Will Council Tax Benefit Changes Add Up?

October 20th 2012

The government is to cut about £1.2 million of ELDC's budget for council tax benefit expenditure, or about 10% of the total, in sweeping changes to the system. This means the local authority must come up with its own scheme for making up the shortfall, or else have a standard one imposed by the government, for implementation by 1st April 2013. So they are consulting residents about their proposed changes, and in this area that will end on 19th November 2012.

This is what ELDC has to say about its new scheme:

"Council Tax Support payments - The Council Tax Benefit scheme currently helps people on a low income or with no income to pay their Council Tax.

Under the proposed new Local Council Tax Support scheme, entitlement for working age claimants would continue to be calculated based on similar means tested rules to the current Council Tax Benefit scheme. However, under the new scheme, 75% of the resulting entitlement would be applied to the Council Tax account. Pensioners and War Pensioners would not be affected under these proposals.

In addition to this the Council is also looking to change Council Tax exemptions to those set out below:

• Owners of homes which are vacant but have major repair works or structural works underway will receive a 25% Council Tax discount for the whole period, up to 12 months.
• Owners of vacant, unoccupied and substantially unfurnished homes will receive a 100% discount for one month, then a 0% discount for the remaining period up to 6 months.
• Owners of homes that are vacant for six months or more will pay 100% Council Tax on the empty home.
• Owners of homes that are left empty or unoccupied for more than 2 years will be will required to pay 150% Council Tax."

Mixed messages

"East Lindsey District Council has been clear that it aims to support the most vulnerable people in the community," according to October's East Lindsey Messenger. Their document on the principles of Council Tax Support claims that it will seek to support those with children, disabilities and caring responsibilities.

However the FAQ states that "People claiming Council Tax Benefit now who receive 100% Council Tax Benefit, will have to pay approximately 25% of their Council Tax bill from April 2013. This includes people on Income Support, Job Seeker's Allowance, Employment and Support Allowance and Disability Living Allowance. Our new scheme proposes that everybody pays something unless they are protected."

The district council's literature seems to be saying two different things about vulnerable people of working age, hinting that they might be exempt and then saying that they won't be. The consultation documents are lacking in details, but it's exactly these details that determine just how acceptable the impact of this is going to be.

The sums

Council tax for a band A property for 2012/13 is £909.66. That means people who got a 100% discount under the old system will be paying at least £227.42. Average tax for band D is £1,364.49, meaning anyone in that band will need to find an extra £341 if they're currently exempt.

This will affect about 7000 people in East Lindsey who get council tax benefit but aren't pensioners. If all of those people pay up at a rate of 25% for band A homes it will raise £1 589 000. That's obviously more than enough, so what gives? The council are either budgeting for a high rate of exemptions and non-payments, or they expect protests and plan to revise their figures following the consultation.

An invitation to fraud

You may notice that I haven't mentioned the savings that might be made by changing the rules on discounts for vacant properties. According to the Draft East Lindsey Housing Strategy 2013-2018: "There are over 1000 empty properties across the district". The last bullet points are about changing the exemption rules so that owners of vacant properties pay more. Due to the numbers of such properties, this can't be a significant source of income.

The council think they will raise extra money by charging owners of homes left empty for over two years 150% council tax. They won't. Property owners will simply employ people to house-sit, or find other ways to avoid this punitive tax. However, that doesn't mean it's a bad idea: there's currently a severe housing shortage in East Lindsey. This is leading the council to back plans for all sorts of developments, so long as they include provision for affordable homes. So even if the empty homes tax scheme makes no money, if it somehow alleviates the housing shortage it will be a good thing.

So I'm convinced that changing exemptions for empty homes won't make a big difference, and the figure of a possible £1.589 million that could come from lower-income working-age people seems to bear that out. The bulk of this new tax burden will fall on poorer households.

Remaining exemptions

There are a couple of anomalous exemptions that aren't getting scrapped. One is class H, properties held for a minister of religion. I don't understand why professing to believe in something should be a way to avoid paying taxes. If these are buildings of special historical interest we should protect them, but that should be through a separate fund other than council tax support. Then there's class V - the main residence of a person with diplomatic privilege or immunity. That probably applies to no-one in East Lindsey, but there's no reason why diplomatic immunity should mean getting everything for free.