Councils face a tough challenge replacing the council tax benefit, according to a new report.
Plans to localise the help lowincome families receive with their council tax while cutting funding for it by 10 per cent leaves local councils with a tough challenge to design replacement schemes, according to research carried out by the Institute for Fiscal Studies (IFS).
With 5.9 million recipients, council tax benefit (CTB) is more widely claimed than any other means-tested benefit or tax credit.
The UK Government is proposing to abolish CTB across Britain from 2013–14 and give local authorities in England, and the Scottish and Welsh governments, grants to create their own systems for rebating council tax to low-income families – though pensioners in England will have to be fully protected.
These grants will be based on 90 per cent of what would have been spent on CTB in each area.
The report, funded by the Joseph Rowntree Foundation (JRF), and carried out by the IFS, examined the likely effects of this policy and the options available to councils.
According to the research, localisation will further the Government’s aims of allowing support to vary in line with local priorities and strengthening councils’ incentives to promote employment and growth.
However, it will also give councils an incentive to discourage lowincome families from living in the area, and a disincentive to encourage take-up of support.
Having schemes that vary across the country will reduce transparency and increase bureaucracy.
Stuart Adam, a senior research economist at the IFS and one of the authors of the report, said: “Councils face a difficult task to design replacement schemes that protect the vulnerable while maintaining work incentives in the context of reduced funding.
“They have little experience or expertise in designing means-tested support schemes and very little time to do it.
“The fact that they also need to make these schemes work alongside Universal Credit, which is being introduced from October 2013, makes an already difficult challenge truly formidable.” Responding to the findings, programme manager for poverty at JRF, Chris Goulden, said: “The research done for JRF by the IFS highlights the problems caused by the decision to localise council tax benefit.
“It is a decision that travels in the opposite direction to the major welfare reform of Universal Credit, which is centralising benefits within a single wrapper under the charge of the Department for Work and Pensions (DWP).
“Not only is the 10 per cent cut likely to affect people already in or close to poverty, the protection from this cut provided for pensioners means that working-age adults are hit that much harder; on average losing almost a fifth of their current support and, in some areas of the country, up to a third.”