Agenda item
Localisation of Council Tax Benefit: Financial Impacts and proposed mitigation
This report sets out the financial impact to the Council of the government’s policy on the localisation of Council Tax Benefit (CTB) and potential mitigation of this.
Minutes:
David Oates (Head of Benefits) introduced the report which set out the implications anticipated from the government’s proposals for Local Authorities to implement a new local Council Tax Support Scheme to replace the existing national Council Tax Benefit scheme from 1 April 2013. The implications of such a tight timetable were highlighted including a consultation document currently in circulation and legislation unlikely to gain royal ascent until October. The proposals will see the existing demand-led Benefit subsidy scheme replaced by a fixed grant that will be at least 10% lower in value than the current 100% subsidised scheme however for Brent, it could potentially be a 13.7% cut. In addition increases in council tax and other increases in benefits expenditure through caseload growth could increase the estimated deficit to approximately £5.2m. It was explained that the savings could be achieved through either being made through the general fund, partially by using increased revenue obtained from Council Tax exemption and discount changes currently proposed by the government; or by changing the current Council Tax Benefit scheme. It was noted that if a new scheme had not been devised by 31st January, a default scheme would be put in place resulting in the deficit being met by the general fund. The scheme will be fixed-grant funded, unlike the current demand led scheme and will be designed by the local authority with the inclusion of several centrally-imposed parameters such as a requirement to protect pensioners. It was reported that although growth would not be taken into account, resulting in the council having to meet any shortfall from its own budgets, the risk would be shared by the GLA with a 22.46% distribution share in council tax.
The Head of Benefits informed the committee of the various scenarios as outlined in 6.7 and the potential impacts on cash flow, council tax non collection, debt provision and increased admin and software costs. To meet achieve the savings, a combination of a new scheme was being proposed alongside reductions in council tax exemptions and discounts to generate more council tax revenue to offset the deficit. A number of options had been considered within the discretion provided, with the following option being proposed subject to council approval later during the autumn –
1) Changes to Council Tax exemptions and discounts -
· Class A – 50% discount
· Class C – nil discount
· Second homes – nil discount
· Long-term empty properties – 150% charge
2) Changes to Council Tax Benefit –
The proposed scheme is based on six key principles and an assumed 80% collection rate, with Principle 1: “Everyone should pay something” being key to ensure that the savings can be achieved. A variety of risks had been identified with the proposed changes including the unknown reaction of claimants, lack of full information relating to claimants in receipt of certain DWP benefits resulting in assumptions having to be made when carrying out modelling, changes to software and the scheme being introduced alongside various other welfare reforms. Discussions with the software company had been on-going and there was confidence that the required changes could be delivered in time, although still remained a high risk. The changes to the scheme as currently modelled would result in the council being in a financially neutral or slightly positive situation, with the intention that changes to the scheme when reviewed annually would not be made unless necessary with the current intention to review in year three.
Following queries from the members, David Oates clarified that although there were some similarities with the poll tax, proposals were only in relation to council tax benefit claimants, not all residents, and certain vulnerable people were protected, bringing deductions and the expectation of others contribution into line. No additional staff resource had been identified as it was only the level of charge applied that was changing and current procedures required evidence to ensure that the policy was enforced correctly. It was recognised that the changes to class A and class C could be difficult politically for members however a political choice on how the savings would be achieved needed to be made, and the current proposals encouraged housing to be brought back into use which would be a subsequent benefit to the borough. It was noted that the detail of the universal credit scheme due to commence in October 2013 was currently not available however, schemes were expected to be piloted during April. Universal credit also provided difficulties in the modelling as in future it will be unclear whether people on Universal Credit are working and the information would have to be obtained separately from DWP and potentially means tested. It was explained that the council was the first to go to public consultation, although councils had adopted various approaches with some councils choosing the minimum contribution route or other options such as removing the facility to back date claims, which had been rejected by Brent. It was clarified that additional resource may be required initially to inform the public of changes to the scheme which was to be publicised beforehand however, some funding from central government has been provided to mitigate the impact the impact of welfare reform generally. Additional communication lines and access points were being explored to ensure that all queries and concerns could be addressed. It was reported that a collaborative scheme could not be implemented due to the tight timescales, however potentially a collaborative scheme could be produced in future or the Brent scheme amended to incorporate successful aspects of other local authority’s schemes.
It was queried whether the scheme would assess claimants on a six monthly basis or when their circumstances changed. It was confirmed that claimants benefits would be amended as circumstances changed rather than on a rolling review process to ensure that no prejudice or hardship was invoked on claimants.
RESOLVED:-
i) to note the likely financial implications arising from government proposals to localise CTS with reduced funding arrangements with effect from 1 April 2013.
ii) to note the requirement for the Council to consider a number of options for a replacement CTS scheme, including the option that the Council retains and underwrites the existing CTB scheme by making savings elsewhere in the Council.
iii) to note the forecast financial impact of proposed changes to Council Tax exemptions and discounts, and the CTB scheme, which will mitigate the impact of the government funding reduction, and the risks and caveats attached to these.
iv) to note the scheme principles and technical mechanisms which will form the basis of the proposed CTS scheme, subject to public and stakeholder consultation, and the timetable for decisions which will be necessary in determining the final scheme in Autumn 2012
Supporting documents: