The Latest on Local Support for Council Tax

David Magor OBE IRRV (Hons)Chief Executive

Institute of Revenues, Rating and Valuation

Introduction

Spending Review 2010 Localise support for council tax reduced by 10%

from 2013 -14 Abolition of council tax benefit provision in the

Welfare Reform Act Part of wider policy giving councils increased

financial autonomy Enabling power for the new scheme to be contained

in a finance bill now before the current parliamentary session

Overview Broad parameters

Framework for support for eligible pensioners The importance of supporting incentives to work

LAs encouraged to collaborate to reduce costs LAs to consider how system can be simplified for

working age claimants LAs will seek to integrate arrangements for

providing support within council tax system Reform accompanied by a new grant Proposals to create local mechanisms to manage

financial pressures

Council Tax and Localism

It is now the Localism Act 2011 More scrutiny on levy Just how far does the proposed power of

competence go? Referendum on levels of council tax above stated

thresholds Neighbourhoods, Community Councils and Parishes

– a new power base? How does all this impact on local support for council

tax?

Establishing local schemes (1)

Likely to be a minimum of central criteria. Develop model schemes which could be recommended

to local authorities. Information from the UC system ought to be available to

local authorities for use in the administration CTB replacement schemes.

The rules relative to changes of circumstance should be identical for both schemes any change in entitlement to UC should automatically trigger a recalculation of the CTB replacement.

Data Protection may be an issue in sharing data across systems

Establishing Local Schemes (2)

Analysis of caseload Impact analysis Developing a scheme Factors to be covered by schemes Consultation Adoption of the scheme Revisions to schemes Default schemes

Administering Local Schemes

Making an application Appeals

To the local authority To another body

Arrangements for individuals subject to immigration control or are not habitually resident in the UK

Data Sharing

Data sharing to design schemes Data sharing to process claims within local schemes Provision in the Welfare Reform Act Will be subject to a protocol between CLG and DWP Establishing data sharing

ATLAS LACI LAID ETD CIS Hubs

Vulnerable Groups

Pensioners Passported Claimants Means Tested Claimants

Vulnerable Groups Child Poverty Act 2010 Disabled persons (Services, Consultation and

Representation) Act 1986 Housing Act 1996 Equality Act 2010

Benefit cost funding

The authorities that will receive grant The position on parishes Powers to pay grant Methodology for distributing grant Frequency of grant allocation Grant allocation in future Spending Review periods Limits on spending Maximising the tax base Managing pressures through the collection fund

The Overall Funding Mechanism The government’s consultation on localising support for council

tax introduced the proposal to transfer the funding of council tax support from demand-led AME (Annually Managed Expenditure) to DEL (Departmental Expenditure Limits)

The Government is proposing to pay grant to billing and major precepting authorities to bring down council tax requirement rather than allocate it to the Collection Fund

This will mean the tax base will have to take account of the local scheme in a similar manner to discounts

This issue could create problems for Local Precepting Authorities (parish councils and town councils) because if the tax base is reduced and they do not receive grant then parish band D will go up

This could be a particular issue if referendums are extended to some parish councils.

Calculating the Council Tax under the new rules

Grant allocation

The DCLG has indicated that a separate technical consultation will be held on the specific factors and indicators which should determine the level of grant allocated to a particular authority. Issues to be considered in this consultation will include:

The basis for allocation (what factors are taken into account in distributing grant)

The frequency of allocation (how frequently grant is adjusted – annually or less annually).

Grant allocation

The relevant factors for the basis of allocation could include:

The relative size of eligible claimant groups Previous expenditure Other indicators – unemployment levels etc Council tax costs

Grant allocation

The issues that will need to be considered are: What are the advantages – and disadvantages of

using previous expenditure to determine shares of funding?

Is there a case for using previous expenditure initially?

What other factors could be taken into account as well or instead?

How should Government balance the need to reflect costs with the importance of incentivising local authorities to manage down demand/ensure there is accountability over council tax levels?

Grant allocation

Consideration will need to be given to the frequency of allocation.

There are two broad options:

Reflecting as closely as possible levels of take-up or demand, by adjusting as frequently as is practicable. This would achieve a better match between needs and grant across all authorities and would tend to reduce the financial risks to authorities

Leaving the grant allocation unchanged for several years. This would provide local authorities with greater certainty about their allocation in future years and help with financial planning; it would also enable a local authority to gain if liabilities under its scheme were to fall during that period.

Local precepting authorities

Option one - pass no money on Disregard the parish share entirely in distributing the total grant

between billing and precepting authorities Pass the parish share to billing authorities – but with no

obligation to pass it on to parishes

Implications Does not require additional legal powers Administratively simple for billing authorities – more complex for

central government if parish share has to be identified Could lead to big leap in Band D for some parishes – may mean

that some get caught by any referendums principles

Local precepting authorities

Option two - pass money on Pay grant directly to parishesImplications Requires additional legal powers Highly administratively complex for central

government Minimises impact on Band D Unclear how this could operate under

retained business rates

Local precepting authorities

Option three - pass money on Pay grant to billing authorities with a requirement to pass the

grant on to parishes Paying grant to billing authority, with requirement to pass on

through council tax systemImplications Requires additional legal powers Degree of complexity for both central and local government –

integrating within the council tax system could make less administratively onerous

