Changes to Council Tax / Council Tax Benefits 25 September 2012 Vic Allison Deputy Managing Director

Current System of Council Tax Benefit National scheme 100% Government funded No direct payments to taxpayers, reductions to bills Government grant compensates for loss on Collection Fund No impact on taxbase £7m in Council Tax Benefits £62m in Council Tax payments Precepts out to major preceptors and town / parish councils

Proposed changes National scheme to be replaced by local schemes of Council Tax Support wef 1 April 2013 Local schemes to be agreed by end January 2013 Funding through general settlement based on 90% of current / recent costs We decide how to fund 10% through scheme design or funding from elsewhere Discount not benefit Will reduce taxbase for total amount of Council Tax Support

The funding shortfall Will be a taxbase loss of around 10% (£7m / £69m) 90% of this loss will be paid to us and major preceptors by Government We will get less in Council Tax, more in Government grant (business rates)

But 10% or £700k shortfall split: County72%£505,000 Police12%£85,000 Fire5%£35,000 District (inc town/parishes)11%£75,000* Total100%£700,00 * Parish element = £21,000

The problem with parishes Parish X has a taxbase of 1,000 in 2012/13 Will reduce to 900, following these changes Precept in 2012/13 was £20,000, Council Tax = £20.00 (£20,000/1,000) Precept in 2013/14 of £20,000, Council Tax = £22.22 (£20,000/900) Payment of grant, ie 90% would make taxbase 990, council tax = £20.20 But no Government powers to do so and far too many

The solution for parishes - current consultation Two taxbases, one unadjusted for benefits changes Parishes unaffected by changes to Council Tax Benefit Collection Fund carries the cost Districts get the 90% Government grant and make appropriate transfer for parishes But what about the 10% funding shortfall for parishes, equivalent to £21,000? (assuming we don’t close the funding gap via our replacement local scheme) District cost or shared with other preceptors?

Replacement local scheme Have to protect pensioners Other vulnerable groups? Risks of challenge Difficulty in collecting small amounts Consulting and implementing changes Proposing minimal change in year 1 Just band D limitation

Technical reforms to Council Tax Also 1 April 2013 Part of Local Government Finance Bill More local discretion over exemptions and discounts Will have an impact on taxbase – will increase if exemptions / discounts reduce Could be used to compensate for loss of taxbase as a result of benefits changes

The Year 1 numbers for Wychavon Loss from funding shortfall£700,000 Limiting support to band D-£23,000 Class C – reduce to 50%-£307,000 Second homes discount - abolish-£60,000 Class L – abolish-£28,000 New shortfall£282,000 Class C = exemption for short term (up to 6 months) empty properties, currently 100% Class L = 100% exemption for mortgagees in possession

What does this mean? Reduces Year 1 impact for major preceptors from £700,000 to £282,000 Beneficial impact on town / parish councils In previous example: Taxbase 1,000, precept of £20,000 Taxbase unchanged for Council Tax Benefits / Support But 0.5% uplift for other reforms to Council Tax Taxbase 1,005 Band D Council Tax £19.90 (compared to £20.00 in current year)

Next steps Consultation on local Council Tax Support scheme – 17 September to 26 October 2012 Please see Event for town / parish councils 21 November 2012 Consultation on parish solution closes 9 October 2012, regulations by end November 2012 Local Government Finance Act late October / early November Report to Board 27 November 2012 Council adopts proposed Council Tax Support scheme 18 December 2012 Review of local scheme for 2014/15 commences