The administrative cost of localising council tax benefit will be even bigger than next year’s grant funding cut, according to an early estimate submitted to government.
Birmingham City Council has told the Department for Communities & Local Government the controversial policy could cost them up to £40m in additional costs - almost four times more than the council is set to lose in grant funding.
The city council is one of 30 councils who submitted estimates last month to DCLG officials who are attempting to assess how much financial support councils should receive for taking on the ‘new burden’ of administering council tax benefit.
Like all councils, Birmingham will see council tax benefit funding cut by 10% when it is localised in April, producing a £11m shortfall, and it is about to consult with the public on how the scheme can be redesigned and which claimants should receive less.
Chris Gibbs, Birmingham’s assistant director of revenues and benefits, said the £40m was a “provisional assessment” and included estimates of what it would cost for the council to gather claimant information if DCLG were unable to secure a data sharing agreements with the Department for Work & Pensions.
Staffing costs, property costs and back office costs for the council’s 300 person revenues and benefits team have also been included. These costs are currently paid for by an administrative grant by DWP but this is due to be withdrawn in coming years as housing benefit, currently managed by councils, becomes universal credit, to be managed by central government.
Mr Gibbs said most housing benefit claimant also claimed council tax benefit meaning there still remained a similar amount of processing work to be done even after housing benefit is phased out. “I will probably need the same sort of size team as I have now,” Mr Gibbs said.
Collection costs and bad debts were also included in the new burdens assessment sent to DCLG as Birmingham, like a number of other councils, are proposing to ask almost all claimants to pay something towards their council tax bill.
Mr Gibbs said: “If we have to collect from people who have not had to pay before there will be inevitable costs in chasing those small debts.”
Birmingham refused to release a breakdown of their £40m estimate.
Claire Cooper, the DCLG deputy director responsible for localising council tax support, confirmed that the government had received the estimates from councils and was assessing them.
“There is quite a lot more work to be done in interrogating them and to understand the assumptions that people have made”, she said at an LGA conference held last week.
Ms Cooper reminded the audience that £30m was distributed to councils in March as a “down payment” on the new burden payment and said the intention was to have the new burden assessment ready in the Autumn in time for the local government settlement.