Proposed changes to 2019/20 Council Tax Reduction Scheme

Please note: this consultation closed November 2018 - thank you to everyone who took part.

We have evaluated and considered all of the feedback received during the consultation period. The changes to the scheme were approved by Cabinet in February 2019.

Agenda, minutes and papers from the Cabinet meeting - 12 February 2019.

What we consulted on

Have your say on our proposed changes to the Council Tax Reduction Scheme

If you are a Haringey resident liable to pay council tax (or who may become liable to pay council tax), we have recently consulted on proposals to change the current Council Tax Reduction Scheme (CTRS).

You may also wish to tell us your views about the financial implications of the proposals for you or the council.

Our consultation closed on 12 November 2018.

• Background
• What is Council Tax?
• What is the Council Tax Reduction Scheme?
• Whose entitlement to Council Tax Reduction could be affected?
• Why are we proposing changes to the Council Tax Reduction Scheme?
• What is the council's preferred option to change the Council Tax Reduction Scheme?
• Why would updating the scheme to align with some national welfare changes affect the level of Council Tax Reduction?
• Why is this the council’s preferred option?
• How much will the preferred change cost?
• Funding the preferred option
• What alternative changes to the Council Tax Reduction Scheme were considered?
• Case Studies
• Frequently Asked Questions
• How to have your say
• What are the next steps?

Background

The government abolished Council Tax Benefit in 2013 and every council was tasked with designing its own local scheme to provide financial support to those working age residents on low incomes. The scheme is called the Council Tax Reduction Scheme.

The scheme has not changed since it was introduced in 2013.

The council is proposing to change its scheme as it applies to working age residents in the borough.

The council is required to consult on its proposals and if the scheme proposals are agreed the council is required to have the new scheme in place by 11 March 2019 to start on 1 April 2019. If the proposals are not agreed the current CTRS remains the same.

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What is Council Tax?

Council Tax is based on the value of your property (in one of eight bands) on 1 April 1991. It part funds local services provided by the council. The level of Council Tax a household is required to pay is based on the defined band of the property you live in, less any discounts or exemptions for which you qualify.

As a London borough we also collect money as part of the Council Tax for the Mayor of London to provide police, fire and public transport services. This amount is included in your council tax bill.

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What is the Council Tax Reduction Scheme?

The Council Tax Reduction Scheme is a way of helping people on low or no income pay their council tax bill.

Currently, working age recipients who are not protected under the existing scheme (as explained below) are awarded a reduction of up to 80.2% of their Council Tax bill.

In Haringey, over 26,000 residents currently receive some level of support under the Council Tax Reduction Scheme.

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Whose entitlement to Council Tax Reduction could be affected?

All working age CTRS claimants. In addition, working-age residents who are not currently entitled to Council Tax Reduction could become entitled to it. In addition, working-age residents who are not currently entitled to Council Tax Reduction could become entitled to it.

The level of support provided to pensioners by the scheme is determined by the government, therefore if you are a pensioner the level of support you will receive will be unaffected by the consultation proposals.

As part of its existing local scheme, the council decided to protect working age people who were in receipt of disability related benefits or premiums by providing up to 100% support. The consultation proposals will not affect this group’s entitlement to this level of support.

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Why are we proposing changes to the Council Tax Reduction Scheme?

We are proposing to change the Council Tax Reduction Scheme because we want to provide more financial support to a group of our residents who we think most need it.

We also propose to align the scheme with some national welfare changes that have taken place since the scheme was introduced in 2013.

Therefore, we want to consult with the public on our preferred option, as well as alternative options that we’ve explored.

We want to strike a balance between the need to provide extra financial support to residents we think require it, whilst maintaining a scheme that is financially sustainable for the council’s wider budget.

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What is the council’s preferred option to change the Council Tax Reduction Scheme?

Option (a)

Our preferred option (a) is a combination of changes to prioritise additional support:

• Increasing the maximum level of Council Tax Reduction from 80.2% to 100% for working age residents with children

And

• Updating the scheme to align with some national welfare changes, some of which would affect the level of Council Tax Reduction for working-age claimants and some of which would not.

