Jul 242012

Cuts to Council Tax Benefit

If you haven’t been reading the more arcane periodicals of local government finance and administration, you probably have no idea what is about to sweep the country. The biggest change and cut in local taxation since the Council Tax was brought in to replace the combustible and unpopular Poll Tax. The axing of Council Tax benefit, in it’s present form, is about to take place from April 2013. To be replaced with Local Council Tax Support based on rules decided on by local councils.

According to documents posted on Parliament UK website Council Tax Benefit is described as “a national benefit with policy and rules set by central Government but it is administered by local authorities in England, Scotland and Wales. Administration is linked to the Council Tax billing arrangements and usually takes the form of a reduction to the Council Tax a person would otherwise be liable to pay.”

However, and according to Brent Council “The Government is abolishing the Council Tax Benefit scheme and is asking councils to replace it with their own locally run service called Council Tax Support.” The effect of which is that “every single council will have their own local Council Tax Support scheme, with its own eligibility criteria.”

In addition, and according to South Gloucestershire Council, “under the existing council tax benefit scheme, the council generally receives 100% funding from the government to cover the cost of the scheme.” However, under the new localised schemes councils will receive from government a “maximum of 90% grant toward what is paid out.”

Writing in The Guardian Poly Toynbee give a succinct summary of a complicated piece of legislation: “Here’s the background: on average, households pay £1,000 a year in council tax. Until now, households on low incomes were exempt or paid only according to their means, so 5.9m households received council tax benefit. From next April, the benefit is cut by 10%, which is bad enough; but then insanity takes over. Each local authority will be given the sum that was handed out in benefit in their area (less 10%) to disperse as they please. They must keep paying the full benefit to pensioners and “the vulnerable”. Each council must choose who is “vulnerable”, as the government refuses to provide its own definition. Half of the recipients are pensioners, so protecting them means all other low-income households bear the whole cut, averaging 20%. People who live in areas with a lot of pensioners or a lot of the “vulnerable” will suffer the biggest cuts, as much as 30% or more. The Institute for Fiscal Studies (IFS) says low-income households in Haringey, north London, lose £38 a week.”

Toynbee adds: “300 councils must each devise their own criteria. Each becomes a mini DWP, establishing its own means test without having access to people’s earnings. Each must divide its benefit pot between varying numbers of claimants each year. Miserly authorities can keep much of it for other purposes. Each decides who is “vulnerable” or whether to include disability living allowance, child benefit or personal savings in declaring who is eligible for how much.”

Figures seen by Rutland & Melton Labour Party suggest that for Rutland County Council this will mean deep cuts in benefits to people who are already struggling. The present cost of Council Tax Benefit for Rutland is £1.87m each year. This is paid to 1,929 Council Tax Benefit claimants. Figures released by the government for 2013 onwards give a cut of £435,000. Leaving Rutland Council to administer locally a budget of £1.44m. While pensioners entitlement to Council Tax Benefit will be ring-fenced, the savings forced on Rutland Council are going to be made up elsewhere – by cutting the claims of working age people. As 58% of claimants for Council Tax in Rutland are pensioners, this is going to mean some sever cuts of twenty or thirty percent for people in part-time jobs and on low pay.

So, if a major business is forced to close or restructure the effect is going to be devastating, not only for the people who lose their jobs, but also for the people who depend on support from the state for their Council Tax payments. It means that a local council can suddenly be swamped by claims for Council Tax Support. Claims that it has to find from its existing budget. As more people claim Council Tax Support, the less there is to go around for others. As Toynbee points out “It is, in effect, a tontine, a lottery.” And it is the working poor who are going to pay the highest price.

Rutland County Council are starting an eight week period of consultation about how these changes are going to be managed. Other councils will be consulting on these changes in the next few weeks.

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