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Cuts warning as council tax support claims hit record levels

by Ian Shires on 3 November, 2020

Published in Local Government 30 OCTOBER 2020 BY 

Claims for council tax support from working age adults reached their highest ever level in June, leaving councils facing a hit of almost £600m to their budgets next year, a new analysis of government figures has found.

The scale of the increase in claimants – up 9% during April and June this year compared to the same period in 2019 – has sparked warnings from the Local Government Association, which commissioned the research, that councils could be forced to ask claimants to pay a greater proportion of the tax in order to balance their books.

Some councils including Bolton MBC, Oxford City Council and Fenland DC are already consulting on reducing levels of council tax support to working age claimants.

The LGA blamed the coronavirus pandemic for the rise in claims, taking the number seeking support to 2.5 million. This is the highest number since collection of the data began in 2015 and is expected to have risen further since June.

Richard Watts (Lab), chair of the LGA’s resources board, said councils were “desperate to protect those affected the most” by Covid-19 but without additional funding it was “almost inevitable that bills will continue to be forced up for those who can least afford to pay”.

Since council tax support was devolved in 2013, the government has cut the funding it provides councils to deliver it by £2bn.

Cllr Watts added: “No one wants to ask those on the lowest incomes to pay more but councils have faced an impossible position that the pandemic has made worse.”

Oxford, which until now has continued to give some working age claimants 100% discount on their bills, launched a consultation last month on making its scheme less generous. Bolton is consulting on increasing the minimum proportion paid from 12.5% to between 17.5% and 25% while Fenland is proposing increasing its 14% minimum contribution to as much as 30% by next April.

Fenland saw a 12.6% increase in claimants in the first quarter of 2020-21, according to the data from the Ministry of Housing, Communities & Local Government, however in Oxford and Bolton rises were below the national average at 2.4% and 6.6% respectively.

Slough BC saw a 67% increase in claims, the largest proportionate rise of any council, from just under 6,000 in the first quarter of last year to almost 10,000 this year. South Hams DC saw the next largest percentage increase at 38%, taking the numbers of claimants to just over 3,000.

South Hams leader Judy Pearce (Con) told LGC this was due to the area’s reliance on tourism with a lot of people employed in minimum wage jobs.

“It’s genuinely people who are really in trouble who are looking for extra support,” she said.

“While we may have to make an adjustment to our council tax base next year, we are largely surprised by how well council tax payments are holding up.”

She said tourism had picked up from 4 July and the area had had a “strong summer” with bookings for holiday lets only now starting to drop off, suggesting the situation could have improved in the second quarter.

However, in neighbouring Plymouth City Council, where the number of claims from working age adults was up 14% by June this year, finance director Andrew Hardingham told LGC claims had continued to rise. In August total claims were up 20% year on year, with the vast majority of this driven by working age adults, he said.

The council is forecasting this will mean a £2m pressure on its budget next year.

“It’s too late for us to make any changes [to council tax support] for next year due to the consultation required… but we may well start thinking about what it looks like for the following year,” he said.

Two more Devon districts, Teignbridge DC and West Devon BC, also featured in the 10 areas with the largest proportionate increases, piling pressure on Devon CC’s council tax base for 2021-22.

Many of the areas with the largest proportionate increases are more affluent areas, such as Richmondshire and Sevenoaks DCs and Winchester City Council, reflecting in part lower numbers of claimants prior to the pandemic.

However, those that saw the largest numerical increase in claimants tended to be in more deprived urban areas. Liverpool City Council and Bradford City MDC saw claims rise by 5,070 and 4,737 respectively equivalent to 12% and 18% increases (see table below).

Sefton MBC, where claims were up by 9% in June, has since seen them fall again slightly to around 8%. However, chief executive Dwayne Johnson told LGC he expected it to rise again due to the impact of tier three restrictions.

“The first furlough scheme was a lot fairer way of dealing with people who are going to be suffering hardship. [The government] is reducing that so it’s going to hit the low paid and particularly in our area people who work in hospitality and leisure.”

In the north east Hartlepool BC saw a slightly below average increase of 7.4% over the period. However, director of resources and development Chris Little told LGC the council forecast this would mean a hit of £3m to its funding over the next few years while the number of households eligible to pay full council tax returned to pre-Covid levels.

“Our scheme requires eligible households to make a 12% contribution and we will be maintaining at this level for 2021-22 to support low income working age households during what we hope will be the Covid recovery period,” he said.

Councils with biggest % increases in claimants % increase Councils with biggest numerical increases in claimants Increase
Slough BC 67% Liverpool City Council 5,070
South Hams DC 38% Bradford City MDC 4,737
Ribble Valley BC 34% Cornwall Council 4,233
Warwick DC 32% Leeds City Council 4,059
Cheshire East Council 30% Slough BC 3,959
Teignbridge DC 27% Wiltshire Council 3,557
North Warwickshire BC 27% Hull City Council 3,303
West Devon BC 26% Tower Hamlets LBC 3,281
Eden DC 26% Newcastle upon Tyne City Council 3,268
Richmondshire DC 26% Wakefield MDC 3,064

 

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