For the purposes of this consultation document, ‘children’ means:

• A child (ie a person under the age of sixteen), or
• A young person (ie a person aged between sixteen and nineteen) for whom child benefit is payable

There are case studies showing the likely effect of the preferred option under the sub-heading ‘Case Studies’ below. They show the likely effect of both the increase to 100% maximum Council Tax Reduction for working-age residents with children and the alignment with some national welfare changes. Further information about the proposal to align with some national welfare changes is provided in the document below:

• Summary of proposals to align with some national welfare changes (PDF, 70KB)

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Why would updating the scheme to align with some national welfare changes affect the level of Council Tax Reduction?

Council Tax Reduction is intended for residents who have a low income. Therefore, it is means-tested.

The existing means-test for working-age claimants is based on national welfare entitlement in 2013. The government has made changes to national welfare since 2013. This means that some of the language and figures used in the existing CTRS are out of date.

Therefore, the council is proposing to update the means-test.

This would include:

• Updating the amounts the government says you need to live on per week
• Updating income bands
• Updating deduction rates, and
• Updating the language used

The proposal to align with some national welfare changes would mostly either financially benefit working-age CTRS claimants or make no change to CTRS entitlement.

However, changes to income brackets and deduction rates could mean some working-age CTRS claimants pay up to 95p per week more Council Tax. This could happen if you live with a non-dependant adult, are not in receipt of a prescribed disability benefit or premium, and have no children in your household. Non-dependant adults are normally adult children or relatives who live with you.

The people most likely to be affected are those living with multiple non-dependants. However, for most people, it is expected that changes which could have meant they pay up to 95p per week more Council Tax would be off-set by the other proposed changes that make the CTRS more generous.

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Why is this the council’s preferred option?

We recognise that since Council Tax Benefit was abolished in 2013, some residents have increasingly struggled to pay contributions towards their Council Tax. We want to provide additional financial support to residents who have children because we believe that it balances affordability with the need to provide more financial assistance to those in most need. By raising the maximum level of support to 100% for these families, we would raise the entitlement of working age residents with children to the same entitlement that working age residents in receipt of disability related benefits currently receive under our local Haringey scheme.

We also propose to update our scheme to bring it in line with some national welfare changes that have taken place since 2013. This is proposed in order to make the CTRS up to date, easier to understand and reflect changes to inflation. These changes are automatically made for pensioners each year but have not been updated for working-age CTRS claimants since 2013. Most working age people without children would also receive additional financial support based on the changes we are proposing.

We are not proposing to bring the Council Tax Reduction Scheme in line with all national welfare changes, for example introducing the two child limit. This is because we think that would worsen the financial position of residents who are already in particular need.

We think the proposal to align with some national welfare changes balances the benefit of making the CTRS easy to understand by reflecting the national welfare scheme, and the desire to provide additional financial support to residents who are the least well-off.

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How much will the preferred change cost?

The proposed changes to the Council Tax Reduction Scheme would mean an additional, ongoing annual cost to the council. This is estimated to be £1.6m in 2019/20.

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Funding the preferred option

An increased cost to the council of the scheme could realistically be funded from its General Fund budget; or through raising Council tax; or using the council’s reserves, or a combination of the three.

We would propose to meet this cost from the council’s General Fund Budget. This is its council-wide budget for the revenue costs of all council services, except its landlord role. Regardless of whether Council Tax Reduction is increased, service areas will have to make further savings from 2019/20 due to ongoing reduction in our funding position and cost pressures. Increasing the level of Council Tax Reduction would add to the financial pressure on the council and could mean that service areas have to make additional savings. The implications of this would have to be addressed by the council, along with other budget changes, when setting its 2019/20 Budget and new Medium Term Financial Strategy in February 2019. This could lead to some council services that you receive having reduced funding as a result of Council Tax Reduction being increased.

Our understanding of further future service budget cuts being necessary is based on the council’s current financial forecast for 2019/20. This model already assumes that our Council Tax would increase by 2.99% for that year, although no decision has been made on this. To generate further Council Tax income to the General Fund would require us to put Council Tax up by more than 2.99% and, under government rules, this would necessitate a local referendum to be held and a higher increase supported. We do not propose to do this to fund the Council Tax Reduction Scheme.

