Consultation on changes to Council Tax benefit scheme

The decisions we make about working age people affect the amount of money that the LCTS scheme pays out.

The government gives us money to help pay for the LCTS scheme, but they have reduced this amount each year. The government’s funding is now not enough to fully pay for the scheme.

We have to decide if we want to:

• top up the scheme with our own money, so we still pay out the same amount
• only fund the scheme with the government grant and pay out less to residents

If we only fund the scheme with the grant money, working age people will receive less help and will have to pay more towards their Council Tax.

If we make up the difference, we will have to find that money from somewhere else. This could mean increasing Council Tax, reducing some services, using money that the Council has saved or a combination of all of these things.

The gap between the funding we receive and the cost of the scheme could be as much as £295,000 in 2020/21.

The amounts for 2021/22 are difficult to estimate because we do not know yet:

• how much grant we will receive
• if Council Tax charges will change
• how many people will claim in 2021/22

If we increase our share of Council Tax to pay for this, we would have to put up Council Tax by about £4 per year for a Band D property. In recent years, we have only been able to increase Council Tax by a maximum of £5 per year.

Alternatively, we could reduce our existing services by £295,000 per year or take the money out of our savings. Our savings and income are already under extreme pressure due to the effects of the COVID-19 pandemic.

Some of our services are statutory, meaning that we have to provide them by law. This might mean that we have to reduce non-statutory services by a greater amount.

Using money from our savings may not be possible year after year, as reserves run out.

We do not intend to reduce the amount of money that the scheme pays out. However, we would like to know whether you think we should:

• ask taxpayers to pay more in their Council Tax
• reduce services
• use our savings reserves
• make other savings

We use the amount of Council Tax payable for a Band D property as the maximum starting point for working out how much help you can get.

If your band is higher than band D, you will not receive any extra help. If your property is in Band A, B, C or D, we will use the actual amount that you pay to start working out how much help you can get.

Working age claimants:

• must pay at least 23% of the Council Tax bill themselves
• are not entitled to LCTS if they have more than £6,000 in savings

We will disregard:

• War Pension income for disablement or bereavement
• Disability Living Allowance income
• between £15 and £35 per week of earned income when we calculate entitlement, depending on the household make-up.

If you live with other adults (such as grown-up children), we assume they will contribute towards your Council Tax bill. We will therefore reduce how much you can claim, depending on their income.

You won’t be able to claim support just because other adults in the property receive a low income (previously known as Second Adult Rebate).

You can read the full details of the current 2020/21 LCTS scheme in our Council Tax Reduction Scheme Policy.

You can also find out more about Council Tax Reduction.

Flexibility to change to scheme

At present, Full Council agree the scheme before the start of each financial year. We cannot then change it until the next financial year. 

However, as 2020 has shown, unexpected events do occur. Therefore, we would like the flexibility to change the scheme during a financial year. This will help us respond to unexpected changes in the wider welfare benefit system.

For example, in 2020/21 the government increased the amount of Universal Credit (UC) it pays by £20 per week. Normally, a £20 increase in income would reduce the amount of housing benefit and council tax people could receive. Housing benefit would reduce by £13 per week and Council Tax support by £2.99 per week. This would mean that people would only receive £4.01 of the £20 increase.

The government has the option to introduce an “additional earnings disregard” of £20 per week in housing benefit. This ensures that UC recipients receive all of the additional £20 per week Universal Credit increase. We have to change our Council Tax Support Scheme to achieve the same effect, and we don't want to wait until the next financial year to do so.

Proposed changes to the scheme

We would like to insert the following wording within the scheme:

“In the event of unexpected changes to government welfare benefit regulations which are intended to:

• increase the income of benefit recipients; and,
• which are introduced during a financial year;

Chelmsford City Council reserves the right to amend the provisions of its Local Council Tax Support Scheme to ensure that those changes do not negatively impact the entitlements of working age recipients of Council Tax Support.”

This consultation closed on Monday 18 January 2021.