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:

Council-Tax-Benefit-reform-table
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

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