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Written Statement - Support for Council Tax in Wales

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Carl Sargeant, Minister for Local Government and Communities

I am making this statement today to update Members on the position regarding the abolition of Council Tax Benefit and the next steps in establishing the new scheme to provide support for council tax in Wales.

The Welfare Reform Act 2012 will abolish council tax benefit in its current form across Great Britain.  It is being abolished on 31 March 2013 and the responsibility for putting in place arrangements to provide support for council tax in Wales passes to the Welsh Government as a new responsibility.  I have said before that this is a huge change, requiring us to develop and implement a new scheme that provides support for some of the most vulnerable members of our society.  The timescales in which this is being forced through present significant challenges.

When the UK Government announced the changes, it also indicated that it would make a transfer of funding to the Welsh Budget to accompany this new responsibility but that the funding provision would be cut by 10% compared to the funding for council tax benefit.  

At the time of the announcement, no legislative provision existed for the Assembly or Welsh Ministers to establish arrangements to provide council tax support in Wales.  Primary legislative powers have since been secured through the UK Government’s Local Government Finance Act 2012, which received Royal Assent on 1 November 2012.

That Act gives Welsh Ministers powers to make a scheme but the detailed provisions for any scheme must be set out in regulations.  Officials have been working on the draft regulations since the beginning of the summer in anticipation of the Bill being passed.  

I will shortly be laying the first two sets of regulations before the Assembly.  They will set out how the main scheme will operate.  My original intention was that these regulations be laid and debated with a view to their coming into effect from 1 December.  

However, a critical component of the regulations is the percentage figure which applies a reduction to the council tax liability to be taken into account for the purposes of calculating the amount of support to be provided to eligible households.  This percentage must accurately reflect the reduced level of funding available and cannot be finalised until HM Treasury has the confirmed the amount to be transferred.  Whilst Treasury provided some indicative figures for Wales in May 2012, these figures were significantly lower than the previous estimates they provided.  No explanation of the change was provided.  Our view is that the current figures represent a funding gap of over £20 million.  This would be a recurring, and growing, gap which the Welsh Government does not have the resources to cover.  

My Ministerial colleagues and I have been pressing the UK Government for confirmation of the funding transfer for several months.  Last week, Treasury confirmed that the figure would not be provided until the Autumn Statement is made on 5 December.  This means that it will not be possible to lay the regulations before that date.  We have therefore requested that arrangements be made for the regulations to be considered in a plenary session as soon as possible after the regulations are laid.

I have made the significance of this matter clear to the UK Government on a number of occasions.  If the regulations are not brought into effect in early December, there is a considerable risk that we will not be able to put a new scheme in place by April 2013.  

A number of commentators have suggested that, in Scotland, all these things have been resolved.  It is true that the Scottish Government has laid its initial set of regulations before the Scottish Parliament.  The Scottish Government has been able to do this because it has the resources to be able to cover the funding shortfall and their scheme for 2013-14 closely follows the existing council tax benefit system.  However, the Scottish Government shares our concerns about the funding position.  When they made the decision to cover the 2013-14 shortfall, the gap was estimated to be £40 million but, like here, the Treasury has since reduced its estimates of the amounts to be transferred to the Scottish Government.

I have expressed my concerns about this matter on a number of occasions.  It is disappointing that those concerns have become reality and I will be writing to the UK Government to spell out the implications of their actions.