What is the future of council tax support?

There are two options for making Council Tax Support more sustainable and halting the growth in debts, says Tom Peters.

At the start of the last parliament, the Coalition Government made quick progress across a broad range of welfare reforms, but five years on some tensions are emerging between different agendas; patches of policy that require renewed attention. One of these is Council Tax Support (CTS), which must now be reviewed to ensure it sits comfortably within the context of a changed system of welfare.

JRF recently published research with the New Policy Institute, examining the design and implementation of CTS schemes since they were localised in 2013. The report finds that local authorities are responding creatively to the challenge of having to develop a local system from a reduced funding pot. Authorities have tailored schemes to suit their demographics, and have given care and attention to finding an appropriate balance between maintaining their revenue base and protecting vulnerable groups. Where councils have had opportunities to draw funding into schemes from other sources – such as removing exemptions on second homes – they have done so. By looking beyond the boundaries of Council Tax funding pots, these authorities have eked out greater room to maintain protection for vulnerable groups in spite of the constraints of a reduced budget.

In this sense, the Government has delivered on its intentions, driving innovation through the system, and creating the conditions for more responsive local schemes. However, the research raises concerns about the ongoing sustainability of CTS, not least due to the household arrears mounting across many different schemes.

CTS has led to a sharp increase in debts owed by households to their local authority, suggesting that a minimum payment may be beyond the means of many low-income households struggling to make ends meet. Councils have taken different steps to reduce this pressure, such as tweaking minimum payment levels, investing in advice and support, or working up longer-term payment plans with claimants. However, amounts owed continue to increase across most authorities, with some claimants still paying off the previous year when the new bill arrives. A policy premised on an ever-expanding mountain of arrears is not sustainable, so central government must now set a clearer direction to stabilise the system. This requires a tough choice between two options.

Our research emphasised the tension between the objectives of CTS and those of Universal Credit. Local CTS schemes may now be more responsive, but their localisation undermines the policy objectives of UC; to simplify the welfare system and improve incentives to work. Rolling support for Council Tax into UC would help to realign these policy objectives, and ensure that households who cannot afford to pay are not expected to do so. This would, however, entail the return of the system to central government administration, removing the positive flexibility provided by a framework of local schemes.

The other option is to give local authorities further discretion to re-design wider elements of their Council Tax system, for example the cap on rate increases, or the rules on maintaining the single-person discount. This would allow authorities to draw in funding, and better target it towards protecting those who are unable to pay. Furthermore, devolving wider discretion over scheme design would go with the grain of the Government’s localism agenda. Full protection of pensioners could continue, in line with the Government’s ‘triple lock’.

Though neither of these proposals is perfect, either would create a more sustainable system of support for Council Tax. If the Government does not make a choice soon, debts are likely to keep growing, which won’t help either councils or claimants.