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More people failing to pay council tax as a result of government reforms

Council tax benefit reforms have proved more expensive and less efficient than the system they replaced, a government-commissioned review has warned.

The local council tax support (LCTS), introduced in the Local Government Finance Act 2012, replaced council tax benefit (CTB) in order to devolve control over council tax reductions to councils.

However, an independent review of the scheme, published on the DCLG's website, finds that it has led to increased costs and arrears for councils, and recommends that it not be made part of universal credit.

In his foreword to the report, Eric Ollerenshaw MP said: “Local government has effectively implemented the council tax support schemes, despite difficult circumstances.

“However, there remain some barriers which prevent schemes from fully meeting government policy objectives. Many of these are within the control of government, and I recommend that you correct them. Government should also consider providing councils with a much wider range of freedoms, so that LCTS schemes can be truly local.”

The report found that almost all councils reported that administrative costs had stayed the same when they introduced LCTS and many said it had gone up. For example, Aylesbury District Council said the scheme introduced costs for a new computer system, training staff and an awareness-raising campaign.

It praises all the councils for meeting the April 2013 deadline to implement the new schemes, but says that because of the short time scale, many councils reported not having enough time to properly implement the schemes or assess alternatives, instead opting to reproduce the old CTB scheme.

The report added that because all councils are separately designing and administering schemes, the economies of scale are lost. However, it notes that some councils have successfully developed schemes to work with other local authorities – for example, East Sussex and Essex have developed regional groups, and Eastbourne Borough Council has come together with neighbouring councils to ensure schemes are similar.

In 2013-14, the first year council tax was collected under LCTS, 97% of council tax was collected, compared to 97.4% the year before. This was only the second time since 1993 (when CTB was introduced) that council tax collection rates fell, and the total value of council tax arrears increased from £2.4bn to £2.5bn.

It also found that administering LCTS was made more difficult because it only applies to working-age benefits claimants, whereas councils had to administer a separate scheme for pensioners.

Councils also said that the 31 January deadline for submitting LCTS schemes was too early and out of sync with their financial cycle.

Ollerenshaw recommends that LCTS not be moved into the controversial universal credit benefits reform programme at this time, saying councils and central government are not prepared for such a move and it could lead to confusion and disruption for LCTS recipients.

He also suggests that the government remove the 31 January deadline, allow multi-year or rolling schemes and a voluntary attachment to arrears for LCTS recipients to pay off benefits, and consider devolving at least part of council tax payments for pensioners.

A Department for Communities and Local Government spokesperson said: “This independent report recognises councils’ successful implementation of local council tax support schemes and makes suggestions on how to further improve them, which we will carefully consider.”

A New Policy Institute report last week warned that in 2016-17 2.2 million families will have to pay an average of £169 more as a result of the abolition of CTB.

The report comes at a difficult time for council tax schemes, with all business rates income set to be devolved to councils by 2020, although the sum is set to reduce as a result of a relief increase for small businesses.

(Image c. Joe Giddens)




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