Margaret Thatcher's poll tax led to rioting and her downfall in 1990. Ruth Patrick looks at the likely implications of plans to reform the system of local taxation and support.
Apparently unperturbed by the car crash of Thatcher’s poll tax proposals, Cameron’s coalition is pressing ahead with plans to localise systems for support with paying council tax. Currently, many low income households – including both those in and out of work – are entitled to Council Tax Benefit so that they face either reduced liability or complete exemption from council tax.
This will all change from April 2013 when the benefit is abolished and replaced by localised systems of council tax support. The government has decided that each local authority should set their own rules for providing people with council tax support, arguing that this will motivate councils to be more financially independent and encourage their residents to return to work. To help incentivise local authorities, central government funding for council tax assistance has been cut by 10 per cent leaving councils to make some very difficult decisions.
Councils can continue to pay council tax support on more or less the same basis as before, and make up the resulting shortfall from elsewhere in the budget or by cutting services further. Alternatively, councils will have to try and claw back this 10 per cent cut by asking low income families to make a greater council tax contribution. Recent research by the Resolution Foundation suggests that two-thirds of local authorities in England will demand some council tax payment from those previously entitled to full council tax benefit.
Unpicking the problems with this scheme is all too easy; a national system of support with council tax for low income families is being replaced by a confusing array of different local schemes. This will cause a postcode lottery with variations in which households have to pay council tax and how much they are expected to pay. Scotland and Wales have already announced plans to use their devolved powers to protect all their residents from the reforms, creating a real regional divide. In England, it is becoming clear that different councils are taking very different approaches. While Tower Hamlets Council in London has decided not to charge any of its 26 thousand poorest households, Brent Council, also in London, will be demanding an average of £240 a year from a similar number of its residents who were previously not expected to pay council tax.
As the cuts and the austerity agenda continue to bite, there is a real danger that those expected to pay council tax will really struggle to settle their bills. Local authorities may be forced to pursue families through the courts for tiny sums of money, wasting the judiciary’s time and council resources. While many disabled people will be protected as most councils promise special provisions for their most disabled residents, this may be something of a postcode lottery. It is anticipated that those with the most severe impairments will receive full council tax support, but those only entitled to lower rate Disability Living Allowance may well see their council tax liability increase.
The new system seems complex, unfair and more than a little perverse given the government’s stated goal to simplify the benefit system and create clearer work incentives. We can only watch from the sidelines as the new schemes are rolled out from April. Council tax support may not prove to be quite as pivotal as Thatcher’s poll tax, but it’s just one more foolhardy, illogical and socially unjust welfare reform to add to Cameron’s very long list.