MPs criticise 'fundamentally perverse' council tax incentives

The incentive to work for some families has withered because of changes to council tax benefits, with some losing as much as 97p out of every extra pound they earn, the Public Accounts Committee has found.

Councils are 'tackling the biggest cuts in living memory'

Local authorities are "tackling the biggest cuts in living memory" and urged the Government to give them the full amount of funding needed to provide adequate council tax support for vulnerable residents.

Chair of the Local Government Association's Finance Panel, Sharon Taylor hit out at Government cuts after the Public Accounts Committee published a scathing report into measures taken by local authorities in the wake of cuts.

The shortfall between the money councils receive to fund council tax support and the money we would need to protect those on low incomes is getting bigger and is likely to reach £1 billion by 2016.

At the same time, councils are tackling the biggest cuts in living memory and cannot afford to make up the difference.

The Public Accounts Committee's call for Government to review the scheme echoes concerns raised by councils.

Government should consider giving local authorities the full amount of funding needed to provide council tax support.

– Sharon Taylor

'230 authorities' require minimum council tax payment

Almost three quarters of local authorities (71%) required all working-age claimants to pay at least the minimum contribution towards their council tax bill, according to the Public Accounts Committee.

They also found:

  • There were only 133 authorities which provided exemptions only for pensioners and war pensioners, whom the Government insisted must be protected.
  • Some 19 local authorities, representing 225,000 working-age claimants in England, increased the "taper rate" at which support is reduced as income rises from 20% under the old system - some 14 of them increasing it to 25% and four to 30%.
  • Taper rate increases combined with the loss of housing benefit and increase to income tax and national insurance, would mean claimants taking on additional work they would lose 93p of every £1 they yearend on a 25% rate of 97p on a 30% rate

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Council tax benfits 'perverse'

General view of a council tax bill. Credit: PA Wire

Changes to council tax benefits have weakened work incentives for almost a quarter of a million people in England, some of whom stand to lose as much as 97p out of every extra pound they earn, a parliamentary report has found.

The chair of the House of Commons Public Accounts Committee, Margaret Hodge, branded the outcome "fundamentally perverse" saying that the decision to give local authorities powers to design support schemes for themselves has delivered the opposite result to what the Government intended

Council tax benefit was formerly administered nationally, costing taxpayers £4.3 billion in 2011/12 as five million people claimed support.

From April 2013, responsibility was transferred to 326 local authorities in England, with the Government providing funding of £3.7 billion - a cut of £414 million, or 10% of the predicted total budget if the scheme had remained unchanged.