THE BLOG

Council Tax: Hefty Bills for Poorest Families Could Lead to Postcode Poverty

28/03/2013 10:29 GMT | Updated 28/05/2013 10:12 BST

You'd think the last thing the Coalition and local councils would want to be doing at the moment is increasing taxes on low income families. And, no, it's not an April Fool's Day joke - that is exactly what's happening across England with the introduction of localised Council Tax Support from next week on 1 April.

Research by the New Policy Institute for the Joseph Rowntree Foundation has canvassed all 326 English local councils about their plans and analysed the impact on families on low incomes. This shows that 2.4 million such families are facing a tax increase of an average of £138 over the coming year.

The national Council Tax Benefit (CTB) scheme has been abolished and local authorities have had to devise their own systems, albeit with 10% less funding. A decision was made by the UK government to protect pensioners, which means tax rises are mainly being passed onto those of working-age.

But CTB never really was a 'benefit' as such. Most benefits involve a handover of cash from the state to a person (e.g. JSA or child benefit) but with CTB, no-one actually gets any money. Instead of being a transfer, it is a decrease in liability to pay council tax and, more correctly, a rebate rather than a benefit.

Although nearly 60 councils in England (as well as the Scottish and Welsh Governments) will retain their current arrangements, absorbing the cut into their overall budgets, most will increase the tax on residents whether they are out of work or not. A smaller number - around 300,000 - will have to pay over £300 a year more and 1.9 million will have to start paying Council Tax for the first time.

Two out of three families getting the old CTB were already below the income poverty line and the new support schemes will eat into their incomes even further at a time when they can ill-afford it. This chart also shows 300,000 families hovering just above the poverty line, who are in danger of falling below it once those large tax increases have to be paid.

This is going to be difficult for councils to collect, but even harder for people to pay. Making up the shortfall will be beyond most, with working hours under pressure and benefits falling behind inflation.

And the impact of the changes is clear - they are going to hit the pockets of families in poverty.