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A very British coup….

A very British coup….

🕔18.Jul 2012

The Government regularly finds itself accused of being unable to organise the proverbial booze-up in a brewery.

But one piece of work at Whitehall has been completed with such staggering political brilliance and downright cynicism that it takes the breath away.

From April next year several million of the poorest people in this country will for the first time have to pay council tax. They’ve been protected up to now by being able to claim 100 per cent benefit, but that’s all ending at the start of 2013-14.

And just like the doomed Community Charge, or poll tax as it became known, most people will have to pay something towards the provision of council services. Benefit will be capped at 80 per cent in Birmingham, leaving unemployed adults to face council tax bills of between £220 and £500 a year.

Why have people not been protesting about this? Why have there not been demonstrations and riots? The answer is that very few outside of the local government bubble know anything about what is going to happen next year.

The preparation by Government of changes to the council tax benefit system amounts to a master-class in political positioning. A very British coup, you might call it.

Of course, what’s being proposed has been kept under the radar partly because most local authorities simply don’t know how they are going to implement what they are being asked to bring forward. Birmingham is not alone in asking for more time to bring in the changes.

It must be supposed that some poor sap at the Department for Communities and Local Government was summoned by the relevant Minister a year ago and told to prepare a plan that would: A) Cut by 10 per cent the amount of money available for council tax benefit. B) Freeze in future years the total amount of money available for council tax benefit. C) Absolve the Government of all blame.

The first thing that any half-decent civil servant would do would be to devise a name for the proposed changes that disguises the true intent. So, instead of Council Tax Benefit Reform, the DCLG decided to promote a bill for Localisation of Council Tax Support. It sounds harmless enough.

It’s the word ‘localisation’ that reflects the real genius behind this. Local government is always harping on about devolution and putting the case for councils to have more freedom from central government. So, why not hand to town halls the necessary powers and budgets to run their own council tax benefit schemes? And at the same time, take the opportunity to cut the money available for council tax benefit by about 10 per cent.

The Government is, however, taking care to remove pensioners from this new system. They will continue to receive 100 per cent council tax benefit, which means of course that the cuts fall disproportionately on working age adults.

The beauty of this from the Prime Minister’s point of view is that it passes responsibility for deciding who gets benefit and who does not, and at what rate that benefit should be paid, to local councils that area already struggling to deliver unprecedented cuts in public spending. Birmingham will have to find £11.8 million to make up the 10 per cent cut, plus about £15 million to administer the new system and chase bad debtors, according to research by finance officials.

A proposal to make everyone pay at least 20 per cent of their council tax bill, with the exception of pensioners, people with disabilities and those with children under six, will raise £8.9 million. There may therefore be a shortfall of £18 million. To make matters worse, computer software needed to make the changes simply doesn’t exist.

The Government insists its policy of decentralisation will “give local authorities increased financial freedoms and a greater stake in ensuring local tax payers are supported into work”. In other words, councils will have a new incentive to find jobs for unemployed people.

Backing this up is another dramatic change to the benefits system contained in the Local Government Finance Bill currently before Parliament. It’s proposed that the amount of money given to local authorities to pay council tax benefit will be frozen at 2013-14 levels and never increased.

Birmingham will get about £88 million, which is £11.8 million less than this year. Clearly, if economic recovery was to happen and unemployment was to fall sharply, the council would have to pay out less in benefit and would be able to keep any surplus from the £88 million. On the other hand, if unemployment remains high or even increases, the council would have to either cut the size of benefit payments or find money from other services.

Whatever happens to the economy, if the amount of money the Government is prepared to hand over towards council tax benefit remains static the value of the benefit will wither on the vine – unless councils can find additional funds from elsewhere.

The Labour leader of Birmingham City Council, Sir Albert Bore, says the “inescapable logic” of the changes is that low income families already suffering from unemployment and local government spending cuts will face even greater hardship.

Sir Albert added: “The Government is seeking to cut the public purse through the back door. The decision making is being passed to us and the blame is being placed on our shoulders.”

There are few rational commentators who could disagree with that.

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