Latest Public Sector News

06.01.15

Low-income families to foot the bill for shortfall in local government funding

Many councils in England are preparing to demand higher council tax payments from low-income households to help compensate for a £1bn funding shortfall from the government, according to the Local Government Association.

The LGA say that the gap between the cost of protecting discounts and the money provided by central government gives to fund is getting bigger every year. 

This has led to many authorities introducing minimum payments for the less well-off who previously would have been exempt from paying council tax.

The LGA added that councils need to find £2.6bn in savings in 2015-16 due to the 8.8% cut in overall government funding for local services announced in the local government finance settlement. Cllr David Sparks, chair of the LGA, said that a further £1bn would have to be found by 2016 to cover council tax discounts for those on low incomes.

This has left councils with an “unpalatable choice” between charging council tax to the working-age poor or making more cuts to spending on local services.

LGA figures show that only 45 councils out of 326 continue to provide the same level of discount that was available before local authorities became responsible for council tax benefit – 13 fewer than in 2013-14.

They also show that in 244 council areas, all householders have to pay at least some council tax regardless of income – 15 more than in 2013-14.

However 83% of councils said they would not change their existing discount scheme for 2015-16, despite funding reductions.

Cllr Sparks said: "Government reduced funding for council tax support by hundreds of millions of pounds when it handed the responsibility for administering it to councils. As a result, councils would need to find £1bn by 2016 to protect discounts for those on low incomes. At a time when local government is already tackling £20bn worth of cuts, this is a stretch too far.

"Many councils have been put in an impossible position. This cut has taken millions of pounds out of funding for local services and increased the cost of living for some of society's poorest.

He added: "To address this unfairness, government must give local areas the full amount of funding required to provide council tax support to those who need it. Otherwise, it is almost inevitable that further cuts to local government funding in the coming years will further force up bills for those who can least afford to pay."

But Kris Hopkins MP, the local government minister, said the coalition was "returning fairness to the system and making work pay."

He said: "Spending on council tax benefit doubled during the last decade, costing taxpayers more than £4bn a year – equivalent to almost £180 a year per household.

"Welfare reform is vital to tackle the budget deficit this government inherited and our reforms to localise council tax support now give councils stronger incentives to support local firms, cut fraud, promote enterprise and get people into work."

(Image source: Joe Giddens)

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