Will this be the coalition’s poll tax moment?

The 10 per cent cut to Council Tax Benefit will force many to pay the tax for the first time. It could prove the most disastrous of the coalition's welfare reforms.

It is hard to predict which of the coalition’s welfare reforms will prove most politically toxic. The withdrawal of child benefit from those earning over £50,000 could outrage the Tories’ natural supporters, as those families that have not opted out of claiming the benefit discover, to their surprise, that they must now pay a “High Income Child Benefit charge”. Others in the government are more troubled by the introduction later this year of Universal Credit, a new single payment for welfare recipients, reliant on a fearsomely complex computer system that increasingly few in Whitehall believe will work.

But the most hazardous change could be the one that has received the least attention: the government’s reform of the council-tax system. Polls routinely show that the levy is Britain’s most unpopular tax but the coalition is about to ensure that millions of people pay it for the first time. At present, those households deemed too poor to meet the monthly charge receive Council Tax Benefit to cover all or part of their bill. With 5.9 million recipients, it is claimed by more families than any other means-tested benefit or tax credit. Now, in its quest to roll back the welfare state, the coalition has cut the fund for Council Tax Benefit by 10 per cent. At the same time, it has localised the system, transferring responsibility for the new regime from central government to local councils.

From this April, councils must either maintain current levels of support and impose greater cuts elsewhere, remove other exemptions (such as those for second homes and empty properties), or ask those who receive a full or partial rebate at present to make a minimum payment. Early signs suggest that most will opt for the latter. An analysis by the Resolution Foundation and the New Policy Institute found that, of the 86 councils that have published their plans, 57 intend to introduce a minimum payment of between 6 and 30 per cent of a full council-tax bill.

As the government has stipulated that current levels of support must be maintained for pensioners (who, partly owing to their greater propensity to vote, have once again been shielded from austerity), the burden will fall entirely on the working-age poor. On 8 January, Birmingham City Council announced it would impose a 20 per cent charge on the unemployed. That will mean a minimum payment of £200 a year for households affected.

Striking parallel

In the past year, everything from the government’s NHS reforms to its handling of the West Coast Main Line auction has been compared to the poll tax but in this instance the comparison is completely warranted. The parallels with the greatest policy misjudgement by any modern Conservative government are so striking that one is inclined to conclude that the coalition has a death wish. The Community Charge, as it was officially known, similarly required each household, irrespective of its income, to pay at least 20 per cent of the tax. Now, as then, this regressive levy is likely to be met with mass non-payment.

Patrick Jenkin, the architect of the poll tax, has even accused the government of repeating the Thatcher government’s mistake. The Conservative peer told the BBC last year: “The poll tax was introduced with the proposition that everyone should pay something . . .We got it wrong. The same factor will apply here, that there will be large numbers of fairly poor households who have hitherto been protected from Council Tax, who are going to be asked to pay small sums.”

When the poll tax was introduced in 1989, the poor were at least assured that their benefits would rise with prices. But under George Osborne’s plan to uprate working-age benefits by 1 per cent for each of the next three years, rather than in line with inflation, their incomes will be squeezed to an unprecedented degree. The government’s impact assessment showed that the poorest tenth will lose the most in real terms (2 per cent of net income a week), while the next poorest tenth will lose the most in cash terms (£5 a week).

Those faced with the unpalatable choice of either heating their home or feeding their family are unlikely to accept stoically the first council tax bill that lands on their doormat in April. Figures from the Institute for Fiscal Studies show that the average working family will lose £165 per year, while the average non-working family will lose £215.

Confronted by these losses, which household will willingly pay hundreds of pounds in additional tax? Yet, for the sake of saving just £500m a year, the coalition intends to force councils to chase the poorest through the courts to recoup a charge they cannot afford to pay.

Ever since the coalition’s austerity programme began, commentators have asked when its “10p tax moment” will come. In this “son of poll tax”, we may have found the answer.

This piece appears in this week's issue of the New Statesman. To subscribe to the magazine, click here.

A protest in Trafalgar Square in 1990 against the poll tax.

George Eaton is political editor of the New Statesman.

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Our new relationship with the EU may be a lot like the old one

For all the tough mood music, Theresa May has left room for concessions.

I'm sad and dismayed, but that's democracy for you.

The Mail is in a cheerier mood. "Freedom!" is their splash. "Dear EU, We're Leaving You" cheers the Express' while "Dear EU, it's time to go" is the Mirror's splash. "Dover & Out!" roars the Sun, who have projected those same words on the white cliffs of, you guessed it, Dover. "May Signs Us Out!" is the Metro's take.

"Brexit begins" is the i's more equivocal splash, "The eyes of history are watching" is the Times' take, while the Guardian opts for "Today Britain steps into the unknown".

The bigger story isn't the letter but its content, which leads the FT: "May signs historic Brexit letter and opens way for compromise". The government is finessing its red line on the competence of the European Court of Justice. (The word in Whitehall is that Theresa May hadn't grasped the importance of the ECJ as an arbitration mechanism after Brexit and for cross-border matters such as flights when she made her conference speech.)  And the PM has done a good job of not ruling out continuing payments to the European Union, her best path to the deal Britain needs.

A lot depends on what happens to the British economy between now and March 2019. The pound is down still further today but whether that's a minor eruption or the start of sustained losses will have significant consequences on how painful Britain's best path to the access we need to the single market - paying over the odds for the parts of membership that the British government wants to keep and swallowing that £50bn divorce bill - is doable or not.

For all the mood music emanating from May, she's quietly done a good job of clearing the obstacles to a deal where Britain controls its own immigration policy, continues to staff Europol and to participate in European-wide research, the bulk of our regulation is set by Brussels de facto if not de jure and we pay, say £250m a week into Brussels.

Our new relationship with the EU may be rather closer to our old one than we currently expect.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.