29 March 2013

We are about to see substantial new taxes on the poor come into effect. Of course they are not officially called that, the Tory Libdems have prettier names for them.

Bedroom tax
First, there’s the bedroom tax. People in social housing who receive housing benefit to help them pay their rent and who have more bedrooms than they are judged to need will have their benefit reduced by 14 percent for one surplus bedroom and 25 percent for two or more. This is expected by the government but not by anyone else to save £500 million a year in benefit payments. Tenants can avoid the tax by voluntarily downsizing to a smaller house which will affect the anticipated savings.

There are difficulties in downsizing which the government prefers not to notice: for example, Is a small box room a bedroom? Where will family visiting a parent sleep? What happens if there are not enough smaller houses?

On the last difficulty we know that there are not enough smaller places. Tenants who decide to downsize and find there is no social housing available will have to move into a house in the private sector; rents there are dearer than in social housing so their housing benefit will be larger to reflect that. The government’s savings would then be eroded.

There is then incoherence in this policy. The government wish people to downsize to free up large accommodation for people on the social housing waiting list. However, if people downsize that eats into the anticipated savings and, as there are not enough smaller places in the social rent sector, will lead to an increase in housing benefit payments as people move into the dearer private sector.

This is not only an uncivilised policy, it is inept.

How many people in Cornwall are affected?
The National Housing Federation (NHF), the group for affordable housing associations, calculates that in Cornwall around 3000 people will be affected. The average yearly tax (or benefit loss) for tenants in Cornwall is around £532 for one surplus bedroom and £950 for two or more (slightly less in St Ives constituency). [NHF cited in Guardian 28 March 2013. The figures for each constituency can be got by clicking on the map.]

Council tax support (CTS)
At the same time people who up to now have been judged too poor to pay any or all council tax will in Cornwall now have to pay a quarter of it.

The Tory Libdem government cut its subsidy to council tax and left it to local councils to work out how to deal with the shortfall. Pensioners were exempted by the government from any rise down to this cut. At the same time council tax benefit was renamed council tax support. Cornwall Council, with a shortfall of about £6 million a year, decided to limit the subsidy/rebate for the poor to 75 percent of the tax, that is the poor should pay 25 percent of the tax due.

Of course there are difficulties. The poor struggling with depleted incomes may default on their new council tax, choosing to eat and clothe as their priority; Cornwall Council will then have to summons them and perhaps send in bailiffs. We are talking about seriously poor people here. This Tory Libdem policy is likely to have these uncivilised consequences.

How many people in Cornwall are affected?
There are 26 729 people in Cornwall who receive council tax benefit [Cornwall Council Cabinet papers, 12 December 2012, page 83 onwards.]

“At least 50 000 in Cornwall will be affected by changes to welfare at various times over the next five years.” [Cornwall Council’s Community Intelligence Team, page 106 in 12 December 2012 Cabinet papers cited above]

Of 326 councils in England 71 percent are requiring some payment of council tax by the previously exempted poor. Of those requiring some payment four-fifths are requiring a lower percentage contribution than Cornwall. [ Joseph Rowntree Foundation, The Impact of localising council tax benefit .]

See also
Bedroom tax NHF

The New Policy Institute, Council tax support update has a comparison of council approaches to the council tax changes.

Housing Benefit (Amendment) Regulations 2012 (bedroom tax regulations)