To seek the views of the General overview and scrutiny committee regarding the proposed revisions to the current council tax reduction (CTR) scheme ahead of Cabinet review in October and Council approval in December.

The Director of resources introduced the report, the principal points included:

a.           The background to the abolition of the national council tax benefit system in 2013 and its replacement with a local council tax reduction (CTR) system was explained, as well as the subsequent reductions in central government funding.

b.           Pensioner benefits continued to be protected and the council had discretion on CTR for working age claimants only.

c.           The CTR scheme for 2015/16 gave £4.6m in council tax subsidy to working age claimants.  Reflecting reductions in government support grant, there was a saving requirement of £200k from CTR for 2016/17.

d.           The current CTR caseload profile was: pensioners fully or partially unaffected by the CTR scheme 6,594; and working age claimants 6,738, with approximately 4,500 in receipt of CTR at 84% (the remaining claimants qualified for partial subsidy).

e.           The collection rates for council tax remained stable, with 98.10% achieved in 2014/15; the collection rate was 82.5% for claimants in receipt of CTR.

f.             The report provided a breakdown of the circumstances of 190 sample CTR cases that had received a summons and this showed that 53% were in receipt of Employment & Support Allowance.

g.           Initial responses to the council’s Priorities and budget consultation 2016-2020 prioritised income and savings in the following order (out of 10 proposals for savings): sell our smallholdings estate of 4,500 acres, to reduce our debt repayments; increase car parking charges in Hereford; and reduce the discounts available under the council tax reduction scheme.

h.           Appendix 3 to the report detailed the results of a consultation questionnaire on the CTR scheme and the related proposals for 2016/17.  The proposals were:

Proposal 1 - reducing the level of CTR from 84% to 80% but also increase restrictions to CTR and protect CTR at 84% for certain claimants.

Proposal 2 - reducing the level of CTR from 84% to 80% with no other scheme changes.

i.             The Director of resources said that, informed by the data on summonses, consultation responses and engagement with the Children’s Society, Proposal 1 would seek to maintain CTR at 84% where the claimant was either in receipt of severe disability premium, carers allowance or families with a child under the age of five.  This was expected to deliver £144k per annum. 

j.             To bridge the gap to the saving requirement of £200k, Proposal 1 would involve two additional proposals, to amend CTR from a band D property restriction to a band C restriction and reduce the capital limit to £6k.  Appendix 1 to the report detailed the financial impact of 80% CTR and band c restriction and provided examples.  The Director of resources, acknowledging a point made to him by the Chairman, noted that 327 CTR claimants living in a band D property would see an increase in the amount payable from £254 to £458 but also referred back to the potential protections for certain claimants.

k.           The current capital limit was £16k, reducing this to £6k would mean that approximately 110 claimants would cease to receive CTR.  It was reported that 36% of unitary authorities had reduced the capital limit.  Appendix 2 to the report provided an Equality Impact Assessment on the CTR scheme.

l.             Attention was drawn to the financial assistance available under the council’s Discretionary hardship policy.  It was reported that there had been only two successful applications to the scheme from applicants in receipt of CTR in 2014/15.  It was noted that questions had been asked by Cabinet members about this issue and officers were reflecting on how to make the scheme more accessible.

m.         It was emphasised that the authority achieved good collection rates and this was collected responsibly.

n.           It was reported that savings would also benefit preceptors: parish and town councils, West Mercia Police, and the Hereford and Worcester Fire and Rescue Authority.

o.           The Director of resources commented on financial pressures in Children’s safeguarding and that it would be difficult to achieve the saving requirement of £200k from CTR from alternative compensatory savings. 

p.           It was recognised that the issues were complex and important, therefore the views of the committee were sought ahead of the Cabinet review in October and Council approval in December 2015.

The Chairman made the following points:

§    It was questioned what could be done to ensure that citizens could access hardship relief and other protections.

§    Amending the property band restriction would result in a substantial increase in liability for claimants living in a band D property and it may not be practical or possible for them to move house.

§    The potential for a reduction in the capital limit might seem unreasonable.

§    In view of the number of summonses, there could be diminishing returns from further revisions to the CTR scheme.

In response, the Director of resources commented on the difficult choices that had to be made to ensure that the council was able to balance the budget given the dramatic reductions in central government funding.  It was reiterated that the council currently gave £4.6m in council tax subsidy to working age claimants and the proposals sought to achieve savings of £200k.  He added that council tax, being based on property values, was not progressive and it was difficult to design a perfect scheme, hence the options had been put forward for comment.

Responding to questions from a committee member:

§    The Benefits operational manager reported that the overall caseload had reduced slightly.

§    Claimants who deliberately deprived themselves of capital in order to gain benefits could be subject to a process in order to be treated as if they still had that capital.

