Conservative Home

« Council byelection results from yesterday | Main | Let councils choose where they build »

Labour councils are using localisation of Council Tax Benefit to punish work

BrentwoodcouncilLast week a "charity" called the Resolution Foundation won deferential coverage on the BBC for a report attacking the localisation of Council Tax Benefit (which is being renamed Council Tax Support).  While the BBC presented its findings as impartial, Guido Fawkes named and shamed its co-author as a Labour councillor, Cllr Matthew Pennycook.

The Resolution Foundation is an anti poverty lobby based in Savile Row. It's Chief Executive Gavin Kelly, who is paid nearly £100,000 a year, used to be Deputy Chief of Staff to Gordon Brown.

Anyway, from April, the Government will give councils flexibility over the scheme - but with 10% less money and an obligation to continue the current level of protection for pensioners.

In his report Cllr Pennycook says:

There is a very real possibility that over the course of the next year large numbers of CTB recipients currently paying no Council Tax will struggle (or refuse) to pay the small amounts of monthly Council Tax that will be required from them.

Maybe. We will see, in this age of direct debits. But it is odd for the BBC, with its licence fee, to be a champion of this cause.   It is also odd when Cllr Pennycook's own council of Greenwich is charging 15% Council Tax to those of working age who previously paid nothing. It says it needs to. Does it? Not all London councils are doing so this year. My council of Hammersmith and Fulham isn't. Our tri-borough colleagues Kensington and Chelsea and Westminster aren't. Richmond isn't. Wandsworth isn't.

That does not mean we are twiddling our thumbs. We now have an incentive to reduce fraud and to get residents off benefit and into work. Some more of us may introduce some charge for Council tax for those on benefits next year even if this year we lay low like Brer Fox and so how others get on. The point is that Greenwich Council did not "need" to bring in this charge. It was their choice.

I presume Cllr Pennycook voted against his Council's policy.

By contrast there are some Conservative councils who have made the Council Tax Support scheme more generous in certain respects in order to encourage work. The media have presented this in terms of how tough or soft councils are being - this was the theme of a typically crass item on Channel 4 news last Thursday for example. The reality is more sophisticated.

At present, as is well known, there is little financial reward for coming off benefits and taking a low paid job. The loss of Council Tax Benefit is part of the equation. Above a certain threshold, people lose 20p in Council Tax Benefit for each £1 they earn. As from April in Brentwood and also in Wiltshire that "taper" is being reduced to 15%.

Another way of rewarding work is the "earnings disregard" - the amount of money you can earn before you lose Council Tax benefit. Under the existing scheme it is £5 a week for a single person, £10 a week for a couple. In Mendip these figures are being doubled. As they are in West Somerset. In Braintree, as I noted last week, they are going much further and making the disregard £40 a week.

What is the thinking behind making the scheme more generous when there is 10% less funding for it? It is hoped that if more people find work worthwhile it will mean more Council Tax revenue. These councils will also be charging a small element of Council Tax to those on welfare. That means the reward for working in those areas is going to be stronger.

What are Labour doing?

  • Rochdale Council is increasing the taper to 30%
  • Brent Council is increasing the taper to 30%
  • Harrow Council is increasing the taper to 30%
  • Corby Council is increasing the taper to 35%

They seem to be assuming that their residents will carry on taking work even if the loss of benefits removes any financial incentive. These councils, in keeping their residents hooked on welfare, will find these increases counterproductive in terms of their Council Tax revenue.

Another important consideration is what to do about the "non dependent deductions." This is where a couple, or single parent, are on benefits but a son or daughter living at home grows up. If they get a job their parents lose Council Tax Benefit.

In 2011 David Cameron said:

If a family living on benefits wants their adult child to stay living at home they are actually penalised – as soon as that child does the right thing and goes out to work.

You get what’s called a non-dependent deduction, removing up to £74 off your housing benefit each week.

I had a heartrending letter from a lady in my constituency a few weeks ago who said that when her son leaves college next month, her housing benefit will drop significantly, meaning her family may have to split up.

This doesn’t seem right.

In effect, the state doesn’t just open a door to dependency for young people, it drags them in.

At the moment the parents would lose, say £10 a week, of their Council Tax Benefit, if their son or daughter got a job earning, say £20,000, a year.  Brentwood is proposing to abolish the non-dependent deduction. That will reduce the penalty for what Mr Cameron's describes as "doing the right thing". But other councils, mostly Labour ones, are doing the opposite. They are increasing the "non dependent deductions."

For instance in London we have Brent and Harrow, already attacking work as noted above with their taper caper, compounding their offence in this regard. Ealing is also a culprit. So is Lib Dem Kingston and Lib Dem Sutton - as well, I'm afraid, as Conservative Hillingdon.

There is also the question of the Band Cap. Why should those on benefit in a Band H property have their Council Tax bill paid for them by hard working families squashed in a Band A or Band B property?

The cap means that Council Tax support will be limited according to particuler value of property. Anything above that and the occupants must pay the difference themselves or move to somewhere more modest.

This cap would not only be fair but would be another nudge under occupying in social housing to make way for those currently over crowded. Several councils are already bringing in a Band Cap this year - I hope many more will follow next year.

How do the Lib Dems justfy a Mansion Tax for working familes, but for the those on welfare who live in mansions to have their Council Tax paid by the rest of us?

Finally, I am not so far aware of any council proposing to remove Council Tax Support from those involved in anti social behaviour, or to link the level of Council Tax Support to voluntary work. I hope that in time such inititiatives will be brought forward.

Localism means that local councillors are no longer passive when it comes to welfare reform. We are participants. We can make the option of working more attractive - which will happen in Brentwood. Or less attractive - which will happen in Corby. But no longer can we shrug and say it is nothing to do with us.


You must be logged in using Intense Debate, Wordpress, Twitter or Facebook to comment.