briefing on local support for council tax david magor obe irrv (hons) chief executive institute of...
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Briefing on Local Support for Council Tax
David Magor OBE IRRV (Hons)Chief Executive
Institute of Revenues, Rating and Valuation
Background Spending Review 2010 Localise support for council tax and reduce the
subsidy 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
Why localise support for council tax the CLG view
Give local authorities (LAs) a greater stake in the economic future of their area
Give LAs the opportunity to reform the system of support for working age claimants
Reinforce local control over council tax Give LAs a degree of control on the impact of the
10% reduction Give LAs a financial stake in the local support for
council tax (LSCT)
Overview Broad parameters of LSCT
Reduce subsidy by 10% Existing subsidy to be replaced by a new grant Create a local scheme Provision of a default scheme Protection for eligible pensioners and locally determined
vulnerable people Scheme should support 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 Local mechanisms to manage financial pressures
Council Tax and Localism
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?
The Reference Group
Challenge Risks and opportunities Identify interactions Consideration of specific policy issues
through the use of networks Act as a sounding board Membership
The Delivery Group
Timetable Model Schemes Data sharing LA Software Forecasting Finance Issues Membership
Establishing a local scheme (1)
Analysis of existing caseload Impact analysis Developing a scheme Factors to be covered by schemes Consultation Adoption of the scheme Revisions to schemes Default schemes
Establishing a local scheme (2)
Likely to be a minimum of central criteria. Information from the Universal Credit (UC)
system to be available to local authorities for use in the administration LSCT
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 LSCT
Pensioners and Vulnerable Groups
Pensioners Passported Claimants Means Tested Claimants
Potential vulnerable groups Child Poverty Act 2010 Disabled persons (Services, Consultation and
Representation) Act 1986 Housing Act 1996 Equality Act 2010
Options on work incentives
Run on Disregards Non-dependant deductions Progressive manipulation Progressive taper Cash award Non cash facilities
These all have a cost
Constraints
System Funding Limitation and referendums Protecting vulnerable groups Setting aside a sum for extraordinary events Political dimension Timetable Adverse consultation Collection issues
Administering Local Schemes
Initial transition The application Calculation and award Notification Excess LSCT Appeals
To the local authority To another body
Arrangements for individuals subject to immigration control or are not habitually resident in the UK
Delivery Building on existing approaches The existing structure
Personal allowances Premiums Non-dependant deductions Resources Disregards Second adult rebate Taper Excess benefit
Forecasting Formulating the scheme Publicity Systems
Data Sharing
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 Link with UC
Fraud
What structure? SFIS? Enabling statute Specific powers or general powers? Developing local services High level business case for SFIS Risk based verification
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 council tax 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
Benefit cost funding The authorities that will receive grant
Billing Authorities Major Precepting Authorities
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
Administration Costs
Administrative cost Implementation costs (£80k to billing
authorities and £27 to major precepting authorities already paid)
On going costs Link to existing subsidy arrangements New Burdens Assessment
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
Legislative progress
The Local Government Finance Bill The need for subordinate legislation Draft regulations where needed Statements of intent Legislative timetable
Pension Age Regulations
Commitment to protect pensionersDefinition in relation to ageMixed age couples – DWP approachTreatment of war pensionersUprating for pension aged claimants
Transitional Regulations
A claim under CTB on or before 31st March 2013
A claim under CTB on or after the 1st April 2013
A change of circumstance declaration for CTB
A change of circumstances for UC
Collection Fund Regulations
Possible amendment to the Local Authorities (Funds) (England) Regulations 1992
Precepts The proposal to vary the payment schedule Views being sort from the two groups The potential for an alternative proposal The impact of the in-year financial pressure
on Major Precepting Authorities
Council Tax Base Regulations
Amendment to existing regulations rather than new ones
Calculation of the impact of LSCT on the council tax base
The council tax base for baseline purposes likely to remain gross of LSCT
Timeline
The Timetable
Spring 2012 Primary legislation in passage through Parliament. Government preparing and consulting on draft
secondary legislation. Initial thoughts on local scheme Discussions between billing authorities and major
preceptors Political direction Technical consultation on grant distribution
The Timetable
Summer 2012 Primary legislation passed. Secondary legislation prepared Develop operational project plan Billing authorities designing local schemes Scoping IT changes Consultation with Major Precepting Authorities Modelling proposed scheme Public consultation
The Timetable
Autumn / Winter 2012 Secondary legislation passed (early Autumn) Prepare risk assessment Grant allocations published Establishing local schemes – final consultation with
major precepting authorities and public, revisions to schemes.
Technical changes to systems begin Setting budgets. Adopt local scheme
The Timetable
Winter/Spring 2012/13 Finalise system changes Prepare tax base Set council tax and formally adopt scheme Publicise scheme Agree monitoring arrangements Billing
Operating the scheme in a small shire district
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 caseload
6,800 caseload Working age 3,830
ISA/JSA etc Earners Non earners Second adult
Elderly 3,000
Operating the scheme in a large unitary council
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 caseload
63,257 total caseload Working age 32,115
ISA/JSA etc Earners Non earners Second adult
Elderly 31,142
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 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
The risks of localisation
If the current financial crises continues, benefit costs will continue to rise.
Collection performance could suffer significantly with the 10% reduction which will fall largely on working age claimants.
The impact of the reduction in housing costs as a result of housing benefit changes and the cap will have a cumulative affect on the ability to meet council tax and other domestic bills
CTB is currently based on actual as opposed to estimated eligibility. Therefore an increase in the number of claimants will automatically lead to an increase in CTB costs This will expose councils to increased expenditure.
Any cap on expenditure needs to protect local authorities from the burden of increased caseloads.
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 the financial 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.
And finally, 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 Centre” for LSCT Developing a Mutual model for residue fraud teams
and a social enterprise for UC/LSCT/Benefit advice