Cost of collecting minimum council tax ‘disproportionate’, authorities tell review

15 Apr 16

The cost of collecting minimum council tax payments from low-income families is “disproportionate” to the amount being chased, local authorities have told a government-commissioned review into council tax support.

The report from the independent review of local council tax support schemes (LCTS) in England and Wales, commissioned by the Department for Communities & Local Government last December, found councils had implemented localisation “effectively and professionally”.

The review found all councils had implemented local council tax support schemes in time for the localisation of the national council tax benefit in April 2013, and have delivered them since.

When the funding for the benefit was localised, it was cut by 10%. Councils were then required to create new eligibility rules for working age recipients, but to keep the entitlement for pensioners unaltered.

The report, published on 8 April by Conservative former council leader and MP Eric Ollerenshaw, stated this was impressive given the initial tight deadlines from government.

However, councils told the review that collecting council tax from LCTS working-age recipients is far more time-consuming and costly compared with usual collection. Where there is a minimum payment required, as in 259 of a total of 326 councils, the authority must collect small amounts of tax. “The general message was that the staff time and administrative costs sometimes required seemed disproportionate to the amount being chased,” the report stated.

Efficient administration of local council tax support was “hampered” because councils have to administer both the government-set pensioner entitlement and the nationally mandated housing benefit scheme.

“Both are resource intensive to administer [and] this reduces a council’s capacity and willingness to design schemes that would be simpler and cheaper to administer,” according to the report. “Indeed, all councils, excluding South Gloucestershire, are still running schemes that are modelled on the old council tax benefit.”

Changes to the rules governing administration were suggested, including changing the annual 31 January deadline for setting schemes to better match council budgeting processes, and allowing schemes to be approved for multiple years or to roll indefinitely.

Ollerenshaw highlighted that many councils were “frustrated and disappointed” by the restrictions placed on them, including not being allowed to vary the pensioner entitlement.

“There is a sense that LCTS has handed the costs and risks to local government, but only part of the funding and freedoms,” he concluded.

He called on the government to allow greater local control of support for pensioners.

“It is clear from the evidence I have seen that the national scheme for pensioners has led to an additional cost burden on low-income working-age residents,” Ollerenshaw added.

“Government should consider localising at least part of the LCTS scheme for pensioners, allowing councils to decide how much support they wish to provide for all low-income residents.”

The review also called for the government to consider more local flexibility over other nationally set council tax discounts, such as the single person discount.

Ollerenshaw was asked by local government minister Marcus Jones to consider whether the payments should be included in universal credit. Although he said that “a strong argument” could have been made to do so before localisation, there are now far too many issues and concerns for this to be a viable option.

“Despite the challenges, LCTS has been a key step for localism. Reversing this would be particularly unpalatable given the huge time, money, and effort invested in developing LCTS schemes three years in,” the report concluded.

“On a practical level, it would be extremely complex for government to integrate 326 different schemes into universal credit. It could also have dire consequences on council collection rates, impacting council finances.”

Responding to the report, a DCLG spokesman said: “This independent report recognises councils’ successful implementation of local council tax support schemes and makes suggestions on how to further improve them.”

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