The principle that helped to end Margaret Thatcher’s political career – even the poorest members of society should pay something towards their council services – is about to make a controversial comeback in Birmingham.
From April next year, thousands of householders will no longer qualify for 100 per cent council tax benefit even if they are out of work or on low incomes.
For the first time in more than 20 years, since the ill-fated Poll Tax was introduced and then quickly shelved, unemployed people will have to make a contribution toward the cost of local authority services.
The changes are the result of a Government scheme to localise council tax support – effectively, handing responsibility for deciding who qualifies for benefit to local authorities.
But the new system is underpinned by a sharp cut in the amount of money Whitehall is prepared to pay for benefits, leaving council leaders with difficult decisions to make.
Local authorities will suffer a 10 per cent cut in funding under the Localisation of Council Tax Support initiative – £11 million in Birmingham City Council’s case. The council, in common with most other authorities, says it probably has no option but to pass on the cost by imposing an 80 per cent cap on the amount of council tax benefit that can be claimed by people of working age.
The move means that a family living in an average Band C property in Birmingham, paying nothing at the moment because they receive full benefit, will have to find £224 a year. For larger Band E properties the payment will rise to £300 a year, while for large Band H properties the figure will be £500.
It has emerged that Birmingham – Britain’s largest council – is far from ready to implement the changes in April 2013. Labour council leader Sir Albert Bore, who took over from a Tory-Liberal Democrat coalition in May, is expected to ask the Government from more time to introduce the new system.
A council scrutiny report warns: “This timetable is extremely challenging and at best, can only be introduced by utilisation of the current IT systems with minor alteration. This has the effect of IT software dictating social policy through insufficient time to plan and implement changes.”
If Birmingham fails to implement changes on time, the city could be required by the Government to operate a “default” system with the council having no control over which categories of claimants qualify for benefit.
Whatever happens, pensioners will be protected from the changes by Government regulation. At the moment, three-quarters of retired people in Birmingham receive 100 per cent council tax rebate and will continue to do so. Working age people, whether employed or not, will feel the full burden of the benefit cut.
Under proposals being considered by the city council only two categories of working age claimants will still receive full benefit – disabled people and anyone with children under six. No applicant will in future be able to have claims backdated.
The scrutiny briefing paper makes it clear that the council has no choice but to pass on the £11 million cut by reducing benefit payments. Various proposals were considered, including imposing higher charges on people living in larger properties, but a flat rate maximum 80 per cent benefit claim is proposed.
More than 20 years ago, Margaret Thatcher’s third government pushed ahead with the Community Charge as a replacement for the rates system. The Poll Tax, as it became known, was based on every adult, including pensioners, paying something towards council services.
The then Tory Environment Secretary, Nicholas Ridley, famously asked “why should a Duke pay more than a dustman?”. Widespread protests including riots in the streets eventually led to the replacement of the Community Charge by the Council Tax and the re-introduction of a 100 per cent benefit for millions of low-paid claimants across the country.
Birmingham has the third worst record of social deprivation of any city in the country behind Liverpool and Manchester, according to the Department for Communities and Local Government. Just under half of the Birmingham population live in the 10 per cent of most deprived council wards in England.