Council tax refund ‘will entail complexity, risk and cost’

Senior finance officials have warned of the new burdens that the government’s £150 council tax refund will impose on local authorities.

Residents living in properties in municipal tax brackets A through D will receive the rebate to help with the cost of living crisis, Chancellor Rishi Sunak announced today.

It came after energy regulator Ofgem this morning announced a 54 per cent rise in the price cap which could see the average household face an increase in energy bills of £693 from 1 April.

The measures also include a £144m discretionary fund for local authorities to support vulnerable people and people on low incomes who either do not pay council tax or who pay council tax and live in the properties of the EH band.

The £150 rebate will be made directly by local authorities and households will not have to repay it. It is expected to benefit around 80% of all homes in England.

Mr Sunak said: “Right now I know the number one issue on people’s minds is the rising cost of living.

“That’s why the government is stepping in with direct support that will help around 28 million households meet their rising energy costs over the next year.”

However, some industry players have expressed concern over the timing of the announcement so close to the issuance of council tax bills for the next financial year.

Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, told LGC that the difficulty with the announcement lies “in execution rather than intent”.

“Obviously councils will be happy to see their [residents] get help with their energy bills,” Mr. Whiteman said, “but it’s already February and the municipal tax bills are coming out next month.

He said that in the future, local authorities will have to “urgently discuss with the Department of Levelling, Housing and Communities how this will actually be implemented”, and added: “It seems to be an attractive political idea. But have they really thought about the implementation?”

Geoff Winterbottom, a senior fellow at the Municipal Authorities Special Interest Group, echoed Mr Whiteman’s concern, telling LGC the sector would need “rapid communication from the department” on the details of the new measures.

“Councils will set their budgets by March,” Winterbottom said. “They will need assurances from the government that they will provide the funds.”

Some in the sector have pointed out that putting responsibility for new measures on councils is somewhat misleading.

A District Council Section 151 officer told LGC the government should focus on the issue of ‘high utility bills’ which need to be adjusted ‘rather than involving local authorities and tax bills municipal”.

They also said the government’s approach “wrongly lends some credence to the council tax system” which they say “was produced in 1991 using drive-thru assessments and has not no relation to current property values ​​or household finances”.

Those who pay council tax by direct debit will receive a one-off payment of £150 from their council in April, with councils able to process applications from those who do not from the start of April.

The new measures have raised concerns about the administrative burden they could place on councils, as they will likely require new software to deploy them.

According to the Section 151 officer, these measures will add “additional complexity, risk, and cost that typically involves bringing in software consultants who then take a keen interest in the level of new load funding awarded.”

Mr Winterbottom told LGC the government communication should also further clarify whether the new discretionary funding would be on top of existing hardship funding or stand alone.

“There will be an added burden on councils if they have to create a new program,” Winterbottom said.

Others criticized the announcement in light of government cuts to core funding for councils, making them more dependent on council tax for income.

Jessica Studdert, deputy chief executive of the New Local think tank, tweeted: “Government policy has really come through the looking glass with council tax rebate.”

“The government has always seemed extremely relaxed about the costs it is charging residents via its policy of denying funding to local government inc. social care correctly: this can avoid political criticism for increases,” she added.

“Now with a discount he can show up and offer the money and look like the good guy again.”

Responding to the announcement, Shaun Davies (Lab), chair of the Local Government Association’s resource council, said: ‘We are delighted that the government is stepping in to provide financial support to help alleviate these pressures.

“We want to work quickly with the government to clarify the details of this funding.

“To ensure it can be distributed as quickly as possible, we urge that it be added to existing discretionary counseling programs.”

Sharon D. Cole