Callcredit Blog

80,000 households likely to be incorrectly claiming single person discount on council tax, costing local authorities up to £23 million

Collections & Recoveries Fraud & Verification

Back in January in my piece, ‘Alerts monitoring will radically alter how single person discount reviews are performed’, I predicted that councils would start to move away from bulk discount reviews in favour of using alerts to manage changes to single person discounts (SPDs). I’m happy to report that I was right. Requests for bulk reviews are reducing and adoption of our revenues module has increased. I have dug a little deeper into the data to see what it reveals about people incorrectly claiming an SPD.

The value of incorrect SPDs

Census data shows that single person households are rising so SPD rates are likely to increase. With more than 7.65 million properties claiming SPD in October 2015, we know that households are subject to changes every day so there will always be accounts where the discount is incorrect if these changes are not reported or are reported late. Just how many are incorrect has always been subject to debate.

The Department for Communities and Local Government (DCLG) publish the number of SPDs in each English council annually so I compared this to our own view of residency and counted around 80,000 residential properties where our data would suggest an SPD ought not to be awarded.  This means with an average council tax value of £1,141 in England this puts the value of the incorrectness a little under £23 million.  But what of these 80,000 cases? What do they look like?

Profiling an incorrect SPD

We took a sample of data from 10 council areas across a range of geodemographic profiles. Each active SPD was risk assessed using our existing process. This uses our residency dataset to identify current residents living at a property, which is corroborated by financial and residential information used to further assess the likelihood of any additional occupiers actually residing in the property. We compared this data with CAMEO, Callcredit’s consumer segmentation tool.

The first interesting finding is that higher risk cases tend to be from more urban areas. So our towns and cities are more likely to contain proportionally more incorrectness than in the countryside. This is most likely due to the more transient nature of urban areas.  The second finding is that higher risk cases tend to be those living in larger properties with higher council tax bands, which is perhaps surprising.

We are, wrongly, conditioned to believe that fraudulent behaviour may be driven by economic circumstance and so is likely to be more prevalent in deprived households. However, our analysis seems to contradict this. So delving a little deeper we looked at our CAMEO income classifications and found that again higher risk cases were from higher income households.

Recovering money owed from those that can pay

Councils might lack the evidence or resources to prove intent needed to describe this as fraud but it is just as damaging to local authorities. What it does tell us is that in removing SPDs in these cases, the increase in collectible debt is likely to be recovered as there is a clear ability to pay within these households.

With taxpayers’ households changing every day and each council shouldering a share of the £23 million in potential lost revenue, councils need to take control and act proactively and quickly to household changes and ensure discounts are removed promptly. With better, more efficient mechanisms now available I believe the old style annual review is no longer fit for purpose.

Author: James Rawlins

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