JRF: Council tax benefit – the sting in the tail

Katie Schmuecker, research manager for the Joseph Rowntree Foundation, looks at the sting in the tail of council tax benefit.

Yesterday was the deadline for councils in England to put in place their plans for managing the localisation of council tax benefit, an issue that has been concentrating the minds of councillors and their officials in town halls across the land; Katie Schmuecker, research manager for the Joseph Rowntree Foundation, offers them some useful context

For those that haven’t followed this closely, the government decided against including council tax benefit in the new universal credit payment, and instead is passing responsibility to local authorities to provide them with a growth incentive.

Good news for localists you might think, only this decentralisation had a sting in the tail: it came with a 10% cut to the budget, and a requirement to protect pensioners. This latter condition means the cut is effectively 19% for the average council, according to IFS research (pdf) for the Joseph Rowntree Foundation.

The New Policy Institute has been monitoring council plans as they’ve been announced. Based on this data, a new Resolution Foundation report (pdf) has calculated 74% of local authorities can be expected to require new or higher payments towards council tax from the lowest income households.

This comes at a time when many costs are rising while household incomes – whether from wages or benefits – are stagnant or falling.

Looking at these changes through the lens of JRF’s Minimum Income Standard (MIS) work paints a stark picture. This research calculates the minimum income different types of household need to achieve an adequate standard of living in the UK today, based on detailed discussions with members of the public.

Taking a couple with two children as an example, we looked at two scenarios for how these changes might affect low income households – in family one neither adult is working, in family two one adult works full time, earning the minimum wage:

The results of this are clear: under the existing system these two families already lack sufficient income to meet the Minimum Income Standard, and the changes to council tax benefit will push an adequate income that little bit further out of reach.

Some may look at these figures and think it doesn’t make a great deal of difference in the grand scheme of things. But it is not simply the reform to council tax benefit that we need to think about. So much in the benefits system is changing, most notably the introduction of universal credit and the decision to uprate benefits and most tax credits by just 1% per year.

While each individual change may be small, one thing we can be sure of is those with the least to begin with run their households on tight margins. Seemingly small changes to income can tip households into poverty or debt. But the far bigger issue will be the combined effect of the changes in train. Rather than be distracted by each individual change, it is their cumulative impact on low income households that we need to keep an eye on.

See also:

JRF: Council tax benefit reforms will hit working-age adults in povertyJune 1st, 2012

Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.

31 Responses to “JRF: Council tax benefit – the sting in the tail”

  1. LB

    Yet another example of taxes on poor people making them poor.

    Just shows you that when you’re a government desperate for cash, you will do anything.

    Living wage? How about not taxing people in poverty.

  2. Newsbot9

    Yes yes, slash the tax bills and have them pay far more to private companies for the same services to compensate for the cuts. Typical LB.

    Keep blaming local government for your central government decisions too!

  3. LB

    OK, I see, If you’re against tax cuts for the poor, that means you want to tax them

    No wonder they are poor.

  4. Newsbot9

    As usual, you see only your demand to raise the poverty premium with massive new service cuts, and taxation without services.

  5. LB

    The Greek scenario.

    So why would the government increase taxes but cut services?

    Hmmm, the debt. Money going on debts, its money going on services.

    Hence debts a bad idea.

  6. Newsbot9

    Yes, you’re trying to create it here. Why?

    No, because it has basic responsibilities which it can’t abdicate. You want them to crash the economy, and repudiate the debt…leading to massive poverty.

    People like you with offshore bank accounts…

  7. LB

    And? That exactly what the plan is. They have debts that they have no choice but to repudiate.

    Or are you suggesting paying the debts, and not providing the services? Ah yes. Taxes must go on services, not on debts.

    With no taxes to pay debts, it means not paying them.

    Shout it out. We won’t pay back what we are going to borrow.

  8. Newsbot9

    Nope, that’s again your plan, Politician, there is no “they”, it’s you. You want to crash the economy, and are yelling how we must. YOU are trying for tax with no services, since the government would need to be subsiding things like basic imports we needed for decades!

  9. LB

    It’s not my ‘plan’. Its the reality.

    Debt means taxes not going on services. I’m against new debts. Ed Milliband’s plan is to borrow and spend.

    7,000 bn plus of debts, and taxes of 550, spending of over 700.

    The Tories plan is as you say small cuts, massive tax rises. Labour’s is spend spend spend and borrow more. That just means bigger cuts later.

    It’s passed the tipping point. The question is when it goes to Greek style shit.

    However, the good news, the French have admitted they are bankrupt. That will get ugly before the UK,

  10. Newsbot9

    Nope, it’s your plan. You keep claiming your plan to default is “reality”, when it’s a downright revolutionary plan to destroy the economy!

    You are TRYING to talk down the country. You are trying to cause deaths in France. You’re an enemy of civilisation.

  11. LB

    Over 7,000 bn of debt, linked to inflation
    700 bn plus of spending
    550 bn of taxes.

    Tell us how you get that solved?

  12. Newsbot9

    I’ve said so many times. But hey, it’s your Tories who want to open the floodgates of inflation.

