Row over council tax benefit risks derailing Universal Credit mantra

Published by 24publishing for 24dash.com in Housing and also in Central Government, Legal, Local Government, Universal Credit

The “lunacy” of leaving council tax benefit out of the Government’s flagship Universal Credit came out in the wash last night during an opposition day debate on the Government’s benefit reform.

From next October, Universal Credit – the responsibility of the Department for Work and Pensions (DWP) – will replace six income-based benefits, including housing benefit, but not council tax benefit.

That – which comes under the jurisdiction of the Department for Communities and Local Government (DCLG) – is being handed to councils to administer, but with 10% cuts and orders to protect pensioners.

Thus the scene was set for some gentle jostling between ministers, but with serious concerns raised that could render the “making work pay mantra” of Universal Credit inaccurate.

The debate was opened by shadow work and pensions secretary Liam Byrne who teased Iain Duncan Smith that he had lost his battle with Eric Pickles over putting council tax benefit into Universal Credit.

Byrne said: “He was sat on by the right hon. Member for Brentwood and Ongar (Mr Pickles), which is a fate we would not wish on anyone.”

He said the result is that whether someone is better off in work or on benefits will depend on where they live. “The Institute for Fiscal Studies says that Universal Credit 'severely undermines' the simplification,” he added.

Probed on his personal view of the council tax benefit fiasco by another Labour MP, IDS – who once described himself as the “quiet man” – resisted, carefully replying: “My general view is that localisation is a good thing, and I am sure that local authorities will robustly deliver a system that works brilliantly. Collectively, we are absolutely in favour of it.”

East Ham MP Stephen Timms then dealt the hammer blow when he revealed that some local authorities were proposing to add a 40p in the pound taper on council tax benefit on top of the 65p taper for Universal Credit.

“Under that approach, people who earn more would get less because they would lose more benefit than they would gain in income,” he said.

Charlie Elphicke, the Conservative MP for Dover and Deal, tried to brush the concerns under the carpet when he said “the fine tuning of council tax is still under discussion and still under way and I hope that that will come out in the wash”.

Timms later revealed that Welwyn and Hatfield district council – the former housing minister’s constituency – is one that is consulting on a 40% taper rate for council tax benefit.

“If the council proceeds with that proposal, for every extra pound that people earn they will lose more than £1 of universal credit,” said Timms. “That is precisely the kind of lunacy that Universal Credit was supposed to abolish. The idea was supposed to be that work should always pay. I think that that was supported by every Member who spoke today, and it was mentioned specifically by my hon. Friend the Member for West Dunbartonshire (Gemma Doyle). However, thanks to the success of the Secretary of State for Communities and Local Government in winning a row with the Secretary of State for Work and Pensions, it will not now happen. Every council in the country will have its own council tax benefit scheme and its own taper, so people’s work incentives will depend on their postcode. So much, sadly, for simplicity.”

Earlier, Iain Duncan Smith said that through reform to marginal deduction rates, Universal Credit will improve the lives of some of the poorest in society.

He said: “The fact is that 1.2 million people will receive a reduced marginal deduction rate as a result of what we are doing with Universal Credit. At the moment, 500,000 families see marginal deduction rates of well over 80%. Virtually nobody will see that once universal credit comes in. Some 2.8 million households will gain and 80% of those gains will go to the bottom 40%, improving their life chances dramatically.”

Pensions minister Steve Webb urged the opposition to not lose sight of the big picture. He said: "We are bringing together separate strands into a single integrated system so that people do not have to go for their housing benefit to the council, for their jobseeker’s allowance to the DWP, and for their tax credits to HMRC. That will be good for tackling poverty, as it will lift many families and children out of poverty. It will also be good for tackling benefit take-up, because instead of having to claim several separate benefits, people will make a single claim."

Ross Macmillan is the deputy editor of 24housing magazine.