POLITICS

Council Tax Benefit Cuts Leave Poor Families Worst Hit, Says IFS

21/01/2014 10:22 GMT | Updated 25/01/2014 21:01 GMT
Image Source via Getty Images

Poor families are bearing the brunt of the coalition's cuts to council tax benefit, driving many of them to seek advice on how to handle their debt, according to a new report by the Institute for FIscal Studies.

The new report undermines claims by ministers that the coalition's austerity agenda is hitting the rich more than the poor, as most (70%) of the families that were previously exempt from paying council tax now facing the extra burden of paying it.

After council tax benefit was abolished last April, local authorities were asked to design their own schemes which had to protect pensioners but could see poor families made to pay more council tax. The only way they could maintain the previous level of support was by shouldering a 10% cut of £414 million in funding.

Most local authorities in England reduced council tax support this year, with 2.5 million working age households affected by an average of £160.

Labour-controlled councils were more likely than others to introduce minimum council tax payments. However once factors like local poverty is taken into account, the IFS report finds that Tory councils are more likely to introduce minimum council tax payments, 14% more likely than Labour councils and 25% more than Liberal Democrat ones.

The extra council tax burden on poor families also drove more to seek debt advice, with the Citizens Advice Bureau getting 30% more enquiries in July-September 2013.

Stuart Adam, senior research economist at IFS and co-author of the report, said: "Localising council tax support has, of course, led to considerable variation in the level of support available. Low-income working-age families are now 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."

Gillian Guy, chief executive of the Citizens Advice Bureau, 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.”

Local government minister Brandon Lewis 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.”