Monday, 16 July 2012

Council Tax Benefit - pressures analysed

Camden will launch it's Council Tax Benefit consultation in early August, but other councils have started to publish theirs already.

Tory-run Barnet has just published an interesting paper illustrating the complexity of introducing the new scheme and the extra pressures faced by councils (and residents) when demand goes up.

Barnet also employs a number of assumptions "broadly in line with those adopted by other London Boroughs" and include:

• An annual increase in Council Tax of 2.5%
• Following an assumed increase in the number of claimants of 5% in 2013/14, no further increases in claimant numbers or growth in the cost of claims
• The percentage of claimants of working age – this is significant as pensioners are exempt from any scheme that Councils can put in place to recover the 10% shortfall in Government funding.

This translates as follows:

9.4.5  On top of historic increases in take up, the move from a benefit to a discount may see more people take advantage of this new entitlement.  Assuming a 5% increase in take up, this significantly increases the Barnet gap, by a total of £1.2m.  This leaves a revised gap of £4.4m...

Funding gap for Barnet in 2013/14 is a 10% cut based on £32.2m 2011/12 spend (£3.2m) 
Less: GLA element (-£0.7m) 
Add: effect of 2.5% Council Tax increase  (£0.7m) 
Add: 5% increase in take up (£1.2m) 

This gives a total of £4.4m.

In addition the following factors are suggested:

9.4.6 The funding for Council Tax support is fixed therefore a number of factors could vary this position year on year: 
- This gap will increase to the extent that Council Tax is increased in future 
- A pick up in the economy and a reduction in caseloads will see a reduction 
in the gap.   
- The greater the cut that is passed on, the greater amount that is likely to be written off as bad debt. There is an additional risk of a “culture of nonpayment”, whereby people who currently pay Council Tax (our overall 
collection rate is 98.5%) may stop paying Council Tax as a result of the introduction of this scheme and the associated collection problems that may be created. 
- The proportion of claimants who are of working age has been declining over recent years and this trend is likely to continue with an ageing population.  Since pensioners are exempt from any new CTS scheme, the impact of any measures to collect a portion of Council Tax will fall disproportionately on those of working age. 
- The fact that Council Tax Benefit is being replaced by a range of discounts and exemptions may also have an impact on take-up,  since these discounts may not have the stigma associated with benefits in the eyes of some claimants.

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