Councils could mitigate the cut in Council Tax Benefit funding by tackling fraud and error when they take over the system next year, Local Government Secretary Eric Pickles said yesterday.
He urged authorities to ‘get to grips’ with the £200m lost annually though fraud and error. Cutting incorrect payments would ensure authorities ‘fully support hard working families and genuinely vulnerable people’ once the reform is in place, he said.Councils currently administer the benefit on behalf of central government. From next April, they will take over the funding and allocate it according to their own local eligibility criteria. But the funding will be 90% of what would have been spent in each area, amounting to an overall cut of around £500m. A similar transfer of funds is taking place to Wales and Scotland but the devolved governments are making their own arrangements.
According to figures from the Department for Communities and Local Government, spending on the benefit in England hit £4.9bn in 2011/12 and has more than doubled since 1997.
Around 4% was lost in fraud and error last year, which is estimated to include £60m of fraud, £120m of customer error and £20m of official error. Around £200m has been lost in each of the past four years.
Pickles said the figures showed there was ‘lots of money to claw back from wasteful mistakes and fraudsters cheating the system’ when councils introduce their own schemes.
‘Town halls are already the ones who set and collect council tax so it makes sense that they are the ones who give out the support too. Our reforms will restore the confidence of hard-working taxpayers that the benefits bill is under control and that work pays,’ he added.
The government believes that the localisation of support, which forms part of the Local Government Finance Bill, will give councils a stronger incentive to get people into work, as well as to cut fraud.
The local criteria have to be agreed by next January. Town halls have been instructed not to cut the benefit for pensioners, and are unable to reduce the separate single person’s discount. This leaves them with the option of reducing eligibility criteria for working-age people or filling the funding gap themselves.
The Institute for Fiscal Studies warned in May that councils face a ‘tough challenge’ in taking control of Council Tax Benefit at the same time as it is being cut.
