How council tax benefit cuts have hit the poorest

More than a million low-income households are now required to pay the tax after the coalition cut support by 10 per cent last year.

While the baleful effects of the bedroom tax and the benefit cap have been well documented, far fewer have noticed the other large welfare cuts that was introduced last April: the abolition of Council Tax Benefit (CTB). Until that month, those households deemed too poor to meet the monthly charge received CTB to cover all or part of their bill. With 5.9 million recipients, it was claimed by more families than any other means-tested benefit or tax credit.

But last year the coalition scrapped the payment and transferred responsibility for the new regime from central government to local councils. At the same time, it cut the fund for support by 10 per cent. Councils in England were left with the choice of either maintaining current levels of support and imposing greater cuts elsewhere, or asking those who received a full or partial rebate to make a minimum payment. They were required to protect pensioner households, leaving the working-age poor to bear the burden of any increase. 

New research published today by the IFS shows what the results have been. Seventy per cent of English local authorities have introduced minimum council tax payments (forcing many poor households to pay the charge for the first time), with more deprived areas more likely to introduce them owing to a larger reduction in funding. Of the two million working-age households that could have claimed full relief under the previous system, 70 per cent (1.4 million) are liable to pay some council tax in 2013–14, with half liable for at least £85, a quarter liable for at least £170, and 10 per cent liable for at least £225. The new system led to an average increase of 30-40 per cent in the number of people seeking help from the Citizens Advice Bureau in relation to council tax debt between July and September 2013. Last October, Labour found that up to 500,000 vulnerable people had been summonsed to court for failing to pay the monthly charge. 

Labour-run local authorities were more likely than others to introduce minimum council tax payments, although the IFS notes that "this seems to be a reflection of the characteristics of LAs where Labour has a majority rather than a result of political preference". Once these factors were accounted for (most notably, the size of the funding cut and the number of low-income pensioner households), Conservative-majority councils were found to be more likely to introduce minimum payments: 14 per cent more likely than Labour councils and 25 per cent more likely than Lib Dem ones. 

Stuart Adam, a senior research economist at IFS and the co-author of the report, said: "Localising council tax support has, of course, led to considerable variation in the level of support available. Low-income working-age families are now likely to receive more help with their council tax if they live in a better-off area without too many low-income pensioners among their neighbours. Conversely working-age people living in poorer areas and in areas containing more low-income pensioners receive less help."

In response, Brandon Lewis, the local government minister, said: "Spending on council tax benefit doubled under Labour and is costing taxpayers £4bn a year - equivalent to almost £180 a year per household. Our reforms to localise council tax support now give councils stronger incentives to support local firms, cut fraud, promote local enterprise and get people into work. We are ending Labour's something for nothing culture and making work pay." But the steep rise in council tax is one reason why, for too many, work still isn't paying. 

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Council-run housing in Lambeth on November 5, 2012 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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The future of the left: The path ahead is full of challenges

Be in no doubt: the left faces a struggle for survival.

There are plenty of grounds for pessimism about the left’s prospects and they are well rehearsed.  Across Europe, social democrats are out of power and when they do manage to enter government, it is under the skirts of dominant centre-right parties or at the helm of fragile coalitions. Ageing western societies have become more conservative, immigration has driven a cultural wedge into the cross-class coalitions that once undergirded centre-left voting blocs, and austerity has ushered in a politics of security, not reform. Only those who have borne the brunt of the financial crisis and its aftermath, like the unemployed youth and evicted homeowners of Southern Europe, have swung decisively to the left, joined by relatively protected but angry older middle class liberals of Northern Europe. Even in Latin America, where the left swept the board at the turn of the century, politics is shifting to the right. Bright spots, such as municipal experimentalism in Spanish cities, or energetic liberalism in Canada and Italy, illuminate the gloom. But mostly, darkness is visible.

Is this condition terminal? Inequality, stagnant living standards and the turbulence of global capitalism generate profound political discontent. They give oxygen to progressive protest movements as well as populist reactionaries, as the convulsions in US politics show. But only a facile determinism reads off political progress from economic crisis. There is nothing to guarantee that revulsion at political and economic elites will give birth to a new egalitarianism. The left needs a clearer headed view of the political terrain that it will face in the 2020s.

Demographic change is a given. Advanced democracies like Britain will get older and the weight of older voters in elections will increase, not diminish. The gap in turnout rates between young and old is unlikely to close, tilting politics even further towards the cultural concerns and economic interests of the over fifties. Leadership credentials and economic competence matter for these voters more than abstract appeals to equality. But a generation of young people will also enter middle age in the 2020s having endured the worst of the age of austerity, with lower wages, stymied home ownership aspirations and stunted career progression to show for it. So just as 20th century catch-all parties built cross-class electoral alliances, successful political movements in the coming decades will need to secure inter-generational voting blocs. Stitching these together will foreground the politics of family and focus policy attention on transfers of wealth and opportunity across multiple generations. 

Ageing will also ratchet up fiscal pressures on the state, as costs mount for the NHS, care of the elderly and pensions. But Britain’s tax base has been weakened by low productivity, corporate tax avoidance and expensive personal allowance giveaways. In the 2020s, this crunch will loom large over fiscal policy and force hard choices over priorities. Just as in the 1990s, we can expect public disquiet at the run-down of investment in public services to mount, but this time there won’t be the same spending headroom to respond to it. The political debate currently underway in Scotland about raising income tax is therefore a harbinger of the future for the rest of the UK.

Fiscal constraints will also force the left to take seriously the agenda of economic reform opened up under the ungainly title of “pre-distribution”. Without an account of how to generate and share prosperity more equitably within the market economy, social democracy is purposeless. But it will need a far more robust and plausible political strategy for achieving these ambitions than anything that has been on offer hitherto. Technological change will not usher in a new economy of its own accord, and without the solid base of an organised working class to ground its politics, the left needs to be open to a wide set of alliances with businesses, big and small. Combining economic radicalism with credibility and popular appeal, particularly to voters who still blame it for the financial crisis, is the hardest challenge the left faces, but there is no getting away from it.

On a note of optimism, the left is currently strong in cities, from which it can build out. Diversity is a strength in major urban centres, not a weakness, and powerful city leaders endow progressive politics with governing authority. Cities are the places where new social movements are most active and much of the energy of contemporary politics can be found, even if elections are fought on wider terrain. The task is to combine a propensity to decentralise and devolve with clear national political direction. The same holds with party reform: the mass political parties of the 20th century are dead, but networks can’t fight elections, so combining openness and democratic engagement, with discipline and national purpose, is vital. 

Nick Pearce is the director of the Institute for Public Policy Research.