Memorandum by Help the Aged (CTB 5)
INTRODUCTION
1. Help the Aged welcomes the opportunity
to submit evidence to the Select Committee's Inquiry on Council
Tax Benefit following the publication of the Lyons Inquiry into
Local Government. Older people, particularly those on low fixed
incomes pay disproportionate amounts of their incomes on Council
Tax and Help the Aged has consistently campaigned for improvements
to be made to the current system. We warmly welcome the Lyons
Inquiry recommendations which, if implemented, could bring about
significant benefits for pensioners and create a much fairer system
of local taxation. We will address each of the issues from the
Committee's terms of reference in turn.
SUMMARY
— 2.23 million pensioners fail
to claim Council Tax Benefit.
— £1.36 billion is left unclaimed
each year, an average of £598 per year for individuals.
Help the Aged believes that until all those
currently failing to claim Council Tax Benefit are receiving the
money, the system will remain, to an extent, unfair. Help the
Aged firmly believes that payment of CTB needs to be made fully
automatic as soon as feasibly possible.
— 40% of those on low incomes
(under £13,500 a year) paid more than 10% of their incomes
on council tax.
— 10% of over 65s paid their council
tax but had nothing left at the end of the month, 13% cut back
on hobbies to pay, 8% cut back on heating and 5% on food.
We are concerned at the wider burden of Council
Tax on those who have modest incomes but are not currently entitled
to help. We believe that Council Tax Benefit needs to be more
generous. Help the Aged would like to see the generosity of Council
Tax Benefit improved by abolishing the current savings limits
which reduce eligibility.
THE CASE
FOR REBRANDING
COUNCIL TAX
BENEFIT AS
A REBATE
2. For accuracy alone there is a strong
argument that Council Tax Benefit ought to be rebranded as a rebate.
A report for Help the Aged by the New Policy Institute in 2003
argued that Council Tax Benefit effectively assesses individuals
liability to pay tax and as such is misnamed at the moment.
3. There is also evidence to suggest that
redesignating Council Tax Benefit as a rebate could significantly
increase takeup: under the old system of rebates for domestic
rates pensioners had take-up rates of 90%, this compares to 53%
with the current system. Help the Aged staff working in projects
to improve Benefit Takeup frequently express the view that changing
the name of Council Tax Benefit would make their jobs easier.
There is often little aversion amongst older people to claiming
back tax, but many individuals continue have misconceptions around
entitlement to Benefits. A good example of this is Kirklees Council
where it was announced that pensioners would not be subject to
any rise in council tax if they registered with the Council, over
15,000 signed up within 24 hours, takeup of Council Tax Benefit
was greatly improved as a result.
THE ROLE
AND EFFECTIVENESS
OF GOVERNMENT
IN INCREASING
COUNCIL TAX
BENEFIT UPTAKE
LEVELS
4. The Pension Service has taken some important
steps towards improving takeup of Council Tax Benefit including:
— Allowing those claiming Pension
Credit over the phone to also claim Council Tax Benefit—a
pre-populated three page form is sent to individuals for them
to sign and return.
— The Local Pension Service now
carry out home visits which assess individuals for their full
benefit entitlement including Council Tax Benefit.
THE CASE
FOR IMPROVEMENTS
IN THE
PROCESSING OF
PENSION CREDIT
CLAIMS TO
ENABLE THE
PENSION SERVICE
TO ACT
AS A
PORTAL TO
REBATES FOR
ALL CALLERS,
REGARDLESS OF
PENSION CREDIT
ELIGIBILITY , AND
TO EXAMINE
STEPS TO
IMPROVE DATA
SHARING
5. Despite improvements listed above there
is a long way to go. Initial research on the three page form introduced
by the Pension Service has indicated that half of these are never
returned. In addition, there is no help available over the phone
for those who are not eligible for Pension Credit—these
individuals have to make full claims to their local authorities
normally filling in a 28 page form.
