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How viable is your council tax support scheme?

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Councils are looking ahead to what COVID-19 means for collection rates, people’s ability to pay, and whether their council tax support schemes can cope with increased demand.

Zoe and Megan share key findings of three new reports:

- An 18 month project working with 22 Welsh local authorities for the Welsh Government on Universal Credit, council tax reduction scheme and rent arrears in Wales Reports for the Greater London
- Authority on the impact of the Coronavirus Hardship Fund, and on the impact that a flexible approach to collections has on collection rates Analysis for the Cabinet Office on the effectiveness of an early intervention approach to managing arrears in two councils, Newcastle and Barking and Dagenham Council tax arrears were already £3.5 billion pre-crisis and are forecast to reach nearly £5 billion by the end of parliament.

Zoe Charlesworth examines what the worsening financial crisis means for council’s collection rates, budget setting and council tax support schemes, and will look at efforts across central and local government to improve how council tax debt is recovered.

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How viable is your council tax support scheme?

  1. 1. How viable is your council tax support scheme? Policy in Practice Zoe Charlesworth Megan Mclean
  2. 2. www.policyinpractice.co.uk Hello Zoe Charlesworth Director of Policy and Operations Megan Mclean Senior Policy and Data Analyst
  3. 3. www.policyinpractice.co.uk A team of professionals with extensive knowledge of the welfare system. We’re passionate about making social policy work We help over 100 local authorities use their household level data to identify vulnerable households, target support and track their interventions Our benefit calculator engages over 10,000 people each day. We identify the steps people can take to increase their income, lower their costs and build their financial resilience Policy in Practice: What we do
  4. 4. How viable is your CTR scheme? www.policyinpractice.co.uk
  5. 5. Agenda www.policyinpractice.co.uk ● The background and context of CTR scheme design ● Some relevant background analysis: ○ New analysis for the Welsh Government on the impact of Universal Credit on rent and council tax arrears ○ The impact of flexible collections ○ Analysis of CTR Hardship Funds ○ An early intervention case study ● Planning for the future ● Questions and answers
  6. 6. Context to CTR scheme design www.policyinpractice.co.uk COVID-19 presents new challenges The pace of the COVID-19 crisis has meant adjusted forecasts - a shift from relative stability to ever-changing ‘possible scenarios’ ● Out of work benefits doubled to 2.7m by July 2020 ● 15% of the 9.6M on furlough are estimated to become unemployed soon ● Labour market stats: redundancies have doubled in the last quarter Key upcoming changes: ● End of furlough ○ new Lockdown Job Support Scheme and Part-time Job Support Scheme ● COVID-19 benefit changes to expire ● Brexit
  7. 7. ● Councils are seeing an increase in caseload (typically 20 - 50% by July 2020) ○ But scheme design sometimes results in a reduction as households move to UC ○ Difference between councils with automatic claim through UC start ● Council Tax collection has suffered ○ Latest information shows a 0.9% decrease compared to the same quarter last year ● Arrears are increasing ○ 1.3 million households in arrears, worth £500 million (25 June) ○ Reduction to income is primary (although not the only) reason for arrears. Being a key worker and having to shield were also factors The story so far ... www.policyinpractice.co.uk
  8. 8. Caseloads are changing www.policyinpractice.co.uk COVID-19 is changing caseloads Lower prevalence of disability Less likely to be working More claimants in receipt of Universal Credit
  9. 9. Future changes www.policyinpractice.co.uk What we know: ● November 2020 - Minimum Income Floor to be reinstated ● April 2021 - other COVID-19 measures to expire: ○ £20/week increase to UC Standard Allowance, Housing Benefit income disregard and Tax Credits ○ LHA rates reflect cheapest 30% of rents What we know might vary: ● The unemployment impact of furlough ● Impact of local lockdowns ● Brexit ● Will there be a last-minute u-turn on welfare uplift? Party pressure for the Chancellor to keep the £20/week uplift
  10. 10. Uncertainty demands change www.policyinpractice.co.uk Economic uncertainty means that the analysis councils require is changing ● Pre-COVID-19 change was driven by: ○ Cost ○ Impact of UC ● Recent analysis has required greater contextual information to inform scheme design ○ the drivers of scheme redesign ○ the impact of scheme design
  11. 11. Factors affecting scheme design www.policyinpractice.co.uk
