A new poll tax? London's poorest and councils hit hard by Council Tax changes

July 17, 2014

London’s poorest families are struggling to pay council tax bills from their limited benefit income following cuts to council tax support, according to new figures published in a joint report by two leading London anti-poverty charities, the Child Poverty Action Group and Z2K.

‘A New Poll Tax?’ finds that nearly 4 in 10 Londoners affected by the replacement of Council Tax Benefit by local schemes have been unable to meet these payments and have received a court summons.

The report also reveals how these changes mean overstretched London boroughs have been saddled with falling collection rates and rising collection costs.

This is the first comprehensive study of the impact on Londoners of the abolition of Council Tax Benefit and the accompanying 10 per cent funding cut to the replacement schemes. The report evaluates the first year in operation of the new council tax reduction schemes since the changes in April 2013.

The report reveals the changes have caused widespread hardship for individuals and families already struggling on low wages or reliant on benefits and made it more complicated for councils to collect council tax payments – many resorting to the use of private bailiffs to make collection on their behalf.

The report finds that:

• Low income Londoners are facing higher council tax bills: At least 313,519 Londoners were expected to pay more council tax under their local Council Tax Reduction Scheme (CTS) in 2013/14 than they would have under the old Council Tax Benefit. On average they were charged £151 more per annum – the equivalent of two weeks Jobseekers Allowance. These claimants are now liable for over £91.5 million in Council Tax annually.

• 39% of affected Londoners have been sent a court summons for non-payment: 118,027 people who are paying more Council Tax under the new CTS schemes have been issued with a court summons because they have fallen behind on payments.

• Court costs have added £10m to the amount owed by Londoners: In 2013/14 almost 93,000 CTS claimants were charged over £10 million in court costs.

• Nearly 16,000 cases have been referred to bailiffs: 15,944 cases were referred to bailiffs in 2013/14.

• Local authorities are facing lower collection rates: The collection rate for Council Tax owed by CTS claimants with an increased liability in 2013/14 was on average 81 per cent, compared to average collection rates of 97.4 per cent in 2012/13.

In response to these findings Z2K and CPAG are calling on the Government to scrap this policy and return to a national, fully funded system of Council Tax Benefit. It concludes that requiring individuals and families living on very low incomes to pay council tax will inevitably impoverish many – according to the IFS, child poverty is projected to rise by nearly one million by 2020 due largely to changes to tax and benefits.

In the meantime, the report urges the Government to restore 100 per cent subsidy for local Council Tax Support schemes in 2015/16 and for London Boroughs to protect their poorest residents, following the example of the seven London boroughs who have continued to pay full subsidy to their poorest residents.

Alison Garnham, Chief Executive of Child Poverty Action Group, said:

“This research shows the direct impact that changes to council tax funding are having on the poorest families. Families tell us that it is simply not possible for them to make these make payments from household budgets already stretched to breaking point.

“Problems are being exacerbated for residents by councils increasing the debt owed by adding additional charges to a bill they are already struggling to pay.

“We call on central government and local authorities to stop taxing households that are too poor to pay.”

Z2K Chief Executive, Joanna Kennedy said:

“Although the responsibility for this policy clearly lies with the coalition Government this report demonstrates that many London local authorities have adopted policies that are pushing thousands of low income Londoners further into poverty.

“Any policy that results in nearly 40 per cent of those affected being sent a court summons clearly isn’t working.”

“While it is vital that the Government restores the funding cut in the meantime local authorities have an opportunity to do more for their residents.”- ENDS -

Notes to Editors

• Browne J, Hood A, Joyce R (2014) Child and working-age poverty in Northern Ireland over the next decade: an update, London: IFS.

• For more information or the full report, please contact CPAG on 07816 909302 or Z2K on 07540993431

• CPAG is the leading charity campaigning for the abolition of child poverty in the UK and for a better deal for low-income families and children. CPAG is the host organisation for the End Child Poverty coalition, which has members from across civil society including children’s charities, faith groups, unions and other civic sector organisation, united in their campaigning for public and political commitment to ensure the goal of ending child poverty by 2020 is met. Visit cpag.org.uk

• The Zacchaeus 2000 Trust (Z2K) is a London-based charity addressing poverty issues caused by unfairness in the law, legal and benefits system. We help vulnerable debtors to gain justice against these unfair systems. For more information see http://z2k.org/