Changes to Council Tax / Council Tax Benefits 25 September 2012

1. Changes to Council Tax / Council Tax Benefits 25 September 2012 Vic Allison Deputy Managing Director

2. Current System of Council Tax Benefit • • National scheme • • 100% Government funded • • No direct payments to taxpayers, reductions to bills • • Government grant compensates for loss on Collection Fund • • No impact on taxbase • • £7m in Council Tax Benefits • • £62m in Council Tax payments • • Precepts out to major preceptors and town / parish councils

3. Proposed changes • • National scheme to be replaced by local schemes of Council Tax Support wef 1 April 2013 • • Local schemes to be agreed by end January 2013 • • Funding through general settlement based on 90% of current / recent costs • • We decide how to fund 10% through scheme design or funding from elsewhere • • Discount not benefit • • Will reduce taxbase for total amount of Council Tax Support

4. The funding shortfall • • Will be a taxbase loss of around 10% (£7m / £69m) • • 90% of this loss will be paid to us and major preceptors by Government • • We will get less in Council Tax, more in Government grant (business rates)

5. But 10% or £700k shortfall split: • * Parish element = £21,000

6. The problem with parishes • • Parish X has a taxbase of 1,000 in 2012/13 • • Will reduce to 900, following these changes • • Precept in 2012/13 was £20,000, Council Tax = £20.00 (£20,000/1,000) • • Precept in 2013/14 of £20,000, Council Tax = £22.22 (£20,000/900) • • Payment of grant, ie 90% would make taxbase 990, council tax = £20.20 • • But no Government powers to do so and far too many

7. The solution for parishes - current consultation • • Two taxbases, one unadjusted for benefits changes • • Parishes unaffected by changes to Council Tax Benefit • • Collection Fund carries the cost • • Districts get the 90% Government grant and make appropriate transfer for parishes • • But what about the 10% funding shortfall for parishes, equivalent to £21,000? (assuming we don’t close the funding gap via our replacement local scheme) • • District cost or shared with other preceptors?

8. Replacement local scheme • • Have to protect pensioners • • Other vulnerable groups? • • Risks of challenge • • Difficulty in collecting small amounts • • Consulting and implementing changes • • Proposing minimal change in year 1 • • Just band D limitation

9. Technical reforms to Council Tax • • Also 1 April 2013 • • Part of Local Government Finance Bill • • More local discretion over exemptions and discounts • • Will have an impact on taxbase – will increase if exemptions / discounts reduce • • Could be used to compensate for loss of taxbase as a result of benefits changes

10. The Year 1 numbers for Wychavon Class C = exemption for short term (up to 6 months) empty properties, currently 100% Class L = 100% exemption for mortgagees in possession

11. What does this mean? • • Reduces Year 1 impact for major preceptors from £700,000 to £282,000 • • Beneficial impact on town / parish councils • • In previous example: Taxbase 1,000, precept of £20,000 • • Taxbaseunchanged for Council Tax Benefits / Support • • But 0.5% uplift for other reforms to Council Tax • • Taxbase1,005 • • Band D Council Tax £19.90 (compared to £20.00 in current year)

12. Next steps • • Consultation on local Council Tax Support scheme – 17 September to 26 October 2012 • • Please see www.wychavon.gov.uk/ct12. • • Event for town / parish councils 21 November 2012 • • Consultation on parish solution closes 9 October 2012, regulations by end November 2012 • • Local Government Finance Act late October / early November • • Report to Board 27 November 2012 • • Council adopts proposed Council Tax Support scheme 18 December 2012 • • Review of local scheme for 2014/15 commences