Fears over low-pay families as council tax benefit cut

It says the Government proposal will disproportionately target those of working age, and could also face similar problems to Margaret Thatcher’s poll tax by hitting low-income families for small amounts of revenue.

The Government proposes to abolish council tax benefit (CTB) across Britain from 2013–14 and give grants to local authorities to design their own systems. The coalition is planning to cut funding for council tax support by 10 per cent and, as there is a requirement to protect pensioners, the report estimates that on average those of working age face a 19 per cent cut.

The study, undertaken by the Institute of Fiscal Studies (IFS) and the Joseph Rowntree Foundation charity, says that while the move will strengthen incentives for local authorities to promote employment and growth, finding the additional 10 per cent of funding could see them discouraging low-income families from living in the area, and seeking to discourage take-up of support.

The Government claims that spending on CTB has more than doubled since 1997 and welfare reform is needed to tackle the deficit, but Hilary Benn, MP for Leeds Central and Shadow Secretary of State for Communities and Local Government, said the findings exposed the proposal as being “fundamentally unfair”.

“These council tax benefit changes are rushed, badly thought out and are fundamentally unfair,” he said. “They will particularly hit those that who work hard for modest wages.

“Eric Pickles has gone around the country saying that councils should not increase council tax. Yet here he is planning a great big increase for the poorest.”

The IFS warned that not only would there be funding issues, but also that councils may not have the time or expertise to set up the new systems. Its senior research economist Stuart Adam, said: “Councils face a difficult task to design replacement schemes that protect the vulnerable while maintaining work incentives in the context of reduced funding. They have little experience or expertise in designing means-tested support schemes and very little time to do it.

“The fact that they also need to make these schemes work alongside Universal Credit, the new benefit structure which is being introduced from October 2013, makes an already difficult challenge truly formidable.”

The findings also warn areas with a higher than average elderly population face the biggest shortfall – naming Craven District council as having to make up the largest deficit of 33 per cent.

“The grant for each local authority will be based on 90 per cent of what would have been spent on CTB in that area,” the report states. “Unless councils find additional money from elsewhere, a requirement to protect pensioners in England will imply a 19 per cent cut in support for working-age claimants, on average.

“Those local authorities where pensioners account for an above-average share of CTB expenditure would need to make larger percentage cuts to support for working-age claimants.”

A spokesman for the Department for Communities and Local Government said: “People who have worked hard and paid taxes all their lives need to know the spiralling benefits bill is being controlled and that work pays.

“It is right that councils, who collect council tax, have a strong incentive to put in place a fairer local council tax support scheme based on local priorities that helps residents get back into employment and protects the vulnerable.”

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