Support for housing costs in the reformed welfare system - Work and Pensions Committee Contents

6  Localised Council Tax support

125. Council Tax can be regarded as a "housing cost" for which benefit support is available. The form of this support was changed under the Welfare Reform Act 2012. Previously, support for Council Tax was delivered through Council Tax Benefit (CTB). This was a means-tested national scheme for which central government provided the funds and set the eligibility criteria and level, with local authorities then administering it. Under CTB, claimants could receive up to a 100% reduction of their liable amount of Council Tax.

126. In April 2013, responsibility for providing support for Council Tax passed to individual local authorities and is now known as "Council Tax Reduction". Local authorities were responsible for designing their own local Council Tax Reduction schemes. The Government explained that: "localising support for council tax is part of a wider policy of decentralisation, giving councils increased financial autonomy and a greater stake in the economic success of their local area".[131]

127. At the same time as localising Council Tax support, the Government reduced central funding by 10%. LAs were given the option of requiring claimants who previously had full entitlement to CTB to pay at least 10% of their household Council Tax. However, the Government has stipulated that eligible pensioners must continue to be offered a 100% reduction in their Council Tax.

128. The devolved administrations in both Scotland and Wales have decided to continue to provide funding for Council Tax support while allowing local authorities to administer it. Both have provided funding additional to that granted by central Government—£40 million in Scotland and £22 million in Wales—to local authorities in order to enable all eligible claimants to continue to receive a 100% reduction in their Council Tax for 2013-14. Both administrations have committed to continue funding the shortfall in 2014-15.[132]

Changes to local Council Tax Reduction and the funding for councils

129. The London Borough of Newham was concerned about the pressures the new schemes were placing on local authority budgets. It pointed out that a 10% cut in total funding translates to a greater than 10% reduction for individual councils because they are still obliged to offer pensioners full support despite the overall cut. It cited IFS calculations that the 10% cut actually translated, on average, to a 19% cut in funding. It was concerned that the "resources allocated to deliver this policy are insufficient in terms of both programme and administration budgets" and that ongoing uncertainty over funding would make local schemes "very volatile and subject to change every year". [133]

130. The London Borough of Camden explained that it had been compelled to make some difficult choices: "If we had adopted a scheme that [absorbed] the 10% reduction in funding from central government, we would have created a permanent funding pressure of around £2.5m a year." It opted in the first year to accept a transitional grant which allowed it to limit the minimum amount people had to pay to 8.5% of their council tax liability and is attempting to sustain this structure in the second year. However, "this has still resulted in a budget pressure for the council."[134]

131. Several witnesses were concerned that the discretion given to local authorities to design their own local support scheme structures was creating a "postcode lottery" for claimants. Some councils have chosen to fund or partially fund the additional costs themselves, including Hammersmith & Fulham, Kensington & Chelsea, Merton, Tower Hamlets, Wandsworth, Westminster, and Bristol Council. However, Z2K thought it a matter of great concern for claimants that many councils (for example, three-quarters of London councils) were passing on the costs and requiring claimants who were previously eligible for greater levels of Council Tax Benefit to pay between £100 and £250 a year.[135]

132. The Minister for Housing told us that it was too soon to get a complete picture of the effectiveness of the new schemes and how local authorities were coping, but he believed that they were managing well and that the "picture looks encouraging." The Government is committed to reviewing the financial burden on local authorities in three years' time.[136]

Local Council Tax Reduction schemes and arrears

133. Witnesses reported that many low-income households who were previously eligible for full support were having to pay some portion of Council Tax, at times up to 20%, and that this was causing hardship. Z2K cited June 2013 Council Tax figures which showed an increase of households in arrears of 45% since the same time in 2012. Many of the people who were in arrears had been issued with court summons and liability orders for non-payment. Z2K was concerned that the costs applied by local authorities to each court summons, which could be in the region of £90-120, were "entirely unnecessary and simply acts as a penalty for late payment for those who are struggling to make ends meet."[137] Surrey Welfare Rights Unit believed that it was highly likely that many local schemes "will provide less and less financial support unless central Government provides additional funding for those schemes." It was concerned that "without additional support for low income families, there would be significant levels of default and court proceedings as well as declining council tax collection rates at a local level."[138]

134. Witnesses were concerned about how new Council Tax Reduction schemes would interact with work tapers under Universal Credit. The IFS pointed out that, because of the 10% funding cut, councils would need either to reduce support for those previously entitled to maximum CTB or weaken work incentives through more "aggressive" means-testing. This could lead to inconsistent work incentives for some individuals.[139] Our 2012 report on Universal Credit implementation came to a similar conclusion: that excluding Council Tax support from Universal Credit "has the potential seriously to undermine the objectives of Universal Credit in terms of enabling claimants to see clearly the financial benefits of taking up a job or working more hours".[140] The Public Accounts Committee also recently published a report exploring the implications for work incentives of the devolved Council Tax Reduction Schemes and their interaction with Universal Credit.[141]

135. We are concerned that the 10% reduction in central funding for council tax support which accompanied its localisation is leading to hardship for some households and to increased expense for local authorities through loss of revenue, and costs relating to arrears collection, court action and providing support to affected claimants. The move to localise Council Tax support has also created a post-code lottery whereby in some areas residents qualify for 100% support while in other areas someone in the same circumstances has to pay as much as 20% of their Council Tax. We recommend that the Government commission research into the impact this variation in Council Tax Reduction schemes across the country is having on levels of poverty in different areas.

131   DWP (HCT92) section 15 Back

132   House of Commons Library Standard Note, Council Tax Reduction Schemes, SN/SP/6672, June 2013; The Scottish Government, 24 June 2013, Council funding backed by Parliament Vote; Welsh Government, 19 December 2013, The National Assembly for Wales has approved a new set of Council Tax Reduction Scheme regulations for 2014-15. Back

133   London Borough of Newham (HCT 47) para 6.1 Back

134   London Borough of Camden (HCT 61) para 3.13-3.15 Back

135   Surrey Welfare Rights Unit (HCT 29) para 4; Zacchaeus 2000 Trust (HCT 34) para 30; Bristol City Council (HCT 72) paras 18-20; Hanover Housing Association (HCT 25) para 5.2 Back

136   Oral evidence taken on 12 February 2014, Qq616, 619 Back

137   Zacchaeus 2000 Trust (HCT 35) paras 28-33 Back

138   Surrey Welfare Rights Unit (HCT 29) para 4 Back

139   Institute for Fiscal Studies (HCT 28) para 23 Back

140   Third Report of Session 2012-13, Universal Credit implementation: meeting the needs of vulnerable claimants, HC 576, para 206 Back

141   Committee of Public Accounts, Forty-eighth Report of Session 2013-14, Council Tax Support, HC 943 Back

previous page contents next page

© Parliamentary copyright 2014
Prepared 2 April 2014