Council Tax Support and the Localisation of Revenues and Benefits Simon Horsington, MBA IRRV Simon Horsington and Associates

Introduction and Overview Scale of savings The background, timing & context to change Scheme design Likely caseload Enforcement questions and mitigation Forecasting and the CTB Conclusions

The Biggest Losers? DCLG Finance paper, May Metropolitan Councils losing more than £3M Birmingham (10.1m) Large Mets and “super” districts (Incl. Liverpool, Leeds, Co. Durham, Manchester, Sheffield, Cornwall, Bristol. Range: £4-6m) Haringey, Croydon, Enfield, Brent, Hackney, Ealing, Barnet, Newham, Tower Hamlets, Islington (£ m)

And in the room…. CTB Loss 2010/11 Council Hackney 3.5 Barnet 3.1 Newham 3.1 Tower Hamlets 3.0 Islington 3.0 Lewisham 2.8 Hillingdon 2.2 Hounslow 2.2 Barking & Dagenham 2.1 Bexley 1.7 Hammersmith & Fulham 1.7 Kensington & Chelsea 1.4 Colchester 1.1 Dacorum0.95

Overall key dates Now:Scheme design, consult Major Precepting Authorities Now-Oct:Formal consultation of scheme Sept-Nov:Final design & modelling Nov:Budget forecasting & modelling Dec:Executive approval of scheme Jan 2013:Full Council 31/1/13: “Local Scheme” must be adopted 1/4/13: Scheme live 0ct 2013:Universal Credit, new claims

CTS: Project Skillsets The design of a scheme in isolation from: – Collection and enforcement requirements; and – Financial considerations Extent to which DCLG approach has prioritised this approach, but… Three skillsets required: – Benefits specialists: scheme design – Revenues and collection: will it work? – Finance: Is it affordable? Is it achievable?

Overall Legislation Welfare Reform Act 2012 Localism Act 2011 Equalities Act 2010 Local Government Finance Bill Regulations- late! DCLG advice

Background to change The national savings agenda & CTS – DCLG: Takes at least 10% out of the CTB Budget; and – “Localises” Welfare support for CT; but – Protects pensioners from the change The biggest changes for Revenues and Benefits in 30 years? – Localising Council Tax Benefit – Cutting Council Tax Benefit funding – Incentivising Business Rates – Council Tax exemptions and discounts

Overall Estimates Funding to be calculated at 90% of overall subsidised CTB, but As pensioners protected, impact is on working age payers So a 10% cut overall means, for most, a 16%- 20% increase for working age The burden on the “inscope” working age increases if “Vulnerable People” are protected

Current CLG Advice CTS: – Vulnerable Groups – Financing arrangements – Incentives to work and local schemes – “statement of intent” for CTS regs Business Rates: – Six advice/briefing papers

IFS & Rowntree: Models Across the board cut of 17% (saving est: 9.7%) Maximum entitlement is 85% (9.3%) Band B maximum entitlement (3.8%) No entitlement from Band D & above (7.2%) Increase taper from 20%-30% (2%) Only support passported claims (14.8%) Count Child Benefit as income (1.9%)

Other, lower value options Capital limits Non dependant deductions Second adult rebates Child benefit as income The role of Band limited reductions in most of England except London and the South East!

Rowntree: The Effects of CTS Encourage LA’s for growth & employment Discourage increases Council Tax Discourage low income families from living in LA area Discourage social housing development Discourage “take-up” of CTS Increase incentives to reduce fraud and error Non-unitary Councils: incentives for a “cheap” scheme?

So what this means is… Even for many districts, an extra £1m to collect, if local scheme implemented For Unitaries many will be £1.5- 3m Likely to be smaller debts, and due from households with limited ability to pay But one scheme published already proposes a Max CT Eligible amount of 65%!

Collection & Enforcement: Key Questions Use of LO? Use of bailiffs as a default measure? Fee structure? Attachment to IS and hopefully UC? Write off and hardship policies? Relationship with discretionary funds? Payment arrangements? Deferral for those with a higher likely-hood of a return to work?

Council Tax Base What we know….. CTS is a discount not a grant “10%” cut is likely to be on the low side Local provision for increase in claims, and the costs of pensioners at 100% Local provision for “job shock” What we don’t…. Relationship between proposals on CT and New Homes Bonus How Business Rates incentivisation will work CTS: How financial “risk sharing” will work CTS: Changes to Collection Fund?

Technical CT changes Ability to charge for currently exempt classes – Class A – Class C – Class L – Granny annexes Discounts for second homes The extent to which class A and C may lie within Social Housing stock Consequential changes in Taxpayer behaviour

Challenge of Local Schemes No plans for amendment of scheme within year Enforcement difficulties, for affected Councils Smaller impacts likely: e.g. rules for self employed calculations Larger impacts: e.g. variable % eligible CT Draft schemes now published with – 65% max CT eligibility – Little or no attempt to explain complex draft regs – No apparent regard in “Two tier” model for Major Precepting Authorities

In Conclusion… Most significant change in at least 30 years Being completed at speed Welfare reform: a pattern of relief which has grown over 60 years is reformed in 18 months “May you live in interesting times”

Thank You