Tuesday, 15 January 2013

New scheme to replace Council Tax Benefit to be considered

City Councillors will consider a new scheme to replace Council Tax Benefit at a specially convened meeting of Full Council on Wednesday, as it faces more cuts to its overall funding from government.

Under Government plans, Council Tax Benefit is due to be abolished in April 2013 and local councils have been told to develop new Localised Council Tax Support schemes.

The Government has said that it will reduce the amount of funding it gives to councils to fund their schemes by around 10 per cent, just at a time when many councils are reprting more people are claiming the benefit, including working people as the squeeze on wages continue and more people face unemployment. 

For Lancaster City Council, the funding reduction is approximately 10.5% or £1.1million.

Nationally, The Guardian reports low-income households face a "postcode lottery" of council tax bills for the first time since the system was introduced, which will involve some low-income people paying nothing and others facing a potential bill of thousands of pounds a year. The BBC reports that, for example, North Tyneside Council estimates it is £1.8m short of having enough money to fully fund existing council tax benefit claims. It is therefore considering asking all working age council tax payers to contribute at least 20% of their tax bill.

The Government has insisted, however, that the changes must not affect pensioners, and so in order to offset the reductions in Government funding, it would mean that people of working age would have the amount of financial support they receive cut as a result and this would be by about 23% on average.

If council tax support is not reduced by this amount, then other essential services would need to be reduced, including those provided by the County Council, Fire and Police.

During the autumn of last year, Lancaster City Council asked local people for their views on three proposed options for its localised scheme.

Councillors are now being asked to decide how the new scheme should look and will consider the results of the consultation in making their decision.

Councillor Abbott Bryning, portfolio holder with responsibility for such benefits, said: “If it had an option the city council would not want to make any changes to the way it currently pays out Council Tax Benefit, but given that our funding from Government is being cut and the existing national scheme is being abolished, we must consider alternatives.

“Members of Council will consider the information that has come out of the public consultation in making this very important decision, and they will also consider the other very large cuts in funding that the Council is facing and what impact the options have for other services.  It is a very difficult choice.”

Apart from the major requirement – that pensioners receive the same amount as they do now – councils were told they would have near full autonomy to create the new schemes when Council Tax Benefit is abolished.

But recent research by the New Policy Institute and False Economy, detailing what councils have been proposing since August 2012, calls into question how much autonomy councils actually have.

A sample of the proposed local schemes indicated that of 200 councils, only 20% intended to replicate the former system and make savings elsewhere in their budgets. The vast majority intended to make the savings by reducing the amount of claimants and/or cutting the amount of support they receive.

By far the most common measure considered was to introduce a minimum payment of typically between 15-20% of council tax liability (proposed by 70% of sample councils). Other popular measures included removing the second adult rebate (50%) and lowering the maximum savings limit (35%).

However, within a remarkably short space of time much of these findings are now obsolete.

The amendment to the local government finance bill, which sets out that the reforms to council tax benefit will be subject to review after three years, has played no small part in this development as has the announcement by the Department for Communities and Local Government (DCLG) that an additional £100m of funding would be made available to councils to develop schemes that meet certain criteria of "best practice".

Although more than 200 local authorities had already drafted individual schemes, many are now amending their plans in order to qualify for the grant, are reopening consultations or extending their consultation periods. Additionally, notes Sabrina Bushe at NPI, it is plausible that councils will opt to "wait and see", absorb the cut and reappraise next year, going through the process all over again.

Despite the council tax benefit reform being heralded as an important step towards localism, the promise of autonomy that it offered seems unlikely to be realised. Furthermore, it is deeply worrying that with a mere 7 weeks remaining for councils to decide on the new schemes the future of council tax benefit in England remains highly uncertain.

The findings featured precede a larger research project by the New Policy Institute, funded by the Joseph Rowntree Foundation, which will detail the new schemes adopted by all councils across England and the effects of reform on the estimated 3.7 million council tax benefit claimants.

• The NPI and False Economy findings are publicly available online at counciltaxsupport.org.

• The Council reports on Localised Tax Support are here and here (PDF format) is available on the council’s website at www.lancaster.gov.uk. The meeting agenda is here.

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