- Six London local authorities applying two-child limit to council tax support
- Use of bailiffs for council tax debt on the rise
- Total council tax debt rises to £24.8m in London (up from £18.2m in 2017/18)
- 26% of working age council tax support claimants in arrears
Five London boroughs and the City of London are needlessly applying a two-child limit which cuts the amount of help that working families with three or more children can receive with council tax, research by Child Poverty Action Group (CPAG) and Zacchaeus 2000 Trust (Z2K) shows.
A sixth borough – Westminster – has applied the limit since 2018 but after reviewing its impact will remove it from April this year.
The charities are urging all councils to review their processes to check whether the limit is being applied.
Nationally, the controversial two-child limit policy axed child allowances in tax credits and universal credit for third or subsequent children born after April 2017.
As a result of choosing to apply the two-child limit to council tax support, families affected are losing significant amounts – up to £53.52 per month for a three-child family and up to £94.12 for a four-child family. The local authorities are Barking and Dagenham, Bexley, Hillingdon, Kingston upon Thames, Newham, and the City of London. City of London reported that no family’s entitlement was affected in 2018/19 and it monitors to check that this remains the case.
Low-earning families can be entitled to a reduction on their council tax bill. Their basic needs are assessed, based on their circumstances, and the amount of income deemed necessary to meet those needs is calculated. This amount is disregarded when their eligibility for council tax support is assessed. But any income they have that is above the basic needs threshold (or “disregard”) leads to a percentage reduction in the amount of council tax support they can have.
For a three-child family subject to the two-child limit in council tax, the amount of their income that is disregarded (and therefore not subject to reductions in the amount of council tax support) is lower than it would be if the two- child limit were not applied because only two (not three) children are taken into account in determining the family’s basic needs. (See example in Notes to Editors).
The findings emerge from CPAG and Z2K’s FOI requests on council tax support schemes in all London local authorities.
Commenting on the FOI findings, Chief Executive of Child Poverty Action Group Alison Garnham said:
As a nation we believe it’s right to have a social security system that protects people from poverty and helps them to get better prospects. But more than any other single policy, the two-child limit is driving up child poverty and undermining family stability.
“We‘re dismayed to find that a handful of London local authorities have imported this nasty policy to cut council tax support for some of London’s low-paid families – simply because there is a third or subsequent child in the household. It means the needs of a third-born child in Barnet are recognised in council tax support schemes but in Barking and Dagenham they are overlooked.
“Already 96,000 Londoners have council tax arrears because they can’t afford the bills. We are urging local authorities to remove the two-child limit in council tax support - to prevent even more working families from sliding into debt.”
The IFS has reported that nationally 74 English councils (23% of the total) introduced a two-child limit in their council tax support schemes in 2018/19.
The two-child limit is applied in Housing Benefit (HB) – as well as universal credit and tax credits. Housing benefit is administered by councils using the same default software that is used for council tax. There may, therefore, be efficiency savings for councils which adopt the two-child limit in council tax support since they avoid the need to adapt the default software used for HB, or to find a manual workaround, in order to make it possible for more than two children in a household to be taken into account in determining entitlement to council tax support.
Total council tax arrears in London reached £24.8 million in 2018/19, a big jump from £18.2 million the previous year. More than nineteen thousand (19,367) London council tax support claimants were referred to bailiffs in 2018/19, up from 16,444 in 2017/18. Fewer claimants got a court summons in 2018/19 (75,669) compared to the previous year (89,929) but those that did paid a total of almost £6 million in court costs.
In recognition of the strain that council tax places on their low-income residents, nine boroughs have a hardship fund for council tax support claimants in arrears.
Ten London local authorities pay the full council tax bill for residents who qualify for council tax support in 2019/20 (one more than did so in 2018/19) but most boroughs require a minimum payment - ranging from 8.5% of the bill (in Islington) to 30% (in Wandsworth).
Chief Executive of Z2K Raji Hunjan said:
“The responses to our FoIs and other information published by the Boroughs shows there have been positive steps over the past 18 months. Richmond has reinstated 100 per cent support and Haringey has done the same for families with children. Newham has halved its charge, Greenwich is reinstating 100 per cent support from April and Brent is doing the same for its poorest residents in a new banded scheme.
