Agenda item

     Report by Executive Director Alistair Cunningham OBE.

Cllr Philip Whitehead, Leader of the Council, presented a report which detailed costed options for changes to the Council Tax Reduction Scheme.

The Leader explained that following the introduction of the Council Tax Reduction Scheme in 2013, it had been subject to a number of changes to bring it in line with other welfare benefits. Further changes were now necessary to improve administration and accommodate the effects of Universal Credit and these changes would require consultation.  The report set out a number of options for consultation and the Leader proposed that Option 4, detailed in the Appendix to the report, be supported for consultation, the results of which would be considered by Cabinet at its meeting in November 2019.

In response to questions from Cllr Ian Thorn, Chair of the Financial Planning Task Group, about how the consultation would be conducted and how the income ‘bands’ would operate, the Leader and Director of Finance and Procurement explained that the income bandings would be suitably flexible so that they avoided additional financial burdens on those who were part of the Scheme.

Resolved: That Option 4, as detailed below, be approved as the preferred option for consultation, with the results being reported back to Cabinet in November 2019.

Option 4

Maintain the existing scheme but offers those on Universal Credit a scheme based on the household income which offers 80% maximum entitlement but limits the number of adjustments made to the claim each year.  Entitlement will be based on a number of income ‘bands’. Those with Capital/assets of over £6,000 will not be entitled to CTR Non-Dependant deduction standardised at £4 per week.

The scheme will be designed to be cost neutral other than to include a factor for the overall increase in council tax. This proposal will mean the CTR scheme as a whole will cost approximately £24.65m in 2020-21.

Reason for Decision:

Since 2013 the Council has operated two schemes to determine entitlement to council tax reduction. There is a default scheme for those of pensionable age, Council Tax Benefit and a local scheme offering a Council Tax Reduction for those of working age. Both schemes are affected by the roll out of Universal Credit which is managed by the Department of Work and Pensions (DWP) but the most significant impact has been felt by those of working age.

The introduction of Universal Credit has had a number of effects. It has changed the relationship between the council and the claimant, who in the past relied upon the council for all their housing costs. Now Universal Credit includes housing costs for the majority of tenants, lessening both the information local authorities hold and the urgency with which customers once engaged with local authorities. It is a benefit that that can be used to top up a low income. It can be claimed by those temporarily out of work as well as those unable to work. Around one third of all households in receipt of council tax reduction are already in receipt of Universal Credit with the expectation that another two thirds will migrate over the next four or five years. The overall impact of migration upon council services will be significant as many of these customers are also supported by Adult Social Care, Mental Health and Learning Disabilities Teams and the Court of Protection Team.

The sums paid to those in receipt of Universal Credit, in terms of the basic living allowances have also been frozen for the last three years, when in real terms, council tax has increased by 13%.

According to a recent report by the Institute for Fiscal Studies “There are still substantial cuts planned for working-age benefits in the next years, especially because of the move from the ‘legacy’ benefits system to the overall less generous (in entitlements) universal credit system, which is now expected only to be fully rolled out by 2023–24,” it said. “In combination with cuts to tax credits, this means that benefit entitlements are likely to shrink in real terms, pushing down the incomes of poorer households.”

Methods of exchanging information between local authorities and the DWP have become more sophisticated. The point has been reached where much of the information sent populates the software system used by Revenue and Benefits. Typically, 5,000 notifications are imported from the DWP each month for those on Universal Credit, alone. The current council tax reduction scheme is too sensitive to accommodate those changes. Each notification requires the claim to be looked at. Consequently, claims for council tax reduction are subject to frequent amendments, often as a result of a relatively minor change in income. The council tax reduction scheme needs updating to better accommodate these changes.

In conjunction with the introduction of the local scheme in 2013 changes were made to other council tax discounts and exemptions over which the council were given discretion to change to best suit the authority. These changes offset some of the costs of the current scheme. The council have already maximised methods of income generation from local taxation and so any proposal to amend the scheme will have a direct impact upon the council’s budget.

The estimated cost of the scheme in 2020-21 will be £24.65 million before any change is made to the scheme (still less than the scheme cost in 2013-14 when it cost £27million). This report sets out proposals for consultation to change the scheme. It provides costed options for a local council tax scheme which may offer better support to those who most need help, particularly those in receipt of Universal Credit. In doing so the council could minimise the administrative costs of maintaining claims for council tax reduction and the collection of arrears. Any proposal to increase the generosity of the scheme will however impact upon the formula used to calculate the tax base and will reduce the tax base which will have an impact upon all precepting authorities and levels of precepts.