This is a copy of the internal document dated February 2009 in which the Audit Commission legal department begins to realise that the information it has published is unfair and incorrect.
The author of this document is crystal clear that the complainant is right, that their report could more accurately reflect the legislation. Later, in a move Sir Humphrey would have admired, they changed their stance, claiming that the report was not 'inaccurate' - just incomplete.
So, it's not incorrect to say that two and two = five: it's just that in all observed instances they = 4.
Though it could be done more thoroughly, the author disposes of the myth that this data comparison shows false or inconsistent 'claims'. This false belief is one of the more common reasons people imagine that a fraud investigation is justified. If people are making a false 'claim', the thinking goes, then something must be wrong.
The Audit Commission later decided that this point was 'merely pedantic', that nothing turned upon it, and that people who used the word 'claim' should not complain when it used the word.
But what it failed to disclose was that its pop ups prejudicially - if not actionably - asserted that identifiable individuals were making two inconsistent claims simultaneously.
This appears to be yet another example of what its ICR calls conduct giving an 'unintentional impression of duplicity'. I am struggling to believe that the duplicity is unintentional, though the impression of it may well be. Alternatively, since it is more or less a wholly unaccountable body, it probably just couldn't give a proverbial one way or the other.
As it said on the matter of ultra vires (on its own account) activities: it's not unusual and there is nothing to stop it.
What this document does is
a) set out the main legal frameworks governing council tax discount law
b) prove that the Audit Commission has been publishing incorrect and prejudicial information as a result of which people are regarded as potential thieves and as being in situations which warrant investigation when in fact there is nothing in the situation which warrants investigation.
What it does not do is consider the Statutory Code of Data Matching Practice.
It may be that by carrying out
hundreds of thousands of abortive investigations you do in some sense assist in the prevention and detection of fraud. But the fact that in some vague sense, and ignoring all the damage, misinformation, bullying of and lying about innocent entitled people that goes on, some fraud is prevented is surely not enough to make the project legal and proportionate.
And indeed, on the account of the Audit Commission itself the matters relating to human rights raised in the Robertson judgments are 'still live'. So the Commission itself knows that this is an issue.
In order to comply with the legal framework governing all NFI data matching, the processing should be designed to show up inconsistencies requiring investigation. The aim of data matching is, according to the Code, to identify 'inconsistencies', and not to allow some puffed up bureaucrats to sit in their offices saying 'He might be a thief. He might be worth investigating. Oooh, let's investigate them.'
I have highlighted some of the more important points in red. Comments are in blue.
To: XXXXX XXXXXXX
cc XXXXX XXXX
Date: 24th February 2009
Advice on council tax discounts and fraud in the context of data matching
powers
1.
Correspondence received by the complaints unit at the Commission from
XXXXX has raised a number of questions as to how entitlement to
council tax discount on the basis of being the only resident of a dwelling who
does not fall to be disregarded for the purposes of the discount (which we
shall call single person discount) works.
This is in the context of the Commission’s powers to conduct data matching exercises
under section 32A of the Audit Commission Act (“the 1998 Act”),
which can only be exercised for the purpose of assisting in the prevention and detection of fraud.
It is necessary to determine whether being in false receipt of a single person
discount can amount to fraud, in order to establish whether data matching for
the purposes of determining whether a person is falsely in receipt of a single
person discount is within the Commission’s powers under section 32A of the
1998 Act.
(NB Here the lawyer puts the cart before the horse: as she realises midway through the document this comparison does not show that a person is 'falsely in receipt of a single person discount'. Indeed, her own material demonstrates that there is no such thing in the law as a 'single person discount' as this term is often misunderstood. Check her introduction. Read the definition. )
I will set out the statutory background to single person discount in
the following section for reference.
The statutory background re: entitlement to single person discount
The Local Government Finance Act 1992
2.
