RENT OR COUNCIL TAX ? THE TAXPAYER DILEMMA THE PUBLIC ACCOUNTS COMMITTEE SHOULD BE FACING…
A report issued by MPs on the Public Accounts Committee states that local authorities are engaging in increasingly risky commercial ventures that threaten public services and which will leave council taxpayers with hefty bills if they fail.
‘”If commercial decisions go wrong, council tax payers will end up footing the bill and other services will be under threat” warns the Committee in its report.
However, the warning is issued against a backdrop of declining local authority income from government grants and council tax. The dabbling in potential risky investment schemes and banking arrangements reflects the increasingly beleaguered and cash-strapped position that local authorities are actually in.
It is a symptom and not a cause.
Local authority income from local taxes and central government fell 25.2% between 2010-2011 and 2015-2016. A further reduction of 7.8% in real terms is widely anticipated by 2019-20.
Meg Hillier, Committee Chair, stated: “It is alarming that the Department of Communities and local government does not have a firm grasp of the changes happening locally”.
The revenue problems that local authorities face arise from changes to council tax under the Local Government Finance Act 2012 and the abolition of national council tax benefit in 2013. The Ollerenshaw Report issued on 31 March 2016 into local council tax reduction schemes which revealed a 40-50% increase in council tax non-payment since 2013, coinciding exactly with the abolition of council tax benefit.
Added to this come the cuts and caps on other welfare benefits – including the latest cap imposed on 7 November 2016 hitting some 88,000 households across England. This cap reduces the maximum amount in benefits that households receive from £26,000 to £23,000 a year in London and to £20,000 outside the capital.
As with previous caps, the biggest impact is on limiting the amount of housing benefit payable. The November 2016 cap means a national reduction in benefit expenditure of £100 million, but the money being saved is not going back to local authorities.
What does this mean for ground level where the effects of cuts are hitting?
THE CHOICE FACING MANY TAXPAYERS – RENT OR COUNCIL TAX ?
What does this mean at ground zero – where councils operate and council taxpayers actually live and black holes are appearing in the public and private purse?
Inevitably it means a greater squeeze on the ability to make rent and council tax payments, both of which are classed as priority debts in the view of most debt advisers. For many affected this means skipping an instalment in council tax, in order to try and keep a roof over their heads.
However, the picture is more complex. Faced with a cut in overall income, it might be imagined that most tenants opt to pay rent first, but this not the case, as any housing adviser knows. Sometimes people pay council tax first and thus accrue rent arrears, putting their homes at risk of repossession by the landlord.
Whatever happens there are serious knock on effects for the public and private sector. With mounting debts, either of rent or council tax (or both) it is not just individual benefit recipients who are adversely affected. Housing associations, private landlords as well as council taxpayers all go on to bear the brunt of these benefit cuts. When a household is repossessed for rent arrears it leads to homelessness, save for any children and vulnerable adults in a property, who then often have to be housed by the local authority. This incurs yet further costs to the public purse.
Growing levels of default also mean further pressure is placed on local authorities attempting recovery via an already over-loaded court system. All too often the little that is being recovered is absorbed in enforcement costs.
Public Accounts Committee Report ‘Financial Sustainability of Local Authorities’ issued 16 Nov 2016.
Financial Times 18.11.16
National Housing Federation bulletins on benefit caps
It’s not just the United States that has a new President entering office. The Lord Chancellor, the Right Honourable Elizabeth Truss MP, has appointed Gary John Richard Garland as the new President of the Valuation Tribunal for England, replacing Professor Graham Zellick, who retired as the first VTE President in August 2015.
Mr Garland, aged 58, was called to the Bar in 1989, served as an Asylum Support Adjudicator between 2001 and 2003 and has sat at the magistrates’ court where he served as a Deputy District Judge (Magistrates’ Court) from 2005. He will be based in London and will serve as President for a term of four years until September 2020 on a salaried part-time working basis of 60%.
The President oversees the running of the Valuation Tribunal system and is responsible for issuing Practice Directions on the conduct of proceedings. The President also hears cases involving important points of law.
A new appointment process for new lay panel members of valuation tribunals began from 6 October 2016, concentrating upon the Midlands, the North West and South West of England. This follows the withdrawal of paid lower tier tribunal judges from VTE panels in the summer. This was a response to the very small number of appeals by low income taxpayers on local council tax reduction schemes which were reaching the tribunal. Overall the numbers had fallen far below the 14 000 appeals predicted by the Government in 2014. After initial training and sitting with more experienced panel members the new panel members should begin hearing cases in 2017.
