Why the poorest households face a council tax bill increase five times the average

Poorer families could face year-on-year cuts in the safety net following changes to Council Tax Support.

New research by the New Policy Institute for the Joseph Rowntree Foundation shows that from April 1st 2014 around 650,000 families face an additional reduction in their council tax relief – effectively, a rise in council tax - of around £60 a year. In contrast, the average council tax payer will see an increase of £12 this year, just a fifth of that amount.

What’s behind this dramatic increase for the poorest families? 

The government abolished the national system of Council Tax Benefit in 2013-14, requiring that local authorities draft their own scheme at the same time as cutting the available funding by 10%. The previous system ensured that those deemed too poor to pay received a 100% discount on their council tax. There are now 326 local schemes across England In 2014/15, only a minority (45) of these local schemes are maintaining the level of support that was available under previous CTS arrangements, meaning many of those previously considered too poor are now paying council tax.

The headline figure of 650,000 claimants paying £60 more in 2014/15 is an average of the 70,000 claimants seeing their support cut for the first time (losing an average £114 per year) and the 580,000 being hit by a second successive reduction in support (losing an average £54 on top of last year).

The changes this year are quite revealing. In 2013, the government made £100 million in ‘transition grant funding’ available to councils to encourage the development of schemes that met certain criteria of ‘best practice’, including limiting the reduction in support for poor households. This year there has been no such fund and accordingly the schemes this year are less generous than last. 

A key criterion to qualify for that funding was to limit the minimum payment to no more than 8.5% of the council tax payable. Of the 229 councils requiring a minimum payment in 2013/14, 113 introduced a minimum payment level of 8.5% or less. In 2014/15, the number of councils introducing a minimum payment increased to 244, with only 69 requiring a minimum payment of less than 8.5%.

Cash-strapped local authorities, who cannot increase council tax in general by more than 2% without a referendum, are increasingly likely to cut CTS entitlement instead as a way to increase revenue. So 12 months into this scheme, the overwhelming trend is to cut support further, a prospect now facing low income families year on year.

Perhaps unsurprisingly, given the low incomes of many of the families affected, the research also finds there has been an increase in council tax arrears in areas where a minimum payment has been introduced. Council tax collection rates have also fallen, again particularly in those areas with a minimum payment.

Those without adequate means - previously considered too poor to pay council tax - face an increase in council tax substantially above what is considered acceptable for others. Councils are now required to hold a referendum if they want to increase overall levels of council tax above the maximum set by the Sectary of State. But no such protection is offered to those low income families affected by CTS who face possible cuts in support each year.

If national safeguards against increases in council tax are in place for council tax payers, should they not exist for low-income CTS recipients too?