Pickles' council tax benefit reform will disproportionaly affect the working-age population, incentivise local authorities to push poor people out to neighbouring boroughs, will penalise councils of poorer areas and create a patchwork of inconsistent systems.
By Ed Turner, Lecturer in Politics at Aston University’s Centre for Europe, and Deputy Leader of Oxford City Council. The views expressed are his own.
The casual reader of the Department for Communities and Local Government website might think that the headline: ‘Supporting more people into work: councils to take the lead in boosting local economic prosperity’ was in some way good news. Sadly not: instead it marked the start of the long-overdue consultation on cutting 10% off the bill for council tax benefit, and allowing councils to devise their own local benefit schemes.
Of all the areas of the government’s welfare reform agenda, this is probably the most ill-conceived and unpleasant, for reasons of both principle and practice.
Council tax benefit is cut paid to around 5.8 million people in Great Britain, at a cost of £4.8 billion (it’s a reserved matter and so the cut in funding will affect Scotland and Wales also, although these precise proposals will not).
It is administered by local councils alongside housing benefit, and gives a full or partial subsidy to the council tax that would be payable by those on low incomes. Currently, the government meets the full costs of council tax benefit; what we knew from the government’s spending review was that it intended to reduce the funding for council tax benefit by 10%, and allow local authorities to develop their own ways of paying it.
The government’s latest announcement includes one important new claim: that it intends to protect pensioners from any cuts by this policy. As a result, the 42% of claimants of council tax benefit who are aged over 65 may be unaffected, although the government has not announced the details of how they will be treated.
But of course this doesn’t affect the overall scale of the funding cut, so those below pension age will be hit nearly twice as heard. In broad terms, if the average council tax per dwelling in England is £1,195, then the average poorer claimant of working age, prior to yesterday’s announcement, would have expected to fork out £119.50 per annum out of his or her benefits; now that sum will be around £200 per annum.
This is wrong in both principle and in practice. Let’s start with the principle. First, the government has suggested that local authorities will be able to develop frameworks for council tax benefit costing less than their (reduced) government grant, and keep any difference.
So an authority will be financially rewarded for cutting benefits to the poor. In doing so, it might expect poorer people to move out of its area, further reducing council tax benefit bills, but adversely affecting neighbouring areas with more generous schemes, who will receive these desperate claimants – a classic ‘race to the bottom’.
Secondly, the government’s consultation patronisingly suggests the reform will “Give local authorities a greater stake in the economic future of their local area, and so supporting the Government’s wider agenda to enable stronger, balanced economic growth across the country”.
The idea that local councils are currently uninterested in levels of unemployment in their areas is pretty insulting, but more importantly, the government appears not to recognise that rises (and falls) in unemployment are, to a very significant degree, completely outside the control of local authorities. So, if a major employer in a town closes, not only will the local council have to deal with the social consequences, it will also find itself severely out of pocket because it will have to pay out more in council tax benefit.
Thirdly, the regional effects of this cut are highly unlikely to be equal: instead, as Dan Paskins of the New Policy Institute has shown, the cut in funds, if applied equally, will hit the poorest areas hardest: Haringey, Hartlepool and Liverpool, for instance, are in the top ten of losers per dwelling. In cutting funds for local government, it has been shown that the government has hit poorer areas the hardest, and this reform is set to exacerbate the trend.
The reform is also going to create mayhem in practice. For a start, the government has the aim of simplifying the benefits and tax credits system by introducing the “Universal Credit”; it is very hard to see how having 300 different local schemes of council tax benefit will help achieve this aim.
In addition, the hundreds of different council tax benefit schemes will be administered by local authorities. This currently happens alongside housing benefit, but under the universal credit, the administration of housing support will shift to the DWP; there have been assumptions this will reduce staffing costs – but if the staff are still needed to process council tax benefit, savings will be drastically reduced.
Moreover, the DWP, not local councils, will hold information (primarily on incomes and benefits) which will be needed to calculate the new council tax benefit entitlements, so the transfer of large amounts of data will be needed from the DWP’s highly risky, planned new IT system to local councils, just at the time when two systems of benefits will be running in tandem (universal credit for new claimants, administered by the DWP, and existing benefits including housing benefit for current claimants). It’s hard to see this herculean task being accomplished without chaos.
Finally, local authorities, already under severe financial pressure, are going to be exposed to tremendous risks, potentially facing catastrophic funding shortfalls for council tax benefit for several years if, for instance, unemployment rises.
The consultation document encourages them to earmark contingencies for increases in the number of claimants as well as, in the document’s words, dealing with the risk that “Local authorities struggle to collect increased amounts of council tax from those households who experience a reduction in support with their bill”. Pretty obviously, chasing people with little money for a proportion of their council tax will prove expensive, and will increase arrears.
