Agenda item

AGREED that Executive note the contents of the report and submit the proposed CTR scheme for 2025/26 to Council for approval.

The Executive Member for Finance submitted a report for Executive consideration the purpose of which was for Executive to note the proposed Council Tax Reduction (CTR) scheme for 2025/26.

In 2022/23, the Council moved to an income-banded scheme. By doing so, it moved away from the previous complex means tested schemes to simplify the claiming process, reduce the administrative burden and cost of multiple in year changes and associated recalculation of council tax instalments, and to support its achievement of greater collection rates.

The scheme implemented a 90% maximum discount, with lower discount bands of 72%, 36% and 23%, aligned to the level of net weekly income and composition of each household (providing for up to 2 dependent children).

The CTR scheme was a means tested scheme, based on the household size and income, this differed from discounts and exemptions which were not means tested. Where a 100% exemption was granted, such as a student exemption, CTR would not apply as there was nothing to pay. If, on the other hand, a resident was in receipt of a single person discount or other discount, CTR may have still been awarded based on the income and household composition.

The 2024/25 scheme maintained the current income-banded scheme, but also included support for Care Leavers, who were able to apply for CTR as opposed to receiving a local council tax discount. This was a technical adjustment and made no difference to the level of support available to Care Leavers, which remained unchanged.

For 2025/26, it was proposed that the current income-banded scheme be retained subject to the proposed amendments, including that the scheme income ranges were increased in line with inflation. A number of Local Authorities had already implemented an income banded scheme with many more Local Authorities also opting for similar schemes. The main reason for doing so was that a banded scheme was far easier to administer, removed the need for residents to report certain changes, opportunity for ‘take up’ was made simpler as residents could determine entitlement far easier than the previous scheme. Removing the level of complexities meant that applying for support with Council Tax payments was far easier.

On 30 October 2024, the Chancellor announced in the Autumn Statement that state benefits, including Universal Credit and other working age benefits, would increase in line with inflation at 1.7% from April 2025.

The increase in income from state benefits due to the inflation uplift could have resulted in a lower discount rate band being applied in some cases, based on the existing CTR income ranges set. This would have resulted in a reduction in the level of support which, for some households would add in excess of £300.00 per year to their bill.

The CTR scheme provided for income band ranges to be increased “by the appropriate level of inflation decided by the Council”. It is therefore proposed to adjust the income band ranges for 2025/26 to reflect the inflation increase applied to state benefits and thereby maintain the level of support as far as possible for applicants.

It was clarified that there was approximately £120million in unclaimed benefits that there was a significant amount of work being undertaken in this area.

OPTIONS

The Council could reduce the level of support offered to working age residents in receipt of CTR. However, the Council recognised the financial challenges placed on residents and was therefore proposing that the current level of support was maintained which incorporated the proposal to increase the income bandings in line with inflation.

In addition, the Council was not in a financial position to consider awarding additional support through higher discounts or different income ranges without affecting other Council services due to the current budgetary pressures. If the Council chose to increase the maximum award for working age residents to 95%, this would incur an additional cost of circa £0.65m. Similarly, if the maximum award was increased to a 100% maximum award, this would result in additional costs of circa £1.3m. If this were to be considered, a full consultation exercise would also need to be carried out which had not taken place during the current financial year.

AGREED that Executive note the contents of the report and submit the proposed CTR scheme for 2025/26 to Council for approval.

REASONS

The proposed scheme would assist low-income households and support the collection of council tax whilst remaining affordable for the Council to provide.

CTR was introduced by Central Government in April 2013 as a replacement for the Council Tax Benefit scheme which was administered by councils on behalf of the Department for Work and Pensions. As part of the introduction, the Government placed the duty to create a local scheme for working age claimants with Billing Authorities.

Middlesbrough Council, as the Billing Authority, had a statutory requirement to revise or design and fund a CTR scheme by no later than 11 March each year which must be approved by a full Council decision.