Around 1.3 million more low-income households in England are being billed for council tax since the system was remodelled and support cut in 2013, a study has shown.
The report, published today by the Institute for Fiscal Studies, found that 90 per cent of English councils have severed council tax support for those of working age – though some protections are in place for pension-age people – and so for the first time some of the country’s lowest-income households are being forced to pay.
It was also confirmed that the removal of support has resulted in many households falling behind with their tax bills, and as much as a quarter of the extra tax going unpaid. This is around 10 times more than the 2.5 per cent of council tax liabilities not collected by councils on average before the 2013 cuts.
Figures showed that council tax support schemes have continued to get less generous. Entitlements for working-age households were slashed by 14 per cent in 2013-14, but this had grown to 20 per cent by 2018-19.
Thomas Pope, a researcher at IFS and one of the authors of the report, said: “Many low-income households do not pay this new bill, almost regardless of its size. From their point of view, these changes have clearly increased problems with council tax arrears. From councils’ point of view, they are likely to receive significantly more council tax if they increase bills for those already paying some council tax than if they try to raise the same extra money from those who currently have no bill to pay.”
Poor households in deprived parts of England were more likely to be affected by the cuts than the equivalent income households in affluent areas – however, those in affluent areas tended to lose the most (simply due to council tax being more expensive in well-off areas).
The report also concluded that working-age households are subject to a kind of ‘postcode lottery’ for council tax – they are treated very differently depending on where they live. Before the cuts, 1.8 million would have been entitled to a full rebate. Now, around half a million still receive this – but 1.3 million now have to pay council tax.
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Richard Watts, chair of the Local Government Association’s resources board, said: “Council tax support schemes are no longer fully funded, with almost £2 billion – around half of the original funding – removed between 2013 and 2020.
“No one wants to ask those on the lowest incomes to pay more but this has put councils in an impossible position.
“Between 2010 and 2020, councils will have lost almost 60p out of every £1 the Government had provided for services. Alongside growing pressure on services, such as adult social care, children’s services, fixing potholes and collecting bins, this has meant many councils have had little choice but to reduce discounts.
“Councils have worked hard to try and protect discounts as much as possible but the Spending Review needs to ensure councils have the full amount of funding required to provide council tax support to those who need it. Otherwise, it is almost inevitable that bills will continue to be forced up for those who can least afford to pay.”
But the council tax figures have ignited existing worries among services for people on low incomes that a lack of tax benefits will leave people more vulnerable to unfair and heavy-handed bailiff behaviour.
In response to the new council tax figures, social policy charity Joseph Rowntree Foundation pointed to their recent research showing that one of the main factors tipping people into destitution was harsh and uncoordinated debt recovery practices by public authorities (including councils) and utility companies, something other bodies are concerned is being exacerbated by the lack of council tax support available.
Poverty charity Turn2us said that anecdotally, they have seen this cause problems – where many people under pension age have lost their support and are now paying more council tax than they used to, or paying something when they used to pay nothing.
Matthew Geer, campaigns manager at Turn2us, added that local councils have been asked to provide more and more services with less and less money over the last few years. This, he says, has resulted in many local authorities providing “tired and minimal” services.
Geer added: “Council tax support is one such example of this, by-and-large it is less generous than the national Council Tax Benefit scheme it has replaced, and as a consequence, people are worse off.
“On top of this, we are now in a situation where many people on low incomes are in a postcode lottery as to whether their council can provide them with help. Where you live, should not dictate what support you can receive.”