One suspects that this particular cut was announced with little consideration for the consequences, which is why it has taken nearly a year to come up with this pathetic consultation document. Frankly, the government would do well to go back to the drawing board, rather than pressing on with a policy which is as economically inefficient as it is morally reprehensible.
73 Responses to “How Pickles’s brutal council tax benefit reforms will pulverise the working-age poor”
Dave Citizen
Anon – Once the coal is back under the control of people who live in the communities close to it then maybe they will take more trouble to make good use of it.
‘The world has gone mad’, but I’d want to run that past a focus group before adopting it as the new mantra of the left!
Anon E Mouse
Leon Wolfson – You say; “and the Tories urged LESS regulation” but weren’t in power. It’s meaningless what they said just as Ed Ball’s recommending lowering VAT is meaningless.
Pointless remark.
Are you seriously saying that when Labour took over in 1997 the country was in more of a financial mess than the last election? Are you stark raving bonkers?
Labour lost it’s core vote after people started buying their own council houses under Thatcher and only got it back under their best electoral asset ever, Tony Blair. With Tony Blair the winner, he brought the centre voters in, both right and left so the core vote was unimportant to the mass of supporters.
Ed Miliband is unelectable as a leader which is why he’s only there thanks to the union dinosaurs. After his rejection by both the voters and then the party after 2015 the party will need to undergo a massive “New Labour” moment to try to get support. These things are cyclic and in times of austerity right wing governments always do well.
As for Climate Change I haven’t denied anything, just stated the FACT that the planet continues to get colder despite the computer models used by the Climate Alarmists.
But then presenting evidence to you never seems to work does it Wolfy Boy so please explain why you think the planet is getting warmer….
Climate: http://www.thegwpf.org/science-news/3540-climate-change-far-less-serious-than-alarmists-predict-says-nasa-scientist.html
Anon E Mouse
Dave Citizen – Very good ;-}
Clare Fernyhough
So areas will be socially cleansed, tenants not only suffering income cuts, benefit cuts, housing benefit cuts and now council benefit cuts? To ‘encourage’ them to move to cheaper areas: total nonsense and bunkam!
I’ve said this before, but I will say it again. I live in one of the cheapest areas to rent in the country, so where am I supposed to move to that is cheaper?! As a chronically disabled person am I supposed to live in a tent facing the winters we have had recently?
No one has yet suggested where I live, but one thing is absolutely certain now: I won’t be able to afford to live in my home of 24 years or anywhere else for that matter.
As bad as labour were with regard to ID cards, and all sorts of things, would they really have made millions of vulnerable people homeless? Let’s be clear about this, I will also repeat this again. 8 million social housing tenants of which over 5 million claim some level of housing benefit. The remainder are largely not well off even if they are currently able to pay rent. Of that group, once the ‘Affordable Rent Programme’ is initiated, rents will rise to upwards of £250 per week within 12 years. Long before that time, those on low incomes will find it impossible to afford social housing, and impossible to afford private lets, and way before unless all of the 5 million housing benefit claimants can stay with relatives or find some way to rent a property, they will become homeless. There are not enough homeless shelters now to meet demand: what kind of chaos will this cause?
This attack on the working poor, pensioners (whom by the way WILL be affected by the rent changes despite what the government previously stated), the disabled and the unemployed is unprecidented. The last time the Conservatives just tried to force Poll Tax on the poor, we saw the consequences. These moves go much further and they also make no sense, as analysts have said that this enforced homelessness will cost local authorities more to address than they were paying out in housing benefits; London as a whole is a good example of this.
I am just hoping that the public outcry when this happens will be so immense that the government will have to back track. Unfortunately, for many millions of people it will probably come too late; they will either be dead or they will be homeless with no realy prospect of being rehoused for the rest of their lives, because their homes have been given away to those who could afford the £12,000 or more rent, namely average wage earners.
Within 10 years if not sooner, we will be viewed as a third world/first world country, similar to Mexico and India where great wealth and abject poverty exists side by side.
Leon Wolfson
@11 – Of course parties calls while out of power are relevant. You’re quite willing to sneer at Labour for what they call for today, your entirely partisan call “but, but, we CAN’T hold the Tories responsible for calling for even less bank regulation” is transparent and biased.
And no, YOU are stank raving bonkers, or alternative illiterate – what I actually said was that BEFORE the financial crisis, the UK was in better financial shape than the Tories had left it.
You deny science, deny jobs and deny the Tory actions consequences. Typical rich-boy politics.
Let’s find one of MANY debunks of Spencer – http://www.realclimate.org/index.php/archives/2008/05/how-to-cook-a-graph-in-three-easy-lessons/
@13 – And well before that, they’ll be turning off the utilities. WE’LL be turning off the heat – three of the five people living here are very low paid, and the two others are not paid that well either…we won’t be able to afford the heating this winter (and with an expensive meter, much electricity either).
Heck, having to disconnect the internet access cuts you off from a large number of government services, pushes you onto expensive phone calls and pushes many OTHER costs onto you as well…