Social Security and Welfare Reform

Labour and Conservatives are choosing the poll tax over the 'safety net'

  • Published: Apr 09, 2014
  • Author: Peter Kenway
  • Category: Social Security and Welfare Reform

In our opening blog yesterday, we used Cameron’s row with the Catholic hierarchy to make the point that alongside the better known cash benefits, the social security safety net also contains subsidies for things ranging from prescription charges to housing.

This blog, which looks at one of them, namely the discount on council tax for low income households, shows how the return of a key poll tax principle is undermining the safety net.

Prior to April 2013, as part of the safety net, anyone entitled to a cash benefit automatically received a 100% discount on their council tax. In April last year, that changed. In both Wales and Scotland, the former system was maintained with the support of their governments. But English local authorities had to choose. They could continue as before (but with reduced central government funding) or they could introduce their own system. This April, many of those local schemes changed again. Our report published last week showed that three quarters (244) of the 326 English local authorities that collect council tax have now adopted schemes that required working-age households to make a minimum council tax payment regardless of income.

In that report, we estimated the average amount of council tax to be paid in 2014/15 was £149 over the year (£2.85 per week) for those households who previously would have had to pay nothing. For those out of work, as most of these households are, this money has to be found from the cash benefit. As a result, the value of the safety net has been reduced, but by a different amount depending on the local authority.

Individual councils have made decisions on the basis of their own finances, tax revenues etc. Yet these decisions have started to alter the bedrock of a national system, meaning a previously England-wide safety net is now worth different amounts in different places.

For people reliant on means-tested benefit, £2.85 is the sort of sum that matters. And £2.85 is only an average. Here, for example, are just ten of the (more than 60) local authorities where the average minimum payment for workless singles is estimated to exceed £3.60 a week: Blackpool, York, Stoke, Peterborough, Chelmsford, Haringey, Hillingdon, Bath, Torbay, Cornwall. For singles with no dependent children, that has to be found out £72.40 a week. Losing £3.60 is a 5% cut in living standards. Since the value of these cash benefits hasn’t changed other than to keep up with inflation since the late 1970s, local discretion in the last 53 weeks has altered the value of the safety net by a bigger amount than all the governments from Thatcher to Brown succeeded in doing.

When the Thatcher government sought to replace domestic “rates” with a Community Charge at the end of the 1980s, it was pushing two principles. One was that the tax should be a flat rate per person (hence a poll tax). The other was that every adult should pay something, however low their income. That “something” was 20% of a person’s normal community charge liability.

Council tax, based on property value, swept away the first principle. Council tax benefit, providing a 100% discount to those getting cash benefits, swept away the second. 20 years on, the localisation of council tax support has reversed this. With 244 councils opting for some minimum payment, the second poll tax principle clearly now enjoys consensus support. But how far do the decisions about the size of the minimum payment reflect the political party in control?

The graph below (based on a separate analysis) provides the answer. The 326 English councils are grouped according to whether they are Conservative, Labour, LibDem or NOC/Independent controlled. Within each group, councils are classified according to the size of the minimum payment, from zero at one end to above 20% at the other. 8.5% is in this list because it was the maximum a council could set last year and still be eligible for central government’s transitional grant.

Minimum_payments_by_politicalcontrol.png

It is clear from the graph that the few LibDem councils all have minimum payments at the lower end while NOC/Independent are clustered at both the low and the high ends. But the spread of minimum payments for Labour and Tory councils are remarkably similar. It’s particularly striking how many have chosen a minimum payment at least equal to the poll tax 20%.

Does this then mean that the safety net is no longer in safe hands whichever party is in power?


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