Cutting council tax support in Wales

Any cuts to council tax support in Wales are bound to hit lower-income households, says a think-tank briefing.

The Institute for Fiscal Studies has examined the likely impact on Wales of the UK government’s proposal to devolve council tax support from 2013/14 onwards, and to cut funding for it by 10 per cent. The briefing looks at the options available to the Welsh Government.

Main points

  • 80 per cent of council tax benefit in Wales goes to households in the bottom half of the income distribution, so cuts to support are bound to hit lower-income households.
  • More aggressive means-testing could protect those in the greatest poverty, but with the result some people would be worse off after a pay rise.
  • Measures saving the full 10 per cent typically involve hitting those entitled to maximum support; i.e. those with the lowest incomes.
  • Local authorities in Wales, like those in England and Scotland, will have an incentive to cut the cost of council tax support by discouraging low-income families from living in their area, or by doing less to encourage take-up.
  • Unlike English local authorities, those in Wales are not being required to protect pensioners’ entitlements, so pensioners could be asked to take a cut.
  • Welsh authorities can also reduce the single-person discount, which would predominantly hit better-off households and would reduce the incentive for people living alone to occupy larger properties.

The Welsh Government expressed ‘profound concerns’ over the impact of the cuts.

Source: Stuart Adam and James Browne, Reforming Council Tax Benefit: Options for Wales, Briefing Note 129, Institute for Fiscal Studies

Links: Briefing Note | IFS press release | Welsh Government press release.