the lowest uptake.
- It is likely up to 100,000 people are missing out. There are no official figures for how many potential claimants are failing to receive the SMI discount. Our back-of-the-envelope calculations suggest it is up to 100,000 people – but the Government needs to urgently carry out an assessment of how many people could be eligible.
Martin: 'It's tough not to think the cause is just mass council ineptitude'
Martin Lewis, founder of MoneySavingExpert.com, said: "The law rightfully recognises that many vulnerable people who have a severe mental impairment such as dementia or Alzheimer's are entitled to a council tax reduction. Sadly, many councils do not, and the result is that society's most vulnerable face a postcode lottery with huge variance in take-up depending on where people live.
"I would urge any family affected by this to speak to their local council. Not only are many due a reduction of £400+ a year, but it can be backdated for years. We've already had a number of successes where people have been paid back £1,000s – though this again depends on a postcode lottery.
"In some council areas the number of people actually receiving the discount is paltry. As councils don't actually lose money from this – it's funded by central Government – it's tough not to think the cause is just mass council ineptitude in administering it.
"Local councils need to urgently review their processes in order to reduce the amount of misinformation given out by frontline staff. They could also help by proactively communicating the discount in their standard literature. Meanwhile we've put full free claiming help on MoneySavingExpert.com.
"The people who are missing out on this are among the most vulnerable in our society and can't fight for themselves. They should not be left to battle this alone. Better awareness is fundamental – and all councils should agree to allow backdating, or at the very least each council should publish a clear policy.
"There should be an urgent review by central and devolved Government of how local councils are applying the SMI discount, including setting up a standardised procedure, with one form, to make it easy to claim, regardless of postcode."
The councils with the lowest uptake
The FOI responses from 265 councils highlight a staggering disparity in terms of the uptake of 25% SMI reductions. The following table shows the councils with the lowest proportion of people claiming the SMI reduction:
Councils with lowest uptake of SMI discount
|Council||Uptake of discount vs total households (1)||Proportion claiming discount|
East Ayrshire Council
|11 out of 57,392||0.019%|
Spelthorne Borough Council
|10 out of 41,076||0.024%|
City of Edinburgh Council
|90 out of 240,794||0.037%|
Great Yarmouth Borough Council
|23 out of 47,117||0.049%|
Tower Hamlets Council
|75 out of 119,440||0.063%|
Denbighshire County Council
|29 out of 44,436||0.065%|
|88 out of 111,224||0.079%|
South Lanarkshire Council
|119 out of 148,295||0.08%|
|114 out of 140,864||0.08%|
London Borough of Newham
|126 out of 145,310||0.09%|
|1) For last full year for which figures were available.|
Alex McPhee, Depute Chief Executive and Chief Financial Officer at East Ayrshire Council: "The award of Council Tax exemption in relation to Severe Mental Impairment is based entirely on application. There is little discretion in the award. The availability of exemption is publicised on our website which also includes a downloadable form but we would always encourage an application in cases where we believe it may be appropriate.
"We are grateful that this has been brought to our attention and we will be talking to councils whose incidence of uptake is high with a view to seeing whether this is an accident of geography or if they do anything differently that we can learn from."
Great Yarmouth Borough Council, which appears in the table above, has this week disputed its figures, despite providing them in response to the original FOI request and then confirming these figures were correct when we double-checked in July this year.
'Crucial that discounts are clearly signposted'
Leading charities have welcomed MSE's investigation and backed our call for action.
Dr Hilda Hayo, chief executive of Dementia UK, said: "A diagnosis of dementia can be devastating for families, and financial implications can play a significant role in that. Many people with dementia and their families simply do not know that they are eligible for a council tax reduction or exemption.
"Lack of awareness and training amongst council staff regarding the exemption do not help and we are pleased to support MoneySavingExpert's campaign to raise awareness of this."
Emily Holzhausen OBE, director of policy and public affairs at Carers UK, said: "We advise hundreds of carers every year who miss out on council tax discounts because they are unaware of them. For those carers who do go on to receive the discount, the difference is noticeable.
"With council budgets under so much pressure, SMI council tax discounts offer an opportunity for local authorities to provide more support to thousands of carers by improving their incomes and ensuring they are aware of the discount. We also know that this would help carers to improve their own mental health and wellbeing. We urge every council to look at improving their advice and information to carers on council tax discounts."
Nicola O'Brien, head of policy and campaigns at the Alzheimer's Society, said: "Many people with dementia and their families are already under devastating financial strain as a result of their condition, with some forced to spend hundreds of thousands to get the essential care they need from the broken social care system.
"Lack of awareness and information about council tax discounts, and other financial support out there, only makes the situation harder. It's crucial that discounts are clearly signposted, and simple to apply for, to make sure people get the support they are entitled to."
What does the Government say?
We've now sent our report to the Department for Communities and Local Government, and called on it to make changes.
A spokesperson said: "The law is clear that where people are severely mentally impaired, their council tax bill should take account of this. We expect all local councils to make sure that people entitled to this support receive it."
Power over council tax in Wales and Scotland is devolved.
A Welsh Government spokesperson said: "We welcome this report which provides an important additional insight into how council tax is managed across local authorities.
"We have reformed and funded the Council Tax Reduction Scheme in Wales so that almost 300,000 receive Council Tax Support, of which 220,000 households pay no council tax at all.
"In addition, we have also commissioned our own research to support our commitment to make council tax fairer and will consider the report's findings in this context."
We have yet to receive a response from the Scottish Government.
What do councils say?
A spokesperson for the Local Government Association said: "It is important that people are correctly advised and that those who are entitled to this discount are able to access it. We will be suggesting to our member councils that they reassure themselves of their advice and procedures on the SMI exemption in light of these findings."
We also contacted the five councils whose staff were unaware of the existence of the SMI discount when we carried out our mystery-shopping exercise.
Councillor Carol Runciman, executive member for adult social care and health at City of York Council, told us: "We are very sorry that the mystery shopper was given incorrect information. Our staff are trained and aware of SMI exemptions and able to give advice to residents who call, so this appears to be a one-off error.
"We want to make sure that we give all our residents the right information, every time. We will update all our communications on the SMI to explicitly reference dementia and other qualifying conditions, and remind staff of who qualifies for the exemption as soon as possible."
A spokesperson for Bolsover District Council said: "We issue a leaflet with every annual council tax bill, as well as with every new bill generated throughout the year, which details what discounts are available. Severe mental impairment is included in the booklet, therefore ensuring that every household in the area is made aware of discount availability."
He acknowledged the law states applicants must be 'entitled' to one of the qualifying benefits, but said the eligibility assessments for some benefits are done by the Department for Work and Pensions, not local councils, and so the proof is being in receipt of benefits.
Cheshire East Council and Derby City Council said they provide information and training about the discount but will look again at how they handle claims. Slough Borough Council is yet to respond.