Council tax support faces further cuts, survey finds

2 Apr 14
Local authorities in England are continuing to reduce the amount of council tax support they make available to poor households, a study examining plans for year two of the new regime has found.

By Vivienne Russell | 2 April 2014

Local authorities in England are continuing to reduce the amount of council tax support they make available to poor households, a study examining plans for year two of the new regime has found.

New Policy Institute research carried out for the Joseph Rowntree Foundation revealed that only 45 councils out of 326 would continue to provide the level of support that had been available under the now defunct Council Tax Benefit system.

A total of 244 councils now require all households (except pensioners, who are exempt) to pay at least some council tax regardless of their income via a minimum payment.

The size of this payment varies by area. In 69 councils it is 8.5% or less of their liability, while in 47 councils it is over 20%. The overall level of minimum charge has also increased, with 56 of the 229 councils that already had a minimum payment in place in 2013/14 raising it for this year.

Last year, a minimum payment of 8.5% was common because the government’s one-year transitional grant was available to councils that did not withdraw support from claimants by more than this amount.

Almost 600,000 poor families are facing council tax hikes for the second successive year, JRF said, while around 70,000 will have their support cut for the first time. A total of 2.3 million families will pay on average £149 more in council tax per year than they would have done under Council Tax Benefit, of whom 1.5 million are in poverty and 1.8 million workless.

Chris Goulden, head of poverty research at JRF, said: ‘For a second successive year, the country’s poorest families are facing big increases in council tax. This change to the welfare system is largely below the radar but has significant impact for families already struggling to get by on a low income.

‘Paying this tax increase will be beyond most, pushing them into deeper hardship.’

Sabrina Bushe, co-author of the report at NPI, noted English councils are required to hold a referendum if they want to increase council tax by more than 2%.

‘This government policy, aimed at keeping rises down, has been a success,’ she said.

‘Now the transitional grant has gone, it is time that government offered the same protection to the poorest households.’

Commenting on the funding, Sharon Taylor, chair of the Local Government Association’s finance panel, said: ‘When government handed the responsibility for administering council tax support to local authorities, it cut hundreds of millions in funding for it.

‘The shortfall between the money councils receive to fund council tax support and the money we would need to protect those on low incomes is getting bigger and is likely to reach £1bn by 2016. At the same time, councils are tackling the biggest cuts in living memory and cannot afford to make up the difference.’

She added councils faced an ‘impossible dilemma’ between taking more tax from working-age claimants and taking more money out of frontline services.

‘Councils want to protect those on low incomes but this is being made increasingly difficult by government cutting funding and taking some of the decisions about who receives this benefit out of our hands,’ Taylor said.

‘Government should consider giving local authorities the full amount of funding needed to provide council tax support and ensure that decisions over council tax and discounts are fully localised.’

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