Ministers leave councils to face tax dilemma

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Councils in England have been left in an “impossible position” by Ministers’ decision to scrap the national council tax benefit system, which has saved central government £414m but left many town halls unable to protect those least able to pay, the Local Government Association said.

The warning came as spending watchdog the National Audit Office (NAO) found that the change effectively cut central government funding for council tax support by 10 per cent, and most councils have responded by passing on at least some of that cut to low-income households which previously received help with bills.

Since they became responsible in April for designing their own local support schemes, 71 per cent of councils have introduced a requirement for all working-age claimants to pay at least some council tax, regardless of income, the NAO found. And 41 per cent have introduced minimum payments for all households, with exemptions only for pensioners and war pensioners.

The new arrangements, which mean many low-income households have to pay the tax for the first time, have reduced incentives to work for some council taxpayers, the NAO found. It said the Department for Communities and Local Government (DCLG) needs to “do more” to understand the financial impact which the change has imposed on local authorities.

The chairwoman of the influential House of Commons Public Accounts Committee, Margaret Hodge, said she had “real concerns” about the financial consequences for councils and vulnerable claimants, warning that authorities – particularly in the most deprived areas – will find it increasingly difficult to collect the tax from people struggling to pay it.

The chairwoman of the Local Government Association’s finance panel, Sharon Taylor, said: “As this report recognises, councils have been pushed into an impossible position by the Government’s 10 per cent cut in funding for council tax support.

“This comes on top of the 43 per cent cut to local government funding and as a result many local authorities have been left unable to protect those who can least afford to pay.”