Rate Rebate Replacement Scheme Consultation

The Department of Finance and Personnel is consulting on options to replace the current rate rebates scheme in the long-term. NICVA hosted an event on 19 January 2015 for representatives from the voluntary and community sector.

Currently, people on Housing Benefit who receive certain income-related benefits are automatically entitled to a rebate on their domestic rates. However, the implementation of Universal Credit as part of Welfare Reform will replace these income-related benefits, meaning that it will no longer be possible to 'passport' Housing Benefit claimants on to rate rebate.

Additionally, funding for rate rebates has been reduced by 10% and has been moved from the UK government's budget (Annually Managed Expenditure) to the Northern Ireland Executive's Block Grant (Departmental Expenditure Limit). Continuing to provide the rebate in its current form will therefore put pressure on the Northern Ireland budget.

It is envisaged that Universal Credit will be rolled out in Northern Ireland in 2016 at the earliest. Two previous DFP consultations aimed to provide an interim rate rebate replacement scheme to ensure that no Universal Credit claimant would be adversly affected by a quick switch. Longer-term options are now being considered for the rate rebates replacement scheme.

The deadline for responses to the consultation is 16 February 2015. Please visit the DFP website for details on how to respond formally, and for a copy of the consultation paper.

The Options

The Head of Policy at DFP Rating Policy Division and Land and Property Services Rating and Benefits Service presented two models that could be used as the replacment for the current rebate scheme. The aims of the options, it was said, would be based on targeting those least able to pay their rates, simplifying the rules and necessary administration, and providing good value for money.

  • Model A, the Department's preferred option, bases the rebate amount on information available from the claimant's Universal Credit Award Certificate, and is based on the 'maximum amount' that the award certificate provides. No separate means-test is required under this model.

  • Model B, which is more similar to the current arrangment, is based on the claimant's income (including Universal Credit payment) and is adjusted in line with the current Housing Benefit level. This model requires a separate means-test and is more complex to administer as it requires more information and regular adjustment.

Under both models, non-earners (unemployed), will receive a full rebate.  As Model A is linked to Universal Credit, the 'claimant commitment' will have an impact on the rates rebate: if claimants do not sign up to the commitment they will be unable to receive a rebate on their rates liability. More detail on both models is available from the presentation slides and the consultation document.

The Department has simulated the impact of the changes on current working-age rates rebate claimants under the two models (using the DSD Policy Simulation Model). The outcomes of the simulation is summarised below:

Model A (Universal Credit-based)

Gained Award Increased Award Reduced Award Lost Award Excluded (No UC) No Change Annual Cost
45,000 18,000 15,000 2,000 16,000 97,000 £81,812,000

Model B (current Housing Benefit-based)

Gained Award Increased Award Reduced Award Lost Award Excluded (No UC) No Change Annual Cost
9,000 10,000 9,000 8,000 N/A 118,000 £77,923,000

Issues raised

A number of issues were raised by attendees at the consultation event with respect to the two models put forward:

  • There are currently no fixed plans to provide a Hardship Fund alongside a replacement scheme. Sanctioning that occurs under Universal Credit may have a greater impact on claimants if it also affects their rates rebate award. Any Hardship Fund would be required to be funded out of the total rebates budget.
  • Excess payments made to clients will be recoverable under either model used. This could raise budgeting issues for some claimants if they are hit by a large overpayment bill at the end of the year. 
  • For those who will lose their award altogether under either new model, the average impact will be £10 per week. This does not apply to all claimants in equal measure, however, and some may be affected to a greater amount.
  • There is no safety net for the self-employed under Universal Credit: their award does not change with respect to their actual earnings (in effect, they are treated as having earned an amount equal to their 'minimum income floor' even if they actually earn below this). Therefore, the majority of those who make up the 16,000 'excluded' for receiving a rebate award in Model A are self-employed earners.
  • No appeal mechanism is warranted under Model A as the Universal Credit system is deemed to be the only eligibility determination required. Model B will require a separate appeals system largely similar to the current conditions.
  • At some point in the future, two schemes will be running alongside each other (the current rates rebate scheme and either Model A or B). The point of transition between these schemes will mean that claimants will have an incentive to reduce their earnings temporarily to be assessed for a greater award. A possible solution to this is to assess income over a longer period of time (e.g. 3 months) to calculate an average income on which to base the rates rebate.
  • Under Model A, rebate awards will be reviewed annually. This could mean that flucuating incomes will not account for immediate adjustments to rebates, which may cause difficulty for claimants in meeting rates payments.

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