“In contrast, however, several Boroughs have either ploughed ahead with further cuts to the level of support available or taken more draconian enforcement action like the use of bailiffs when claimants fall into arrears. We really hope this new evidence, especially the increasing examples of best practice in the Capital, will show councillors across the political spectrum how to adopt a more understanding approach that realises, after a decade of austerity, London’s poorest really are too poor to pay this tax.”
CPAG and Z2K are calling on government to re-instate a fully funded national system of council tax support.
Notes to editors:
The report is here
Where the two child limit is applied to council tax support schemes, no allowance is made for the needs of third or subsequent children born after April 2017.
Example of how applying the two-child limit can reduce council tax support:
There are two families with three children, in identical circumstances with identical basic costs. Family one lives in a borough where the two-child limit is not used to calculate council tax support. Family two lives in a borough where the two-child limit is used to calculate council tax support. As an illustration, if the income of both families is £400 and council tax support is reduced by 20% of income over basic costs, this is what happens to council tax support:
Income is £400
Basic costs are £250
Income above basic costs is £150
Council tax support is reduced by 20% of income above basic costs, so the family loses £30 in council tax support
Income is £400
Basic costs are only £200 because one child is ignored
Income above basic costs is £200
Council tax support is reduced by 20% of income above basic costs, so the family loses £40 in council tax support
Where local authorities apply a percentage reduction in council tax support, it is most commonly a reduction of 20%.
Families who are out of work and receiving Job Seekers Allowance, Employment Support Allowance or Income Support receive full council tax support at the maximum level offered by their particular council - for some this may be a 100% reduction (ie they pay no council tax) for others it might mean an 85% reduction (ie they pay 15% of the tax). The two-child limit does not affect these families.
In April 2013, the then government abolished council tax benefit and replaced it with locally run council tax support schemes. At the same time, local authority funding was cut by 10%. Since then, Child Poverty Action Group (CPAG) and Zacchaeus 2000 Trust (Z2K) have been monitoring the changes to the 33 different localised council tax support schemes in London and assessing their impact on low-income Londoners and on local authorities.
Since 2015 the charities have sent FOI requests for information on council tax support policies to all London Boroughs (covering the years 2014-15 onwards). The FOIs for 2018/19 included the following question on the two-child limit: Whether the two-child limit/allowance is used to determine the entitlement of families under your council tax support scheme, and if so, how many families' entitlement to CTS was affected by this policy in 2018/19?
Among the local authorities which have adopted the two-child limit in council tax policies, City of London reported that no family’s entitlement was affected in 2018/19 and it monitors this to check that this remains the case, Newham reported that 1251 households’ entitlement was affected. Barking and Dagenham, Bexley, Hillingdon and Kingston upon Thames did not record or report on how many families’ entitlement had been affected. Westminster reported that 18 families’ entitlement had been affected while the limit was in place. It should be noted that Newham provided some protections or exemptions with the two-child limit, although it did not say what these were.
Only one borough (Barking and Dagenham) gave a reason for using the two-child limit, reporting: "We do use the two child methodology as our [Council Tax Support] CTS scheme mirrors core Housing Benefit Legislation."
The total number of Londoners claiming council tax support fell from 640,664 in 2017/18 to 587,644 in 2018/19. The number of claimants in debt also dropped (96,334 in 2018/19 - down by 4,464 since 2017/18) but the total amount of debt rose in 2018/19 - with £23.6 million owed, compared to £18.2 million the previous year. The proportion of working age Londoners claiming council tax support who are in arrears (24%) is double the proportion in 2013/14.
Referrals to bailiffs increased dramatically in 2018/19 in some boroughs: Richmond upon Thames and Bexley referred three times as many as in 2017/18; Barnet and Redbridge referred approximately twice as many. Lewisham referred 5,324 claimants – a full 27% of all London claimants referred.
Court summonses for council tax claimants fell in 2018/19 to 75,669 – 19% of working-age claimants - (down from 89,929 the previous year).
CPAG media contact: Jane Ahrends 0207 812 5216 or 07816 909302