Cabinet 15/07/2014 for Information Agenda Item 6

CABINET 15/07/2014 FOR INFORMATION AGENDA ITEM 6

BOROUGH OF POOLE

WELFARE REFORM WORKING PARTY

1 JULY 2014

Local Council Tax Support Scheme 2015/16 (LCTSS)

1Purpose of the report

1.1The purpose of this report is to;

a)Update members on the implementation of Poole’s Local Council Tax Support Scheme (LCTSS).

b)To remind members of the £435k assumed saving hardcoded into the Council’s Medium Term Financial Plan (MTFP) as a green rated saving for 2015/16 onwards from changes to the current LCTSS.

c)Outline to members a range of options which could be used to amend Poole’s Local Council Tax Support scheme for 2015/16.

d)Seek Members guidance as to changes which the Council should consult upon in respect of our 2015/16 scheme.

e)Outline the requirements and process for consulting with;

The Police and Fire Authorities (Major Preceptors)

Other interested parties including the claimants affected by the scheme and all other taxpayers within Poole.

2Decision Required

2.1The Welfare Reform Working Party members

a)Note the contents of the report.

b)Recommend to Cabinet which, if any, of the following amendments to the Local Council Tax Support scheme should be consulted upon for implementation from April 2015 onwards:

1Increasing the minimum contribution from 8.5%. This could be to any point up to and including 20%.

2Increasing the taper rate, at which support is reduced as income rises from 20%. For example to 25% (as per 14 councils) or 30% (as per 4 councils).

3Implementing a band restriction which would limit entitlement to say claimants in Council Tax bands (A to C). Claimants in bands over C would receive Local Council Tax Support at a band C level.

88.4% of working age claimants are in Council Tax bands A to C

4Change the basis of the calculation so that child benefit or child maintenance payments received are included as income.

5No second adult rebate for working age claimants.

6There should be a minimum level of Council Tax Support of 50p a week.

3Background

3.1From April 2013 Government devolved responsibility for Council Tax Benefit from Whitehall to 326 individual local authorities. At the same time the budget was reduced by 10%. Nationally this equated to a £414mreduction, locally it equated to a £1.1m reduction.

3.2Using the reduced money available local authorities were required to design, consult upon and implement their own local schemesin replacement of the previous national system

4Poole Local Council Tax Support Scheme

4.1In preparation of the new arrangement Poole consulted on a Local Council Tax Support Scheme based on the following principles;

The proposed Poole local scheme is cost neutral.

Replicates the national scheme as much as possible.

Everyone of working age should pay something towards their Council Tax except the most vulnerable.

The most vulnerable should be protected from the changes.

There should no longer be Council Tax Support for a person who has a second adult on low income living with them (second adult rebate).

There should be a minimum level of Council Tax Support of 50p a week.

Consequentially this meant that the Council consulted on a scheme which would require working age claimants having to pay based on an 80% of net council tax liability scheme(a minimum of a 20% contribution). Claimants of pension age were required to be protected by Government and it was proposed that vulnerable claimants were protected locally.

4.2The consultation was incredibly successful with a 26% response rate from working age claimants and a 50% response rate from Poole Opinion Panel (POP). The consultation strongly supported the principle that the cost of the changes should not be paid from savings from other services or by increasing Council Tax. There was also strong support for the principle that everyone of working age should pay something towards their Council Tax, except the most vulnerable people as defined by the groups that the Council chose to protect.

4.3During the consultation period the Government issued details of a one-off transitional grant scheme to support local authorities in developing well-designed schemes and maintain positive incentives to work. To apply for the grant, billing authorities had to adopt schemes which met certain criteria including;

that those who would be entitled to 100% support under the previous national council tax benefit arrangements pay between zero and no more than 8.5% of their net council tax liability.

Continue with the second adult rebate for the working age

Not have a minimum award

4.4Having had due regard to the consultation and the recommendations of the Welfare Reform Working Party and the Communities Overview and Scrutiny Committee, the Council accepted the transitional grant and agreed the amendment to the scheme that was consulted on so that it was now a 91.5% of net council tax liability eligible scheme(a minimum of a 8.5% contribution).

4.5The Council therefore implemented a 8.5% scheme for the financial year commencing April 2013. However it recognised that it would look at reverting back to the 80% consulted on scheme from April 2014 in reflection of the original consultation feedback and the fact that one-year transitional nature of the funding meant that there was a £435k per annum pressure in the Council’s MTFP from 2013/14 onwards.

