By Mark Smulian | 22 September 2011
London boroughs have warned that their financial stability will be put at risk by planned changes to the council tax benefit system.
The government has proposed that councils design their own tax discount systems to replace council tax benefit, currently administered by local authorities on behalf of the Department for Work and Pensions.Representative body London Councils said council tax benefit should instead be rolled into the government’s proposed Universal Credit.
That is already due to include housing benefit, which many council tax benefit claimants also receive.
A further problem is that councils face a 10% cut in government support for council tax benefit ahead of these radical changes.
London Councils said local benefit systems would leave councils ‘in a precarious position’, as they would have to bear the risk of future demand.
Spending on the present benefit has risen by 55% in the decade to March 2010.
London boroughs collectively spend some £0.8bn on it, out of a £4bn total for England.
Jules Pipe, London Councils’ chair, said boroughs would either have to cut council tax benefit levels or further reduce services.
‘Not only do these plans disproportionately punish those who need support, but they would also force councils into a perilous and unsustainable financial position,’ Pipe said.
‘The impact will go far beyond just those that currently claim, with a serious risk that every resident will see further service cuts.’
A further complication is that the government has imposed various conditions on any benefit cuts. These include: pensioners must be protected, support should be ‘considered’ for other vulnerable groups; and disincentives to move into work should be avoided.
London Councils said these restrictions left it ‘unclear how councils would be expected to reduce expenditure by 10%’.
A Department for Communities and Local Government spokesman said: 'These reforms bring all aspects of the council tax system together at local level, freeing local authorities to decide how best to support working families, get people back into work and help tackle the £200m a year lost through error and fraud.
'Taken alongside other important reforms like the New Homes Bonus and retention of local business rates this will also give councils a much greater stake in the economic future of their areas.'