  12. 12. Recent analysis to consider www.policyinpractice.co.uk/publications ● The impact of Universal Credit on rent and council tax arrears (research for the Welsh Government) ● The impact of flexible collections (research for the GLA) ● Analysis of CTR Hardship Funds (research for the GLA) ● An early intervention case study (research for the Cabinet Office)
  13. 13. Universal Credit in Wales www.policyinpractice.co.uk/wales
  14. 14. Four key lessons learned www.policyinpractice.co.uk/wales Key lessons ● A generous CTR scheme pays off ● Universal Credit has resulted in council tax (and rent) arrears ● Awareness of CTR, and take-up, are still too low ● The impact of Universal Credit on CTR can be mitigated
  15. 15. A generous scheme pays off www.policyinpractice.co.uk/wales A generous CTR scheme pays off ● Welsh Government funded 10% budget cut in 2012-13 ● CTR scheme covers all 22 authorities in Wales ● All awards based on 100% liability ● Collection rates and council tax arrears have remained broadly constant ● But emerging evidence of increased council tax arrears under Universal Credit.
  16. 16. Impact on arrears www.policyinpractice.co.uk/wales Universal Credit has resulted in council tax (and rent) arrears ● Council tax arrears more prevalent amongst households in receipt of Universal Credit. ● Amongst those with arrears, Universal Credit is associated with a higher level of council tax arrears compared to legacy benefits. ● Most households that are not in council tax arrears under legacy benefits remained with no arrears under Universal Credit. ● Council tax arrears were more likely to increase under Universal Credit than legacy benefits. ● Reasons: lower benefit amounts, five week wait and monthly budgeting
  17. 17. Awareness and take up www.policyinpractice.co.uk/wales Awareness and take up of CTR are still too low ● Take-up of CTR estimated to be around 60% in Wales ● Welsh Government mounting an active campaign ● Our survey indicated that some people thought CTR was part of UC ● Others didn’t know whether they were receiving CTR ● And some were not applying for fear of overpayment recoveries
  18. 18. Ways to mitigate www.policyinpractice.co.uk/wales The impact of Universal Credit on CTR can be mitigated ● Reduce taper rate ● Ignore changes in income below a certain threshold (could roll-up) ● Don’t carry forward two-child limit or Minimum Income Floor into CTR
  19. 19. Further analysis underway www.policyinpractice.co.uk/wales Project Extension: The impact of Covid-19 on CTR in Wales This will provide a unique insight into the impact of the economic consequences of Covid-19 across Wales. Phase 1: ● Impact on caseload across Wales and by regions ● Changes in demographic characteristics ● Impact on cost across Wales and by regions ● Breakdown of total cost by demographic characteristics
  20. 20. Forecasting www.policyinpractice.co.uk/wales Phase 2: Forecasting ● Application of latest economic forecast of impact by OBR to the dataset, adjusted for demographic impact to date, to provide a forecast of caseload and cost by year end. ● Estimate the impact on arrears of CT collection. This will be informed by previous work undertaken for the Welsh Government and will be based on average arrears by demographic group.
  21. 21. CT Collection policies in London www.policyinpractice.co.uk/wales ● Council tax rates and collection practices (as captured by adherence to the Citizens Advice and LGA Council Tax Protocol) were not significantly associated with collection rates ● Only council tax reduction scheme (CTRS) generosity and local poverty levels were significantly associated with collection rates
  22. 22. Impact of CTR on collection www.policyinpractice.co.uk ● The GLA research showed that there was a correlation between CTR scheme generosity and collection rates ● Average difference between the most generous and least generous is £45/month (16% of standard allowance) ● A recent analysis for a London Borough showed a clear relationship between level of arrears and level of support: ○ Households receiving the most support under the current working-age CTR schemes (working households in receipt of Universal Credit and protected groups) are also those households with lowest CT arrears. ○ Households who see the greatest reduction in CTR support compared to the default scheme (working households in receipt of legacy benefits) are the group with the highest CT arrears.
  23. 23. CT Collection policies in London www.policyinpractice.co.uk Interaction of poverty and collection rates ● Local authorities with higher levels of relative deprivation tended to report lower council tax collection rates
  24. 24. www.policyinpractice.co.uk/hardship-fund-allocations ● Local discretionary may not be able to plug the gap ● The ability of a council to do this using COVID-19 hardship funding will depend on their local CTR scheme Impact of the Covid-19 Hardship Fund
