Cuts to council tax benefits have gone largely unreported - but the consequences are big news for Britain's poorest

The axe has been devolved, with big consequences for Britain's poorest families. 

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Next to headline- grabbing cuts like the ‘bedroom tax’ and the ‘benefit cap’, council tax benefit cuts have gone largely unnoticed.  But the 2.3 million people paying on average £167 per year more as a result of the cuts have noticed.   Big time - as new research published this week by Child Poverty Action Group and Z2K finds.  

Just over £3 per week might not seem like a lot to most people, but for households on the very lowest incomes, it’s enough to bust already-stretched budgets.  Families are going to great lengths to make sure they keep up to date with their council tax payments. Stringent collection procedures mean that council tax is viewed as a priority debt and families would prefer to borrow money than fall behind on payments.

It used to be the case that council tax benefit protected people too poor to pay from council tax.  But in 2013 this changed. Out went this fully-funded national benefit. In its place came hundreds of local authority-run council tax support schemes (CTS). Worse, lower central government funding for these schemes amounted to a 10 per cent overall funding cut. Pensioners have been protected from this cut, meaning greater losses for the working age population.

Most councils, already reeling from cuts to their own core grant, felt they had no choice but to seek to plug this gap by levying minimum charges on residents previously deemed too poor to pay anything.

No surprise, then, that the change  has left people struggling with a bill that, until recently, everyone accepted they cannot pay. Our research finds that In London alone in 2013/14, 123,000 low-income households fell into arrears, 100,000 were summonsed to court and 12,000 dealt with the stress of bailiffs collecting their debt.  On top of these debts, London councils piled at least £8.5 million in court costs on households in arrears.

With one hand the Government is spending billions on raising  the personal tax allowance  - with  the stated aim of  taking low income workers out of tax (though the main effect is helping better off taxpayers) -  but with the other it’s increasing the tax burden on them through  council tax support cuts.   And most of the low income households affected by the latter earn far too little to gain from the former.

There are some examples of good practice. Some boroughs have replicated the national scheme which protected the poorest residents from charges. Others have tried to protect their poorest residents from harmful collection procedures -  either waiving court costs or not engaging bailiffs for people claiming council tax support. But in most areas, the days when losing your job meant a break from paying council tax are gone.

So what does the future hold for localised council tax support? One obvious issue is that it undermines the goals of simplification and stronger work incentives in Universal Credit,  the Government’s flagship benefit reform. The whole point of Universal Credit is that by combining several benefits into one benefit you can have a unified taper  - the rate at which benefits get withdrawn - so people don’t have to do impossible calculations on what will happen to their benefit income if their earnings rise. Since council tax support is outside Universal Credit, the Government can no longer claim it’s introducing a unified taper. It’s a major flaw the Public Accounts Committee also spotted last year, when it noted that this will mean some low paid workers face effective tax rates of over 90 per cent. 

This is clearly an issue that needs to be looked at given the upheaval and costs associated with introducing Universal Credit but the Government has yet to announce details of its promised review of localised council tax support. 

The evidence is clear that a nationalised, fully funded system is the most effective way of supporting people on low incomes.  If schemes remain localised, there is the risk of further cuts to support - particularly as cash-strapped councils continue to face difficult choices.

Many have already increased the amount of council tax they are charging their poorest residents. Across the London boroughs that put up their charges in 2013/14,  there was a jump in the number of households  falling into arrears and getting summonsed to court.  That should give pause for thought  for any council considering cutting  the council tax support  they offer. But ultimately the  responsibility lies with central government. 

The Government is committed to completing a review of the localisation of council tax support by April 2016. It needs to start that review soon – and it needs to consider how it will respond when the evidence is overwhelming that this change is inflicting real pain on people too poor to pay.  

Megan Jarvie is CPAG's London campaign coordinator.