Council Tax

What is the future of Council Tax Support?

  • Published: Apr 09, 2015
  • Author: Theo Barry Born
  • Category: Council Tax

In April 2013 Council Tax Benefit (CTB) was replaced with 326 local Council Tax Support (CTS) schemes in England while funding for CTS from central government was cut by 10%. Every year since, low income families claiming CTS have had to pay on average more council tax as a result of changes to local schemes designed to make up the funding shortfall. But is this trend likely to continue?

We have modelled the impact of CTS schemes on claimants and found that the amount of additional council tax paid on average by around 2.3 million families has increased from £145 in 2013/14 to £161 in 2014/15 to £167 in 2015/16.

These increases exceed the rate at which council tax is increasing for the rest of the population. Half of English councils (163) have frozen council tax since April 2013. Of these, 136 have introduced CTS schemes that make their poorest residents worse off, with 870,000 families paying on average £160 more council tax per year.

With low income families feeling the squeeze the most, will councils continue to cut CTS and make low income families even worse off in the future? Part of the answer lies in looking at the most popular component of CTS schemes used to make up the funding shortfall: the ‘minimum payment’.

Minimum payments require all residents to pay at least some proportion of their council tax liability; in other words it describes the maximum CTS a family can claim back from their council tax. More councils have introduced minimum payments each year: there were 229 in April 2013 compared to 250 now. The range of the minimum payment is from 5% to 30% of council tax liability.

Moreover, average minimum payment levels have increased year on year: 129 councils now require residents to pay at least 20% of their liability, up from 115 last year and 95 in April 2013.

Grant funding was offered to councils in 2013/14 if they set their minimum payment at 8.5% or lower. Of the 112 councils that set this level in 2013/14, around half (57) have since increased theirs to above 8.5%.


However, last year we saw the first signs of councils reversing the trend towards higher minimum payments. Plymouth and Oldham both set their minimum payment at 25% in April 2013 and reduced this to 20% in April 2014.

In April 2015, 4 other councils – Rochdale, Kirklees, North Hertfordshire and Leeds – joined Oldham in reducing their minimum payments with Oldham lessening the impact on claimants for a second year running. In these local authorities 110,000 families are on average £35 better off in 2015/16 than 2014/15. Not including Leeds, which only slightly reduced its minimum payment, 62,000 families are on average £58 better off.

One reason behind reducing the minimum payment relates to fairness, including fair process in a council’s consultation with residents. Rochdale, for instance, offered residents a reduction in the minimum payment from 25% to 20%, a decrease in the rate at which income is tapered from 30% to 20% and the introduction of a discretionary hardship fund. All components were endorsed by residents for the new scheme and the council agreed to adopt them.

A further reason is about finance and practicality. Between 2012/13 and 2013/14, arrears went up by more than a quarter in more than four fifths of the 43 councils that introduced a minimum payment of 20% or more in April 2013. When consulted by the council last year, CAB Rochdale stated that council tax arrears was the fastest growing debt enquiry issue. Kirklees also cited concerns about council tax arrears outstanding having increased to £19.5 million from the £16.5 million level in previous years. The council decreased the minimum payment from 29% to 20% and stated that this is expected to be budget neutral.

The 5 councils that have decreased minimum payments in April 2015 show that there may be fewer increases in the future and possibly further decreases in areas where the minimum payment has been set too high. Certainly it is unlikely for there to be too many increases by councils with minimum payments that are already quite high, as higher arrears, court costs and lower collection rates are likely to be factored into budgeting decisions. Meanwhile, the Supreme Court’s ruling on Haringey’s unfair consultation process could also signal improved consultation by other councils in the future, increasing accountability and potentially alleviating the impact on low income families.

On the other hand, it is likely that some of the 42 councils that have kept the ‘old’ CTB levels of support and some that elected to have lower minimum payments in April 2013 and have not changed them since will introduce or increase minimum payments, decreasing support for low income families in those areas.

Could the future of CTS be a convergence of minimum payments to around 15-20%? Councils reviewing their schemes are trying to balance minimising the impact on claimants with budgeting necessity. In doing so, they must address how sudden and substantial increases in council tax for the poorest families may actually increase the council’s financial burden. Some councils are therefore now accepting they have to absorb some of the cut they had previously passed on to residents. Meanwhile,  those that have thus far absorbed at least some of the cut are increasingly under pressure to scale back support, which means increasing the costs passed on to low income families.

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