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Council tax funding decisions 'worrying': IFS

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Questions have been raised about the Department for Communities & Local Government’s policy making processes following the last-minute announcement of transition funding for localised council tax benefit schemes.

The respected Institute for Fiscal Studies has questioned why the financial support for local authorities was announced so late in the Local Government Finance Bill’s legislative process, warning of the ‘considerable dangers’ of failing to think through such key welfare reforms.

“The case for well thought through reform of the welfare system is overwhelming. The dangers of less fully considered reform - as this one appears to be - are considerable.”

A note published on Thursday by IFS director Paul Johnson and senior economic researchers Stuart Adam and James Browne said: “Perhaps most worrying is what this says about the policy-making process. The potential downsides that the government seems to be trying to ameliorate - losses for the poorest households and weakening of work incentives - have been obvious to many observers for a long time. Yet this announcement has come very late in the process.”

The IFS team, who published a critical appraisal of the policy in May, said: “Many councils have already been running public consultations on draft proposals, as the bill requires them to do, yet are now being incentivised to change their proposals at the last moment - perhaps only to revert to their original plans when this extra funding is withdrawn a year later.”

The £100m funding offer is equal to around a quarter of the 10% funding cut which are due to be handed to councils in April, according to indicative figures published by DCLG. The IFS said: “It looks as if the government is aiming to pay councils not only to design schemes that the government likes, but to design schemes that don’t cut support as much as councils’ funding is being cut, leaving them to make up the shortfall from elsewhere in their budgets.”

The IFS’ criticism has been echoed by finance directors who have been dismayed that the late announcement of money will not come close to filling the budget gap they face in council tax support next year.

One treasurer who did not want to be named said interest in the offer would be “marginal” given the size of the transition funding compared with the size of the cuts faced and the lack of time to meet the requirements. “All of these late announcements do not help while we are setting budgets,” he added.

Another treasurer speaking anonymously said: “It is the most annoying bit of manipulation I have seen for a while. I have no idea how anybody who has already been out to consultation is going to change their scheme to meet the requirements in the time available. I think lots of people will just ignore it.”

A spokesman for DCLG said it hoped councils would save an estimated £200m a year by reducing fraud and error, but it “appreciates these savings may not be delivered immediately in the first year” and had therefore provided the one-year offer of transition funding.

“To assist the transition, the government has already provided £30m of funding and to assist that further ministers have announced an additional £100m of new funding to help develop good local schemes and promote best practice.”

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Readers' comments (3)

  • davy jones

    This is a really appalling way to run things. Most councils have just finished running the expensive and time-consuming consultations that the Government told them they must do.

    And now these consultations are potentially thrown into the bin as the Government proposal is a completely different scheme from those that most councils have consulted on ! It makes a mockery of consultations, wastes local council's precious time and money, and is a further nail in the coffin of any localist pretensions the Government still claims.

    Davy Jones, Associate of the Consultation Institute

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  • HMG seem to be serial offenders - perhaps its the new Lastminute.gov!

    To be added to their propensity for 'U' turns. Council finance chiefs need to keep tuned in.

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  • The £100m pot allocates c£200k to my council and 2 tier partners , not even half of what we would need to dampen the new liability cases to this mysterious 8.5 per cent threshold. As well as serously underfunding the objective, it's terribly late , it's meddling with near finished and consulted upon local schemes and makes small sums to collect, even smaller. This state of affairs is now clearly as similar to the poll tax experience as the policy making is to the"Thick of it "

    head of revs and bens (east midlands )

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