The abolition of the old council tax benefit system in April 2013 and the cut in central government funding to the new localised schemes is beginning to bite. Millions of people on low incomes are being told to pay more council tax and many thousands are being thrown into debt. By acting as the delivery mechanism for coalition attacks on the poorest people, Labour councils are again taking the political flack for austerity cuts. The union Unite is leading a campaign supporting people to fight back against the new poverty tax, and asking local politicians to refuse to be used as the coalition’s pawns.
At the end of October 2013, against the backdrop of several hundred people queueing outside Camberwell magistrates’ court, Councillor Richard Livingstone, lead member for finance in the London Borough of Southwark, attempted to explain why 5,800 Southwark residents had that morning been summonsed for non-payment of council tax.
It was an unedifying sight. As several local residents berated him for subjecting the poorest people in the borough to a direct cut in income through the new council tax charges, he stammered a defence of powerlessness against central government cuts. It didn’t go down well, and once again the Conservatives seemed to have been successful in making Labour local politicians the bad guys in the eyes of their voters. When offered the opportunity to work with Unite to find ways to avoid passing on the cuts to residents, as has happened in Merton and Tower Hamlets, he looked relieved and agreed.
The people in the queue outside the court were among the poorest of Southwark’s households. The borough’s new scheme requires all residents to pay 15 per cent of their council tax bill regardless of income, meaning that those on out-of-work benefits, or in poorly paid or part-time work will be asked to pay up to £300 a year extra. Around 35,000 households in Southwark are affected – approximately two in every five.
Southwark has now summonsed nearly 10,000 people for non-payment since April. Most are unable to pay unless they stop paying other bills. A number were already in rent arrears to the council as a result of the bedroom tax. Many are now resorting to food banks. Unite’s community and industrial members are rolling out a campaign to lobby targeted local politicians, asking them to take action against the government and protect their residents from further debt and poverty.
The government’s 10 per cent funding cut that accompanied the abolition of council tax benefit appears to have left councils with a stark choice: absorb the cut by further cutting council services, cut the number of people entitled to the benefit and/or cut the amount people receive. But that isn’t in fact the case.
Across England nearly one fifth of councils have decided against passing on this cut to local people. The reason isn’t in the main due to the obvious human and social costs that will result from asking for taxes from people who are already stretched to breaking point. It is that, as with the bedroom tax, which is increasingly being recognised as uneconomical, the costs of attempting to enforce the policy will be higher than any savings made.
Most councils estimated an 80 per cent collection rate of the new charges, and calculated their budgets accordingly. But this is likely to turn out to be a massively optimistic guess. It’s very likely that a high proportion of the new charges won’t be recouped – while councils incur court and bailiff costs, adding up to holes in their budgets that are bigger than the original government funding cuts.
Local Conservative politicians have been among those most critical of the change. As Wandsworth Council commented: ‘The size of these amounts in respect of council tax would in many cases be uneconomic to recover, with the costs of collection, including legal recovery costs which fall to the council, being higher than the bill, and would in all likelihood have to be written off when the debt is uncollectable.’ Six London councils, including Tory-controlled Kensington and Chelsea and Hammersmith and Fulham, are not collecting from benefit claimants for this reason.
Other councils have a chance to do likewise in April’s budget. The risks of not doing so are high. Some are calling this ‘poll tax mark 2’ and suggesting a mass civil response that is similar in scale and consequence. It’s something local politicians should think carefully about before elections in May.