The Local Government Finance Act 1992 (“the 1992 Act”) provides the power
for “billing authorities” (in England meaning district councils in the main and in
this note referred to as “authorities”) to levy and collect council tax in respect
of those dwellings in their area which are subject to the tax (“chargeable
dwellings”) and sets out how the tax will work (both in the Act itself and by
providing the power for certain further provisions to be made in secondary
legislation made under the Act).
3.
Section 10 sets out how the basic amount of council tax payable by a person
who is liable to pay council tax in respect of a chargeable dwelling is to be
calculated. Section 11(1) then states:
“(1) The amount of council tax payable in respect of any chargeable dwelling
and any day shall be subject to
a discount equal to the appropriate
percentage of that amount if
on that day-
(a) there is only one resident of the dwelling and he does not fall to be
disregarded for the purposes of the discount; or
(b) there are two or more residents of the dwelling and each of them
except one falls to be disregarded for those purposes.”.
The “
appropriate percentage” is set by section 11(3) as 25% and Schedule 1
to the 1992 Act sets out who shall be disregarded for the purposes of the
discount. Categories of those to be disregarded for the purposes of the
discount include students, hospital patients and the severely mentally
impaired.
4.
Paragraph 4(2) of Schedule 2 to the 1992 Act provides that regulations under
Schedule 2 may include provision that, before making any calculation of the
chargeable amount of council tax for the purposes of regulations made under
the Schedule, the authority shall take reasonable steps to ascertain whether
that amount is subject to any discount, and if so,
the amount of that discount.
Paragraph 4(3) provides that the regulations may include provision that (a)
where (having taken such steps) the authority has no reason to believe that
the chargeable amount is subject to a discount, it shall assume, in making
any calculation of the chargeable amount for the purposes of regulations
under the Schedule, that the chargeable amount is not subject to any
discount; and (b) where (having taken such steps) the authority has reason to
believe that the chargeable amount is subject to a discount of a particular
amount,
it shall assume, in making any such calculation, that the chargeable
amount is subject to a discount of that amount.
5.
Paragraph 4 goes on to provide, in sub-paragraph (4) that regulations may
include provision that
the authority must inform the person who is or will be
liable to pay the chargeable amount of the assumption in paragraph 4(3).
Sub-paragraph (5) provides that the regulations may include provision that
where
(a) in accordance with paragraph 4(4), the authority informs the person
concerned that it has assumed that the chargeable amount is subject to a
discount of a particular amount; and
(b)
at any time before the end of the financial year concerned, the person has
reason to believe that the chargeable amount is not in fact subject to any
discount, or is subject to a discount of a smaller amount,
the person shall, within such period as may be prescribed, notify the authority
of his belief.
6.
Section 14(2) of the 1992 Act states that Schedule 3 to the 1992 Act shall
have effect and paragraph 2 of Schedule 3 states-
“In any case where
(a) a person is required by any provision included in regulations under
paragraph 4….of Schedule 2 to this Act to notify a billing authority;
and
(b) he fails without reasonable excuse to notify the authority in
accordance with the provision,
the authority may impose a penalty of £70 upon him.”.
The Council Tax (Administration and Enforcement) Regulations 1992 (S.I.
1992/613, as amended)
7.
These Regulations (“the 1992 Regulations”) are made under the 1992 Act.
The effect of regulation 3 (the power for the making of which is derived from
paragraph 2(3) of Schedule 2 to the 1992 Act) is that a person whom an
authority thinks is a resident, owner or managing agent of a particular
dwelling must supply to the authority information which is in that person’s
control or possession, which is requested in writing from the person by the
authority, and is so requested for the purposes of identifying the person who,
in respect of any period specified in the notice, is the liable person in relation
to the dwelling. Under paragraph 1(1) of Schedule 3 to the 1992 Act, a failure
to provide the information, or the provision of information which the person
knows is inaccurate in any material particular, will lead to the authority having
the power to impose a penalty of £70.
8.
