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Too complicated and confusing to account for 53 week rent years in UC awards

 

stuart
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Written answer from Alok Sharma on universal credit and claimants renting from social landlords who have 53 week years -

‘… roughly every six years, there will be 53 payment days in a twelve-month period with the result that, over the cycle, the average social sector tenant will receive approximately 35p a week less towards their rent. A key principle of Universal Credit is that it simplifies the benefit system for working age claimants and re-assessing housing costs to reflect the number of rent payments in any particular year would be complicated and lead to confusion. As such, the Department has no plans to amend these regulations.’

 

     
Vonny
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divide by 12?

     
HB Anorak
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It’s not every six years and it has nothing to do with 53 week rent years. Over any arbitrary 12 month period, any weekly tenant will receive slightly less UC than they pay in rent because the x 52 ÷ 12 method always spreads 52 weeks’ rent over slightly longer than 52 weeks (one day or two if the arbitrary period includes a 29 February).

     
Jeremy Barker
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Presumably the government’s preferred “fix” to these problems is the same as the “fix” for problems caused by non-monthly pay.

Which is that rent should be paid monthly.

     
Peter Turville
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This issue was also raised with us by local councillors.

It seems because there will be 53 rent payments due dates within a calendar (financial?) year twice in every 11 years - LA’s have to show the auditors that they have collected 53 rather than 52 weeks rent in those years (or explain the ‘shortfall’ of 1 weeks rent of £XXXK for those tenants on HB or who pay weekly rather than monthly in those years). 2019 is one of those years for many LA / social landlords.

This is a problem with LA / social landlord accounting procedures not UC (although I note the ‘shortfall’ that Peter mentions above - but that is not issue that concerns LA’s & other social landlords!).

     
Cordelia
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I think this is a real problem, whether you see it as losing one week’s rent next year, or approximately one day’s rent every year.  If a landlord is looking at a tenant’s rent account, it’s going to look a lot like a missing week by the end of next year. 

So what should that landlord do?  If they do nothing the rent account stays in arrears, and in a few years there is another “53 Mondays” year and then the account is 2 weeks in arrears…

If they follow their normal procedures and chase the tenants they are going to expend a lot of resources chasing tenants who probably won’t have a clue why they are in arrears, particularly if they have an APA in place.

It’s shocking that UC are trying to minimise this - as far as I can see they probably didn’t anticipate that there would be 53 week years when they wrote the rules, and they are now too lazy or complacent to fix it.  They can account for an additional week’s earnings in an assessment period (although in a way that is usually unhelpful to the claimant) so why can’t they cope with an extra rent-week in a year?

     
Peter Turville
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The issue here is that social landlords think in weeks but UC in months. There are never 53 weeks in a calendar year! - it is an accounting and conceptual problem with the calendar year because it is not exactly 364 days long (but is exactly 12 months and UC ‘assessment periods’ long) that social landlords need to get over!

Here is the response I received (from councillors) to our opinion on the issue.

Pete is astute and absolutely right on this - the issue is that many social landlords use a week as the accounting unit for rent payments rather than a calendar month, because the capacity for accountants to get their knickers in a twist over units of time which are not of the same length is something tremendous.

(Unnecessary information: because obviously no year is exactly 52 or 53 weeks long - in astronomical terms, it’s not possible mathematically to reconcile the solar day, the synodic month and the tropical year - the accountants insert two extra intercalary weeks every 13 years.  The Romans did something similar, and the Jewish religious calendar still does, al;beit on a 19-year cycle.)

Therefore it is an accounting problem, but as I learned when I chaired the Council’s audit committee for a year (for my sins) problems with notional accounting units cost real money.  If we multiply the Council’s weekly rent by 52 and divide by 12, in two years out of 13 this leaves roughly £800K unacounted for - which is a not insignificant problem for the HRA, or a not insignificant problem for 7,800 Council tenants (and possibly 4,000-odd RSL tenants as well - I don’t know what accounting system they use).

