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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.

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

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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Tags:Welfare