Friday, 13 July 2012

Impact of Council Tax Benefit changes on Camden

Over the past few months the council has been assessing the impact of welfare changes on the borough, from the introduction of the Universal Credit through to the cuts in Council Tax Benefit.  A walk-through has been set up by the council online.

While changes to Housing Benefit in Camden promise to be the ones with the heaviest impact, Council Tax Benefit promises to be the most wide-ranging - and probably the least understood.

An article in this week's Camden New Journal is probably one of the first I have seen in the country to flag up local impacts. [Update - Birmingham have revealed at £10m+ gap]  

Council Tax Benefit was introduced in 1992 when the Council Tax system started.  It purpose was as a protection for working and workless households with the lowest incomes.  Grants are given to councils to administer to people the Government considered too poor or vulnerable to pay tax – helping them reduce their Council Tax bills or take them out of tax altogether. 

Under the current system the council is reimbursed by the government for Council Tax Benefits it pays out to claimants. Under the new scheme the amount of financial support Camden will receive from the government will be reduced by 10% or - £2.7m a year. This means that the council has to consider whether this shortfall should be borne by increasing the Council Tax to all residents, cutting budgets further or by reducing the amount of support it currently pays to poor households. 
Moreover the amount of money we get from the government is now set and will not change again.  The Government has also not ruled out further cuts to the Support budget.  With a further £10bn in welfare cuts announced in the 2012 Budget from unspecified areas further cuts are likely making it impossible for the council to continually absorb these amount in our budgets 
This means Camden will have to manage what it spends on helping people within this budget, even if more people start ask for support (e.g. more unemployment from the recession).   
Austerity is not going away, and that the medium term financial pressures councils face might not sustain diverting limited revenue resources (equivalent in many cases to a rise in our general Council Tax base by 2-3% per annum) to absorb the automatic 10% reduction in Council Tax Support Grant.  From the councils I have talked to this seems to be a common fear.
The Government has stated that people of state pension age who currently get Council Tax Benefit must be protected, so in operating a local scheme the council has to decide which people of working age should continue to get help to pay their council tax bills and how much this should be.  
According to early Equality Impact Assessments this hits: households with large families, disabled people, carers, war widows, people who have been in our care etc.  Note that CTB is claimed by people who work as well as the jobless - e.g. a single mum who works part-time.
Family claimant groups in Camden

The amount people would have to pay depends on their council tax band and their circumstances, but our modelling suggests there are many losers - perhaps up to £250 extra a year.  This might not sound much but remember these people are already struggling.
Our analysis shows:
Reverts back to Poll Tax – CTB was brought in as part of the discussions on what would replace the unfair Community Charge - Poll Tax.  People who were considered too poor to pay council tax according to that legislation now will have to pay it.  The government at the time went to great lengths to say that there would be 'no minimum contribution' (this is a link worth dwelling on). 
It’s a London cost of living issue -  As with the Housing Benefit debate, while the Government casts this nationally as ‘welfare reform’ issue, for London this is a cost of living / affordability issue for low income households.  Our calculations suggest that CTB impact will hit similar groups and areas to housing benefit - as illustrated by this chart.
- Worse than Hobson’s Choice - In order to help people, the government is forcing councils to choose between various deserving groups, to implement costly and complex systems at a time when there are huge changes to welfare in other areas.
 - It doesn’t make work pay - The changes undermine the aim of increasing work incentives and reducing child poverty.  Charging a poor family £150 extra a year negates any benefit they will get from increases in income tax thresholds.  
In fact thousands of families will be brought into tax for the first time.
- It brings poor families into tax for the first time, leaves other discounts - Changes do not fit well with exemptions to council tax and other discounts.  E.g. a high earner living alone will receive a 25% discount at a time when a poor household will be brought into tax for the first time.  We don’t believe any of this benefit should be cut but the decision to protect pensioners and professionals is completely arbitrary.
While the income impact of Council Tax Benefit changes are relatively small compared to Housing Benefit changes on households, there will be a cumulative impact of welfare reform, making it harder for low income families to live in inner London - or London as a whole - further entrenching the 'jam doughnut' effect locally. 

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