The Welfare Reform Bill, currently passing through the House of Lords, has attracted much media attention this week. The decision to move the committee stages off the floor of the House and into a committee room has led to criticism that the debate on the bill is being ’squirreled away’[1].
The Bill will have a far reaching impact on all ages and it is vital that it gets a good hearing. It abolishes Council Tax Benefit and passes responsibility to local authorities to determine the support they give to low-income households to meet their council tax bills [2]. But local authorities must also deliver a 10 per cent cut in the total amount spent on Council Tax Benefit in their jurisdiction.
Pensioners, however, will be protected from this cut. The Government has said that it will do this by prescribing “the criteria, allowances and awards for council tax support to pensioners which local authorities will need to provide for in their local schemes”[3].
This policy represents a recipe for intergenerational conflict. It seems unjust that one group of the poor population will be treated differently to another. One implication is that if a charity were to run a take-up campaign – 3 million households do not claim the Council Tax Benefit they are entitled to [4] – to encourage older people to apply for the benefit for which they are entitled, they will be reducing the pot of money available for local authorities to fund support for other vulnerable groups. Pitching the poor against the poor is bad policy, and in this case, it will also pit young against old.
To an outsider it appears that the Government has watered down localism for political expediency. If the Government believes a reformed Council Tax Benefit system works better locally, then they should let local authorities manage the resources and not stipulate that any one group will be protected. Arguably this is merely a localism of political and fiscal convenience, not principle.
It is worth looking at the figures in more detail. Council Tax Benefit is actually the most popular means-tested benefit in terms of the number of recipients, that is, 5.8 million households. The benefit currently costs around £4.8 billion per year, with an average award of around £830 per year (it generally covers all of a household’s council tax bill) [5].
Almost half of recipients are households with occupants aged 60 or over, that is, 2.7 million people. There are 3.1 million working-age recipient households. We do not know the average awards for different age groups, but if we assume that households from different age groups receive roughly the same amount on average – which is a relatively safe assumption – this means that the required cut of £480 million must come entirely from the amount spent on working-age households. It would reduce the working-age bill to just under £2.3 billion, leading to an average award of around £735 per year, or a cut of around £95 per year.
This is not significantly more than the amount that would be cut if no groups were protected. But the fact that older households will have no cut means that based purely on their age, poorer older households will receive £95 more in Council Tax Benefit than poorer young households. This inequality will be exacerbated if council tax bills rise, yet the total amount that can be spent on Council Tax Benefit does not – a scenario which seems very likely. Older households could remain entitled to 100 per cent discounts as part of the pensioner protection, but working-age households would suffer a cut in the proportion of their bill that can be discounted, as well as a cut in the total amount received. The move to a locally administered and defined system will also undermine attempts to increase take-up as local authorities will receive no extra funds if take-up improves.
It is still the case that Council Tax bills in part of the country hit the asset rich, income poor very hard – older people are more likely to fall into this category. Moreover, around 1.3 million recipients are single female pensioners, who are especially susceptible to poverty. Yet 1.6 million working-age recipients have dependent children, and 1.1 million of these are lone parents. The age distribution of the impact of cuts remains unclear and there is no compelling argument why older people should be protected at the expense children and young people.
Of course, Council Tax Benefit reform is not the only aspect of the Bill which deserves attention through an intergenerational lens. For example, the social housing sector is extremely worried about the impact of Housing Benefit reform on the sustainability of some retirement housing options. This could have a knock-on impact on the housing market for all ages.
The Welfare Reform Bill is a very controversial one. In some ways, whether debate takes place on the floor of the House of Lords or in a committee room probably makes little difference. But what the Government must do is allow and encourage proper scrutiny. And intergenerational fairness must form part of this scrutiny.
Dr Craig Berry and David Sinclair
This blog was initially published at www.ilcuk.org.uk
1. http://www.guardian.co.uk/society/2011/sep/15/welfare-reform-bill-society-daily-email
2. For sake of clarity, Council Tax Benefit is not technically a benefit, but a reduction in the liability to pay tax
3. http://www.communities.gov.uk/documents/localgovernment/pdf/19510253.pdf
4. http://www.telegraph.co.uk/finance/personalfinance/7144127/16bn-worth-of-benefits-unclaimed-every-year.html
5. http://www.npi.org.uk/files/New%20Policy%20Institute/Council%20tax%20benefit%20briefing.pdf
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