So furious is the pace of the government’s reform of the benefit system that many members of the public and benefit recipients alike have yet to understand quite how deep the impact on our society will be. In the tsunami of the Housing Benefit Cap and the looming introduction of Universal Credit the implications of the government Council Tax Benefit (CTB) reforms appear to have been neglected.   

With 5.9 million recipients CTB is by far the most widely claimed means-tested benefit. The government is currently proposing to abolish it across Britain from April 2013, leaving it up to local authorities to design their own scheme with the stipulation that pensioners in England will have to be fully protected. The government claims this as a victory for localism, allowing support to vary across the country to reflect local priorities.

It almost goes without saying that replacing a single national scheme with more than 300 different ones will reduce transparency and increase bureaucracy. But the real issue is that the localisation of council tax comes with a 10 per cent funding cut attached. Local authorities will now receive a grant based on 90 per cent of former CTB spending in that area, and this inevitably means a larger cash funding cut in the most deprived areas, where CTB spending is currently highest.

This leaves local authorities across England with a choice, absorb the cut and make savings elsewhere or pass it onto benefit recipients and reduce their support? The Welsh and Scottish governments (which will operate centralised council tax benefit policies) have made contrasting choices.  Scotland has opted to maintain existing levels of support by finding savings elsewhere while Wales has chosen to reduce council tax support by 10 per cent.

Although the legislation has yet to be finalised, with the Local Government Finance bill still passing through parliament, local authorities all over England have begun to publish their draft Local Council Tax Support Schemes. While there are a number of notable exceptions following the example Scotland, such as Tower Hamlets and Westminster, the majority of authorities appear to be adopting an ‘everyone must pay something’ approach. This is particularly worrying for anyone who remembers the rhetoric surrounding the poll tax. As that experience showed us it is virtually impossible to ever collect small amounts of tax from low-income households that are not used to paying it and the costs racked up in court and bailiff fees inevitably exceed the small sums in question.

With almost half of CTB recipients in the bottom fifth of incomes, any cut to council tax support is bound to hit lower-income households, already reeling from the housing benefit changes, the hardest. Households affected by the housing benefit cap will face a simple choice. Do I pay the increase in rent occasioned by the cap or do I pay my new council tax bill? Z2K considers that at a bare minimum all persons affected by the caps eligible for full CTB should continue to receive it. Vulnerable households already struggling to make ends meet cannot be expected to absorb the effect of two caps in benefit simultaneously.

As local authorities continue to publish their proposed schemes we will keep you up to date on this issue.