The first indication of how many councils will be able to cover council tax benefit funding cuts by adopting new powers on second and empty homes has been revealed.
An estimated two-thirds of single-tier authorities will be able to cover the 10% cut to funding by scrapping discounts on vacant and second homes - leaving one-third that will have to fund a shortfall from other sources.
New local government minister Brandon Lewis this week published estimates of how much second and empty home discounts cost individual councils - totalling £425m across the country but varying widely between councils depending on the number of such properties in the area.
The new flexibilities have been championed by ministers as one way councils can cope with the 10% funding cut due in 2013-14.
Comparing the government’s estimates for the size of each council’s cut with the estimated extra tax yield available to councils by making use of the flexibilities suggests that 80 (64%) single-tier authorities would be able to cover the amount they are expecting to lose in council tax benefit grant (see the methodology box for why two-tier areas have been excluded).
But in London, the reverse appears to be true, with only 12 (36%) councils likely to be able to cover the cut with income from the flexibilities. Metropolitan districts are slightly better off, with 53% able to cover the cuts, while 88% of unitaries could see income increase over and above the funding cut.
However, the government’s figures for both the 2013 funding cut and the additional yield from scrapped exemptions have been questioned by sector commentators.
Sharon Taylor (Lab), deputy chair of the LGA and leader of Stevenage BC, said the data on which next year’s funding allocations were based came from the Department for Work & Pension’s forecasts, which showed that claimant numbers were set to fall.
Disputing that this would be the case, Cllr Taylor said many councils would find their funding cut in 2013-14 was likely to be larger than 10% as a result. “The information that is coming out of ministries saying that claimants are going down is quite simply wrong,” she said.
Paul Woods, city treasurer for Newcastle City Council, said there were also questions about the way in which DCLG had calculated individual allocations for 2013-14 as this was based on shares from 2011-12 outturn data. He warned that using last year’s figures would mean many councils’ funding allocations could be out of kilter with their true claimant numbers.
“The DWP has monthly reports of local authority data,” Mr Woods said.
“Ministers have decided to use data based on the last year. But we want to push hard for the most up-to-date data to be used, otherwise it penalises those suffering worst from the economic recession and benefiting authorities doing well,” he added.
Chris Leslie (Lab), the MP for Nottingham East who asked DCLG to release the estimates of second and empty home discount costs, said: “The government is hitting poorer authorities harder and not recognising that some councils will struggle to claw back extra council tax revenues. There is a basic unfairness in this approach.”
An LGA spokesman said LGC’s analysis was “further evidence in support of our repeated argument that more needs to be done to give councils the financial flexibility they need”.
The LGA is hoping it can secure powers to amend single persons discount and pensioner benefits when theLocal Government Finance Bill reaches the Lords.
The two datasets used in LGC’s calculations are the 2013 council tax support funding allocations, which DCLG published in May, and its estimates of the cost of the council tax discounts for second and empty homes that councils are allowed to abolish, which were published this week.
Both sets of data give figures for individual councils but they are only partly comparable because the data for 2013 funding allocations provides figures for all local authorities, including police and fire authorities, while historic council tax and councils tax benefit data provides figures for billing authorities only.
While unitary areas can be easily compared, two-tier authorities are impossible to compare unless you know the proportion of council tax and council tax benefit/discounts attributable to each billing and precepting authority.
For this reason, only unitary authorities have been analysed.