The transfer of responsibility for Council Tax support from central government to local councils in April 2013 was intended to contribute to the wider welfare reform. The Public Accounts Committee found that it failed to do this.
The Committee’s enquiry into the transfer found that in 19 local authority areas up to 225,000 people could lose more of their earnings – as a result of Income Tax and National Insurance contributions combined with the withdrawal of Council Tax Benefit and Housing Benefit – than under the previous national scheme.?
This just goes to show, for some, work simply doesn’t pay under the new scheme. For them, work incentives have actually weakened rather than strengthened – the opposite of what the Government intended.??
Some of those 225,000 people stand to lose 97p for every extra £1 earned – a fundamentally perverse result. ??When the scheme was introduced, local authorities were also tasked with protecting vulnerable people such as poorer families, despite the fact that savings had to be made. However, many local authorities have passed on some or all of their reduction in funding for Council Tax support to local claimants by reducing entitlement to support.??
Around 230 local authorities introduced schemes which required claimants to pay minimum Council Tax payments. Of these, 133 local authorities offered no protection to vulnerable groups, other than pensioners and war pensioners.?
DWP on the one hand wants to simplify benefits by merging six benefits into the new Universal Credit. Yet here DWP and DCLG are complicating matters by localising Council Tax support.
The Committee has recommended that DCLG should develop a coherent set of guidelines which set out the extent of local authorities’ discretions and obligations, and how the Department will respond when it considers that local authorities’ actions jeopardise the achievement of its objectives, especially on welfare reform and incentives to work.??