Regulation 14 provides that
before making any calculation for the purposes of
Part V of the Regulations of the chargeable amount in respect of any dwelling
in its area, an authority shall take reasonable steps to ascertain whether that
amount is subject to a discount, and if so, the amount of that discount.
Regulation 15 provides that where having taken those reasonable steps (1)
an authority has no reason to believe that the chargeable amount
for the
financial year concerned is subject to a discount, it shall assume, in making
any calculation of the chargeable amount, that the chargeable amount is not
subject to the discount; and (2) an authority has reason to believe that the
chargeable amount
for the financial year concerned is subject to a discount of
a particular amount,
it shall assume, in making the calculation of the
chargeable amount, that the chargeable amount is subject to a discount of
that amount.
9.
Regulation 16 goes on to provide that where a person-
(a) has been informed in accordance with any provision of demand notice
regulations [as to which see paragraph 12 below] of an assumption as
to discount made in his case; and
(b) at any time before the end of the financial year following the financial
year in respect of which the assumption is made has reason to believe
that the chargeable amount is not in fact subject to any discount, or is
subject to a discount of a smaller amount,
he shall, within the period of 21 days beginning on the day on which he first
has reason so to believe, notify the authority in writing of his belief.
10. If persons are jointly and severally liable to pay council tax in respect of a
particular dwelling in the period concerned, the duty above applies to each of
them but is discharged if one of them makes the relevant notification.
11. A demand notice is a written notice that an authority must serve for each
financial year on every person liable to pay council tax under regulation 18, in
accordance with regulations 19-21.
Under regulation 20, the demand notice
shall require the making of payments of the
authority’s estimate of the chargeable amount made, as respects part or whole of the relevant year,
on various assumptions, including in regulation 20(3)(e) that if, by virtue of
regulation 15(1), the chargeable amount is assumed not to be subject to a
discount on the day the notice is issued, that it will not be subject to a
discount as regards any day after the issue of the notice;
and in 20(3)(f) that
if, by virtue of regulation 15(2), the chargeable amount is assumed to be
subject to a discount on the day the notice is issued, that it will continue to be
subject to the same rate of discount as regards every day after the issue of
the notice.
The Council Tax and Non-Domestic Rating (Demand Notices)(England)
Regulations 2003 (S.I. 2003/2613, as amended)
12. Regulation 3(1) of these Regulations (“the 2003 Regulations”) provides that a
council tax demand notice shall contain the matters specified in Schedule 1.
Under paragraphs 16 and 17 of Schedule 1,
these matters shall include the
days (if any) when the amount payable under the notice was calculated by
reference to section 11 of the 1992 Act; the reasons for the discount and its
amount; a statement that if at any time before the end of the following year
the person to whom the notice is issued has reason to believe that the
amount of council tax payable is not subject to any discount or is subject to a
lesser discount, he must notify the authority of his belief within a period of 21
days beginning on the day on which he first had that belief; and a statement
that if the person fails without reasonable excuse to comply with that
notification requirement, the authority may impose on him the penalty which is
specified in paragraph 1(2) of Schedule 3 to the 1992 Act.
Summary of the position in relation to single person discount under the
above mentioned enactments
13. A council is under a duty to take reasonable steps to ascertain whether a
single person discount is applicable in respect of a particular chargeable
dwelling.
What is “reasonable” will be construed in accordance with the usual
public law principles but it is clear from XXXXX XXXXX’s correspondence that
councils have not interpreted this to mean that they must seek information
from persons at every chargeable dwelling before every financial year as to
whether they are entitled to single person discount. This does not appear to
me to be “unreasonable” in view of the expense and time that would be
involved in carrying out such an annual check.