§    The Director of resources said that the authority did not have any information about people that might be eligible for CTR but were not claiming it.  The Benefits operational manager added that a lot of work had been undertaken by welfare benefit teams and others to ensure that people were aware of the scheme.

Another committee member asked a number of questions, along the following lines:

§    Comparing decisions for claimants with council budget setting, would officers recommend depleting capital reserves to fund a revenue expense?

§    Do we understand what it is costing to police this as an activity and how much extra effort was likely to be involved?

§    What was the direction of travel in terms of the Medium Term Financial Strategy (MTFS) and were further reductions to CTR anticipated in future years?

§    What elements of overspending reflected under performance with the projected change programme and savings targets?  It was suggested that there could be a perception that the authority was balancing its own delivery failures by reducing levels of support to CTR claimants.

In response to questions, the Director of resources advised the committee that:

§    The authority had set aside general reserves of 5% of overall expenditure.  A claimant would need to have annual income of more than £120k for the proposed £6k capital limit to reflect a lower percentage of annual income which would not be possible under benefit claimant rules.

§    Although an estimate could not be provided at the meeting, it was not likely to cost more to administer the revised scheme.

§    The current MTFS had been approved by full Council on 6 February 2015 and included savings from CTR for 2016/17.  The strategy was being refreshed and would need to take into account further reductions in government grant.  The views of the committee were being sought on the CTR scheme for the next financial year only.

§    Safeguarding involved demand led services and there had been a large increase in the numbers of looked after children both in Herefordshire and in other authority areas, including Worcestershire and Devon.

The Director of resources noted that people held different views and the issue was considered important enough nationally for the government to mandate that the decision needed to be taken by full Council.

The Leader commented on the following: there were likely to be many people on low incomes that were spending capital to meet revenue costs and did not receive any subsidy at all; it was possible that government grant could be reduced to nil by 2020; the majority of spending was on health and care, demand led services which made it difficult to predict costs; and not proceeding with the revisions to the scheme would require savings elsewhere.

A committee member:

§    thanked officers for the clear and comprehensive report and for the responses provided at the meeting;

§    considered that a £200k saving was small in the context of the overall council budget and reference was made to a Cabinet decision to allocate an additional £250k to meet unforeseen scheme costs to relocate Broadlands primary school on the Aylestone business and enterprise college (ABEC) site [considered by Cabinet on 11 September 2015];

§    commented that the Council would not have been aware of national welfare reforms when it agreed the Budget and MTFS in February 2015; and

§    commented that the potential disbenefits for the county and particularly for the individuals concerned would not necessarily be known to all budget consultation respondents.

The Director of resources commented on a number of matters, including:

i.             Claimants used council services and many people would consider that they should make a contribution to these.

ii.            The provisional outcomes of the Priorities and budget consultation (see paragraph g. above) were re-iterated and it was commented that the least popular options were: reduce customer services and libraries across the county; remove public transport subsidy; and remove community transport subsidy.

iii.          Individual savings figures might appear small but the overall budget would not balance if the authority ignored them.

A committee member felt that many people would not expect others to be able to receive subsidy if they held £16k in capital and commented on the need for pensioner benefits to be looked at nationally.  In response to questions, the Director of resources confirmed that the authority charged the maximum council tax permitted on second homes and empty properties, charging an extra 50%.

A committee member made a number of comments, including:

1.           This was a difficult choice involving vulnerable people and it should not be perceived as an ‘us and them’ situation. 

2.           It was questioned whether the authority would make any saving in the long run given the potential knock on effects in terms of public health and children’s attainment. 

3.           Comparisons with other authorities were noted but Herefordshire had the lowest wages in the country.

4.           Feedback from CTR scheme consultation showed that the majority of claimants were in some form of employment but still needed support.

5.           Although capital of £16k might seem substantial, such an amount would not go far if expenditure was needed on home repairs or a vehicle to get to work.

6.           It was likely that many people with savings would already be spending some of it to meet living costs.

7.           The authority needed to ensure that it did all it could to enable people to access all the help available.

The Leader reminded the committee of the proposals and said that the discretionary hardship policy would be reviewed to ensure it was fully understood and accessible.

The Deputy Leader: emphasised the importance for the authority to be involved in projects that improved the economy and reduced the number of people on low incomes; noted that the capital limit in terms of Adult social care was £23k, including a person’s savings but, unlike the CTR scheme, also including the value of their home; and said that the hardship scheme had to be fit for purpose.

In response to a question from a committee member, the Director of resources drew attention to the supplement to the agenda which contained an illustration of the collection of debt from CTR scheme working age claimants, with £300k outstanding as at 24 September 2015; he stressed that this was outstanding debt, often involving payment plans, and the amount of bad debt was a much smaller proportion.

The Chairman asked whether members wanted to make any recommendations to the executive but the committee was minded to request that their comments be noted.

RESOLVED:       That the report and comments made by the committee be noted.