CTR minimum residency rule

Issue 242 (October 2014)

In R (Winder and others) v Sandwell MBC,1 the High Court ruled that a local authority could not lawfully adopt a council tax reduction (CTR) scheme that was restricted only to those who had lived in the borough for two years. Michael Spencer discusses the case and its implications for CTR schemes and localised welfare more generally.

Background

The Local Government Finance Act 2012 (LGFA 2012) introduced a localised system of council tax support. Council tax benefit was abolished and was replaced by local schemes setting out entitlement to reductions in council tax.

The Act requires local authorities to introduce a CTR scheme setting out reductions in liability for classes of persons who are ‘in financial need’.2 Before introducing or revising a scheme, authorities have to publish it in draft form and consult such persons as they think fit.3 Regulations set out prescribed requirements which, among other things, protect pensioners and exclude persons subject to immigration control.4

Localisation was accompanied by a 10 per cent cut in funding, which, as pensioners are protected, equates to around a 30 per cent cut for working age claimants. Councils have responded in various ways, including introducing minimum payments for all residents regardless of means or only protecting vulnerable groups. At the same time, the government announced a one-off transitional grant of £100 million payable to those councils whose schemes protect people on low income and retained work incentives.

Benefit tourism

Sandwell Council decided to take a novel approach. It initially consulted on a draft scheme granting a full reduction to people on means-tested benefits or with a low income. The scheme was designed so that the council would be eligible for the government’s transitional grant, which would have been £675,000. The draft scheme was consulted on, an equalities impact assessment was conducted and it was approved by Sandwell’s Cabinet.

Then, in December 2012, at the full council meeting held to approve the scheme, the council’s finance chief proposed a radical amendment. Commenting that the benefit cap could lead to an influx of people moving from the south east to the midlands, he suggested a new requirement that all claimants for CTR demonstrate a minimum of two years’ residency in Sandwell. The motion was immediately approved and the CTR scheme adopted with the two-year residency requirement. This concern for what the council called ‘internal benefit tourism’ was its main justification relied for adopting the requirement.

Judicial review

The claimants were three vulnerable women who had been living in the neighbouring borough of Dudley. They became homeless for various reasons – one had fled domestic violence, another was hospitalised after attempting suicide, the third after her husband died. Dudley housed them in a hostel located within Sandwell Borough. As a result, along with at least 3,500 other people on low incomes, they became caught by Sandwell’s two-year residency rule and were refused CTR. As they could not afford to pay the full rate of council tax they were threatened with bailiffs and court action. Although they had been living in Dudley, two of them were actually born and grew up in Sandwell and had family there. They instructed CPAG to challenge the residency rule by judicial review.

The ruling

In a judgment delivered on 30 July 2014, Judge Hickinbottom found the residency requirement to be unlawful on six grounds.

1. The council did not have the power to introduce the residency requirement – ie, it was ultra vires. The wording of the LGFA 2012 was on its face ‘clear and unambiguous’ – the class who are entitled to a reduction must be defined by reference to criteria which the authority considers identify those who are, in general, in financial need. Criteria which do not help identify financial need fall outside the powers granted by Parliament. Even if the wording of the Act was not clear, Parliament’s purpose in introducing it was to identify people who are in financial need. The scheme could not, therefore, be used to discourage those from higher housing costs areas from moving to Sandwell. This ‘short point’ effectively disposed of the claim, but for the sake of completeness the judge went on to consider the other grounds.

2. Sandwell had failed to take into account all material considerations. In particular, it had 
failed to consider the fact that the requirement was inconsistent with central government policy and, if other authorities adopted a similar rule, this would compound the difficulties for some applicants.

3. Sandwell had failed to consult on the residency rule as required by the LGFA 2012. The judge commented that had such a consultation taken place the council may have been prevented from ‘plunging into the unlawfulness into which it did plunge by adopting a CTR Scheme with a residency requirement’.

4. The requirement imposed an obstacle to freedom of movement within the EU. It was intrinsically likely to affect non-British EU citizens and ‘created an obstacle to freedom of movement by the differential imposition of tax’.

5. The requirement indirectly discriminated against women and foreign nationals, contrary to EU law, the Equality Act 2010 and Article 14 of the European Convention. This discrimination could not be justified as a proportionate means of achieving a legitimate aim. There was no evidence whatsoever that ‘benefit tourists’ from the south of England were a problem and no assessment of other options or the collateral damage the requirement would cause on the vulnerable and others in financial need.

6. Finally, the council had failed to have due regard to its equality duties under s149 of the Equality Act 2010. The judge again commented that this might have prevented the unlawful course that followed.

Other claimants who have been affected

Claimants have told us that they are still being pursued for council tax because Sandwell is only applying the judgment as from 30 July. This is in spite of clear wording in the judgment that the residency rule was always unlawful.5

It’s important to remember that CTR is not a welfare benefit, but is a statutory right to a reduction in tax. The normal rules on appeals do not apply. Appeals are first made by way of a written notice to the local authority, subsequently by way of appeal to the Valuation Tribunal.6 There is no time limit for sending the written notice, although once it has been sent appeals must be made within two months of the council’s reply or within four months if there is none. That means claimants refused a reduction because of the residency rule during 2013 and 2014 can appeal now by sending a written notice.

Two other Boroughs – Tendring and Basildon – also introduced residency rules of five and seven years respectfully, which they have now suspended.

Discretionary reduction

Councils have a residual power to reduce council tax liability outside of the scheme to such extent as the authority ‘thinks fit’.7 This power existed before the 2012 Act, but was not routinely used. Some councils (including, for example, Sandwell) have policies saying that they will consider discretionary reductions in cases of hardship.

If your client is not eligible for a full reduction under her/his council’s scheme, but paying council tax would cause hardship, it is worth applying for a discretionary reduction. The Valuation Tribunal recently confirmed that on an appeal against a refusal of a discretionary reduction it can consider the issues afresh, and not just on judicial review principles.8

Broader implications

The judgement is a clear reminder that CTR schemes must be used in order to identify people who are in financial need and not for any other purpose. If councils decide to change their schemes, they should be careful to consult and conduct an equalities impact assessment.

The case may also have relevance for other areas of welfare that have recently been devolved in the name of localism, including local welfare assistance schemes (replacing crisis grants and community care loans). A number of these include minimum local residency rules. It is certainly arguable following Winder that such requirements are unlawful on irrationality, free movement and discrimination grounds.


Please be aware that welfare rights law and guidance change frequently. Therefore older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.

  • 1. [2014] EWHC 2617 (Admin)
  • 2. s13A LGFA 1992 (as amended)
  • 3. Sch 1A para 3 LGFA 1992
  • 4. In England these are the Council Tax Reduction Schemes (Prescribed Requirements) (England) Regulations 2012 No. 2012
  • 5. See para 97: the residency requirements ‘were and are’ unlawful.
  • 6. s16 LGFA 1992 (as amended).
  • 7. s13A(1)(c) LGFA 1992 (as amended)
  • 8. SC v East Riding of Yorkshire Council [2014] EW Misc B46 (VT)