  13. blarg1987

    Simplist scenario is inest to save so things like youth centres which are long term projects should reduce crime for the next generation, this in turn will reduce resources required in this area so saving tax payers money, as you mentioned before the debt pile has been mounted since ww2 so schemes like the above will bring it down over the same period of time as it has massed :). Only thing that is stopping it is short term politics based on things to get elected in 5 years rather then things that benefict society ofver 20 – 30 or 40 years.

  14. LB

    OK, do the maths.

    How much are you going to spend on youth centers?

    How much money does that generate? Or if its savings, which cuts result as a consequence?

  15. blarg1987

    Well it costs at at the very least 30K a year to lock up someone, plus the police time, court time and resources on top. A youth centre costs a simular amount to run per year and looks out for tens if not hundreds of kids.

    So if we do the basic maths you can say the scheme is self funding at the very least in the short term will make small savings but in the longer term over several decades as crime is reduced the savings will greatly increase.

    The thing that would be cut is crime and since it is a generation thing no redundencies will be required.

    That is just one example, there are many others, but as i said it will take decades just as the over spend as you claim took decades :).

  16. LB

    So how much do you spend per year now.

    When do you make the cuts?

    How much do you cut from the police, the courts, and the prison service?

    ie. The basic maths.is that if you borrow money at the moment, you have to pay it back in the future with interest on top.

    You scheme only makes sense if you earn more money, or make savings or cuts, in excess of the interest payments. Assuming that its a 100% dead cert.

    So put some numbers to it.

    Now lets look back. Brown invested how much? Since it doens’t look like that’s resulted in tax revenue increases, the payoff is in terms of savings, or cuts. Pick whatever word you want.

    Why aren’t we seeing the results?

  17. blarg1987

    Well sonce your the genius why don’t you do the maths on the said proposal or show me whther it will cost more or less as you are sure it won;t work then you will have the evidence to back it up.

    I can back mine up by a report of a Manchester borough where the police over a decade focused on the next generation of kids, now 10 years later it has greatly reduced crime, so saving tax payers money.

    When did I say I agree with Brown? be like me saying you agree with Thatcher without any actual evidence.

  18. LB

    I’ve done the maths. It’s not likely to work.

    1. You don’t end up targeting just the criminals, since other people want the perks of society, not just the bills.

    2. It’s borrowed money. That compounds up. End result, you’ve taken people’ spension cash, and just give then 20p in the pound back.

    You could ask a worker on 26K a year. We’re going to take, 420,000 worth of pension off you, so we can run services for people who we think are criminals. That’s just another way of looking at your proposal.

    Why not give them the democratic choice? Or are you worried they would say no?

    What’s the link for your report?

    So back to Brown and Blair. It was all about investment. I’ll ask again.

    1. How much was invested?

    2. What income are these investment generating?

    3. Or if its saving ,how much has been saved?

    It’s a simple question, or rather it should be.

  19. blarg1987

    Can you publish the data on the particular idea I mentioned on here NOT all goverment debt.

    1 What perks are you on about?
    2 its called invest to save, if a person takes out a loan to insulate their house and pays it back through reduced heating bills then the excess is a net saving.

    And I think if it went to a vote people would approve it which i have nothing against :).

    You did not answer my point so I refuse to answer your point about Blair and Brown untill you answer my question when did I say I agree with Blair and Brown?

  20. blarg1987

    Evidence can be supplied googling Manchester CDRP and if you delve throuhg its history, crime has fallen over the last decade.

  21. LB

    I don’t understand your first question.

    On your point 2, you are correct. So long as the reduction in heating costs, exceeds the cost of the loan, its a viable option. Doesn’t mean you have to make that choice, because there may well be lots of other choices with a better return. But in general, its correct, baring an assessment of risk. The plan may not work.

    Now you mentioned you had research on the spend now, get the money back later in not spending on the police, courts, jails.

    I’d like to read it. Care to post a link?

    Meanwhile, there’s 5,300 bn of debt off the books, on top of the 1,100 bn, and other debts.

    http://www.ons.gov.uk/ons/dcp171766_263808.pdf Bottom of page 4. 2 years out of debt, so make sure you increase the figure by the above inflation rate increases.

    That’s the issue. The government has taken people’s pension money and ‘invested’ it. However, there investments have produce no assets (there is no fund) and since spending exceeds taxation, there are no savings.

    That’s the hard evidence, and that puts the onus on you to justify more spending, when the evidence is that its been a disasterous choice.

    e.g. 130K cost of a state pension, versus 560K fund that a 26K a year worker would have had, if the government hadn’t ‘invested’ their money.

    So where’s the link. If we spend now, with numbers, what cuts will we be able to make going forward.

  22. blarg1987

    So in short you have not done the numbers on my idea of increasing youth centres to decrease crime?

    I admit I have not done the maths as I do not have all the raw data, as you would be unable to. However if it links to a fall in crime which it has been and reports show it is expensive to lock people in jail and build new jails, then if crime is reduced that saves money, you do not need to be an accountant to work that one out.

