A think-tank has found that because so many people have fallen behind on payments as a result of changes made to Council Tax Support funding, councils are failing to recoup 25% of the extra tax they are pursuing.
In 2013 support for low-income households to pay their council tax was localised across England and funding was cut, with only pensioners being protected.
Research published today by the Institute for Fiscal Studies funded by the Nuffield Foundation says the cuts have meant 1.3 million more working-age households now receive a council tax bill while another 1.2 million have seen bills rise.
CTS funding for low-income households has been falling since 2013, with 90% of English councils cutting the scheme for working-age adults.
This has lead to an increase in council tax arrears, and the 25% non-collection rate is 10 times higher than before the cuts.
CTS, which is paid to people on low incomes to help with their council tax bills, was given to 4.9 million households across Britain in 2017–18 at a cost of £4.1bn to local authorities.
Prior to the cuts, 1.8 million working-age households in England were entitled to a full rebate on their council tax.
But in 2018–19, 1.3 million had to pay some council tax, with 63% of those households paying more than £100, 33% paying more than £200, and 10% paying more than £300.
Thomas Pope, researcher at IFS and author of the report, said: “Many low-income households do not pay this new bill, almost regardless of its size. From their point of view, these changes have clearly increased problems with council tax arrears.
“From councils’ point of view, they are likely to receive significantly more council tax if they increase bills for those already paying some council tax than if they try to raise the same extra money from those who currently have no bill to pay.”
Richard Watts, chair of the Local Government Association’s resources board, noted that CTS schemes are no longer fully funded, with almost £2bn – around half the original funding – removed between 2013 and 2020.
He said: “No one wants to ask those on the lowest incomes to pay more but this has put councils in an impossible position.
“Councils have worked hard to try and protect discounts as much as possible but the Spending Review needs to ensure councils have the full amount of funding required to provide council tax support to those who need it.
“Otherwise, it is almost inevitable that bills will continue to be forced up for those who can least afford to pay.”
Mark Franks, director of welfare at the Nuffield Foundation, said: “The fact that local authorities are unable to collect around one quarter of the additional council tax they have asked for indicates that support schemes are not working as effectively as they could.
“This important research should help in reviewing the design of council tax support schemes and the benchmarks they are based on.”
