HC Deb 28 November 1991 vol 199 cc592-4W
Mr. Bowis

To ask the Secretary of State for Social Security if he will outline the benefit arrangements that will apply under the new council tax; and if he will make a statement.

Mr. Newton

Under provisions in the Local Government Finance Bill currently before the House, council tax benefit will replace community charge benefit from April 1993. People on income support or equivalent levels of income will be entitled to maximum rebates of up to 100 per cent. of their council tax liability, rather than the 80 per cent. maximum under community charge benefit.

Amounts are currently included in the income-related benefit levels to help towards the 20 per cent. contribution to the community charge that everyone has to pay. From next April, these will amount, in total, to an estimated £680 million a year.

Following the statement I made to the House on 21 October, in which I indicated that the Government did not propose to make a reduction in benefit rates corresponding to this year's £140 reduction in community charge, I am glad to be able to announce also that there will be no reduction in the value of income-related benefit levels on the introduction of the new council tax to reflect the fact that benefit recipients will no longer be expected to meet their 20 per cent. liability for the community charge. This will mean that from April 1993, income support levels will be at least £1.40 a week higher for single people, and £2.80 a week higher for couples, than they might otherwise have been.

Generally speaking, the detailed arrangements for the new council tax benefit will follow the rules that currently apply to all other income-related benefits, including the same structure of personal allowances and premiums, the treatment of capital and the defintions of earnings and income. For those with income above their appropriate applicable amount we propose that council tax benefit will be reduced by 20p for every £1 of excess income, compared with a reduction of 15p for every £1 of excess income under community charge benefit. However, those on the lowest levels of income will gain from the introduction of 100 per cent. maximum rebates and the decision not to adjust benefit levels on the introduction of the new tax and, overall, benefit entitlement will extend to claimants with broadly the same levels of income as those currently helped by community charge benefit.

It is reasonable to assume that non-dependant adults sharing the household on a non-commercial basis with a benefit claimant should be expected to make some contribution to the council tax bill. There will, therefore, be a system of non-dependant deductions in the new council tax benefit scheme, as there is for housing benefit. For those non-dependants who are not in full-time work or whose income is below a prescribed level (£100 a week in 1992–93 terms) the deduction will be £1 a week. For those in full-time work on higher incomes the deduction will be £2 a week. There will be no deduction where the non-dependant is on income support or would otherwise attract a discount.

The new council tax benefit will be uprated each year along with the other income-related benefits. As part of my uprating statement on 21 October, columns 639–45, I announced that the Rossi index had been revised this year to align more exactly with those costs which people are expected to meet from their benefit, thus bringing within it 20 per cent. of community charge, water rates, and certain miscellaneous housing costs not previously included. This approach, which has been widely supported, will naturally entail a further adjustment to the calculation of the index for the April 1993 uprating, to reflect the fact that there will be no minimum contribution to the council tax. Water rates and miscellaneous housing costs will of course continue to be taken into account.

The new council tax benefit scheme will also provide help in respect of non-dependants on low incomes living as the second adult in households where the person liable for the new tax is not receiving a rebate on the basis of his own income. In response to the concerns of the local authority associations to minimise the administrative complexity of the new scheme, rebates for second adults will be assessed on a similar basis to non-dependant deductions. A maximum 25 per cent. rebate will be awarded in respect of a second adult or adults on income support. Lower levels of rebate will apply in respect of second adults with gross incomes above prescribed levels. In relation to 1992–93 income levels, the rebates would be as follows:

Percentage rebate
Second adults with combined income less than £100 a week 15
Second adults with combined income between £100 and £130 a week
Second adults with combined income of £130 a week or more 1
1 No rebate.

The detailed arrangements for the new council tax benefit scheme will be set out in draft regulations on which we will be consulting with the local authority associations in due course. The draft regulations will also be referred to the Social Security Advisory Committee and will be subject to approval by resolution of each House of Parliament.

Overall it is expected that the new council tax benefit scheme will bring help to some 5 million claimants (between one in four and one in five of all council tax payers). At current benefit and estimated council tax levels the cost of the scheme would be around £1.1 billion a year.

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