Council Tax Support and the Localisation of

Revenues and Benefits

Simon Horsington, MBA IRRVSimon Horsington and Associates

Introduction and Overview

• Scale of savings• The background, timing & context to change• Scheme design• Likely caseload• Enforcement questions and mitigation• Forecasting and the CTB• Conclusions

The Biggest Losers?

• DCLG Finance paper, May 2012• 25 Metropolitan Councils losing more than £3M• Birmingham (10.1m)• Large Mets and “super” districts (Incl. Liverpool,

Leeds, Co. Durham, Manchester, Sheffield, Cornwall, Bristol. Range: £4-6m)

• Haringey, Croydon, Enfield, Brent, Hackney, Ealing, Barnet, Newham, Tower Hamlets, Islington (£3.0-3.7m)

And in the room….

CTB Loss 2010/11 CouncilHackney 3.5 Barnet 3.1 Newham 3.1 Tower Hamlets 3.0 Islington 3.0 Lewisham 2.8 Hillingdon 2.2 Hounslow 2.2 Barking & Dagenham 2.1 Bexley 1.7 Hammersmith & Fulham 1.7 Kensington & Chelsea 1.4 Colchester 1.1 Dacorum 0.95

Overall key dates

• Now: Scheme design, consult Major Precepting Authorities

• Now-Oct: Formal consultation of scheme• Sept-Nov: Final design & modelling• Nov: Budget forecasting & modelling• Dec: Executive approval of scheme• Jan 2013: Full Council• 31/1/13: “Local Scheme” must be adopted• 1/4/13: Scheme live• 0ct 2013: Universal Credit, new claims

CTS: Project Skillsets

• The design of a scheme in isolation from:– Collection and enforcement requirements; and– Financial considerations

• Extent to which DCLG approach has prioritised this approach, but…

• Three skillsets required:– Benefits specialists: scheme design – Revenues and collection: will it work?– Finance: Is it affordable? Is it achievable?

Overall Legislation

• Welfare Reform Act 2012• Localism Act 2011 • Equalities Act 2010• Local Government Finance Bill • Regulations- late!• DCLG advice

Background to change

• The national savings agenda & CTS– DCLG: Takes at least 10% out of the CTB Budget; and– “Localises” Welfare support for CT; but– Protects pensioners from the change

• The biggest changes for Revenues and Benefits in 30 years? – Localising Council Tax Benefit– Cutting Council Tax Benefit funding– Incentivising Business Rates– Council Tax exemptions and discounts

Overall Estimates

• Funding to be calculated at 90% of overall subsidised CTB, but

• As pensioners protected, impact is on working age payers

• So a 10% cut overall means, for most, a 16%-20% increase for working age

• The burden on the “inscope” working age increases if “Vulnerable People” are protected

Current CLG Advice

• CTS:– Vulnerable Groups– Financing arrangements– Incentives to work and local schemes– “statement of intent” for CTS regs

• Business Rates:– Six advice/briefing papers

IFS & Rowntree: Models

• Across the board cut of 17% (saving est: 9.7%)• Maximum entitlement is 85% (9.3%)• Band B maximum entitlement (3.8%)• No entitlement from Band D & above (7.2%)• Increase taper from 20%-30% (2%)• Only support passported claims (14.8%)• Count Child Benefit as income (1.9%)

Other, lower value options

• Capital limits• Non dependant deductions• Second adult rebates• Child benefit as income• The role of Band limited reductions in most of

England except London and the South East!

Rowntree: The Effects of CTS

• Encourage LA’s for growth & employment• Discourage increases Council Tax• Discourage low income families from living in LA

area• Discourage social housing development• Discourage “take-up” of CTS• Increase incentives to reduce fraud and error• Non-unitary Councils: incentives for a “cheap”

scheme?

So what this means is…

• Even for many districts, an extra £1m to collect, if local scheme implemented

• For Unitaries many will be £1.5- 3m• Likely to be smaller debts, and due from

households with limited ability to pay• But one scheme published already proposes a

Max CT Eligible amount of 65%!

Collection & Enforcement: Key Questions

• Use of LO?• Use of bailiffs as a default measure?• Fee structure?• Attachment to IS and hopefully UC?• Write off and hardship policies?• Relationship with discretionary funds?• Payment arrangements?• Deferral for those with a higher likely-hood of a

return to work?

Council Tax Base

What we know…..• CTS is a discount not a grant• “10%” cut is likely to be on

the low side• Local provision for increase

in claims, and the costs of pensioners at 100%

• Local provision for “job shock”

What we don’t….• Relationship between

proposals on CT and New Homes Bonus

• How Business Rates incentivisation will work

• CTS: How financial “risk sharing” will work

• CTS: Changes to Collection Fund?

Technical CT changes

• Ability to charge for currently exempt classes– Class A– Class C– Class L– Granny annexes

• Discounts for second homes• The extent to which class A and C may lie within

Social Housing stock• Consequential changes in Taxpayer behaviour

Challenge of Local Schemes

• No plans for amendment of scheme within year• Enforcement difficulties, for affected Councils • Smaller impacts likely: e.g. rules for self employed

calculations• Larger impacts: e.g. variable % eligible CT • Draft schemes now published with– 65% max CT eligibility– Little or no attempt to explain complex draft regs– No apparent regard in “Two tier” model for Major

Precepting Authorities

In Conclusion…

• Most significant change in at least 30 years• Being completed at speed• Welfare reform: a pattern of relief which has

grown over 60 years is reformed in 18 months• “May you live in interesting times”

Thank You

simon.horsington@btinternet.com07990 552929