So I think it is very much worth [MP] making representations to the DWP, whose accountants are apparently not so astute - though as Pete says this is an issue for social landlords rather than for the advice sector, so it’s the Council that needs to take the lead in contacting [MP] and the DWP formally.

     
Mr Finch
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I think there are actually two separate issues here.

One is that the UC regs define a conversion of weekly rent to monthly as 52/12, which cheats claimants very slightly, since normal years are 1/7 of a week longer than 52 weeks and leap years 2/7. This is what the minister is referring to with his 35p every week, and could be fixed fairly easily by defining the year correctly instead.

But that won’t entirely fix the second issue, as with weekly pay, where occasionally more than the usual number of payment days will fall in a UC month. If the first issue were fixed claimants could though in principle save up that 35p a week for a few years and would then have enough to pay the extra week.

      [ Edited: 6 Dec 2018 at 10:30 am by Mr Finch ]
Peter Turville
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Mr Finch - 05 December 2018 11:34 AM

I think there are actually two separate issues here.

One is that the UC regs define a conversion of weekly rent to monthly as 52/12, which cheats claimants very slightly, since normal years are 1/7 of a week longer than 52 weeks and leap years 2/7. This is what the minister is referring to with his 35p every week, and could be fixed fairly easily by defining the year correctly instead.

But that won’t entirely fix second issue, as with weekly pay, where occasionally more than the usual number of payment days will fall in a UC month. If the first issue were fixed claimants could though in principle save up that 35p a week for a few years and would then have enough to pay the extra week.

I agree.

On the assumption the UC formula won’t be changed to using 365/366 days landlords will have to change their accounting procedures from weekly to monthly for UC recipients and decide what their policy will be regarding any arithmetical shortfall that still results. Will they pursue tenants for a 1 or 2 day per year rent shortfall due to the existing formula?

The second issue could be fixed by using monthly instead of weekly rent period for UC recipients. After all it not like they didn’t see the issue coming.  Many social landlord accept monthly DD payment of rent which doesn’t seem to cause them problems with 52 / 53 rent weeks commencing in a calendar year (inc ‘rent free’ weeks).

I don’t see DWP changing UC because of accounting issues for social landlords. I can hear Neil Couling saying ‘put your own accounting house in order’!

     
Timothy Seaside
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Although most PRS tenancies have monthly rent periods, a significant number (I would say the majority, from my experience) of rooms in shared houses are charged weekly. So this is not just an issue for tenants of social landlords.

And, as other people have pointed out, it’s nothing to do with 53 weeks in a year, and it’s nothing to do with simplicity - it’s to do with the regulations using an (unnecessarily) inaccurate formula for calculating monthly rent from weekly.

The answer is fiendishly complicated: Rather than multiplying by 52 (inaccurate) and dividing by 12 (accurate), the trick is to divide by 7 (accurate), multiply by 365 or 366 (accurate) and then divide by 12 (accurate). Obviously this is problematic because it means performing three mathematical operations in a row, and it’s anybody’s guess how many days there are in any particular year, so they might have to phone a scientist or use a computer or something to work that bit out (or they could just use 365.25 for simplicity, maybe?).

There must be somebody at the DWP who can do sums because the monthly standard allowance for UC is almost exactly equal to the IS personal allowance divided by 7, multiplied by 365.25, divided by 12.

      [ Edited: 5 Dec 2018 at 03:34 pm by Timothy Seaside ]
Peter Turville
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Timothy Seaside - 05 December 2018 03:13 PM

Although most PRS tenancies have monthly rent periods, a significant number (I would say the majority, from my experience) of rooms in shared houses are charged weekly. So this is not just an issue for tenants of social landlords.

And, as other people have pointed out, it’s nothing to do with 53 weeks in a year, and it’s nothing to do with simplicity - it’s to do with the regulations using an (unnecessarily) inaccurate formula for calculating monthly rent from weekly.

