Poor communities will bear the brunt of the government’s decision to reduce funding for council tax relief by £500m when it is localised from next year, the Local Government Association has warned today.
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Ahead of a parliamentary debate on the plan, the LGA says devolving the support to local authorities without giving them control of council tax discounts could lead to over 2 million people paying more tax.
Funding for Council Tax Benefit, which is received by almost 6 million people in the UK, will be given to councils in England from next April. The grants provided will be worth 90% of what would have been spent in each area.
The localisation forms part of the Local Government Finance Bill, which will get its second reading in the House of Lords today.
Town halls have to develop their individual plans for the benefit by January next year. But they have been instructed not to cut the benefit for pensioners. They are also unable to reduce the separate single person’s discount when devising local eligibility criteria for the benefit. That leaves them with the option of reducing eligibility for working-age people or providing extra funding themselves.
This means that low-paid workers’ annual council tax bill could rise by an average of £247, according to figures released by the LGA ahead of the Lords debate.
Although the government has proposed that councils will be allowed to recoup some funding by discontinuing discounts for second homes and empty properties, the LGA says this will fall ‘well short’ of filling the gap.
The cut is also likely to hit councils and residents in the most deprived areas hardest, as there are fewer second homes more claimants.
The LGA called for authorities to be given greater flexibility over all council tax discounts, including for single people, to allow them to better target help.
Chair Sir Merrick Cockell said that the cut would be ‘impossible to deliver without cutting services, increasing council tax for everyone or asking the working poor and young unemployed to pay an extra £247 a year’.
He added: ‘The Treasury has made the cut and left councils to make incredibly tough decisions and face the inevitable fallout.
‘The poorest regions and the most vulnerable people will be hardest hit by this cut unless the government offers councils more flexibility over all forms of council tax discount.’
In a separate briefing to peers ahead of the debate, London Councils has called for a ‘full review’ of all council tax discounts.
The group, which represents boroughs in the capital, said it remains ‘strongly opposed’ to the government’s localisation plan, and called for Council Tax Benefit to be incorporated within the Universal Credit system.
If the government is unwilling to reconsider its proposed reforms, implementation of the policy should be delayed at least until at least 2014/15, it stated.
