The Unkindest Cut of All

Jan Luba QC discusses the Government’s plan to abolish council tax benefit and its implications

Although hardly anyone seems to know about it, the Government is about to abolish a scheme that provides nearly £5 billion a year to help the poorest families in the UK cope with their household bills. This note shines a light on a matter which should be at the top of current political debate. It is not – probably because it only concerns the most disadvantaged people in Britain.

Allow me to explain.

Households on modest incomes find that the annual local council tax, payable by homeowners and tenants, is a significant financial burden. At present, the poorest families can qualify for the council tax benefit which – for those at the very bottom of the income ladder – can cover as much as the whole of their council tax bill. The council tax benefit is a national scheme administered under rules set by Parliament and funded by the Treasury.

The Government’s plan is that in April 2013 this nationally funded scheme will be scrapped altogether.

In its place, each of the several hundred local councils in England and Wales will be required to set up their own local schemes for helping the poorest of their council tax payers. Some local schemes will be as generous as the arrangements being cut. But many will not. Councils have competing demands on their own depleted resources and many will not be able to deliver the same level of help. That is no accident. The Government is expecting that the local schemes will mean that over £400m less money is distributed to help the poor meet their council tax bills.[1] An enormous increase in default on payment of council tax can be expected leading to an overall fall in council tax income and ever-harsher enforcement against defaulters.

The change is being made by the Local Government Finance Bill [2] which is slipping quietly through Parliament and will be law by the end of the year. Shouldn’t this be in the spotlight?

But then again, who cares? It is only the poorest who lose out.

[1] Town halls must tackle £1bn Council Tax Benefit fraud and error through localisation, DCLG, August 2012
[2] The change is made by Clause 9. The Bill has its Report stage in the House of Lords on 10 October 2012.

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One Response to The Unkindest Cut of All

  1. joehalewood says:

    In practical terms:-

    29% of current CTB recipents are of pensionable age and wont be reduced from the 10% less funding local government is getting. So in numbers 90% of what was previously paid has to cover the 100% of recipients, but 29% of them have to get the same level.

    This means that 61% of previous funding (90 – 29) has to cover the other 71% of recipients. In effect and on average this means a 16.4% cut in what was CTB for those of working-age.

    Factor in the ageing population living longer and the cuts will gradually increase for those of working-age.

    If you are of working-age, currently in receipt of CTB and happen to live in Eastbourne or Southport or other area with a high older persons percentage….

    In money terms the average CTB in-payment figure nationally is £15.76pw and so a 16.4% cut is £2.58pw or £134.86 per year. So the poorest of working-age will have to find and pay this £134.86 per year from other benefits.

    Finally, the above are average figures and assume councils will recycle the 90% of funding in much the same way in their local schemes, yet I note some councils are already saying the average cut will be 22% in some areas

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