Council Tax Benefit (CTB) Changes

welfarechangesIn April 2013 Council Tax Benefit will be localised, and central government funding for CTB to Local Authorities (LAs) will be cut by 10%.

The stated intention of these changes is to give councils more freedom to respond to local priorities within local financial conditions, and to strengthen LAs incentives to promote local growth and employment.

What is the current system?

The current system consists of nationally standardised criteria for means testing to allocate CTB, where recipients of Job-Seekers Allowance (JSA), Employment Support Allowance, Income Support, and Pension Credit Guarantee Credit are automatically passported’ onto the benefit to qualify for a full rebate. Others on low incomes receive a means test and according to their income and assessed needs receive a full rebate or partial reduction in the amount of council tax they are liable to pay.

What’s changing?

Until April 2013 LAs have been fully reimbursed from central government for the total amount of council tax unpaid by those claiming CTB. The government will now only reimburse 90% of what this grant was at 2012-13, and Local Authorities are required to devise their own schemes, determining qualifying criteria, and amounts claimable, at the local level.

Effectively this is a grant cut of 10% to local councils, and it must be decided locally how, and from whom, this shortfall should be made up. The cuts in funding will be higher in areas where CTB claim is higher, the poorest areas. The Institute of Fiscal Studies say it will work out as £5 per dwelling in City of London, £38 in Haringey, with most LAs facing between £10-25 per dwelling. The 10% shortfall could be found from other LA funding, so an LA could replicate the existing CTB scheme and make cuts to other services. If the saving is found elsewhere, this would mean an average of 0.4% reduction in funding of local services, or 1.9% increase in council tax rates.

Central Government has specified that pensioners must be protected from any changes and will continue to receive the full benefit. The government has said LAs should ‘consider ensuring support for other vulnerable groups’, and has said the new schemes should promote work incentives. The grant left over after pensioners are protected will amount to only 81% on average available for other CBT claimants. Where there is a higher than average number of pensioners in a LA area the grant left over will be lower than this.

How might councils respond?

The new scheme is meant to be devised by January 2013 by LAs, with national government putting into place its own scheme if this date is not met (the exact nature of the national government scheme is not yet known). Councils are required to consult on the proposed new schemes. It is possible that some councils will continue with the current system for the year 2013-14, and find saving by making cuts elsewhere. So far we know that this is being proposed in Tower Hamlets, Kensington, Chelsea and Oxfordshire.

Councils could respond in one of three ways:

  • Distribute cut to all recipients of CTB equally (excluding pensioners)
  • Select particular groups to receive rebate but not others
  • Continue with complete rebate and find savings elsewhere.

Looking at the range of proposals currently being consulted on we can see some of the options being considered include:

  • All working age adults to pay some proportion (eg 20% - 25% of their liability).
  • All properties above bands D/E to have their CTB limited to this amount.
  • Non-dependent deductions increased, including where nondependent is receiving JSA.
  • Protecting disabled people,
  • Protecting lone parents with children under 5 years of age,
  • Reducing the savings limit,
  • Reducing the period for backdating claims.

An initial and fairly cursory analysis of the different proposed schemes appears to indicate that there is no particular correlation between political parties and schemes proposed. There has been no direction to Labour councils on this from the Labour Party centrally. Some councils have publically opposed the proposed changes, including 5 Conservative councils in Yorkshire. At least 1 London Labour council is considering coordinating a campaign to reject the changes.

It isn’t known how future national level grant allocations will be adjusted in future years to reflect changes in local governments spending on council tax rebate the previous year, or whether the grant would be adjusted at longer intervals – if longer there could be serious problems with likely changes in demand for CTB.

Over time there are incentives for councils to:

  • Encourage high earners into area,
  • Discourage low incomes to area,
  • Particularly discourage low income pensioners to area,
  • Discourage take-up of CTB

These changes are part of a package of reforms to the tax and benefit system this government is making - dismantling entitlements to social security and welfare support and attacking some of the poorest people in our society. Many more people are being pushed into poverty because of what this government is doing.

More information, and any further changes to the details documented here, can be found at: