Welfare cuts mean a dramatic rise in council tax for the poorest

The decision to reduce the budget for council tax support by 10 per cent means low-income households face a tax increase of up to £600.

Accustomed to the inflated claims of successive governments, readers might be forgiven for rolling their eyes at the phrase "radical welfare reform". Yet for once the bold rhetoric might match reality. Council Tax Benefit, the most widely claimed benefit in the UK, which provides 5.9 million low-income families with help paying their council tax will soon be abolished. From 1 April, responsibility for council tax support will transfer from Whitehall to each of England’s 326 local authorities (and the Scottish and Welsh governments). Few have yet grasped the full implications.

To the reform’s cheerleaders, the change is ‘localism in action,’ and technically they’re right. But it’s localism of the most meagre and restricting kind. Councils must now provide council tax support but from a budget cut by 10 per cent cut. And they must also contend with centrally-set rules that mean that the amount of help pensioners receive is protected. This leaves them with a stark choice: either substantially increase the council tax bills of low income working families or find savings elsewhere to cover the funding shortfall.

Faced with these constraints and unable to make the required extra savings at a time of unprecedented financial challenge, three-quarters of English councils are set to introduce less generous systems of council tax support in just over two months’ time. Over a third are set to introduce schemes that severely reduce support. Only around a quarter of councils – along with both the Scottish and Welsh governments – feel they are able to absorb the funding shortfall and maintain current levels of support.

What does this mean for low income households? The answer is set out in a report released this morning from the Resolution Foundation. It shows that while the government talks up its decision to "freeze" council tax, millions of households – both in and out of work –in fact face swingeing increases.

Both the scale of the hit and the number of people likely to be affected are dramatic. Many of the 2.5 million out-of-work claimants who currently pay no council tax at all will now, often for the first time, face council tax bills of between £96 and £255 a year. Meanwhile, around 670,000 low-paid working families will see their council tax rise by anywhere up to 333 per cent – an increase of £577 for single working parents who look set to be the worst affected. Little wonder that the handful of prescient commentators alive to the possible implications of Council Tax Benefit reform have drawn parallels with the Community Charge, more commonly known as the poll tax.

It remains to be seen whether we see the emergence of the twenty-first century equivalent of anti-poll tax unions but councils are certainly braced for widespread non-payment. Many are setting aside large sums of money to compensate for unpaid bills while also preparing for more extensive use of bailiff powers and the courts.

Reform did not need to look like this. There was no intrinsic rationale to cutting funding at the same time as localising council tax support and experts have long warned of the dangers that a complex patchwork of local schemes poses to the government’s Universal Credit system. For savings of £410m it all seems unduly hazardous.

But the hazards for government are nothing compared to the very real suffering the changes will mean for many low income families. Already struggling to cope with stagnant wages, rising living costs, a series of cuts to the tax credits and – now – three years of below-inflation rises in support, a swingeing increase in council tax may mean the difference between staying afloat and going under.

As yet, there is no sign that ministers recognise the pain the reform is set to cause. Eric Pickles appears more concerned with the prospect of councils "cheating" their residents by planning across-the-board council tax rises of 1.99 per cent than with those soon to face increases of up to 333 per cent. Perhaps they expect a public inured to cuts to meekly accept the change. Yet there is all the difference in the world between stealth reductions in support over time and a large bill landing on your doormat. Revolt or not, the poor are unlikely to take this lying down. 

The Resolution Foundation's new report, No Clear Benefit, is published today

Communities Secretary Eric Pickles speaks at the Conservative conference in Birmingham last year. Photograph: Getty Images.

Matthew Pennycook is MP for Greenwich and Woolwich, and member of the Energy and Climate Change Committee. He is PPS to John Healey. 

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Why Theresa May can't end speculation of an early general election

Both Conservative and Labour MPs regard a contest next year as the solution to their problems. 

One of Theresa May’s first acts as a Conservative leadership candidate was to rule out an early general election. After a tumultuous 2015 contest and the EU referendum, her view was that the country required a period of stability (a view shared by voters). Many newly-elected Tory MPs, fearful of a Brexit-inspired Ukip or Liberal Democrat surge, supported her on this condition.

After entering Downing Street, May reaffirmed her stance. “The Prime Minister could not have been clearer,” a senior source told me. “There won’t be an early election.” Maintaining this pledge is an important part of May’s straight-talking image.

But though No.10 has wisely avoided publicly contemplating an election (unlike Gordon Brown), the question refuses to die. The Conservatives have a majority of just 12 - the smallest of any single-party government since 1974 - and, as David Cameron found, legislative defeats almost inevitably follow. May’s vow to lift the ban on new grammar schools looks to many like an unachievable task. Former education secretary Nicky Morgan and former business minister Anna Soubry are among the Tories leading the charge against the measure (which did not feature in the 2015 Conservative manifesto).  

To this problem, an early election appears to be the solution. The Tories retain a substantial opinion poll lead over Labour, the most divided opposition in recent history. An election victory would give May the mandate for new policies that she presently lacks.

“I don’t believe Theresa May wishes to hold an early election which there is evidence that the country doesn’t want and which, given the current state of the Labour Party, might be seen as opportunistic,” Nigel Lawson told today’s Times“If, however, the government were to find that it couldn’t get its legislation through the House of Commons, then a wholly new situation would arise.”

It is not only Conservatives who are keeping the possibility of an early election alive. Many Labour MPs are pleading for one in the belief that it would end Jeremy Corbyn’s leadership. An early contest would also pre-empt the boundary changes planned in 2018, which are forecast to cost the party 23 seats.

For Corbyn, the possibility of an election is a vital means of disciplining MPs. Allies also hope that the failed revolt against his leadership, which Labour members blame for the party’s unpopularity, would allow him to remain leader even if defeated.

Unlike her predecessors, May faces the obstacle of the Fixed-Term Parliaments Act (under which the next election will be on 7 May 2020). Yet it is not an insurmountable one. The legislation can be suspended with the backing of two-thirds of MPs, or through a vote of no confidence in the government. Alternatively, the act could simply be repealed or amended. Labour and the Liberal Democrats, who have demanded an early election, would struggle to resist May if she called their bluff.

To many, it simply looks like an offer too good to refuse. Which is why, however hard May swats this fly, it will keep coming back. 

George Eaton is political editor of the New Statesman.