Economy and Infrastructure

29.01.19

Local authorities forced to cut council tax support sees surge in unpaid tax bills

Around 90% of English councils have been forced cut council tax support for working age claimants, meaning many low-income households have fallen behind with their council tax bills, according to new research.

A report by the Institute for Fiscal Studies (IFS) has highlighted the impact of the government’s decision to abolish the centralised council tax support (CTS) for low-income households in 2013, which has seen an extra 1.3 million working-age households sent a council tax bill.

Nearly five million households received localised tax support in 2017-18, costing local authorities a total of £4.1bn – and 2.4 million working-age people received support, with an average benefit of £770 per year.

But the IFS has estimated that councils have failed to collect one-quarter of the extra council tax that low-income households have been billed as a result of the funding cuts.

This explosion of unpaid council tax is around 10 times higher than the 2.5% of council tax uncollected by local authorities under the old CTS system.

CTS schemes have also continued to become less generous since they have suffered funding cuts and were brought under local council control – and the report reveals that low-income households in poor parts of England are more likely to have been affected than those in affluent areas.

Director of welfare at the Nuffield Foundation, Mark Franks, said: “The fact that local authorities are unable to collect around one quarter of the additional council tax they have asked for indicates that support schemes are not working as effectively as they could.

“This important research should help in reviewing the design of council tax support schemes and the benchmarks they are based on.”

The report stated that giving people an entirely new bill is what seems so problematic with this type of tax collection.

Thomas Pope, one of the authors of the report and an IFS researcher, commented: “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.”

Image credit -  Joe Giddens/PA Wire/PA Images

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