Benefit reform could cut council tax for one in three - LGA

Reform of the council tax benefit system could cut council tax bills for up to one in three households and give greater financial support to six million people who live in poverty, a new report published today will say.

The study, commissioned by the Local Government Association (LGA), will call for changes to allow more people to claim reductions in council tax and for more measures to encourage people to apply for the £1.8bn that goes unclaimed every year.

Around one in three households are entitled to council tax reductions. But many are simply unaware they are entitled to the benefit. Six million people in poverty live in homes which pay full council tax.

The report also highlights chronic failings in the system which mean that many people are unable to claim as much as they should. It points out that people who receive Working Tax Credit almost always lose council tax benefit and highlights the fact that claimants start losing council tax reductions even before they begin to pay income tax.

The report, 'Council Tax Benefit and what to do about it', calls for:

- The level of income at which people start to lose council tax reductions to be increased

- People with greater savings to be allowed to claim council tax reductions

- Changes to stop Working Tax Credit and Council Tax Benefit cancelling each other out

- More measures to help eligible households apply, including a publicity campaign to encourage take-up of benefits, in particular amongst pensioners

Sir Jeremy Beecham, Vice-Chair of the Local Government Association says: “The system has been failing society's most vulnerable for too long. Root and branch reform is sorely needed.

“An eye-watering £1.8bn goes unclaimed every year. Part of the problem with take-up is that benefit is wrongly seen as something only for the very poor. Around one in three households are eligible and many are simply unaware that they can get help with their council tax bills.

“One and a half million children and one million pensioners in poverty are living in households that pay full council tax. Physically going to people's homes and helping them to apply is just as important as publicity campaigns."

 â€œThe question of take-up is only part of the problem. This report highlights serious structural shortcomings with the system. Council tax benefit should be seen as a tax allowance not a handout. The process desperately needs to be simplified and the financial limits on eligibility increased.

“It is wholly unjustifiable for people to lose Council Tax Benefit even before they begin paying income tax. The system stops people with even modest savings from claiming reductions. These thresholds must be changed to provide greater help to more people.

“It is a nonsense that Council Tax Benefit and Working Tax Credit work against each other. People going back to work are immediately hit with much higher council tax bills, which acts as a disincentive for the unemployed to get a job.â€

ENDS

Contact: Nick Mann, LGA media Office, 0207 664 3187


Notes to editors:

1. The report 'Council Tax Benefit and what to do about it', is written by Peter Kenway from the New Policy Institute.
2. The following are the thresholds of income per week below which householders should pay no council tax:

Single pensioner - £119
Pensioner couple - £186
Working-age single - £64
Working-age couple - £103
Lone parent, one child - £84 (With child benefits taken into account)
Two parents, one child - £86 (With child benefits taken into account)