4.6During 2013 the Budget Star Chamber, the Welfare Reform working party, Cabinet and Council considered the approach to be taken for the financial year commencing April 2014. Consequentially Cabinet and Council approved the extension of the 8.5% scheme for a further 1 year (covering 2014/15) using a one-off application of reserves and also approved that consultation takes place in the spring of 2014 with a view to implementing a means tested Local Council Tax Support Scheme based on an increased contribution from the current 91.5% of net council tax liability scheme from 2015/16 onwards.

4.7The Medium Term Financial Plan approved by Council in February 2014 recognised that £435,000 in additional resources should be generated from increasing the contribution from April 2015 onwards. This saving is a green rated savings items within the MTFP.

4.8It should also be highlighted that as part of the Local Government Finance Settlement for 2014/15 onwards there will no longer be any transparency about the amount being made available by Government to provide direct support for the Local Council Tax Support Schemes. Therefore, by implication,the £7.9m moved into Poole’s core government funding is being further subjected to the percentage cuts being implemented for 2014/15 onwards (8% cut in 2014/15 and a further 14% cut in 2015/16) or (a further grant reduction of £0.6m in 2014/15 followed by an additional £1m in 2015/16 specifically related to the LCTSS).

4.9Recent press coverage highlights a request from the Labour party to accelerate an independent review of this policy based of figures which identified that by rolling the funding into the year on year reducing Local Government Finance Settlement that the cost to Local Authorities nationally will be £1bn by 2016. Their approach has been supported by the Local Government Association who have requested a return to a 100% nationally funded system.

4.10 There are also no indications of any Government discussions in respect of the previously requestedflexibility for Local Authorities to be allowed to determine the level of the Single Person Discount levied(currently 25% and granted to approximately 1/3rd of properties within the borough) .

5Dorset Schemes

5.1The table below highlights the schemes being implemented in Dorset Councils during the first 2 years of the scheme;

Council / LCTSS
Rate
2013/14 / LCTSS
Rate
2014/15
Bournemouth / 20% / 20%
Weymouth & Portland / 8.5% / 8.5%
East Dorset / 8.5% / 8.5%
West Dorset / 8.5% / 8.5%
North Dorset / 8.5% / 8.5%
Christchurch / 8.5% / 8.5%
Poole / 8.5% / 8.5%
Purbeck / 8% / 8%

5.2Clearly an implication of the scheme is that unprotected working age claimants are havingto pay more Council Tax in all Dorset Authorities since April 2013 onwards and no more so than in Bournemouth. Nationally 80% of all Council’s have reduced the Council Tax support provided to local residents as a result of the localisation of a scheme with significantly reduced government funding.

5.3Early discussions with colleagues in Dorset in respect of their 2015/16 schemes indicate that the district council’s, who as billing authorities have to actually make the decision, are not currently committed to any consultations on increasing their schemes. This is generally due to the statutory arrangementson how any additional resources generated by increasing the scheme are shared with the County Council, with the overwhelming majority going to the County.

6National Changes 2013/14 to 2014/15

6.1To mark the first anniversary of the scheme the Joseph Rowntree Foundation produced a paper on changes in schemes between 2013/14 and 2014/15. As figure 1 below shows, there has been a large drop in the number of councils with smaller minimum payments levels (of 8.5% or less); from 113 councils in 2013/14 to 69 in 2014/15 (A minimum payment of 8.5% was common in 2013/14 because of the one-year transitional grant was available to councils that did not withdraw support from claimants by more than 8.5%). By implication 40% of those authorities who accepted the transitional grant in 2013/14 then increased their minimum payments levels from 2014/15 onwards when the grant disappeared.

6.2Along with minimum payments, councils can make other changes to LCTSS. For example, 35 councils changed how they calculate a family’s ability to pay council tax, typically by counting child benefit or child maintenance as income and 74 councils introduced a band cap.

6.3In response to recent press coverage of the success of the scheme local government minister Brandon Lewis said “Spending on council tax benefit doubled under the last government costing taxpayers £4bn a year – equivalent to almost £180 a year per household. That’s why, as part of our long-term economic plan, we are fixing the welfare system to make work pay and reducing the deficit to safeguard our economy for the long term”.

