RENT OR COUNCIL TAX ?
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