To seek the views of the committee regarding proposed revisions to the Council Tax Reduction Scheme.

The Chief Financial Officer presented the report and the following matters were highlighted:

a.       The national council tax benefit system was abolished with effect from 1 April 2013 and Herefordshire Council set up a localised Council Tax Reduction (CTR) scheme.

b.       For 2014/15, CTR support by the council was based on 84% of the applicant’s council tax charge.  The Medium Term Financial Strategy (MTFS) approved by Council in February 2014 assumed reductions in the level of support to 76% in 2015/16 and to 70% in 2016/17.

c.       Comments were invited from the committee on the proposed revisions to CTR for submission to the Leader (Cabinet Member for Corporate Strategy and Finance) and subsequently to Council.

d.       Cumulative surplus had been delivered against the plan in 2013/14 and 2014/15 and it was anticipated that there would be surplus of £211k in 2015/16 which could be used to provide a contribution towards demographic pressures.

e.       Approximately 5,000 residents of working age were in receipt of CTR at the maximum reduction of 84%, with a further 2,034 claimants having financial circumstances which entitled them to partial reduction.

f.        It was reported that the proportion of summonses issued for non-payment of council tax was significantly higher for those in receipt of CTR than those not in receipt of CTR; an additional charge for the cost of summonses was added to claimants’ debts.

The Chairman used his discretion to allow Richard Hadley of Ledbury Town Council to address the committee on this subject.  Town Councillor Hadley made a number of comments, including:

•        there was a high level of concern about this proposal, not just from those directly affected but also the wider community;

•        although public bodies had to look at potential cost savings and revenue generation, he did not consider this proposal to be acceptable;

•        the level of increase in 2015/16 (for a Band D property) for a resident in receipt of CTR would be around £130, representing a significantly higher increase than that for a resident not in receipt of CTR;

•        he considered the proposal unfair and felt that it targeted the poorest sections of the community;

•        claimants had received 100% discount under the national system, so the percentage increases each year were substantial;

•        the proposal contradicted the national strategy of lifting the least well off people out of tax thresholds;

•        Herefordshire had the lowest average earnings in the West Midlands region and some of the lowest in the country;

•        indices of poverty did not take into account the additional costs of living in rural areas;

•        one third of rural households were considered to be living in fuel poverty;

•        the proposal would affect hard working families and individuals, people with disabilities and long term health problems;

•        unemployment was generally low, meaning that CTR claimants were just ordinary people that found themselves in difficult circumstances;

•        information obtained from the council showed that around 7,000 people were facing court summonses, not only resulting in administrative and court costs but also impacts on the health and wellbeing of those families and individuals concerned;

•        social breakdown could have impacts on communities and on long term costs for the council; and

•        the funding required could be met by marginal increases in council tax rates.

The Chairman thanked Town Councillor Hadley for his comprehensive and impassioned contribution; individual committee members also extended their thanks.

Points made by the Leader included:

i.        He could not disagree with many of the sentiments expressed but members had to consider the figures; he felt that it was potentially misleading to use percentage increases given the low base level.

ii.       Unlike public authorities, utility suppliers were not expected to reduce bills for low-income households for the costs of services.

iii.      Collection rates had remained consistent despite recent changes to CTR.

iv.      Other taxpayers had to pick up the burden for those in receipt of CTR.

v.       Council tax could not be raised by more than 2% without a referendum and expressed a personal view that a sizeable number of people would consider it right that people should make a contribution towards their costs.

vi.      Although there might be sound arguments for not applying the increase, it was inescapable that the money had to be found from somewhere.

A summary of the debate is provided below:

1.       Increasing numbers of people in the county were struggling to meet council tax, utility and transportation costs and many were already relying on food banks and other forms of charity.

2.       Reference was made to the suggestion by Claire Keetch (see minute 25 above) and a concern expressed about the potential impact of increased workload for the CAB at a time of uncertainty around grant funding.

3.       As the situation had resulted from a change at national level, individuals and groups should also make their concerns known to the local MPs.

4.       Utility companies could not cut services off any longer and it would be difficult for public authorities to ration services.

5.       In view of the high proportion of CTR recipients receiving court summonses, it was questioned whether the proposals might be more costly and self-defeating in the longer term.  It was also questioned whether the £85 charge covered the staff time for dealing with a summons.  In response, the Chief Financial Officer advised that there was additional workload associated with chasing debt but many processes were automated and Herefordshire was one of the best performing authorities in the country in terms of collection rates and cost efficiency.  Attention was drawn to the appendix to the report which showed examples of potential amounts payable by CTR claimants; it was noted that the majority of people in receipt of CTR lived in Band A and B properties.  It was reported that the collection rate from claimants in receipt of CTR was about 95%, as at the end of October 2014, albeit it was being collected at a slower rate.

6.       A number of members said that they felt uncomfortable with the level of increase proposed and, acknowledging the costs and uncertainties associated with a referendum, felt that the authority need to find other ways of making savings or generating income.

7.       Some members made observations about inequalities within the taxation system, especially the proportion of income paid towards taxation by people with less means.  A member commented that stable collection rates might result from people wishing to avoid court summonses but nevertheless something had to give way within already constrained budgets.  Another member felt that the argument that some people faced a disproportionate percentage increase in contributions should not be dismissed; it was added that the amount of money involved was relatively small compared to the council’s overall budget but would have immense repercussions for those affected.

8.       The Leader acknowledged the moral arguments but re-iterated the financial pressures facing the authority and the need to consider different perspectives.  He commented that the incomes of many people were not much above those people in receipt of CTR but they were expected to pay the full council tax liability and could be in a worse net position.

9.       A member said that: there was merit in looking at absolute and relative figures; there was concern that the level of increase went beyond the break even point; it was disappointing that it was not considered that there was time to analyse different restrictions used by other local authorities; the table on page 31 of the agenda ought to be presented in a different way to reflect what was being collected in year and to clarify the treatment of surplus; the fact that people in receipt of CTR were more likely to receive a summons than those not in receipt demonstrated how fragile their finances already were; there was a lack of clarity about the knock on effects in terms of the health and wellbeing of families and individuals and the resulting service pressures which ultimately fell to the council as costs elsewhere. 

10.     Further to paragraph 9 above, the member commented that the Income and Charging Task and Finish Group commissioned by the committee had identified guidelines to recover service costs and the council had also engaged consultants to identify additional savings and income opportunities.  Therefore, it was questioned whether the authority had delivered the full range of measures before proposing revisions to CTR.

11.     The Chief Financial Officer clarified the purpose of the table on page 31 and the key considerations and confirmed that it could be amended to make it more transparent to the user.

12.     A member commented on the potential hidden costs of the proposal and noted that the consequences of the breakdown of a small number of families could offset the projected income.

13.     A Councillor in attendance commented on how reductions in part-time working hours for women were placing them in difficult financial positions.

14.     It was suggested that the executive should look in greater detail at what was happening in other local authorities and it was noted that the response rate from CTR claimants to the consultation on the proposal was much higher than that usually received from the general population to the consultation on council tax.  The Chief Financial Officer said that further information on other unitary authorities could be provided within the report.  A member suggested that additional figures be obtained from Cornwall, Devon and Somerset authorities.

RESOLVED: That

(a)     The executive be notified that the committee is not content with the conclusions of the report and considers that the Council Tax Reduction Scheme should remain at the present level;

(b)     The executive be urged to explore alternative savings or income opportunities, as identified by the Income and Charging Task and Finish Group, before considering any future changes to the scheme; and

(c)     Detailed analysis be undertaken of other restrictions put in place by other local authorities.