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UK Politics

Low income families ‘worst hit’ by cuts in council tax benefit as thousands struggle with household bills

Calls to a helpline have risen 87 per cent

Low-income families in deprived areas are bearing the brunt of the Government’s cuts in council tax benefit, according to research published today.

The findings undermine the Coalition’s pledge that its austerity programme is hitting  the better off rather than the poor.

When council tax benefit was abolished last April, English local authorities were ordered to design their own schemes. They had to maintain the same help for pensioners but could ask low-income working age families to pay more council tax, or they could keep the previous level of support by absorbing a 10 per cent cut worth £414m in central government funding.

The Institute for Fiscal Studies (IFS) found that the shake-up reduced entitlement for 2.5m working households by an average of £160 in the current financial year. Some 70 per cent of authorities asked for a minimum payment and only 20 per cent found the money to maintain the previous level of support. 

Of the two million working-age households who had all their bills met under the old system, 1.4m (70 per cent) are now paying some council tax. One million pay at least £85 a year; a quarter at least £170 and 10 per cent at least £225.

According to the IFS, authorities in more deprived areas were more likely to bring in minimum payments because their government funding cuts were greater. The number of pensioners was also a factor.

Overall, Labour-run town halls were more likely to introduce such payments. But, when deprivation was taken into account, Conservative-controlled authorities were more likely to ask low-income families to pay council tax than Labour or Liberal Democrat authorities. For example, Labour-run Birmingham and Manchester brought in an 8.5 per cent minimum payment last April, while Tory-controlled Westminster and Kensington & Chelsea did not.

Stuart Adam, a senior research economist at the IFS, said: “Localising council tax support has led to considerable variation in the level of support available. Low income working age families are now more likely to receive more help with their council tax if they live in a better off area without too many low income pensioners among their neighbours. Conversely, working age people living in poorer areas and in areas containing more low income pensioners receive less help.”

The change provoked a flood of inquiries at debt advice services by people worried about going into arrears because of having to pay some council tax, the IFS said.

Gillian Guy, chief executive of Citizens Advice, said: “The localisation of council tax support has thrown household budgets into disarray as people try to find extra money to cover the cost of paying council tax for the first time. The impact of these changes was immediately evident as 37,000 people sought online help from Citizens Advice about council tax in April 2013 – 87 per cent higher than the same period in 2012.”

Brandon Lewis, the Local Government Minister, said: "Spending on council tax benefit doubled under Labour and is costing taxpayers £4bn a year - equivalent to almost £180 a year per household. Our reforms to localise council tax support now give councils stronger incentives to support local firms, cut fraud, promote local enterprise and get people into work. We are ending Labour's something for nothing culture and making work pay.”