Make HMRC cover Pay to Stay workload, council tells Government

HMRC should handle the extra bureaucracy that the Government's Pay to Stay policy will generate, a London council has argued.

Under Pay to Stay, which is due to come into force in April 2017, social housing tenants earning £40,000 a year in London or £30,000 elsewhere will be charged rents at market or near-market levels.

But in a letter to housing minister Gavin Barwell, Southwark Council said that the policy would force it to means-test tenants to find out their incomes, something that would add an "immense" administrative burden.

It calls for HMRC to pick up the extra workload as it already collects data on income and should therefore be responsible for supplying the information.

The Local Government Association has already warned that Pay to Stay will require councils to invest millions in new IT systems, staff and administration, and the bureaucracy will be so complex that it will be "impossible" to meet the Government's implementation deadline of 2017.

Councils do not generally means-test tenants because, as in the private sector, they do not always have to disclose their salary, only prove their ability to pay their rent. They are assessed based on their need for housing, which can cover many factors not necessarily relating to income.

Establishing how much tenants earn would be costly, time-consuming and in direct contradiction to the Government's New Burdens Doctrine, Southwark said. The doctrine requires Whitehall to justify new duties, powers and targets and other bureaucratic burdens placed on local authorities, and to assess how much policies will cost and how they will be paid for. While the focus of the doctrine is the General Fund and council tax, the London borough said the principle should apply to tenants and the Housing Revenue Account.

Southwark would face a particular problem because it has a large than average population of self-employed people and it would be "virtually impossible" to accurately measure their annual or weekly income as it fluctuates, and taxable income is filed to HMRC a year behind the current year.

Cllr Stephanie Cryan, cabinet member for housing, said Pay to Stay amounts to "an intrusion on people's privacy and a bureaucratic nightmare for councils".

"In many cases, it would be almost impossible to prove people's income and we feel the Government already has an organised body set up for this very purpose and it should follow its own guidance when it comes to burdening authorities with the extra workload," she said.

"Discouraging the entrepreneurial spirit that Southwark is proud of could have a direct impact on our local economy and tenants who run small businesses are already suffering enough in these challenging economic times. Self-employed people would effectively have to file their tax returns twice and be penalised for their business success.

"Means-testing tenants is an expensive exercise in futility. It could cost authorities millions in administrative costs and prove nothing more than we already know - that people can either pay their rent or they cannot."