7Financial Information

7.1Data for the first year of operation of the Poole scheme is reflected upon in the following data;

Collection Rate / Detail
98.18% / Overall Council Tax collection rate(previous year 98.38%)
98.6% / People not affected by the change
84.4% / People who had previously paid but are now paying more
74.0% / People paying for the first time

It should be referenced that the above tablerelates to in-year collection only, not ultimate collection, which basically highlights that collection of any outstanding amounts is ongoing particularly for example through any specific arrangements that they have made or via attachments to benefits.

It may also be worth a reminder that of those previous receiving Council Tax Benefit 63% were not affected by the change due to being of pension age (Government protection – 49%) or deemed in a vulnerable group (Poole Council protection – 14%). This left approximately 4,300 claimants who were previously paying something but now paying more or paying for the first time.

7.2As part of this new process the Council continues to emphasise to residents that they should contact us directly if they have difficulty in paying so that we can consider how we can best help them. In respect of amounts outstanding, that maybe by reaching agreements which many have done in 2013/14 which includes, for example, the use of direct debits.

The table below shows examples of the amounts under the current 8.5% scheme that residents may have to pay.

Council Tax
Band / Annual
Amount
2013/14 / 8.5%
Annual
Amount / 8.5%
Weekly
Amount
A / £972.30 / £82.65 / £1.59
B / £1,134.35 / £96.42 / £1.85
C / £1,296.40 / £110.19 / £2.12

An increase to 20% would mean that residents may have to pay;

Council Tax
Band / Annual
Amount
2013/14 / 20%
Annual
Amount / 20%
Weekly
Amount
A / £972.30 / £194.46 / £3.74
B / £1,134.35 / £226.87 / £4.36
C / £1,296.40 / £259.28 / £4.99

7.3Comparison information on other Local Authority Schemes

Collection rates 2013/14

7.3.1Numerous authorities have started to publish their collection rates for 2013/14 allowing us the opportunity to consider the impact of their chosen localised council tax support scheme. The table below is a sample of local authorities (Districts and Unitaries)with a 20% reduction scheme showing an overall average collection rate reduction of 0.61%.

% Collection Rate @ Q4 2014 / 98.60% / 96.50% / 97.60% / 96.81% / 95.80% / 98.80% / 95.80% / 98.05%
% Collection Rate @ Q4 2013 / 98.70% / 97.32% / 98.10% / 97.65% / 96.50% / 99.00% / 97.20% / 98.36%
Difference / 0.10% / 0.82% / 0.50% / 0.84% / 0.70% / 0.20% / 1.40% / 0.31%

7.3.2It should be noted in all the abovecases (except for the 1.4% loss)we are aware that the local authority invested in additional front end staff to support the recovery process (on average an extra 1 or 2 FTE staff have been chasing Council Tax Support cases immediately they default on instalments).

7.3.3The table below provide a sample of unitary authorities with varying liability reduction schemes and their collection rates achieved.

Authority / Liability scheme
(min to pay) / Collection Rate
2012/13 (%) / Collection Rate
2013/14 (%) / Change (%) / Band D Council Tax 13/14
Kingston upon Hull / 8.5% / 95.75 / 94.21 / - 1.54 / £1,369.05
Torbay / 25% / 97.02 / 95.84 / - 1.18 / £1,503.21
Leicester / 20% / 95.97 / 94.81 / - 1.16 / £1,483.90
Peterborough / 30% / 96.15 / 95.26 / - 0.89 / £1,378.02
Southend on Sea / 25% / 97.90 / 97.10 / - 0.80 / £1,351.41
Darlington / 20% / 95.96 / 95.24 / - 0.72 / £1,465.47
Plymouth / 25% / 96.50 / 95.80 / - 0.70 / £1,507.86
Cornwall / 25% / 97.80 / 97.13 / - 0.67 / £1,477.05
Bournemouth / 20% / 97.00 / 96.40 / - 0.60 / £1,498.68
Brighton & Hove / 8.5% / 97.66 / 97.09 / - 0.57 / £1,508.09
York / 30% / 97.94 / 97.58 / - 0.36 / £1,419.98
Poole / 8.5% / 98.38 / 98.12 / - 0.26 / £1,458.45
Bath & NE Somerset / 22% / 99.00 / 98.78 / - 0.22 / £1,468.35

7.3.4From this evidence it is difficult to draw any specific conclusions as to the impact of the Local Council Tax Support Scheme as the collection rates would also have been impacted by any changes these Council’s implemented to reflect increase local flexibility around certain categories of local discount.

7.3.5 Officers have also attempted to obtain comparable information of the collection rates for different categories of claimants as shown at 7.1 of this report. However this information is proving unreliable as there appears little consistency in approach.

