Back Door cuts to Council Tax Support
Until now attention has focussed on the Minimum Payment level in each authority's Council Tax Reduction scheme, but our new research reveals which London Boroughs are using the Minimum Income Floor from Universal Credit to cut support to local self-employed claimants
Over the past few years, with Child Poverty Action Group (CPAG), we’ve been tracking the impact of the “localisation” of Council Tax Benefit in London. The latest data will be published next month, but one new issue we have looked at this time is the use of the Minimum Income Floor (MIF) in local Council Tax Support schemes.
The concept of MIF was first brought in for Universal Credit. It ignores actual income and assumes that self-employed claimants will earn at least the equivalent to 35 hours a week on the National Minimum Wage. This dramatically reduces the entitlement of self-employed claimants to the housing costs element of UC. Unsurprisingly, this has proved controversial, with the Federation of Small Businesses criticising it publicly.
Back in 2013, following a wrestling match between the Departments of Work & Pensions and Communities & Local Government, ministers decided to temporarily keep Council Tax Support outside the scope of UC. That position was upheld following the Ollerenshaw Review of Council Tax Support in 2016. Ministers clearly feel they’ve got enough on their plate with UC alone, let alone adding a further complication.
Despite the apparent separation between the two benefit regimes, some of the worst aspects of UC are being drawn across into individual Borough CTS schemes. Our Freedom of Information requests have revealed that five London boroughs – Bexley, Ealing, Sutton, Tower Hamlets and Waltham Forest – are using the Minimum Income Floor to determine the CTS entitlement of self-employed claimants. (Two others – Greenwich and Southwark – say they are using it when the CTS claimant is already actually in receipt of UC.)
At Zacchaeus 2000, we believe people should be taxed on the basis of their actual income and not an assumption about what someone ought to be earning. Part-time employees are not taxed as if they earn a full-time wage. So why should self-employed claimants? You don’t see HMRC taxing one-day-a-month city directorships as if they are one-twentieth of those lucky people’s incomes. And so it’s absolutely wrong that the lowest earning self-employed families are getting stung that way by their local council.
Perhaps surprisingly, the MIF is proving controversial on the ground as well. In Tower Hamlets, for example, the number of self-employed claimants getting Council Tax Support fell from around 2,544 to just 523 after it changed its scheme back in 2017. Self-employed claimants there like mini-cab drivers report they have seen their monthly Council Tax bills increase from about £30 a month to £100 a month as a result of the significant reduction or even complete loss of Council Tax Support because of that authority’s use of the MIF.
The argument put forward by those who brought this in in Tower Hamlets is that they are getting self-employed claimants ready for the looming managed migration of UC under which they will lose much more each week. In theory, that sounds pretty decent – helpful even. But in reality, that means these households are seeing their Council Tax bill double or even treble, and are then being slapped with a court summons and an extra £100 charge when they fall into arrears. Some may even end up getting a visit from the bailiffs.
Tower Hamlets councillors will make a decision whether to retain the Minimum Income Floor early next year. But in the meantime, we hear that council officers across London are encouraging Mayors, Council Leaders and Cabinet Members to put it into their schemes – even advising councillors their CTS scheme must be “aligned” with UC, which simply isn’t true. Some, like Hackney’s Mayor, Phil Glanville, have rejected that suggestion. (A report to Hackney’s Cabinet earlier this year called it “a significant disadvantage” to those in the gig economy, “who are vulnerable to periods of low income as a result of inactivity due to illness/injury”.) But others are becoming tempted. For example, Barnet is currently consulting on plans to incorporate it (alongside a “Banded” scheme) to cut around £3 million from its CTS budget next year.
Just as changes to taper rates, Non Dependent Deductions, capital limits etc are all being used to deliver “back door” cuts to Council Tax Support for disabled and unemployed Londoners, our FoIs show that the MIF is now being used to hit self-employed claimants, while avoiding the more politically controversial cuts to the headline Minimum Payment level. Zacchaeus 2000 will be keeping an even closer eye on these “technical” changes and “alignments” in future and doing everything we can to ensure councillors are fully aware of their adverse impact elsewhere before they sign up to them in their Borough.
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