Instead, it appears that councils rely on regulations 15(1) and (2) of the 1992 Regulations
to make an assumption, presumably based on the previous financial year’s entitlements
(where they have not been made aware of a change in entitlement to the
discount), that the chargeable amount in relation to a chargeable dwelling is
either subject to or is not subject to a single person discount. They also rely
on regulation 20(3) to make an assumption in the demand notice that the
state of affairs that pertains in relation to the entitlement to a single person
discount in respect of a chargeable dwelling on the day the notice is issued
will pertain for the remainder of the financial year.
(NB It is not correct to state that councils 'rely' on these regs to make the assumption outlined here: the legal assumptions are not optional, or something that can be relied on, they are compulsory steps in the administration of the tax. This is the central point about them which, due to the focus of the author, is missed in this analysis. It would appear that the council chooses 'steps' which do not involve writing to the taxpayer, but what these may be are obviously not particularly clear to the Audit Commission. Having then decided, as a result of these steps, that there is entitlement to a discount of a particular amount, the council then must make the assumptions set down in the regs, which are 'assumptions as to the future'. This makes it all the less acceptable for the Audit Commission to write letters making assertions about the 'beliefs' of council officers, as it has done, asserting that these officers hold 'beliefs' which would be inconsistent with their legal duties. )
14. However, under regulation 16 of the 1992 Regulations, there is a clear duty
on a person who has been informed in a demand notice (as he should be
pursuant to the 2003 Regulations) of an assumption as to single person
discount
made in his case, to inform the authority if he has reason to believe that entitlement to the discount or to the level of discount has changed within
21 days of him first having such a reason to believe. A failure to do this,
without reasonable excuse, allows the authority to impose a penalty of £70.
(NB 'The discount' here means the sum in question at the rate of 25%)
15. It is also clear that, under regulation 3 of the 1992 Regulations, a person
whom an authority thinks is the resident, owner or managing agent in respect
of a chargeable dwelling must supply any information he has to that authority
when requested to do so in writing by the authority where the purpose of the
request is to identify the person who is the liable person in respect of the
dwelling. This would allow a council to request information at any point during
the year from the relevant person for the purpose of establishing who the
liable person for a chargeable dwelling is and that person would be under a
duty to comply (and may be subject to a penalty if he does not).
(NB The Audit Commission has made some rather broad claims about the situation in which the council may demand information under the 'guise' of using regulation 3, based on its own suspicion that if a person is on the electoral register and not on council tax data sets a sexual/live in relationship is likely.)
Fraud
16. The next question we need to consider is whether a false claim as to
entitlement to single person discount or a failure to comply with the duty
under regulations 3 or 16 of the 1992 Regulations amounts to fraud.
17. Section 1 of the Fraud Act 2006 provides that a person is guilty of fraud if he
is in breach of one of the listed sections, which include section 2 and 3.
Section 2 provides that a person is in breach of the section if he dishonestly
makes a false representation and intends by making the representation to
make a gain for himself or another or to cause loss to another or expose
another to risk of loss.
A representation is false if it is untrue or misleading and the person making it knows that it is, or might be, untrue or misleading, and a representation means any representation as to fact or law. The current
meaning of dishonesty was established by R v Ghosh 1982 which set a 2 stage test.
The first question is whether a defendant’s behaviour would be
regarded as dishonest by the ordinary standards of reasonable and honest
people. If answered in the affirmative, the second question is whether the
defendant was aware that his conduct was dishonest and would be regarded
as dishonest by reasonable and honest people.
18. If a person provides a council with information that he is the only adult
resident in a chargeable dwelling (or the only adult who does not fall to be
disregarded for the purposes of the discount) and that information is false and
known to be false by that person, if he does so dishonestly and if he intends
by providing that information to make a gain for himself (i.e. by receiving
single person discount to which he is not entitled so as to reduce his council
tax bill), then he will be guilty of fraud.
(This is why it is so wrong of the Audit Commission persistently to imply that people on its hit lists are literally claiming to live alone.)
