REPORT OF THE CITY MAYOR
TO
Council
ON
16 January 2013
TITLE: Localised Council Tax Reduction Scheme: Final Scheme Options
RECOMMENDATION:
That:
The City Mayor recommends that council agree to the proposed Council Tax Reduction scheme as detailed in this report and appendices:
It is requested that:
The main changes of the proposed Council Tax Reduction scheme for working age customers to be implemented from 1 April 2013 are as follows:
i) Second Adult Rebate is withdrawn for all cases unless 100% entitlement.
ii) Everyone who receives a Council Tax Reduction will be asked to pay at least 8.5% of their council tax bill
iii) Awards will not be paid where the weekly award is less than £1
iv) All awards where a partial reduction is calculated will have their entitlement calculated at a 25% taper rate
v) Where a non dependant deduction is applied to a claim the amount of each deduction will increase by £0.50 per week unless a higher amount of deduction is prescribed by government legislation.
vi) Backdated Council Tax Reduction will not be allowed
The Council Tax Reduction scheme from 1 April 2013 for pensioner claims will be administered in accordance with the prescribed legal requirements. This will apply apart from the local discretionary arrangements detailed in this report in respect of war pensions and Armed Forces compensation payments, that allow for certain income to be disregarded for both working age and pensioner claims.
It is requested that:
Council tax payers who are experiencing extreme financial hardship will be able to apply for some discretionary financial assistance. The amount of funding available to support this is still to be agreed. The funding for this discretionary assistance will become available from the funding made available to council’s for the purpose of replacing certain elements of community care grants and crisis loans which are being transferred from the Department for Work and Pensions from April 2013. This funding is not ring fenced.
EXECUTIVE SUMMARY:
This report provides the council with details of the public’s response to the consultation.
The report also requests a decision to be made by council on the finalised local Council Tax Reduction scheme so that it can be published by 31 January 2013, to comply with Central Government requirements.
Also included is the likely financial impact for the council.
BACKGROUND DOCUMENTS:
Documents available on DCLG website
Working Papers internal and external sources
Other publications
Council Reports
Consultation materials
KEY DECISION: YES
DETAILS:
Financial Implications
Central Government is ceasing to fund the current council tax benefit scheme from 1 April 2013 and will be allocating a fixed amount to billing and precepting authorities. This means that any expenditure in excess of the fixed amount will be the responsibility of the council to fund.
The provisional financial settlement figures recently announced by the Government provided for £23.775m (including the amounts applicable to precepting authorities) for Council Tax Support funding which is slightly in excess of the amounts included in our previous forecasts. This equates to a funding shortfall of £1.225m based on the costs of the proposed scheme. However, taking into account the other components to the scheme this leaves a net shortfall of £0.472m as illustrated in the table below:
Table 1
Transitional Scheme Latest Estimates / £mProposed Scheme Estimated Cost: / 25.000
Less Total Government funding: / 23.775
Less Transitional funding additional Income / 0.553
Initial cost of Transitional Scheme / 0.672
Factor in potential Loss of Council Tax collection Income / 0.500
Potential shortfall / 1.172
Utilise increased Discounts and Exemptions revenue to reduce shortfall / 0.700
Net Shortfall / 0.472
As detailed in the previous report issued to the City Mayor, Central Government have confirmed that it is making an additional £100m available to support Local Authorities in developing their schemes. The aim of the additional funding is to develop schemes to protect the poorest. Salford’s share of this funding is expected to be £552,732. However, in order to receive this transitional funding there is conditionality attached to the scheme. It is anticipated that the components of the proposed scheme detailed in this report will comply with the conditionality requirements to enable transitional funding to be claimed.
In terms of the transitional funding, Central Government has indicated that this funding is only available for the initial 12 months of the scheme. The council may have to devise a different scheme from 1 April 2014 onwards, which as it stands is likely to mean a further consultation process. It could also mean that depending on the council’s finances for 2014/15 working age customers could face a larger increase in the amount of council tax they would have to pay as there may be less funds available to use for the council tax reduction scheme.
In considering a scheme which allows for transitional funding, it eliminates any criticism that the council did not take advantage of the funding available to minimise the financial effect for customers affected.
The changes in the funding provisions for the Council Tax Reduction scheme may have more of a financial impact in relation to the prevention and detection of fraud activities. Therefore the approach to be taken in relation to this area is currently being reviewed to take into account the council’s increased burden.
In terms of the financial impacts, although funding arrangements have not been finalised, it is expected that there will be a funding shortfall of around £0.472m should the council tax reduction scheme proposals contained in this report to be adopted.
In terms of the estimated scheme support values it is to be noted that:
· The values do not take into account any increases to council tax that may be agreed by council for 2013/14.
· It is not possible to calculate the numbers of customers who may wish to claim council tax support in the future.
· It is not possible to assess numbers of customers currently in receipt of partial benefit who may then move to being in receipt of full benefit.
· The estimates have been calculated mainly using our software modelling tool using existing case values.
The council must decide and publish a local scheme by 31 January 2013. Failure to do so will mean that the council must adopt the central government default scheme and as a consequence of this the council would have to fund the gross estimated shortfall of £3.022m. This is because the default scheme is more generous.
