Under the Localism Act 2011, the manner in which council tax benefit is administered is being devolved to local authorities from central Government (DWP). Could the Portfolio Holder comment on how he sees this impacting on current benefit recipients and the wider council tax payers?
Minutes:
Under the Localism Act 2011, the manner in which council tax benefit is administered is being devolved to local authorities from central Government (DWP). Could the Portfolio Holder comment on how he sees this impacting on current benefit recipients and the wider council tax payers?
Councillor Jarrett stated that this was one of the most important issues and one of the most difficult challenges facing the council over the next few months through and into budget setting. As part of the devolution of this responsibility, Government had protected pensioners such that they were unaffected by any subsequent changes that local councils make. The good news was therefore that all current and future pensioners in Medway would continue to receive the same level of support towards their council tax bills as was currently the case. Of course, if individual circumstances changed, then that level of support would change too, which meant that future lottery millionaires could look forward to paying their council tax in full.
However pensioners currently only accounted for about 40% of those presently receiving help to pay their council tax. The remainder were of working age and many of these would be in receipt of Job Seekers’ Allowance, income support or other benefits.
The decision to localise support for council tax was taken as part of the 2010 Spending Review and was accompanied by a declaration that there was an expectation that the level of support would reduce by 10%, as a contribution towards the deficit recovery plan. Of course any such reduction now needed to be made against working age recipients since pensioners were protected.
Councils were of course free to make alternative savings, other than cutting benefit, to compensate for the central reduction to funds that was accompanying the localisation. This could have meant cutting funding for services or increasing council tax, were that to be permitted under Government capping arrangements.
The Council had carried out calculations against the indicative grant issued for council tax support in 2013/2014 and believed that there would be a shortfall, significantly in excess of the Government’s figure of 10%. Furthermore any move to bill council tax upon those in receipt of benefit was likely to prove difficult to collect and incur further costs.
This would be a difficult issue on a number of fronts. Clearly there were hard financial decisions to be made and the Council would be bringing forward proposals in the near future. As a benchmark, there was a general scheme being discussed for the other parts of Kent that was based upon an overall cut in benefit for non-pensioners of 18.5% but the Council believed that this understated potential costs. The timescales for this exercise were also challenging in that Councils had to have a scheme agreed by 31 January 2013, having been subject to a public consultation. Further any proposed changes must be deliverable by the providers of the computer software that calculates benefit entitlement and this was a significant risk in its own right.
It was an important task in attempting to make this task painless for current recipients of support for council tax who by definition were not amongst the well-off in the community. At the same time the Council could not ignore the expectation of the majority of taxpayers that bills would be contained and services continue to be provided.
How the Council tackled these issues would be a moot point, and the Council would be bringing forward proposals for consultation in due course. Under the government legislation, as well as protecting pensioners, the Council could exclude if it so wished, other vulnerable groups which would make the task of bridging the gap that much more difficult and he believed under the consultation being brought forward the only group, apart from pensioners, that the Council would be looking to exclude, would be war widows, the reason for which was quite plain.
It would be made clear at all times to the people of Medway that these changes that were being proposed were being brought about because of the Deficit Reduction Plan and not because of any actions proposed or being taken by the Council.
Councillor Adrian Gulvin thanked Councillor Jarrett for a very comprehensive explanation for what was a very difficult situation. He asked Councillor Jarrett what actions were being taken to lobby the government with regard to local government administration
Councillor Jarrett responded by stating that he had taken a number of steps relating to this and associated issues relating to council tax late last year as follows:
Councillor Jarrett had received a substantive reply on 25 July from Lord Best, including a substantial extract from Hansard and referred to some general points made by Lord Best including this: “I append the Hansard report on our debate and you will see that I am seeking to get greater discretion for councillors to exercise their own judgement by providing them with the flexibility to reduce the single person discount is a better way of finding the savings for the treasury than impoverishing those already on the lowest incomes”.
Councillor Jarrett stated that under the current proposals, the single person discount which was 25%, would remain unchanged under these proposals. Councillor Jarrett stated that Lord Best added “it would be excellent if you could see what reduction a single person discount perhaps only for those in Band C and above could achieve sufficient revenue to avoid touching current council tax benefit claimants”. Councillor Jarrett stated that he would ask the Chief Finance Officer, Mick Hayward, to see if he could produce with some helpful calculations so that Councillor Jarrett could reply to Lord Best in a timely manner.
Councillor Jarrett made further references to Hansard and stated that Lord Best was a cross bencher. Lord Best stated “my amendments concentrate on not on whether the arrangements should be localised per se but on the ways in which localisation can be made to work. The amendments are aimed at making the process of localising the council tax benefit or discounts fit for purpose by allowing local authorities proper discretion to tackle the difficult position in which they are placed because of the requirement on them to save a further £400m per annum”. Councillor Jarrett stated that this seemed a reasonable approach in that if the government really did want to localise this matter, it should surely localise it in all its parts.
Councillor Jarrett stated that Lord Best had added “my starting point in pursuing these amendments has not been so much about the principle of localisation but addressing the implications of the cuts”.
Councillor Jarrett stated that, later in his speech, Lord Best had said “from the prospective of local councils there are practical problems in being asked to raise revenue by reducing discounts on council tax for the poorest households. The cost of collecting council tax for those with no spare income is likely to be very high because arrears and the cost of prosecuting those who fall into arrears is a serious problem, the amount to be found by each council is likely to be much greater than the headline figure of 10% of last year’s council tax benefit bill. Costs seem certain to grow as more people become eligible for help. The 10% council tax benefit cut seems merely an underestimate of where this is going and it comes on top of the 28% of cuts in government funding which local authorities are already having to handle”. Councillor Jarrett stated that it was the government’s thinking on this was predicated on the reduction on the number of benefit claimants, however, here in Medway and elsewhere in the country all the evidence suggested that the number of benefit claimants was rising and that in Medway already this year, the Council was expecting an additional £200,000 worth of benefits being paid out.
Councillor Jarrett stated that Lord Best added “I have nailed my colours to the mast and suggested that the best extension to flexibilities which the Bill is giving to councils would be to vary the level of discount for single occupancy. This is the big one when it comes to discounts, it is not means tested and clearly the concession is not targeted on those in most need of help. Moreover it is not necessarily good social policy to award single occupiers of, for example, large properties, yet the larger the property and the more valuable the property, the greater will be the benefit to the occupier of the single person discount.”
Councillor Jarrett stated that Lord Best continued “what about the argument that council tax should reflect the amount of use the person that occupies is likely to make of local services and there are shades I think of the thinking that elected a poll tax here. The Bill recognises that council tax is a tax on property irrespective of the uses made of council services by those that occupy or do not occupy that property. I cannot think that there are any grounds to argue that a discount should always be applied at a fixed 25% by local authorities in all areas to benefit all single occupiers”.
Councillor Jarrett stated that there were various other comments throughout the debate but certainly one idea that was being promoted by Members of the Lords was that the single person’s discount be revised to 17.5% from 25% and that was the work the Council would do to look into this.
Councillor Jarrett stated that he was doing the best he could and he added this matter had been raised with three local MPs. All of the three MPs were on side over this issue and doing what they could to press the government to think carefully about this issue.
Councillor Jarrett added that the genesis for the whole of this issue was the economic mess that the coalition government inherited and this was demonstrably the case and he recalled the words of the greatest Prime Minister since Winston Churchill when she (Margaret Thatcher) said “that the trouble is with socialists they eventually run out of other people’s money”, which was exactly the reason for being in this state.