6. Investing in the Pension Credit application
line so it could take CTB claims for all pensioners would be very
helpful. At the moment Local Authorities and even the Local Pension
Service, are picking up the costs of finding these pensioners
and helping them through the process of claiming. So even if investment
is required, this could be justified by efficiency savings elsewhere.
Help the Aged believes that Government needs to pull its full
weight in improving CTB takeup, rather than leaving it to local
authorities. As Sir Michael Lyons noted, "low takeup is a
systemic as well as a local issue." However, improving the
phone service could only go so far in improving takeup, as it
would not itself offer a way of reaching those who currently believe
themselves to be ineligible for benefits, those who do not know
about benefits or those who are not claiming because of stigma
or the perceived complexity of claiming.
7. Help the Aged believes that the only
way the current property based system of local taxation can be
made fair for older people is by introducing a system which pays
Council Tax Benefit to older people automatically. Central Government
holds the relevant data on individuals' state and private pension
incomes, it also has information on the returns people receive
on their savings which can be used to generate a profile of their
overall savings. If this information were used to best effect
and then shared with Local Authorities, then Council Tax Benefit
(or Rebate) could be deducted automatically from people's bills.
Pensioners would not need to claim at all, which would circumvent
all the problems of takeup. Clearly this is no small project and
would require upfront investment. The rewards of doing this would
be very great and we have listed some below:
— Thousands of pensioners would
be removed from poverty (the NAO estimated that for every 10%
increase in Council Tax Benefit and Housing Benefit takeup, 100,000
pensioners would be taken out of poverty.
— More money would be spent in
local areas as a result of people having more money in their pockets—this
would be particularly so in deprived areas where CTB eligibility
is higher.
— Capacity in the public sector
and voluntary sector would be freed up and staff could concentrate
on helping older people claim disability entitlements or enabling
people to access services.
If the Committee would like further information
on the practical issues around automatic payment Help the Aged
would be happy to provide supplementary evidence.
THE CASE
FOR REFORM
OF THE
COUNCIL TAX
BENEFIT ELIGIBILITY
CRITERIA INCLUDING:
THE CASE
FOR CHANGING
OR ABOLISHING
THE SAVING
LIMIT IN
COUNCIL TAX
BENEFIT FOR
PENSIONERS AND
THE CASE
FOR ALIGNING
COUNCIL TAX
REBATE THRESHOLDS
WITH OTHER
PARTS OF
THE TAX
SYSTEM
8. At the moment individuals cannot receive
help with Council Tax if they have more than £16,000 in savings.
The only exception to this is where the individual or couple are
receiving the guarantee component of Pension Credit, as savings
are assessed in a different way for this benefit. The £16,000
limit creates an anomalous situation shown by the example below.
Couple A: Joint income of £285 a week including
an assessed income of £8 a week from their savings of £10,000.
= will receive council tax benefit of £16
a week; and
= pay £17 a week in council tax equal
to approx 6% of their income.
Couple B: Joint income of £168 a week including
an assessed income of £21 a week from their savings of £16,500.
= no help with council tax; and
= pay £33 a week equal to approx 20%
of their income.
Couple A are £6,000 better off for the
whole year. Yet it is couple A who receive over £800 in state
help with their council tax bills. In this situation it is only
rational for Couple B to spend their savings until they are below
the savings limit.
9. Help the Aged is very concerned about
the impact of Council Tax on older people's incomes. Research
we carried out with NOP showed that many older people were cutting
back in order to pay bills. We believe that CTB needs to be more
generous and we support wholeheartedly the proposal that the capital
limit ought to be increased to at least £50,000 and preferably
abolished and that the lower limit should move to £10,000.
An average benefit of £10 per week to new claimants might
not seem much, but amounts to around £500 a year. Our research
on poverty has shown that small sums such as these can make a
significant difference to people on low incomes. As with automatic
payment we would expect there to be benefits in terms of reductions
in levels of pensioner poverty, and increased spending in local
areas. At an estimated cost of £260 million to benefit over
1 million pensioners, this seems a very cost effective way of
improving Council Tax.
June 2007
| 
