Council Tax Reduction Schemes

Development of local schemes

From 2013/14, local authorities have been required to publish a scheme setting out Council Tax Support in their area, detailing the classes of individuals eligible, the reductions they may receive, the procedures through which they can apply, and an appeals process.

The Council Tax Reduction Schemes (Prescribed Requirements) (England) Regulations 2012 state councils must make reductions for certain classes of pensioners. No other groups are required to receive reductions under the Regulations.

The New Policy Institute (NPI), with funding from the Joseph Rowntree Foundation, has monitored the schemes designed by the 326 English local authorities from 2013/14 to 2018/19. Their data shows:

• In 2018/19, only 36 councils continued to provide the levels of support available under the former Council Tax benefit system;
• The most common change was to introduce a “’minimum payment”, which requires everyone to pay at least some Council Tax regardless of income;
• In 2018/19, 215 councils had reduced or removed the second adult rebate. This is the benefit homeowners not on a low income are entitled to if they share their home with someone on a low income;
• Around a third of councils (110) had introduced a band cap. This limits the amount of benefit received in higher value properties to the amount provided to those in lower value properties. The most common band cap applied is D.

Institute for Fiscal Studies (IFS) and NPI analysis found that the most commonly protected groups, aside from pensioners, were veterans (protected by 70% of councils in 2018/19) and disabled people (88% of councils in 2018/19).

Most authorities have full details or summaries of their schemes on their websites. Links to the appropriate authority can be found via Gov.UK, Apply for a Council Tax reduction and Advicelocal, Council Tax.

Impacts

Reports by Citizens Advice (Negative budgets (2020)), the Child Poverty Action Group and Z2K (Still Too Poor to Pay: Council Tax Support in London 2018-19 (2020)), and Stepchange (Council Tax debts (2015)) assess the impact of scheme changes on household budgets, Council Tax arrears, and the use of enforcement powers by local authorities. Citizens Advice reported in 2020 that fixed costs (such as Council Tax) alone pushed 11% of the people they supported with debt into a negative budget, and called on policymakers to identify opportunities to “increase people’s income and reduce essential living costs”.

Claimant statistics (England)

The Ministry of Housing, Communities and Local Government’s (MHCLG) quarterly snapshot data for England show that the total number of claimants for Local Council Tax Support fell from 4.4 million in the third quarter of 2015/16 to 3.9 million by the final quarter of 2019/20, before rising to 4.0 million in the first quarter of 2020/21. Local authorities have cited the economic conditions arising from the Coronavirus outbreak, changes to the state pension age, and impact of Universal Credit as factors influencing claimant numbers. The number will also be impacted by any changes to eligibility at a local level.

Coronavirus

In March 2020, the UK Government announced £500 million of funding for councils to primarily provide additional Council Tax relief, alongside existing local Council Tax support schemes over 2020/21. In accompanying guidance, the Ministry of Housing, Communities and Local Government (MHCLG) said it had a “strong expectation” that billing authorities would provide all recipients of working age local Council Tax support with a further reduction in their annual council tax bill of £150, potentially reducing their liability to nil.

Ollerenshaw Review, 2016

The Local Government Finance Act 2012 placed a requirement on the Government to conduct an independent review of all local Council Tax Support schemes. Eric Ollerenshaw OBE chaired the resulting review, Three years on: An independent review of local Council Tax Support schemes (2016).

The review noted that the collection rates of Council Tax had declined since the introduction of local Council Tax Support, though were “slowly improving” by 2016. Some councils also faced the problem of arrears accumulation that were unlikely to be paid. The review argued that the work incentives in Council Tax Support schemes did not, by themselves, appear to have had an impact on local employment levels.

The Review made fourteen recommendations to the UK Government, including that the Government confirm it would not roll Council Tax Reduction Schemes into Universal Credit, rectify data sharing issues between the Department for Work and Pensions and local authorities, and localise at least part of the local Council Tax Support scheme for pensioners, allowing councils to decide how much support they would to provide for all low-income residents. In its response, the Government confirmed did not intend to merge local schemes with Universal Credit, would continue to share information with authorities and said it had no plans to allow local discretion over support for pensioners.