Poor families face council tax hike in most authorities

31 Jan 13
Almost three-quarters of English local authorities will be demanding more in council tax from low-income families from April, the Resolution Foundation has revealed.
By Vivienne Russell | 31 January 2013

Almost three-quarters of English local authorities will be demanding more in council tax from low-income families from April, the Resolution Foundation has revealed.

Today is the deadline for town halls to set out the details of the council tax support they will offer when they take over the national benefit scheme in April. The think-tank estimates that 3.2 million of the poorest working-age households face a hike of up to £600 a year when the local schemes come in.

The government is transferring the Council Tax Benefit to local authorities along with a 10% cut in the funds available to pay for it. Councils are responsible for designing their own eligibility criteria but have to protect pensioners’ entitlement to the benefit.

While some town halls have decided to fund the benefit cut themselves, the majority (74%) will be demanding new or higher payments from low-income households, according to the Resolution Foundation report, No clear benefit. At the higher end, a third of councils have opted to charge affected households an extra 20% of the full council tax bill.

The most severe rise would affect a single, part-time working parent on the minimum wage. A parent currently paying £173 a year of a £1,126 council tax bill for a Band B property would become liable for an extra £577 a year. The bill for a person in identical circumstances living in a higher band property would rise by more than £600.

The report also found that many councils were setting aside a contingency fund to cover non-payment of council tax. It noted that the costs of pursuing non-payers through the courts could outweigh the revenue coming into the local authority.

Resolution Foundation chief executive Gavin Kelly said: ‘Millions of England’s poorest households – both in and out of work – are already very close to the edge, given falling wages, tax credits and benefits.

‘Very few of those currently exempt from paying the full rate of council tax are expecting a large new bill to drop onto their doormat this spring. When it does, they are going to find it hard to cope. The new system will result in hard-pressed councils spending scarce resources chasing some of the poorest people in the country for non-payment.’

Matthew Pennycook, a senior analyst at the foundation and author of the report, added that the changes to Council Tax Benefit conflicted with the aims of Universal Credit to simplify the welfare system and give people incentives to seek work.

‘These changes undermine both goals,’ he said. ‘There will now be a highly complex and confusing patchwork of local support, while the low paid will keep even less of an extra pound in earnings than the government has claimed.’

The situation does not arise for Welsh and Scottish councils as their governments are making up the 10% funding cut. The Northern Ireland Executive is consulting on a similar move.

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