Scheme Design
In accordance with the requirements to qualify for transitional funding, the following Council Tax Reduction scheme is proposed to be adopted for working age people from 1 April 2013, shown in the table below.
Table 2
Measure / DescriptionA. / Remove second adult rebate from working age people unless students also reside in the property where the appropriate council tax reduction will be made in accordance with Appendix 8.
B. / Everyone of working age who receives Council Tax Reduction will be asked to pay at least 8.5% of their council tax bill.
C. / Working age people must qualify for a Council Tax Reduction of £1 or over per week, in order to receive any council tax reduction.
D. / Everyone of working age who is entitled to partial council tax reduction tax will have their entitlement calculated at 25% taper rate. Therefore for every £1 over the governments applicable amount limit £0.25 will be taken into account as income as compared with £0.20 currently. The applicable amount is the standard amount set by central government to represent the financial needs of the claimant.
E. / Everyone of working age who has an amount for a non dependant deduction applied to their claim will have to pay £0.50 per week more for each non dependant deduction unless a higher increase is prescribed by government regulations.
F. / Backdated council tax support will not be allowed, therefore Council Tax Reduction claims will not be allowed for past periods.
Consultation Responses and Analysis
The consultation exercise commenced on 12 September and ran for a total of 12 weeks and 5 days and within this period a total of 1109 survey responses were received. There have also been 21 comments received but not as part of an actual survey response.
Appendix 1 gives an account of the consultation activities undertaken.
Appendix 2 shows the results of the consultation questions given by percentages
Appendix 3 shows an analysis of the survey question responses.
The results of the consultation show that organisations have responded as well as individuals. In addition to questions about the elements of the draft proposals, the survey also asked monitoring questions relating to:
- if respondents were getting council tax benefits
- gender
- sexual identity
- age
- ethnic heritage
- whether the respondents had a religion or belief, and if so which ones
- whether the respondents had any disabilities
- respondents home postcode
This information indicates how representative respondents were of the city’s population and helped to inform the community impact assessment. Analysis gives confidence that although the profile of respondents was not directly representative of the population it did include good samples from all groups and areas in the city.
The written comments received as part of the survey have been made available to the City Mayor together with a consultation summary.
Key Findings
As can be seen from the consultation responses:
· The majority of respondents agreed that in principle everyone of working age should pay something towards their council tax.
· More respondents were in favour of the minimum contribution being 8.5% as opposed to between 10% and 15%.
· More respondents agreed that people should pay more if they lived in higher banded properties and claimed Council Tax Reduction.
If the proposals are accepted the 8.5% minimum council tax contribution will mean as council tax bands increase the amount to pay also increases. The proposal is also consistent with other views stated above.
· Nearly three quarters of respondents agreed that as household income increases the amount of Council Tax Reduction people receive should be less.
The proposals are consistent with this view in that if the council decided to increase the taper applied to calculate council tax reductions from 20% to 25% for every additional £1 income over a set amount Council Tax Reduction would be reduced by £0.05.
· Over 70% of respondents were also in favour of introducing a minimum council tax reduction payment of £1.00 per week
The proposals are consistent with this view and this would also reduce the administrative burden for the council. There are also minimum award levels in other benefits for example the Housing Benefit Scheme has a minimum award of £0.50 per week.
· 75% of respondents agreed that in principle that certain non dependants should contribute more to the council tax bill where they live
· Over 70% agreed that each of the existing non dependant deductions should be increased by £0.50 per week.
The scheme proposals are consistent with these views, however central government published on 12 December 2012, a draft amendment to Localising Council Tax Support. In this publication it is prescribed that non dependant deductions are of certain minimum limits which are greater in some cases than the £0.50 proposal that was consulted on. Therefore the proposals have been amended to include this draft requirement.
· Responses to questions in relation to ending second adult rebate and people not being allowed to claim backdated Council Tax Reduction were relatively balanced and not conclusive either for or against.
The proposals are to continue with these two options with the aim of simplifying the administration processes and to reduce expenditure on the scheme.
In relation to ending second adult rebate proposal, council tax payers will be able to claim Council Tax Reduction in their own right and depending on their circumstances may qualify for some financial assistance. In accordance with the current council tax benefit scheme a “better buy” calculation is made which compares the second adult rebate calculation to the council tax benefit calculation. Whichever calculation provides the most benefit to the customer is then applied. It is expected therefore that some existing customers will still qualify for a Council Tax Reduction when the changeover occurs.
It is proposed that backdated Council Tax Reduction is not allowed, however it is expected that customers could still apply for some discretionary assistance if they have extreme financial difficulty via the arrangements outlined in the recommendations of this report.
Working age customers in receipt of Universal Credit, Income Support, Income based Job Seekers Allowance or Income Related Employment Support Allowance who apply for a Council Tax Reduction within one month of their claim for these benefits being received by the designated office, will be treated as though they made their claim for Council Tax Reduction on the first day of entitlement to those benefits.
· Over 80% of respondents felt that a discretionary fund should be set up.
The proposals are consistent with this view by the provisions stated in the recommendations part of this report to help customers with severe financial hardship.