The lack of reduction-related appeals undoubtedly reflects the complexity and technicalities of local schemes (which replaced council tax benefit in 2013) which are a major challenge for many advisers and puts appealing simply beyond the majority of would-be claimants without specialist legal support. Yet the VTE provides the only effective route of challenge to adverse decisions and its workload is likely to increase over winter 2016/2017 in respect of other decisions with a shrinking tax base.
NEW CHANGES TO COUNCIL TAX BILLS REFLECT CARE FUNDING PROBLEMS IN ENGLANDIt is doubtless somewhat inconvenient that just as councils have worked out their latest local reduction schemes, and are calculating their bills for 2017-2018, the Government has ordered alterations to the contents and format of council tax bills in England and Wales.
The Council Tax (Demand Notices) (England) (Amendment) Regulations 2017 SI 13 amend the existing regulations on demand notices. Bills must provide additional information about expenditure on adult social care functions to be presented along with notices in the financial year beginning in 2017 and in subsequent financial years.
SOCIAL CARE FUNDING PROBLEMS
Taxpayers are to be made aware that bills are widely expected to be higher in 2017/18, reflecting the growing shortfalls in funding social care. Originally, rules required local authorities to call referendums in England wherever council tax rises exceeded 2% or more. This led to a fashion for 1.99% rises in bills by many authorities.
However, shortfalls in social care budgets have forced the Government to relax these rules. Now the 151 social care authorities in England can increase council tax by a further 3%. The Secretary of State for Communities and Local Government made an offer to adult social care authorities with functions under the Care Act 2014 (i.e. county councils in England, district councils and London borough council) allowing them to be able to charge an additional “precept” on their council tax for future financial years without holding a referendum. This means an additional 3% may be added on, allowing total rises of up to 5% this year without triggering any referendums. However, this unlikely to be sufficient to cover care funding shortfalls.
On 20th February 2016, the Chairman of the Local Government Association Lord Porter said services supporting the most vulnerable people in our communities are at “breaking point” meaning councils are increasingly unable to turn down the chance to turn down any opportunity to raise funds.
He stated: “But extra council tax income will not bring in anywhere near enough money to alleviate the growing pressure on social care both now and in the future.”
The situation reflects the rise in council tax default which has arisen through welfare cuts and the removal of council tax benefit in 2013. Unfortunately, it seems the Government has yet to fully admit or recognise this connection.
CHANGES TO BILLS IN WALES
Changes have also been made to bills have been made by the Welsh Assembly which came into force on 15 February 2017.
The Council Tax (Demand Notices) (Wales) (Amendment) Regulations 2017 SI (W) 40 relate to decisions to charge higher premiums on empty dwellings.
The information to be supplied with council tax bills must also be amended to include information about any premium (this will typically come in the explanatory notes).
The new regulations alter Schedules 1 and 2 of the Council Tax (Demand Notices) (Wales) Regulations 1993 require demand notices to include a statement of the number of days that the council believes a premium applies. This will be helpful to property owners challenging local authority decisions.
Where the authority believes a premium applies, a demand notice must include a statement of the amount of the premium and the reason for it. The notice must also carry an explanation for the taxpayer of the duty to notify changes and the possible consequences of failing to comply with that duty.
Council Tax (Demand Notices) (England) (Amendment) Regulations 2017 SI 13 in force from 10 February 2017 amending SI No.3038 of 2011
Council Tax (Demand Notices) (Wales) (Amendment) Regulations 2017 SI (W) 40
Council Tax (Administration and Enforcement) (Amendment) (Wales) Regulations 2017 (SI 2017/41)
Public Finance 20 February 2017 – http://www.publicfinance.co.uk/news/2017/02/upcoming-council-tax-rises-not-enough-stem-social-care-crisis-lga-warns?
CTLS at Institute of Money Advisers Conference 15-16 May 2017
Alan Murdie, director of CTLS, hosted a workshop ‘Cuts, Computers and Council Tax: Responding to a Changing Environment’ for delegates attending the Institute of Money Advisers Annual Conference held at Bristol over 15-16th May 2017. The conference brought together over two hundred professionals working in money advice and the wider advice and financial sectors, on the theme of Quality and Sustainability in Money Advice.
The workshop looked at the impact that increased computerisation has had upon the recovery of local taxes and individual taxpayers, its links with the growth in debt and at ways in which advice organisations can best respond to rising levels of default. Reflecting concerns over the increasing numbers of people seeking wider financial advice, partly as a result of more severe enforcement measures, the Conference also announced the launch of a public campaign concerning imprisonment for council tax debts and the need for local authorities to pursue other more sustainable remedies.