The impact of the introduction of Council Tax Support

While a minority of English local authorities have managed to absorb the funding reduction (by scrapping discounts on second homes, for example) and have not passed on the cut, the majority are now sending out Council Tax bills to low-income residents, many of whom had never paid Council Tax before the changes were introduced. The cuts were not passed on in Scotland or Wales.

In January 2015 the Local Government Association (LGA) reported that rising numbers of families on low incomes are likely to face bigger council tax bills this year because of the shortfall in government funding for Council Tax Support. Many councils are warning that they will have to ask those earning the least to pay more Council Tax this year – or make even bigger cuts to already squeezed local services.

The LGA says that the gulf between the money that government gives councils to fund local schemes and the cost of protecting discounts for those who previously qualified for council tax benefit is getting bigger every year. It says that local authorities would need to have found an additional £1 billion to keep discounts as they were under council tax benefit in the three years since it was scrapped.

As a result many areas have had to introduce minimum payments for people who previously would have been exempt from paying council tax. With councils already needing to find £2.6 billion savings in 2015-16 due to a cut of 8.8% in overall government funding for local services, the LGA reports that many are struggling to find additional money to protect discounts for those on low incomes.

The LGA’s Council tax support: the story continues report lays bare the impact of the government’s funding cut and shows that:

• only 45 councils out of 326 continue to provide the same level of discount available under the old council tax benefit regime – 13 fewer than in 2013-14;

• in 244 council areas, all householders have to pay at least some council tax regardless of income – 15 more than in 2013-14;

• for 2015-16, one in seven councils (14%) said they definitely plan to change their discount scheme – 83% said they would not change their existing discount scheme, despite funding reductions;

• beyond 2015-16, only 27% of councils said they would maintain their current scheme. Most were unable to say. This is likely to be due to uncertainties over future funding for local government; and

• last year’s decline in council tax collection rates – only the second since 1993 – was bigger in areas where newly-introduced minimum payments were higher.

“The reduction in government funding has left councils with an unpalatable choice between charging council tax to the working-age poor, who in many cases may not have paid council tax before, or finding additional savings to spending on local services on top of the cuts of 40% being made to council funding by government,” says the LGA. “Some councils have been able to make up for the reduction in government support through measures like ending automatic council tax discount on second homes. But there are many areas in which this has not provided enough income to fill the gap.”

The LGA, which represents councils in England, is urging the next government to help councils protect those on low incomes by fully funding council tax support to the same level as under council tax benefit.

The full report is available at www.local.gov.uk/publications/-/journal_content/56/10180/6869795/PUBLICATION.

Appeals against a decision about Council Tax Reduction are made through the Valuation Tribunal rather than through the independent Social Security and Child Support Tribunal.