The city council’s cabinet will be discussing options for the local level of council tax support for almost 7,000 low income households for the next year at its meeting on Tuesday. It could keep support as it stands or reduce support, bringing potential savings of £835,000 per year.
Under Westminster Government council tax support laws, eligible pensioners are offered protection but people of working age are not. Every local authority is required to decide how much support is offered locally to households on low incomes.
At the moment, Lancaster City Council is the only district council in Lancashire which offers 100 per cent payments to working-age people on low incomes who qualify for council tax support. It is one of 36 councils nationally to do this.
However, a number of the other Lancashire authorities are re-thinking their scheme for April 2022 and may adopt the current Lancaster model of 100 per cent support, a report for this month’s cabinet meeting on Tuesday states. But Lancaster also has an option to cut support.
Local authorities have an option to choose the level of council tax support they offer. But they have to review it every year and confirm it. The Government says councils should consider protection for vulnerable groups but also support work incentives through the Universal Credit system.
A report for the cabinet meeting in Morecambe states the local council tax support scheme overall is estimated to cost £11.2 million in total each year. The cost can vary over time with council tax rates, the number of claimants and council decisions.
Due to the impact of the pandemic, support costs have risen recently, albeit temporarily. The costs to support working-age households on low incomes is £7million while it costs £4.2million to help pensioners on low incomes.
A report for the cabinet meeting states: “The council is currently facing a significant budget deficit in 2021/22 and beyond. As a result there is pressure to reduce costs where possible. Lancaster City Council is one of only a few councils which provides 100 per cent support for working-age claimants, at an annual cost to the council of approximately £835,000 per year. So this is an area where changes could provide savings to reduce the deficit.”
If councillors wish to revise the scheme to achieve gain some savings, the report advises that changes should be balanced against the council’s priorities and the impact on working-age households and vulnerable people; the extra effort and cost of council tax recovery work, and the potential costs of developing new arrangements such as consultation and legal work.
Two options are highlighted for cabinet to consider.
The first, recommended by council officers, is to retain the existing local scheme, subject to minor changes to match changes in Housing Benefit rules.
The cabinet report states: “The existing scheme is considered soundly structured and works well, and offers maximum support for low income families, who may otherwise find themselves in mounting debt. The current forecast assumes the continuation of the existing system and, as such, maintaining current levels of support would normally have no impact on the council’s financial forecast.
“However, costs have increased in recent years with increased take-up due to Covid-19, although the year 2021/22 has seen a slow but steady decline in the number of residents receiving council tax support, which should reduce costs if the trend continues. Retaining existing policy principles in-line with other key welfare benefits promotes equality.”
The second option for councillors is to reduce benefit entitlement for working age claimants.
The report states: “Currently, 10,779 residents claim local council tax support in the district. This has reduced from a high of 12,202 in 2014. Because pensioners make up 35 per cent of claimants (3,821 people), any cut to the level of support falls on the remaining 65 per cent of working age people on low incomes (6,958 people ), which has reduced from 7,253 in the previous year.
“A reduction in support could arguably provide claimants with further incentives to work, reducing their reliance on benefits, although the jobs market is particularly uncertain at this difficult time. This option will have greater adverse financial impact on working-age households, but would help protect other council services by requiring less savings to be made.
”If levels of support are reduced, the council would be tasked with the difficulty of collecting this debt from the more-vulnerable members of society, increasing the workloads and costs associated with council tax recovery.”
The cabinet’s option on Tuesday will then go to the full council for final approval.