Study finds council-tax support cuts have hit collection rates

The analysis, by the Institute of Fiscal Studies (IFS), comes hot on the heels of the decision by Northumberland County Council to reduce its support, in a bid to save £1million a year.

From April, all households in the county will have to pay a minimum of eight per cent of their council-tax bill, after councillors last month agreed a reduction in the level of support for working-age claimants to 92 per cent.

The current scheme provides up to 100 per cent, meaning that some households pay no council tax. To a typical band A property, the change will mean a bill of £98.55 per year for a couple/family or £73.91 for a single person.

In April 2013, council-tax benefit, which provided help for low-income households with their council tax, was abolished.

In its place, local authorities in England were charged with designing their own council-tax support (CTS) schemes for those of working age.

Since then up to this financial year, the IFS study found, 90 per cent of English councils had made some changes to their CTS scheme for working-age households, almost all of them cuts. This figure is up from 82 per cent in 2013–14.

It also said that more deprived councils, and Labour councils, have been more likely to introduce minimum payments than other councils – but only because they received larger cuts to CTS funding from central government.

After adjusting for other differences between councils – including differences in funding cuts – Labour councils were 15 percentage points less likely to introduce minimum payments than Conservative councils.

It means that there are now 1.4 million households who have to pay some council tax who would not have had to pay it if the generosity of the pre-2013 system had been maintained.

The IFS estimates that about a quarter of the additional council-tax liability arising from cuts to CTS is not collected in the year it is due.

This is far higher than the typical rate of non-collection of council tax; around 10 times higher than the 2.5 per cent of council tax that authorities failed to collect, on average, in 2012–13, before the cuts.

The Conservative leadership in Northumberland explained that the normal collection rate in Northumberland is around 98 per cent and for the purpose of this budget proposal, the collection rate is estimated at 83 per cent, which is benchmarked against other councils in the North East.

Coun Richard Watts, chairman of the Local Government Association’s resources board, said: “Council-tax support schemes are no longer fully funded, with almost £2 billion – around half of the original funding – removed between 2013 and 2020.

“No one wants to ask those on the lowest incomes to pay more, but this has put councils in an impossible position.

“Between 2010 and 2020, councils will have lost almost 60p out of every £1 the Government had provided for services. Alongside growing pressure on services, such as adult social care, children’s services, fixing potholes and collecting bins, this has meant many councils have had little choice but to reduce discounts.

“Councils have worked hard to try to protect discounts as much as possible, but the Spending Review needs to ensure councils have the full amount of funding required to provide council-tax support to those who need it. Otherwise, it is almost inevitable that bills will continue to be forced up for those who can least afford to pay.”

Ben O'Connell, Local Democracy Reporting Service