Key facts

  • Council Tax Support (CTS) will be introduced in April 2013; it will replace Council Tax Benefit (CTB).
  • Entitlement to CTS will be decided at the local authority level, rather than the national level as under CTB.
  • Councils will have 10% less money to fund their CTS schemes than they had to cover the costs of CTB.
  • The change is estimated to save £410 million per year across England.
  • The entitlement of pensioners under CTB will remain the same under CTS.
  • CTB is the most widely claimed means-tested benefit. 3.7 million working-age claimants in Great Britain claim CTB, all of whom could be affected by the change to CTS.

What is CTS?

In April 2013 Council Tax Benefit (CTB) will be replaced with Council Tax Support (CTS). Unlike CTB which was a national system, CTS will be operate locally: all 326 local authorities across England will have to devise and implement their own schemes.

The money provided by central government to fund the new schemes will be 10% less than under the former CTB system. Each local authority is responsible for devising its own scheme within the reduced budget. They are also responsible for any shortfall or surplus in the CTS budget. The change from CTB to CTS is designed to:

  • increase local authorities’ financial autonomy;
  • give local authorities a greater financial stake in the economic future of their area;
  • save £410 million in a year across England.

Apart from one major requirement – that pensioners receive the same amount as they do now – councils have near full autonomy to create the new schemes. They have been advised to devise schemes that encourage work and protects the vulnerable, but defining the vulnerable is at the discretion of each local authority.

Additional funding has become available to councils for the year 2013/14 if their proposed CTS scheme meets three requirements:

  • that those who currently pay no council tax are not made to pay more than 8.5% of their council tax liability;
  • the taper rate does not increase above 25% (see below for an explanation of the taper);
  • there is no sharp reduction in support for those entering work.

What are the options available to councils?

All councils will have 10% less funding for CTS than they did under CTB. Some councils will replicate the former CTB system and make savings elsewhere in their budgets. Other councils will make the savings by reducing the number of people entitled to the benefit and/or cutting the amount of benefit people receive. The options that councils have proposed include:

  • Introduce a minimum payment: requires all working age people to pay at least some Council Tax.
  • Introduce a minimum level of support: removes the entitlement completely from those who only receive a small amount of benefit.
  • Lower the savings cap: under CTB those with savings over £16,000 are not eligible for help however low their income is. This savings level could be lowered.
  • Increase the income taper: the amount of CTB a household is entitled to falls by 20p for every extra £1 of income. This rate of withdrawal or ‘taper’ could be increased.
  • Count other benefits as income: in calculating how much Council Tax someone can afford to pay some benefit income is disregarded. This could be changed.
  • Introduce a band cap: Council Tax varies by the value of the property. The lowest value properties (band A) have lower council tax than the highest properties (band H). Councils could limit the amount of benefit received in higher value properties to the amount provided to those in lower value properties.
  • Remove/reduce the second person rebate: under CTB homeowners not on a low income are entitled to some benefit if they share their home with someone on a low income. This entitlement could be changed.
  • Remove/reduce non-dependent deductions: under CTB low income homeowners are entitled to some benefit even if they share their home with someone not on a low income. This entitlement could be changed.

When will it happen?

All local councils were required to announce their CTS scheme by 31st January 2013.  If a council has not decided by this date the former CTB scheme will continue (but still with the 10% funding cut).  The schemes come into effect in April 2013.

What is happening outside of England?

The 10% cut affects the whole of Great Britain. However, as local government finance is a devolved matter, Scotland and Wales can decide independently how to make the savings. The Scottish government has decided to keep CTB at existing levels, and make savings elsewhere.

The Welsh government originally planned to make the 10% saving from CTB but in January 2013 announced that it would, like Scotland, retain the current levels of council tax benefit in April. The Minister for Finance and Leader of the House said:

“Flexibility available to us at the year end means that we are able to provide additional resources and return the council tax support budget to the level it was before the UK Government made its cuts. 
“This will provide important support to individuals who are facing such difficult times as a result of benefit cuts.”