The answer is fiendishly complicated: Rather than multiplying by 52 (inaccurate) and dividing by 12 (accurate), the trick is to divide by 7 (accurate), multiply by 365 or 366 (accurate) and then divide by 12 (accurate). Obviously this is problematic because it means performing three mathematical operations in a row, and it’s anybody’s guess how many days there are in any particular year, so they might have to phone a scientist or use a computer or something to work that bit out (or they could just use 365.25 for simplicity, maybe?).

There must be somebody at the DWP who can do sums because the monthly standard allowance for UC is almost exactly equal to the IS personal allowance divided by 7, multiplied by 365.25, divided by 12.

They could cut & paste the TC(ITDR)Regs 7 or 8 that do basically that calculation for TC ‘relevant periods’. If the ancient TC IT system can apply such calculations one would assume the all singing & dancing UC system could. After all its not rocket science (computing capacity on the Apollo missions etc!!).

but will they .......

     
Mr Finch
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Timothy Seaside - 05 December 2018 03:13 PM

Although most PRS tenancies have monthly rent periods, a significant number (I would say the majority, from my experience) of rooms in shared houses are charged weekly. So this is not just an issue for tenants of social landlords.

And, as other people have pointed out, it’s nothing to do with 53 weeks in a year, and it’s nothing to do with simplicity - it’s to do with the regulations using an (unnecessarily) inaccurate formula for calculating monthly rent from weekly.

The answer is fiendishly complicated: Rather than multiplying by 52 (inaccurate) and dividing by 12 (accurate), the trick is to divide by 7 (accurate), multiply by 365 or 366 (accurate) and then divide by 12 (accurate). Obviously this is problematic because it means performing three mathematical operations in a row, and it’s anybody’s guess how many days there are in any particular year, so they might have to phone a scientist or use a computer or something to work that bit out (or they could just use 365.25 for simplicity, maybe?).

If three operations is too much, they could always simplify it to 365/84 (and 366/84).

Or to simplify things consistently, wouldn’t it be possible to just include whatever housing liability arises in the assessment period, as is the rule for income when it works against the claimant? Mr Couling is adamant this doesn’t cause any unfairness so it should be fine.

      [ Edited: 6 Dec 2018 at 10:56 am by Mr Finch ]
Timothy Seaside
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Peter Turville - 05 December 2018 03:50 PM

They could cut & paste the TC(ITDR)Regs 7 or 8 that do basically that calculation for TC ‘relevant periods’. If the ancient TC IT system can apply such calculations one would assume the all singing & dancing UC system could. After all its not rocket science (computing capacity on the Apollo missions etc!!).

but will they .......

It’s not even as complicated as working out tax credits - because you’re not starting with a yearly amount and then working out how much of the year is left and then working out what the weekly rate is from that. With that calculation you have to take into account where you are in the year, how many days you’re dealing with, etc. But when converting a weekly amount to a monthly amount, you can do it simply by applying a constant multiplier.

The problem is that for rents in UC they use 4.3r and they ought to be using at least 4.34r523809r (365/84, as Mr Finch puts it). On average I would argue they should be using 4.3482r142857r (365.25 days) if they want to keep it simple and use the same figure all the time. But it is almost as easy just to do the calculation properly and get the actual answer. As you say, it’s not rocket science; it’s primary maths.

Sharma’s argument that the system and the regs are simpler and less confusing because you use x52/12 is unsupportable. A calculation is required, and there is nothing inherently simpler about doing the calculation wrong. It is confusing to be on full housing costs and still fall behind with your rent. It is confusing to say you’re going to convert a weekly amount to a monthly amount and then instead convert your weekly amount to a slightly less than monthly amount. Why not just multiply the weekly amount by 4, as there are just over 4 weeks in most months - that would be even simpler?

The honest reason (as I think Mr Finch is hinting at with his suggestion about aligning rent calculation with income calculation), is that the system is designed to be unfair - using contradictory reasoning and methods to short-change claimants wherever possible. It is deliberate. In the cock up or conspiracy debate, cock ups get corrected when they are discovered.