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Written Statement - Update on the Arrangements for the Council Tax Reduction Schemes in 2014-15 and Longer Term Considerations

Lesley Griffiths, Minister for Local Government and Government Business

This statement is to update Members on the arrangements being made for the Council Tax Reduction Schemes in 2014-15, as well as to provide information on the longer term considerations for the Schemes.

From 1 April 2013, in collaboration with Local Government, the Welsh Government required the introduction of centrally prescribed Council Tax Reduction Schemes across Wales.  We established the Schemes in response to the UK Government’s decision to abolish Council Tax Benefit and to cut by 10% the amount of funding available for future arrangements to provide Council Tax support.

The new Council Tax Reduction Schemes currently provide financial assistance to help more than 320,000 households meet their Council Tax bills.  

For 2013-14, the Welsh Government was able to provide an additional £22m to support Local Authorities in operating the Council Tax Reduction Schemes, taking the total provision to £244m.  This was necessary to cover the shortfall in funding transferred from the UK Government enabling all eligible claimants to continue to receive their full entitlement to support. We have protected approximately 200,000 households who were facing the prospect of having to pay some Council Tax for the first time, the same households who are struggling to cope with the UK Government’s raft of other welfare reforms.

The Regulations which introduced the Council Tax Reduction Schemes are limited to 2013-14 by virtue of a sunset clause agreed with opposition parties last year. In addition, increased pressures on the Welsh Government Budget and the outcome of the UK Government’s spending review mean we are no longer in a position to cover the full funding shortfall for 2014-15.  As a result, I am working closely with Local Government to develop new Regulations which I will be laying in November, 2013. 

I am committed to ensuring our Council Tax Reduction Schemes provide assistance to vulnerable households.  Consequently, I have agreed with Cabinet, in bringing forward the new Regulations, we will retain the National Framework introduced in April. We have also agreed to maintain entitlements for eligible claimants at their current levels, for a further year.

I will also take the opportunity of making the new Regulations to:

  • Incorporate amendments required for certain Welfare Reform changes;
  • Make further simplifications to improve the process for claimants and, where possible, to reduce the costs of administration; and
  • Consider any practical adjustments needed based on our experience of the first few months of the Schemes’ operation.

As last year, the draft Regulations will be issued for a detailed technical consultation in advance of their being laid for formal consideration by the Assembly.  I will shortly be issuing this consultation and on publication it will be circulated to Members for consideration.   The timetable for making the necessary sets of Regulations, which provides for formal scrutiny, is provided as an Annex to this statement.

These decisions regarding the Regulations avoid the situation in England where there are now more than 300 different types of Schemes in operation.  The majority of these reduce the support provided to working age claimants, some requiring households to pay a minimum of 30% of their Council Tax liability.  The Welsh Government was determined to avoid this “postcode lottery” and provide a consistent level of support across Wales. Not only are we protecting households, we are also shielding Local Authorities from some of the financial costs and risks being faced in England, such as those arising from designing their own Schemes, from lower collection rates and from issuing numerous and additional low value bills.

As with this year, it is anticipated there will be a more significant shortfall in funding for the 2014-15 Schemes from the UK Government. Whilst Welsh Government cannot continue to bridge the gap particularly in this unprecedented financial climate, we are committed to continuing to provide support for households in need. I have, therefore, made an offer to Local Government for Welsh Government to  share the costs of managing this year’s shortfall.  

This offer reflects the shared nature of the Schemes, which have been developed in conjunction with Local Government to provide assistance in meeting Council Tax bills, costs which are locally determined.  With the additional funding we provided last year, as well as the funding for transition costs, we will have provided more than £40m to support Local 
Authorities in operating the Council Tax Reduction Schemes.

It is also crucial we develop a longer-term solution to provide Council Tax support in Wales. Therefore, I have commissioned a review to examine the options. I want a solution which will provide sustainable and fair long-term support within the funding available. This new model of support will be implemented from 2015-16.

The review will look at how to maximise the funding available to provide support by assessing potential options and their impact on public finances and local services, as well as examining implications for both for those who currently receive Council Tax support and  other Council Tax payers.  It will include an analysis of the Schemes currently operating in England and the effects of welfare reform to identify viable options and model their likely impact.  A Task and Finish Group of officials, Local Government representatives and the Third Sector will oversee this work.

Our ultimate aim is to establish arrangements, in partnership and collaboration with Local Government in Wales which are sustainable and equitable for recipients. However, within the context of narrow timeframes, reduced funding and significant financial and legislative  constraints, we should be under no illusions about the challenges we face in this task. I will keep Members updated on this longer term work as it progresses.

This statement is being issued during recess in order to keep Members informed and due to the considerable time pressures of completing work on the arrangements for the Council Tax Reduction Schemes 2014-15.  Should Members wish me to make a further statement or to answer questions on this when the Assembly returns, I would be happy to do so.