Minimise impact on parish Band D Unclear how this could operate under retained business rates

Administration Costs and Transition

Administrative cost Implementation costs (£80k on the way to

billing authorities and £27 to major precepting authorities)

System apportionment Transitional arrangements Cost of transition Link to existing subsidy arrangements New Burdens Assessment

Current matters under consideration Delivery Group

Timetable Model Schemes Data sharing LA Software Forecasting Finance Issues

Data Sharing New Burdens Grant Distribution Local Precepting Authorities Pension Age Regulations Procedural Regulations Transitional regulations Prescribed Matters for Local Schemes Collection Fund Regulations Council Tax Base Regulations

Fraud

What structure? SIFIS? Enabling statute Specific powers or general powers? Developing local services Risk based verification

Protecting pensioners and the vulnerable in Ashfield

Under the new scheme the amount provided to support Council Tax benefit will be reduced by 10% amounting to £1.04m

Annual Council Tax benefits £10.4m Less: 10% reduction as proposed £ 1.04m Less: Protection for pension age groups £ 4.68m Balance to be used for working age £ 4.68m

This means that the assistance with Council tax for working age claimants will be reduced by around 19% which means that in future working age claimants will be entitled on average to around 80% of the their current entitlement.

The Ashfield caseload

12,700 total caseload Working age 7,300

ISA/JSA etc Earners Non earners Second adult

Elderly 5,400

Protecting pensioners and the vulnerable in Hertsmere

Under the new scheme the amount provided to support Council Tax benefit will be reduced by 10% amounting to £695K

Annual Council Tax benefits £6,954 Less: 10% reduction as proposed £ 695 Less: Protection for pension age groups (50%) £3,477 Balance to be used for working age £2,782

This means that the assistance with Council tax for working age claimants will be reduced by around 18% which means that in future working age claimants will be entitled to around 80% of the their current entitlement.

The Hertsmere caseload

6,800 caseload Working age 3,830

ISA/JSA etc Earners Non earners Second adult

Elderly 3,000

Protecting pensioners and the vulnerable in Durham

Under the new scheme the amount provided to support Council Tax benefit will be reduced by 10% amounting to £6.3m

Annual Council Tax benefits £63.0m Less: 10% reduction as proposed £ 6.3m Less: Protection for pension age groups £30.9m Balance to be used for working age £25.8m

This means that the assistance with Council tax for working age claimants will be reduced by around 19% which means that in future working age claimants will be entitled to around 80% of the their current entitlement.

The Durham caseload

63,257 total caseload Working age 32,115

ISA/JSA etc Earners Non earners Second adult

Elderly 31,142

Options on work incentives

Run on Disregards Non-dependant deductions Progressive manipulation Second adult rebate Progressive taper Cash award

These all have a cost

Constraints

System Funding Capping Protecting vulnerable groups Transition Setting aside a sum for extraordinary events Political dimension Timetable Adverse consultation

What are the realistic options for Billing Authorities?

Maximise the tax base and utilise the discount changes Adjust the tax base provision Fund the 10% locally from own resources either partially or fully

The Billing Authority proportion The Precepting Authority’s proportion

Continue with existing scheme less up to 10% cost and protecting vulnerable groups, achieved by either/or A straight cut of the appropriate percentage for all non protected

claimants – the “equal pain” approach A flexible approach to minimum benefit or a cap A regressive taper A modified existing scheme protecting vulnerable groups and

reducing cost

Risk Sharing

Sharing risk through the collection fund Integration of schemes Deficit or surplus in the collection fund Shared the following year? Should major precepting authorities be able to

influence scheme design Varying precepts in year

To reflect collection rates A new power

Managing the Risk of Fraud and Error The consultation document suggests that it is for local authorities to

administer support for council tax in as fair and efficient a way as is possible whilst minimising errors and the risk of fraud.

The Department for Work and Pensions will be launching the new Single Fraud Investigation Service (SFIS) in April 2013.

Local authority administration of fraud and error in LSCT should continue, whilst working in partnership with SFIS where the need arises.

In the long term LAs will have to make their own arrangements The risk of fraud and error should be minimised by effective data

sharing across all areas of the public sector. The Government have yet to realise the potential savings of

comprehensive public sector data sharing coupled with effective partnerships with the private sector.

Managing risk

Billing authorities should be able to share the risk of any scheme across the tiers of administration and with Precepting Bodies

Strict budgetary control is necessary to manage the financial risk

Managing the Collection Fund and regular reporting will be critical

There is however a need for more discussion on how risk is managed across the tiers of local authorities and between central and local government.

Collection Issues April 2013 and Beyond

Collecting residue debt identical to the reduction in LSCT

Collecting small balances from those in receipt of LSCT

Do you apply for a liability order? If so which remedy do you use? If the debt remains unpaid how will you prove

culpable neglect and/or wilful refusal?

What is the IRRV doing?

Membership of the Reference Board and the Delivery Group

Partnership with “Destin” on a modelling tool Partnership with “Coactiva” on a Risk Based

Verification tool Partnership with “Entitled to” on a UC/LSCT

calculator Delivering a “Resource Pack” Developing a Mutual model for residue fraud teams

and a social enterprise for UC/LSCT/Benefit advice