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Deepest tax support cuts sparked highest arrears, report finds

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Councils that made the deepest cuts to council tax support are the most likely to see the steepest increases in arrears and administration costs.

Those findings have come from the New Policy Institute, which researches poverty, housing and economic issues.

Council tax support replaced the former council tax benefit system in April 2013, with responsibility also switching from central to local government but with an overall 10% cut in the resources available to help those unable to pay the full rate.

This meant councils had to either make up the missing 10% by charging low income residents part of the tax, or find equivalent savings elsewhere.

A report by NPI researchers found councils that introduced a requirement for all working-age adults to pay at least some council tax – regardless of income – were the most likely to see arrears and court and administration costs rise, and collection rates fall.

The report said council tax arrears had risen by £145m to £836m since the system changed, while related court and administration costs rose by £24m to £233m.

Arrears increased by at least a quarter in 84% of councils with a high minimum payment, but rose at this rate in only 32% of councils with a low minimum payment.

Court and administration costs increased in 40% of councils with no minimum payment, in 64% of councils with a minimum payment and in 73% of councils where the minimum payment was high.

The overall council tax collection rate fell by 0.4 percentage points, only its second fall since its inception in 1991.

Collection rates fell in 15% of councils that introduced low minimum payments and in 63% of those with high minimum payments.

According to the NPI’s report: “The size of these changes was clearly linked to the level of minimum payment: higher minimum payments were associated with bigger increases in arrears and court costs and a falling collection rate.”

NPI director Peter Kenway said: “Our research shows that the bigger the cut in council tax support, the bigger the fall [in collection rates] tended to be. Councils should consider the implications for the collection rate when setting council tax support for next April.”

Size of minimum payment
Number of councils in group
Proportion of councils where arrears increased
Proportion of councils where arrears increased by at least 25 %
No minimum payment
97
52%
14%
8.5% & under
111
73%
32%
8.5-20%
21
86%
57%
20%
53
85%
55%
20+ %
43
95%
84%
All councils
325
72%
39%
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