19. Section 3 of the Fraud Act 2006 provides that a person is in breach of the
section if he dishonestly fails to disclose to another person information which
he is under a legal duty to disclose and intends by failing to disclose the
information to make a gain for himself or another or to cause loss to another
or expose another to a risk of loss. If a person dishonestly (as per the
meaning set out in paragraph 17 above) fails to disclose information in
compliance with regulations 3 or 16 of the 1992 Regulations and he intends
by the failure to disclose this information to make a gain for himself (i.e. by
receiving single person discount to which he is not entitled so as to reduce his
council tax bill), then it seems he will be guilty of fraud.
20. Given that, on the above analysis, it is possible for a person to be fraudulently
receiving single person discount, the Commission has the power to conduct a
data matching exercise for the purpose of assisting in the prevention and
detection of persons who are receiving single person discount but are not
entitled to so receive it.
(This is a very contentious assertion. It all depends upon what you mean by 'data matching')
Website material identified by XXXXX XXXXX as inaccurate
21. XXXXX XXXXX identified paragraphs 42 and 47 of the NFI 2006/07 national
report under the section “Other data matching” as inaccurate. I have looked at
all of section 3 (paragraphs 42-51) and
I agree that the content of paragraphs
42 and 47 could more accurately reflect the legislation.
I attach a link to the report here
http://www.audit-commission.gov.uk/Products/NATIONALREPORT/
A3F1CBB1-C859-4bb1-82CD-B8A088FAAA07/NFI200607nationalreport.
pdf.
Given this is a 2006/7 report, I am not sure whether
making changes to it is feasible but my suggestions may inform further
versions or further NFI documents. For ease of reference, I will set out the
paragraphs as they appear in the 2006/7 report below with my suggested
track changes (and reasons for them).
22. Paragraph 42: The amount of council tax payable by a person in respect of a
chargeable dwelling will be set by reference to the area and valuation band in
which the dwelling falls.[DN there is nothing apparent in the legislation which
bases the tax on the number of persons in a dwelling- this point was raised by
XXXXX XXXXX and so I have substituted the first sentence.]
Deleted: A full council tax bill assumes that there are two
adults living in a property
If only one adult lives in the property [Deleted: they can claim.
DN entitlement may arise via council’s assumption rather than a claim by
the person, hence the change of wording here
No, entitlement arises as a result of the conditions laid down in the law applying, and not via assumption. A small slip, perhaps, but worth pointing out.]
(who does not fall to be disregarded for the purposes of
the discount) or there are 2 or more adults but only 1 of these does not fall to
be disregarded for the purposes of the discount, there will be an entitlement
to [] a council tax single persons discount of 25 per cent.
Nationally these discounts are being received by over
7 million householders, costing councils over £2 billion each year.
It really is annoying the way this discount is persistently represented as costing councils money when single people cost councils less to provide services for than dwellings in multiple occupation.
23. Paragraph 47: Also within this exercise is a “Rising 18s” match which
identifies young people becoming an adult at 18 who live with a council tax
single person discount recipient. (Deleted: As t) This age change could make many
recipients of the single person discount ineligible as they will not then be the
only adult living in the property (although it is important to bear in mind that a
recipient will only become ineligible in these circumstances where the person
turning 18 will not fall to be disregarded for the purposes of the discount) [DN
XXXXX XXXXX raised the point that no mention was made of disregards here
and I agree that this is less than ideal bearing in mind that many people on
turning 18 will be disregarded for the purposes of the discount due to being
students]. By identifying such cases, the Rising 18s match will enable
councils to address this risk at an early stage.
In this case how can there possible be an inconsistency requiring investigation?
24. I have not looked in detail at the other publications on the NFI section of the
Commission website but am happy to do this and check for inaccuracies if
necessary.
25. I have addressed this minute to you as I thought it was useful to set out the
statutory scheme and so on in detail for future reference.
Please let me know,
however, to what extent (if at all) you want this advice to be passed to clients.
Happy to discuss
Leah Griffiths
Solicitor
Corporate Services (Legal)
Audit Commission
