Council Tax Support

Debate between Kate Green and Nick Raynsford

Wednesday 14th May 2014 Westminster Hall

[Mr Raynsford]

My hon. Friend has identified one of the interesting characteristics of the consequences of this change to localisation—the significant and often surprising variations between individual areas. One of the curious characteristics of the change is that, based on figures I have seen, the largest adverse impact appears to be on council tax benefit recipients in the south-west, who are now facing a greater average obligation to pay than those in any other region in England.

[Kate Green (Stretford and Urmston) (Lab)]

I am grateful to my right hon. Friend and to my hon. Friend the Member for Plymouth, Moor View (Alison Seabeck) for pointing out that anomaly. Is it not the case that when local authorities or regions have substantial and disproportionately high numbers of older people and pensioners, the effect will inevitably be felt more adversely in those areas? I guess that is as likely to be an explanation in the south-west as it is in my local authority of Trafford.

[Mr Raynsford]

I am grateful to my hon. Friend for identifying precisely the factor likely to be behind the slightly surprising figure from the south-west. In the north-west one might expect it because there is probably more substantial poverty than in the south-west so there might be a bigger problem with the greater proportion of council tax that individual households must meet, but the number of households with people over pension age who are protected has a significant impact and I suspect that that is the main reason why the south-west features in this way. That highlights the arbitrary and curious consequences of the rules that the Government have put in place.

In the first year of the new arrangements, there was protection with the 8.5% limit provided by the Government’s transitional support, but when that support ended, many authorities increased the amount they expect individuals to pay without support and as a result the overall level of council tax support in 2014-15 will be lower than in the previous year and substantially lower than under the former council tax benefit scheme. Research by the New Policy Institute for the Joseph Rowntree Foundation shows that 2,340,000 low-income families will be paying an average of £149 a year more in council tax this year than under the old council tax benefit scheme. For a Government who continually boast about their efforts to keep council tax demands down, and threaten action against councils that seek to increase council tax, this figure should be a source of deep shame. More than 2.25 million households are being required to pay an average of almost £3 a week extra in council tax purely because of the Government’s actions, and £3 a week is a significant amount to those living on the edge of poverty.

As the Joseph Rowntree Foundation report points out, there is ongoing uncertainty for households who may face further cuts in future years as the system that the Government have put in place not only gives local authorities the option to change the scheme, but provides an incentive to cut council tax support further in future years. If they cannot increase council tax because the Government have blocked that option, a further cut in council tax support is the only available option to increase their council tax revenue. Such perverse incentives to cut help to the poor is a shameful outcome, for which the Government are wholly responsible.

Not surprisingly, the impact of the cuts on entitlement to low-income families has led to increased debt, arrears and bailiff action to recover debt. The New Policy Institute research suggests that the growth in arrears has been most marked in areas where a minimum payment obligation has been introduced. As yet, the detailed evidence available from different parts of the country is patchy, but Citizens Advice believes that council tax debt now accounts for around 10% of all its debt inquiry work and the debt charity, StepChange, reports 45,000 people seeking its help with council tax arrears in 2013—a staggering 78% increase on the previous year.

As we know only too well, the cuts to council tax support are only one of a series of benefit cuts by the Government, and problems become even more acute when there is a cumulative impact of two or more benefit cuts hitting individual households.