The council tax is an important source of revenue for local government. Perceptions of the legitimacy of the council tax are more likely to be undermined if there is not an effective mechanism in place to alleviate the financial burden it places on low-income households.
Attitudes towards council tax are influenced by various views of its fairness. One of the common concerns raised about council tax is that it does not take sufficient account of households' income. Council tax relief enables the council tax system to take account of the income of some low-income households, and reduces their council tax liability accordingly. A reduction in council tax liability is not a social security benefit designed to provide income support to those in need yet it is still called a benefit and in many ways operates like one. Its governing rules tend to be aligned with the benefit rather than the tax system and people only receive it if they make a claim rather than being automatically entitled. We believe that council tax benefit should be treated as part of the tax system to more accurately reflect its true nature and have called on the Government to remove the 'benefit' label immediately as a first step.
At present, there are significant weaknesses in the operation of council tax benefit that reduce its ability to alleviate effectively the financial burden of council tax on low-income households for two main reasons. First, the rules governing council tax benefit eligibility and entitlement are too restrictive to reduce adequately the burden of council tax upon those in greatest need of relief and, secondly, take-up is so low that relief is not reaching all those whom it is intended to help.
The Government's policy focus is on increasing take-up among pensioners. While this is an important task it is not the only issue that needs to be addressed. The restrictive nature of the rules governing council tax benefit eligibility result in a situation where an estimated 600,000 children are below the poverty line in households which are not eligible for any council tax benefit. We note that the Government currently saves an estimated £1.8 billion a year from unclaimed council tax benefit. Using some of these funds to widen the eligibility and entitlement rules governing council tax benefit could make a substantial difference to the fairness of the council tax system. We call on the Government to take action as matter of urgency to address the restrictive nature of the rules governing council tax benefit as well as to increase take-up among all eligible low-income households