    If you want to but figures on why not dpo FOI’s to work out how many children are off the streets because of youth centres and how much it costs as a service then subtract that from the cost if these people are imprisioned later in life for crime.

  23. LB

    So in short you have not done the numbers on my idea of increasing youth centres to decrease crime?


    You’re the one who has said you’ve done the basic maths. I’d like to see your mathematics on.

    Now it looks to me that you haven’t got any numbers, and are asking me to go and research the cast iron ‘it saves money’ claim.

    Shouldn’t you as the proposer have the information available to back up your argument?

    Hence I’ll keep pushing the point. We’ve had decades of such investment. Those investments should either be generating cash for the state, removing the need to pay tax, or they should be the sort of project you’re proposing, that saves money. Saving money means cuts in spending.

    Well given the 5,300 pension debts, hidden off the books, but published by the ONS, its clear that spending people’s pension contributions hasn’t led to any assets that generate cash. Given the overspend, 700 bn on taxes of 550 bn, they haven’t lead to reductions in spending.

    The evidence is against you.

  24. blarg1987

    I did provide a basics as per previous posts it is down to you to rprove to the contrary if you want a more detail analysis not me so again I ask you please prove a detailed break down to show it won’t work not the cast iron it wont work counter argument.

  25. LB

    Which post? There are no numbers bar a 30K a year imprisonment cost.

    What’s the cost of the schemes?

    How many people?

    What cuts get made?

    What percentage success rate?

    Not mentioned. Hence no one can analyse.

    Lets take an example. Lots of 5 a day organisers. How’s that investment going? Hmm obesity up. That’s a fail by anyone’s book.

    Cost massive. Pensions and debt payments still to come. Negative benefits.

  26. blarg1987

    Please read back again there was more, as I said youth centres cost that much to run i.e. about £30K a year, so read into the detail more and as I said you have dozens if not hundreds of kids pass throuhg each year, they are off the streets not getting into trouble.

    Brings down costs in anti social behavour = saving.

    Kids stay out of gangs most gang culture leads to prison sentences – Reduces chances of kids going to prison = saving which self funds for one person.

    Less prisons required = savings in prison numbers and therefore later on possble closures.

    I accept it will not eradicate crime and is one example others include not outsourcing to the private sector as your the genius I am sure you are well aware that outsorcing costs can be anywhere from 10 – 20% more.

  27. LB

    No you didn’t. The 30K figure was from this

    Well it costs at at the very least 30K a year to lock up someone

    Hence the 30K I quoted.

    I accept the premise, however, you need the numbers to back it up.

    For example, I’d like an Aston Martin, paid for by the tax payers, on the grounds that would employ British workers to build it.

    Employing British workers, who pay tax, how can you argue against it? Pretty obvious, its not a good use of money because its a negative return. The car depreciates, and it deprives other people of tax, adds to the debts.

    How do we tell if your scheme isn’t in the same category, without a cost benefit analysis?

  28. blarg1987

    That requires more specilists then either you or myself have as we do not have all the raw data or time, the underlying point I am saying though is that my belief is in long term projects that cost money up front but will save money later will bring tax liabilities down.

    You and I can not do cost benefit analysis in enough detail to show that it will work or that it won’t as we do not have enough data feely available.

  29. LB

    Well, I’ve no doubt there are projects that do make sense. There are also projects that are completely barmy.

    From what you posted, you said you had the evidence that the youth centers were sensible, and had the numbers to back it up. OK, perhaps that was a bit of puffery on your side :-), maybe they are, maybe they aren’t. You’ve got a gut feeling that they are money making. I’ve a gut feeling, that its the other way. So I would rather give the tax back to people, and then they can make their own value judgements. Lots will make the choice. They will spend on sports clubs, or on tuition. Some won’t. I’m not going to force my spending decisions on them. You think that you should be making the decisions for them.

    However, what we can tell, is the government is more barmy than sensible. After all, if their choices had been positive on the cost benefit, debts would be down, government assets generating cash, and the spending on prisons, police and justice, legal aid bill etc, slashed, because the need is down. I don’t see that, I see the opposite. They are being slashed, but I don’t see the need gone. That’s after vast spending by the state over the Labour period, and the first 3 years of the condems. Up in real terms.

    Pretty strong evidence that over all, they are making bad decisions.

  30. blarg1987

    Well the linkI said to google shows evidence to support what I said that crime is down throuhg a combination of things including uouth centres.

    People are also more barmy then sensible if we are being honest alot of Labours failures include to large scale spending was because everytime they said vote for us we will improve services although you have to pay more for them the people voted against it, after they said vote for us we won;t increase your taxes and improve services people did vote for them, so does that not show as strong evidence that we as people are also very good at making very bad decisions?

  31. LB

    If I spend money on myself, which I’ve earned the hard way, I’m very careful.

    At the other extreme, spending other people’s money, or printing money to spend on getting people to think I’m a nice chap, well, what the heck, lets have another party, I’m not paying.

    There’s a major difference.

    People are good at making decisions. However, the only choice you get, is which MP, not about any issue.

Leave a Reply