7.4Although not Council Tax related it maybe useful for Members to be made aware of the impact of welfare reforms are so far having on the rent arrears levels within the Council’s owned stock as managed by Poole Housing Partnership (PHP).

31.3.2013
£ / 31.3.2014
£ / % Change
Current Tenant Arrears / 146,453 / 116,233 / -20.6%
Former Tenant Arrears / 68,368 / 79,142 / +15.8%
Total Arrears / 214,821 / 195,375 / -9.1%
No’s in Arrears / 792 / 841 / +6.2%

8Consultation Process and Timetable

8.1The requirements of the Local Government Act 2012 provide that for each financial year, each billing authority must consider whether to revise its scheme or to replace it with another. The requirement being that any revised, or any replacement scheme, is approved no later than the 31 January in the financial year preceding that for which the revision or replacement is to have effect. In revising or replacing its scheme the authority must (in the following order);

a)Consult any major precepting authority which has power to issue a precept to it;

b)Publish a draft scheme in such a manner as it thinks fit

c)Consult such persons as it considers are likely to have an interest in the operation of the scheme

8.2This legislative framework means that Council at its meeting on the 16 December 2014 will need to approve the Local Council Tax Support scheme that will be applied from April 2015 onwards.

8.3The Head of Legal and Democratic Services has provided advice that there is a requirement to consult with the extent of the consultation depending on the changes to the scheme that are being proposed. The viewed formed is that if the proposal is generally inline with the previous consultation (up to 20%) then any consultation would only need to be “light touch”. It is also considered good practice to give the public an opportunity to comment. External advice has independently confirmed the need to consult if revising the scheme.

8.4In light of the extensive consultation carried out in the Autumn of 2012, the Corporate Strategy Team Manager has advised that they would suggest a proportionate consultation depending on the extent, or otherwise, of the final recommendations Members agree to consult upon. The consultation period would still need to be reasonable and the Council would still need to engage with key partners including the Citizen Advice Bureau.

9Options for consideration

9.1Amendments to the current scheme that Cabinet could consider consulting upon for April 2015 onwards, include:

1Increasing the minimum contribution from 8.5% to 20%.This could be to any point up to and including 20%.

2Increasing the taper rate, at which support is reduced as income rises from 20%. For example to 25% (as per 14 councils) or 30% (as per 4 councils).

3Implementing a band restriction which would limit entitlement to say claimants in Council Tax bands (A to C). Claimants in bands over C would receive no support.

88.4% of working age claimants are in Council Tax bands A to C

4Change the basis of the calculation so that child benefit or child maintenance payments received are included as income.

5No second adult rebate for working age claimants.

6There should be a minimum level of Council Tax Support of 50p a week.

7No protected groups other than the statutory pension age protection.

9.2These scheme options assume the following;

a)The capital limits will stay the same

b)Disregards (other than those specifically referred to) for earnings, certain income and capital will be maintained

c)Discretionary exceptional hardship payments can be claimed.

9.3The financial Implications of these alternative options can be set out as follows;

Saving compared to 2014/15 Scheme
a. Current scheme with 25% taper / £122,000
b. Current scheme with 30% taper / £205,000
c. Current scheme capped at Band C
(claimants in bands above C receive Band C level support) / £59,000
d. Current scheme with min 50p per week / £260
e. Current scheme with no second adult rebate / £15,000
f. New scheme based on a 20% scheme / £424,000
g. New scheme based on (b) to (f) / £636,000
h. Current scheme no protection to vulnerable groups / £163,000
i. Current scheme with child benefit treated as income / £302,000
j. Current scheme with child maintenance treated as income / £47,000

It should be emphasised that other than in option (h), the current vulnerable groups will still be protected.

9.4 Taper Arrangements

In the current scheme, once a claimant’s income increases above the “applicable amount” the council tax support is gradually reduced. This is done by using a taper of 20%. The higher the taper the lower the income point occurs for an individual to stop getting financial support and any rebate. It is currently regarded that a higher taper would be a disincentive to work.

9.5Second Adult Rebate

Currently awarded when the claimant has a second adult living in their home that is on Pension Credit, Income Support, Income based Job Seekers Allowance or Income related Employment and Support Allowance or has a low income.

9.6No protections other than the statutory pension age protection.

Implemented by a number of Local Authorities on the grounds that the income disregards, income limits and capital limits factored into the system offers sufficient protection against any financial vulnerability.