COUNCIL TAX COULD RISE TO EASE BENEFITS CUTS

FIRST PUBLISHED BY: THE TELEGRAPH 

WORKING FAMILIES FACE INCREASES IN THEIR COUNCIL TAX BILLS TO PROTECT BENEFITS CLAIMANTS FROM CUTS IN WELFARE SPENDING, ECONOMISTS AND COUNCIL LEADERS HAVE WARNED.

Coalition plans to make local authorities set their own rules for Council Tax benefit could also undermine the Government’s plans for welfare reform, it was suggested yesterday. The Institute for Fiscal Studies analysed Coalition plans to reform the rules for Council Tax benefit and identified a number of potentially serious problems. 

Next year, the Government is planning to scrap the national system of Council Tax benefit, which gives discounts on the tax for low-income households including the unemployed. 

Under the new system, local authorities will be given control of money for Council Tax benefit. The sum available for the benefit will also be cut by 10 per cent. Because Council Tax benefit for pensioners is protected, that cut could mean much larger reductions in areas with large numbers of retired residents.

In parts of Dorset and Yorkshire, for example, working-age claimants would face a 33 per cent cut in Council Tax benefit. The IFS said the 10 per cent cut would leave councils facing a choice between making significant cuts in benefit for working-age households and finding the money elsewhere, either by cutting services or increasing tax. Scotland’s devolved administration has taken the choice to find the money elsewhere, to avoid major cuts in benefit payments.

The IFS calculated that the average English local authority choosing to do the same would either have to cut spending on other services by 0.4 per cent, or increase Council Tax by 1.9 per cent. Sir Merrick Cockell, chairman of the Local Government Association, said that councils are being put in an impossible position and may have to increase taxes.

"Councils are extremely worried about how they're going to protect deserving and vulnerable people from the £500 million cut to Council Tax benefit next year,” he said. “They can either cease helping the working poor, or continue to support them by taking money from other services or putting up Council Tax.” In a report on the Council Tax benefit reform, the IFS suggested that a localised benefit regime could “undermine” the Coalition’s flagship Universal Credit welfare reform.

Universal Credit, due to begin next year, is meant to integrate all benefits into a single system, and ensure that people claimants are always better off if they take paid work. However, Council Tax benefit has been left out of the new system, and the IFS warned that trying to co-ordinate the local and national benefits system would be complex and possibly damaging.

Depending on how councils design their welfare rules, the effect could be to “reintroduce some of the extremely weak work incentives that Universal Credit was supposed to eliminate.” Overall, the IFS concluded, the localisation of Council Tax benefit “has the potential to undermine many of the positive impacts of Universal Credit.”

Bob Neill, the local government minister, said that the Government's reforms were right. He said: "It is right that local authorities, who collect Council Tax, have a strong incentive to put in place a fairer local Council Tax support scheme that helps their residents get back into employment based on local priorities."

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.

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