Localising Council Tax Support

Local Council Tax Support Introduction The Context Legislation The Policy Impact on Parish / Town Councils 14/15 and Beyond

The context DEFICIT REDUCTION Government’s top priority. Taxpayers were paying almost £120 million a day (£43 billion a year) in debt interest - more than council tax, stamp duty and inheritance tax combined last year WELFARE REFORM Reforming the welfare system - to make it fairer, more affordable and better able to tackle poverty, worklessness and welfare dependency LOCALISM Coalition principles of increasing freedom and sharing responsibility by localising power and funding. De-ringfencing of funding, abolition of top-down targets and inspection regime

The context: Spending Review 2010 Support for council tax localised from Forecast spending (subsidised expenditure) reduced by 10% from the same date. Funding to be switched from AME to DEL. Reform should protect the most vulnerable, in particular pensioners – and support improved work incentives to be delivered through Universal Credit. Devolved administrations to bring forward own plans for reforming support for council tax.

Legislation - Primary Legal framework provided through Local Government Finance Act Bill introduced on 19 December 2011 – received Royal Assent on 31 st October 2012 As well as requirement relating to schemes, Act also provides for: Business Rates Retention System Wider Flexibilities for Council Tax

Legislation - Regulations Detail of framework will be set out in regulations. Statements of intent published in May and July 2012, setting out detail for regulations. Main Regulations include: Prescribed Requirements Default Scheme Council Tax Base

The Policy - Funding Government will allocate funding to billing and major precepting authorities. English Local Authorities and Local Policing Bodies will receive £3.7bn in toward the costs of local council tax support schemes. For councils and fire and rescue authorities, funding will be through the new retained business rates system. After 2013/14 the allocation for English local authorities will not be separately identified. There is no reduction in overall funding for local council tax support for

The Policy - Proposal.

The Policy - Transitional Grant Transitional grant worth £100m to support development of well- designed schemes and maintain positive incentives to work. To apply for a grant, billing authorities must adopt schemes which ensure that: Those who would be entitled to 100% support under current CTB arrangements pay between zero and no more than 8.5% of their council tax liability; The taper rate does not increase above 25%; There is no sharp reduction in support for those entering work The deadline for applications was Friday 15 February claims from billing authorities were received, worth approximately £51 million Payments will be made in March 2013

The Policy - Progress 31 st January was the deadline for local authorities to agree their schemes. Range of options considered : Reducing the in-work taper as an incentive for claimants to return to work Extending Council Tax Support when claimants starts work Requiring everyone to pay something Abolishing second adult rebate All authorities have a local scheme for 13/14

Impact on Parish / Town Councils Impact on Parish / Town Council driven by: Reduction in the council tax base No direct funding relationship with parish / town councils Consequence: Possible increase in the Parish / Town council element of the band D Bill, with no increase in overall precept issued

Impact on Parish / Town Councils In May 2012 the Government published the Funding Arrangements consultation. This included the proposal that the reduction in the council tax base should apply to parish councils and billing authorities would be expected to pass down to them their share of the grant. The risk of this approach was that if billing authorities did not pass down funding then, due to a lower tax base, upward pressure would be put on the parish element of the band D bill. The risks of the voluntary approach, where billing and parish / town councils work can be addressed by sensible joint working.

Impact on Parish / Town Councils Following discussions with the local government sector the Government in August 2012 consulted on a further option – Council Tax Base consultation This would not apply the reduction in the tax base to parishes which would protect parishes from the impact of localising council tax support. This option put the cost pressure of the 10% cut in funding relating to parishes onto the billing authority.

Impact on Parish / Town Councils Two serious risks were identified: Billing authorities with parishes would face an increased financial burden over time as precepts increased. Secondly, a billing authority could, without increasing their bills, have to reduce expenditure to qualify for the freeze grant and possibly to avoid the need for a referendum. Critically, there is no way of mitigating either of these risks.

14/15 and Beyond There is no reduction in the overall funding for council tax support for After 2013/14 the allocation will not be separately identified but will form part of the overall funding available to local authorities. It is entirely for local authorities to decide how much they are prepared to spend on council tax support, which is why allocations for future years are not separately identifiable. Billing authorities and parish councils will need to continue to work together mitigate impacts on local taxpayers.

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