Council Tax Benefit - call for reform by Select Committee
22/08/2007
One in three people who are entitled to it do not claim council tax benefit (CTB) and the Communities and Local Government Select Committee has now called for major reforms.
The call by the Low Incomes Tax Reform Group (LITRG) for a rethink was endorsed by the Committee’s report
Council tax benefit is the mechanism by which people can have their liability to pay council tax reduced or removed. The report says that the rules for CTB are too closely aligned to the benefit system. Many perceive it as a claim for financial support rather than an automatic entitlement to have their council tax liability reduced on account of their household income.
The Committee draws attention to two major failings in the current system:
* The CTB rules are too restrictive to help those in greatest need of relief. For example, 600,000 children live in households that are not eligible for CTB, yet are below the official poverty line.
* Take-up is so low that relief is not reaching many of those whom it is intended to help. Only about two thirds of those eligible actually claim CTB – saving the government an estimated £1.8 billion a year.
Many of the Committee’s recommendations are in line with LITRG’s evidence and we particularly support the Committee’s recommendations for rapid action to:
* rename CTB as a rebate;
* raise (and eventually abolish) the £16,000 savings cut-off to qualify for CTB;
* improve incentives to work by reducing the income taper of 20% applied to CTB.
Other recommendations by the Committee are longer term. These include proposals for:
* the government to investigate the scope for greater alignment between thresholds for council tax, other taxes, tax credits and benefits;
* better data sharing between government departments and local authorities to promote take-up;
* introduction of automatic assessment and billing for groups such as pensioners.