Low-income working families and people in receipt of social security benefits may have to pay higher council tax bills, warns the Local Government Association (LGA).
A shortfall in Government funding for Council Tax support has left local authorities having to divert money away from local services. This means that some councils may be forced to ask those earning the least to pay more Council Tax, says the LGA.
The Tory-led coalition Government abolished Council Tax Benefit in 2013 as part of widespread changes to the welfare system, resulting in a large number of low-income families having to pay Council Tax for the very first time.
Council Tax support helps the poorest households with a discount on their bill, but the LGA says “uncertainties” over funding from central Government leaves councils “little choice but to reduce the discount”.
Councils would need to find an additional £1 billion to keep Council Tax discounts at the same level they were before Council Tax Benefit was axed, says the LGA.
At a time when local authorities are being asked to find £2.6 billion in savings due to an 8.8% cut in overall funding, councils are now asking the least well-off in society – who would have previously been exempt – to come up with ‘minimum’ Council Tax payments.
The LGA report ‘lays bare’ the impact of axing Council Tax Benefit and a lack of funding support on some of the poorest in society.
Some of the key findings of the report are:
- A total of 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 per cent) said they definitely plan to change their discount scheme. 83 per cent said they would not change their existing discount scheme, despite funding reductions.
- Beyond 2015/16, only 27 per cent 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.
- 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.
Councils are left with a choice on whether to charge the working age poor Council Tax, or find additional savings from local services on top of the 40% already demanded by the Government.
The LGA said that while some councils have been able to cover some of the shortfall in Council Tax support by scraping automatic Council Tax discounts on second homes, it isn’t enough to completely fill the funding gap.
Other councils have introduced ‘hardship funds’ to give the worst affected households longer to catch up with missed payments.
The LGA is urging whoever is in power after the next general election to fund Council Tax support to the same level as under Council Tax Benefit.
Cllr David Sparks, Chair of the LGA, said:
“Government reduced funding for council tax support by hundreds of millions of pounds when it handed the responsibility for administering it to councils.
“As a result, councils would need to find £1 billion by 2016 to protect discounts for those on low incomes. At a time when local government is already tackling £20 billion worth of cuts, this is a stretch too far.
“Many councils have been put in an impossible position. This cut has taken millions of pounds out of funding for local services and increased the cost of living for some of society’s poorest.
“No one wants to ask those on the lowest incomes to pay more. But faced with significant cuts to the money we receive to look after the elderly, protect children, repair the roads and collect the bins, many councils have had little choice but to reduce the discount.
“Councils know how tough things are, and are doing their best to protect those affected the most, whether through introducing hardships funds or changing the way we collect unpaid tax. But these measures can only go so far in alleviating the burden.
“To address this unfairness, government must give local areas the full amount of funding required to provide council tax support to those who need it. Otherwise, it is almost inevitable that further cuts to local government funding in the coming years will further force up bills for those who can least afford to pay.”