Cabinet asked to endorse new localised Council Tax support scheme

Shropshire Council’s Cabinet will be asked to endorse a new scheme to help Shropshire residents on low incomes with their Council Tax payments, at their meeting on Wednesday 17 October 2012.

The scheme is being proposed in response to central government abolishing the current Council Tax benefit from 1 April 2013.  The Government is asking councils to replace it with their own locally-run service called Council Tax Support (CTS) Schemes.

The Government will also significantly cut funding for the new scheme.  Current Council Tax benefit expenditure in Shropshire is £19.7m, and early estimates suggest that the money that Shropshire Council will get to fund the new scheme will be cut by around £2.17m.  This reduction in funding means that the council has to make some difficult decisions about who gets financial support, and how much.

In Shropshire 22,869 residents qualify for Council Tax benefit.  Out of these, 10,275 (45%) are of working age, and 12,594 (55%) are pensioners.  The proposed CTS scheme will not affect pensioners, who will be protected from these changes and will still receive the same amount of discount as they did under the Council Tax benefit scheme.

We want to lessen the impact on those who will be affected by these changes, and ensure that the impact of the enforced changes are as fairly distributed as possible, across a broad range of residents.  The CTS scheme report is therefore recommending that Option 3 be adopted.

These proposed changes will spread part of the Government’s reduction in funding across everyone of working age who qualifies for a Council Tax reduction, and will include a combination of:

• Removal of second adult rebates
• Increase in the value of non-dependant deductions – other adults in the household to contribute
• Removal of child benefit and earning disregards – all earnings and child benefit will now be classed as income
• Reducing the upper capital limit to £10,000 – this means reducing the amount of savings and investments people are allowed to have and still be entitled to claim from £16,000 to £10,000 

By making the above changes, a person claiming support for Council Tax payments would on average only receive £1.90 per week less, compared to the £3.50 reduction identified in one of the other options in the report. 

We will also spread the cost of the CTS scheme across the broader population through:- 

• Abolishing second home discounts – currently 10% – to 0%  
• Reducing Class A exemptions (unoccupied / unfurnished requiring structural repair) currently 100% for 12 months to 50%  
• Reducing Class C exemptions (unoccupied / unfurnished property) currently 100% for 6 months to 25%, and align the long-term empty discount accordingly. 

Councillor Keith Barrow, Leader of Shropshire Council, said: 

“We have to try to design a fair and accessible alternative Council Tax benefit scheme, with approximately £2.17m less grant per year.  This is equivalent to a cut in funding of around 11%.  This is a very serious issue for a council representing the interests of all its communities in what are very tough economic times. 

“It is therefore important that any changes in funding arrangements are handled sensitively, in order to minimise the impact of the introduction of a Council Tax support scheme. 

“This is something that we have been forced to do, but we are trying to work round this to protect our most vulnerable.  We must make the best of this situation, and we feel these proposals strike the right balance.” 

Gwilym Butler, Shropshire Council’s Cabinet member for flourishing Shropshire communities, said:

“We want to assure those affected that as a council we remain committed to helping them in these difficult times by providing targeted support to the most vulnerable following these changes.

“In designing a new scheme, we are keen to ensure that we protect the vulnerable and that we can continue to provide assistance for people either in work or returning to work.  The council is committed to ensuring that people are better off working than not working.  The new support scheme will aim to reflect this. 

“We also want to ensure that those impacted by the changes receive clear and consistent information about how and when they will be affected.  We’ll tell people what the changes will mean for them personally, what options may be available to them should they wish to make changes to their circumstances prior to April 2013, and who they can contact for help and advice.”

If approved, the new scheme will be subject to consultation with Shropshire residents, which is anticipated to start this month.

Further information

Council Tax benefit is currently a national welfare benefit scheme that helps people on a low income to pay their Council Tax for the home they live in.  It is fully funded by the Government.

As part of its overall changes to welfare benefit, the Government has decided to change this scheme.  It has asked all councils in the country to replace it with their own scheme – ‘Council Tax Support Scheme’.  This new scheme must be in place from 1 April 2013.

The Government has also said that it will no longer fully fund the new scheme and plans to reduce the money it gives to councils.  In Shropshire, this means an overall reduction of approximately £2.17 million.

The new scheme will have a budget that is 10% less than the current Council Tax benefit scheme, plus an anticipated reduction in claimants made by the Office of Budget Responsibility of 1.03%.  This means that we are going to have to make some very difficult decisions about who we can help with a discount towards their Council Tax.

If Shropshire Council does not set a scheme, a default scheme based on the current national arrangements will be imposed, with costs being borne by the council.

The other two options:-

Option 1 – The Default Scheme

a) If the Council was to adopt the default scheme, the current Council Tax benefit rules would apply; there would be no savings in expenditure or administration, and after a slight amendment to account for demographic changes, the shortfall in funding of £2.08m would need to be identified from existing resources.

Option 2 – All working age claimants have a 20% cut in award.

b) Applying a standard reduction of 20% to all working age claims spreads the impact across the widest possible benefit group.  It would, however, extend the requirement to collect small amounts of Council Tax from low income customers (at £3.50 per week).

This option would reduce eligibility and require increased collection of £1.8m.  The IT functionality is not currently available, and there would be an increase in the cost of collection.