  25. 25. www.policyinpractice.co.uk ● Re-Imagine Debt wanted to prove whether proactive approaches are more effective in tackling debt and reducing arrears ● Data analysis via LIFT identified households in arrears eligible for the pilot ● We tracked debt journeys and compared results with a control group ● Newcastle City Council focused on those most at risk and identified 20 households already in serious debt, owing more than £20,000. Of these, 14 households engaged and were offered holistic support and debt guidance ● LB Barking and Dagenham took an early intervention approach and identified 28 households with combined government debt of below £8,000. Of these 25 people were seen and 17 experienced a positive outcome Re-imagine Debt
  26. 26. www.policyinpractice.co.uk Outcomes achieved Arrears fell: ● People in arrears of £250+ fell from 74% to 58% ● Rent and council tax arrears fell by £1,216 ● 17% became wholly arrears free ● Arrears fell by £200 more in the treatment group than control group Income rose: ● Benefits income increased by £115 ● Average income rose by £124 Arrears fell: ● People in arrears of £250+ fell from 18% to 8% ● Rent and council tax arrears fell by £174 ● Arrears fell by 3x more in the treatment group than control group ● Half of participants became arrears free Income rose: ● Benefits income increased by £171 ● Average income increased by £108 ● Unemployment fell from 91% to 67%
  27. 27. Re-imagine Debt www.policyinpractice.co.ukwww.policyinpractice.co.uk/reimagine-debt
  28. 28. The context for CTR redesign www.policyinpractice.co.uk The context in which your CTR operates is changing rapidly. This will have an impact on - Caseload - Cost - Household income - Arrears & Collection rates - Front-line services and support for residents It is important to understanding that context in order to set objectives for scheme redesign
  29. 29. 292929 Over to Megan www.policyinpractice.co.uk
  30. 30. Why plan ahead? www.policyinpractice.co.uk Immediate impacts ● Benefits caseload and resource impacts ● Demographics of the new low-income cohort (unemployed or working reduced hours) - who will need support? With these implications ● For councils: ○ Council Tax Reduction - caseload, cost and arrears ■ Cost per household increasing since more households out of work ○ Local service delivery ○ Budgets and financial planning ● For households: ○ Wider issues around debt and arrears ○ Homelessness ○ Financial resilience and poverty
  31. 31. How data analysis and modelling helps www.policyinpractice.co.uk Data analysis and modelling of change allows councils to ● Understand the impact of current CTR scheme design on residents ● Understand the relationship between CT arrears and CTR scheme design ● Understand the impact of CTR scheme change and who will be affected ● Take account of future changes (including welfare support & macro-economic changes) ● Understand the cost of scheme change
  32. 32. Understand current impact www.policyinpractice.co.uk
  33. 33. Model impact of scheme redesign www.policyinpractice.co.uk
  34. 34. Forecast the impact of caseload change www.policyinpractice.co.uk Previe Feb 2020 Aug 2020 April 2021 - best case April 2021 - worst case
  35. 35. Forecast caseload change www.policyinpractice.co.uk ● Complicated situation: interaction of COVID-19, move to UC, CTR scheme change ● Total HB and CTR caseload has dropped between Feb and Oct 2020
  36. 36. Forecast cost www.policyinpractice.co.uk We are modelling the cost of CTR in 2021 based on: ● Actual current CTR awards ● Scheme redesign if relevant ● Projected awards in 2021 based on: ○ Average CTR awards awarded by the council for different demographic groups (e.g. in work, unemployed and out of work) ○ Projected numbers in the demographic groups from 2021 (using OBR and other estimates) ○ Expected changes in welfare support (eg reinstatement of MIF) ○ Expected migration to UC ○ Expected CT rise ● We can also merge benefits data with CT arrears data to predict impact on arrears in 2021
  37. 37. Finally… www.policyinpractice.co.uk Designing a viable CTR scheme ● Understand the current national and local picture ● Understand the drivers and context of scheme change ● Forecast the likely range of change in the near future ● Understand the impact and cost of your proposed CTR scheme Amidst all the uncertainty, it is important to get as much as possible out of the data you have. Data analysis can help
  38. 38. www.policyinpractice.co.uk Please visit our virtual stand to: ● Download more information ● Chat to us live online ● Book a meeting or just get our contact details ● Enter our prize draw to win a donation to your favourite charity
  39. 39. 393939 Thank you We look forward to your questions. Zoe Charlesworth, Policy in Practice Megan Mclean, Policy in Practice hello@policyinpractice.co.uk 0330 088 9242 www.policyinpractice.co.uk

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