We are also not proposing to use the council’s reserves because they can only be used once and do not provide an ongoing funding solution. We therefore do not consider it prudent to use them to meet the ongoing financial commitment of a council tax support.

We recognise these potential consequences of having to fund the proposed change to the CTRS but believe that increasing the support it provides is important for our most financially vulnerable residents.

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What alternative changes to the Council Tax Reduction Scheme were considered?

• Option (b): No change to the Council Tax Reduction Scheme
• Option (c): Increase the maximum level of CTR from 80.2% to 100% for all Working Age Claimants
• Option (d): Limit the amount of CTR received in higher value properties to the amount provided in a designated band
• Option (e): Alter the capital savings limit

It should be noted that the council could also reduce the maximum level of Council Tax Reduction from the existing rate (80.2%). However, this would not be consistent with the council’s stated purpose to provide increased support to residents in need and so is not put forward as an option here.

Option (b): No change to the existing Council Tax Reduction Scheme

We are not recommending this because we are committed to providing additional financial support to residents in receipt of Council Tax Reduction to alleviate the financial burden for families and other claimants.

Option (c): Increase the maximum level of Council Tax Reduction from 80.2% to 100% for all Working Age Claimants

We are not recommending pursuing this option because it would be a significant additional annual cost (£843,000) to the council’s budget. This would increase the additional annual cost of the scheme from an estimated £1.6m to £2.44m in 2019/20, and is considered to be more than the council can currently afford. Our preferred option strikes a balance between providing additional support to residents most in need and the financial impact on the council and its services.

Option (d): Limit the amount of Council Tax Reduction received in higher value properties to the amount provided in a designated band

The council could 'cap' the level of support based on the Council Tax liability of a designated Band. For example, if the limit was set at Band D, the maximum support a claimant could receive would be no more than they would get if they lived in property band E to H.

We are not recommending pursuing this option because it would significantly increase Council Tax bills for residents who are affected by the cap (those in bands above the limit). We recognise that claimants in receipt of Council Tax Reduction are financially burdened and need support.

Option (e): Alter the capital savings limit

Currently, if a resident has more than £10,000 in capital they do not qualify for support under the Council Tax Reduction Scheme.

We are not recommending changes to the capital savings limit because we believe the £10,000 limit strikes the right balance between recognising residents have a need to save and develop sustainable long-term financial plans, and ensuring the scheme reaches the most vulnerable residents.

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Case studies

The document below gives examples of how claimants across all council tax bands will be affected by the council’s preferred option.

It shows the likely effect of both the increase to 100% maximum Council Tax Reduction for working-age residents with children and the alignment with some national welfare changes.

• CTRS Consultation 2018 - case studies for all property bands (PDF, 83KB)

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Frequently Asked Questions

Please read our live FAQs document (available below). The document answers some frequently asked questions about the consultation proposals. If you require any further information regarding the consultation, please email us: CTRSconsultation@haringey.gov.uk

We will update the FAQs if any common questions arise that we haven’t already answered in the document.

• Download the CTRS Consultation FAQs document (PDF, 30KB)

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How to have your say?

Residents were able to respond using our online or paper survey form.

• Download the Council Tax Reduction Scheme Consultation booklet (PDF, 848KB)

We also ran a number of consultation drop-in sessions:

Contact

If you have any questions about this survey, please contact us at the address below:

• CTRS Consultation
  River Park House (5th Floor)
  225 High Road
  Wood Green
  N22 8HQ

When does the consultation end?

Our consultation ends on 12 November 2018.

Translated consultation documents

You can also view the consultation document in the following languages:

• Consultation booklet - Polish version (PDF, 171KB)
• Consultation booklet - Spanish version (PDF, 99KB)
• Consultation booklet - Turkish version (PDF, 138KB)

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What are the next steps?

The consultation will run for 10 weeks from 3 September to 12 November 2018.

We will publish the results of this consultation and the following steps on this page.

You can also view the council's draft scheme:

• Draft Council Tax Reduction Scheme (PDF, 1MB)

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