Statement on council tax support

Local authorities deserve recognition for implementing Council Tax support on schedule in what is an extremely difficult environment for local government. They had just 9 months to do so because it took the Department 19 months from announcing the policy to issuing councils with guidance on designing local schemes.

The Department expects to save £414 million by localising Council Tax support in order to assist the objective of deficit reduction, yet in doing so it simply transfers costs from central to local government, at a time when councils are already facing significant budget cuts.

I have real concerns about the financial impact this will have both on local authorities and on claimants. The government has cut funding for Council Tax support by 10% and more than 70% of local authorities have passed some of that cut on to claimants. A large number of people on low incomes will have to pay Council Tax for the first time. While pensioners are protected under the new arrangements, many local authorities have not been able to protect other vulnerable groups such as lone parents or people with a disability.

There is a danger that local authorities will find it increasingly difficult to collect the council tax owed if those on the lowest incomes struggle to pay. I am concerned that councils in the most deprived areas may particularly struggle.

One of the government’s stated objectives for localising council tax support is to support its wider welfare reform agenda. But according to this report some councils have introduced schemes that actually make work incentives worse, compared to the old system of Council Tax Benefit this was designed to replace.  In other words, these councils have increased the rate with which claimants have their support taken away as they earn more money, reducing their incentive to work more hours.  It is unclear why Council Tax support has not been included in Universal Credit alongside Housing Benefit, but the Department must work closely with DWP to ensure that the two schemes work smoothly together.

The Department intends to carry out a review of Council Tax support after three years, but in the meantime it must carefully monitor the impact of localisation on the financial sustainability of local authorities and on vulnerable groups.

Despite the localisation of Council Tax support the Department still bears significant responsibility for ensuring value for money from the new arrangements and we will take evidence from the Department in the New Year.