webinar: how to future proof your council tax reduction scheme for universal credit
TRANSCRIPT
How to future proof your
Council Tax Reduction
Scheme for Universal Credit
Wed 11 Oct 2017
Housekeeping
• Audio check
• Please ask questions
• Poll and a survey
• Finish by 11:30
We make the welfare system simple to understand, so that people can make the decisions that are right for them
Speakers
Zoe Charlesworth Head of PolicyPolicy in Practice
Paul HowarthDirectorWelfare Reform Club
Ian JonesLegislation, Strategy and Policy OfficerLondon Borough of Hackney
Agenda
• Background to Council tax reduction and trends since 2013
• Arrears and collection rates
• Objectives of CTR schemes
• Hackney’s CTR scheme
• The need for change driven by Universal Credit
• Different models – winners and losers
666
Over to Paul
Council Tax Reduction: is your scheme fit for purpose – 5 years on?
Paul Howarth
A brief recap
April 2013
Default scheme
10% cut
DCLG policy
Most schemes
follow CTB
No really radical
schemes
Consultation
Trends since 2013 - New Policy Institute evidence
• From April 2017, 264 schemes include a PERCENTAGE CUT, or minimum payment, up from 259 in April 2016, and 229 in April 2013. Usually pre-assessment (e.g. 80% of liability maximum) though some apply the % cut after assessment. Everyone required to pay at least some council tax regardless of income, unless protected.
• 214 councils have reduced or REMOVED THE SECOND ADULT REBATE, 16 more than April 2016, and 40 more than April 2013.
• 100 councils have introduced a BAND CAP which involves limiting the amount of benefit received in higher value properties to the amount provided to those in lower value properties, 15 more than the previous year and 41 than in April 2013. The most common band cap applied is D.
Trends since 2013 - New Policy Institute evidence (2)
• 98 councils have LOWERED MAXIMUM SAVINGS LIMIT (the savings limit over which one is no longer eligible for Council Tax Benefit), 14 more than the previous year and 41 more than in April 2013. Most reduced the threshold to £6,000.
• 58 councils have introduced a MINIMUM CTR ENTITLEMENT , 13 more than in April 2013. A minimum CTR entitlement of £5 per week would mean that claimants entitled to less than this would receive nothing.
• 25 councils increased the INCOME TAPER (the amount by which support is withdrawn as income increases) from the CTB rate of 20p per £1. (3 councils lowered the taper).
Council tax arrears
• Total CT arrears £2.8bn (England) - DCLG
• An increase of £102m over 2015/6
• Citizens Advice report more referrals on CT arrears
• Some evidence that CTRS has contributed (NPI)
• Contributes to overall debt problems (StepChange)
Council tax collection rates – DCLG stats
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Poll: What would your main objective be if you were changing your CTR scheme?
Possible CTRS objectives
• Reduce cost of the scheme i.e. the cost of the benefit/discount
• Reduce administrative costs for the authority
• Reduce (or avoid increasing) council tax arrears and the cost of collection
• Align with Universal Credit
• Promote work incentives
• Define and protect vulnerable people
• Reduce poverty
• Simplify
Scheme modelling
Include future policies
Universal Credit National Living Wage/tax allowances
Understand current, uprated and proposed schemes
Costs Impacts at household level
SHBE
Benefit calculator
Scheme modelling
Other considerations
• Financial pressures likely to increase – funding for CTRS now part of business rates retention scheme
• Policy for those at or over pension age not likely to change soon so will still have to administer two schemes
• Perhaps now is the time to move away from pseudo-CTB schemes?
• Clear advantages in some form of direct link to Universal Credit but doesn’t have to mirror the assessment
• No scheme is perfect but broad-brush discounts with some discretionary back-up seem a good way forward
202020
Over to Ian
Ian JonesLondon Borough of Hackney
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Over to Zoe
Roll-out of Universal Credit
Advantages
• Chance to introduce a new scheme in a gradual manner
• Another agency is undertaking the assessment – the council can use this
• Can use the CTR scheme to support or mitigate the impact of Universal Credit
Challenges
• Monthly re-assessments- de minimus
- set assessment periods
- bands of similar income so no need for re-assessments
• Perceived fairness of having 2 schemes
Simple solution: keep the default scheme
What is it?
• Similar to current scheme but UC Max replaces the “Applicable Amount”
• Income for UC purposes PLUS UC replaces income
• No earnings disregards
General outcomes:
• This will usually cost slightly less than the legacy benefit scheme.
• For households not in work there is likely to be no difference in support
• For many earning households they will receive lower CTR as they will be receiving higher UC. Good news for LAs!
BUT……
This does not maintain the status quo – there will be winners and losers
In particular groups that receive lower UC than legacy benefits AND receive lower CTR.
This will happen if :
• the assessment of “needs” is lower under UC than under legacy benefits because this also reduces the income side of the equation (e.g. ending disability premiums)
• Income that is taken into account is higher under UC than legacy benefits (e.g. self employed and the minimum income floor)
Simple solution: keep the default scheme
Default scheme
Biggest losers
• The self-employed
• Working households containing a person with a disability
• Working households in receipt of ESA support
Winners
• Income from boarders: higher UC and higher CTR
The default scheme
Advantages
• Taper rate so gradual withdrawal of benefit
• Assessment process is known
• Already drawn up and just needs amending for local minimum etc
Disadvantages
• Some groups that lose out under UC also lose out under the default scheme
• Monthly change in UC = high volume of reassessments
• Little admin cost savings
• Difficult to explain
Banded Scheme
Biggest losers
• Those with high needs
• Disabled
• Multi-person households
Winners
• Single person households
A one person household with £250 per week may be fine. A four person household with £250 per week may need assistance
Banded Scheme
Advantages
• Easy to explain
• Flexibility
Disadvantages
• Unlikely to make administration savings as complexity may be the same as current scheme
• Re-assessment as income crosses bands
• Affects vulnerable groups and families
Discount scheme
Biggest losers
• Those on out-of-work benefits if discount is set at a a level that is cost neutral
Winners
• Working households
Discount scheme
Advantages
• Easy to explain
• Admin savings
• Only requires reassessment if UC ends or starts
• Those hit by UC will be protected from lower support in CTR
• Flexible
Disadvantages
• Fairness? Wide disparity of incomes will receive the same support
• Will need an income cut-off to contain claimant numbers
Banded discount scheme
Biggest losers
• Those on out-of-work benefits if discount is set at a a level that is cost neutral
Winners
• Working households
Banded discount scheme
Advantages
• Easy to explain
• Admin savings
• Only requires reassessment if moves into or out of work or UC ends or starts
• Those hit by UC will be protected from lower support in CTR (self-employed and disabled)
• Flexibility
Disadvantages
• Will need an income cut-off to contain claimant numbers
Conclusion
Universal Credit is coming and the status quo will not be neutral
The best scheme for an authority will depend on:
• Demographics
• Current scheme
• Political climate
• Overarching policies and local priorities
The effectiveness of your scheme can only be understood through detailed cost and social impact analysis
Questions
Next steps
Download our CTRS handout
Short survey:
• We value your feedback
• Ask further questions of Paul, Ian or Zoe
• Request a sample CTR report (bespoke and fully anonymised)
• Request a call to discuss modelling options for your CTR scheme
