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Lessons learned: our year modelling Council Tax Reduction Schemes

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In this webinar Policy in Practice gave a review of the 150 or so council tax reduction (CTR) support schemes we modelled for local authority clients in 2019. Zoe Charlesworth, Head of Policy, and Megan Mclean, Policy and Operations Analyst, recapped on highlights from our analysis, discussed trends we've identified and considered what this means for local authorities in 2020.

For more information visit www.policyinpractice.co.uk, call 0330 088 9242 or email hello@policyinpractice.co.uk

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Lessons learned: our year modelling Council Tax Reduction Schemes

  1. 1. Policy in Practice webinar Lessons learned: Our year modelling council tax support schemes Wednesday 11 December 2019
  2. 2. Housekeeping • Audio check • Please ask questions • Poll and a survey • Aim to finish by 11:30
  3. 3. Today’s speakers Zoe Charlesworth Head of Policy Policy in Practice Megan Mclean Policy & Operations Analyst Policy in Practice
  4. 4. A team of professionals with extensive knowledge of the welfare system who are passionate about making social policy work We help over 80 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 actions people can take to increase their income, lower their costs and build resilience
  5. 5. Agenda • Trends and changes taking place in CTRS schemes this year • A snapshot of CTRS schemes across the board this year • Considerations and tools used to model outcomes when changing CTRS schemes, identify vulnerability, target support and track change • Two case studies: income-banded and discount scheme modelling: predicting the outcomes and benefits of CTRS scheme changes • Looking forward and next steps
  6. 6. 666 Poll: What would your main objective be if you were changing your CTR scheme?
  7. 7. 888 Over to Zoe
  8. 8. CTS is significant Findings from IFS: The impacts of localised council tax support schemes, 2019 • Paid to 4.9 million households in 2017–18 – more than any other means tested payment • It cost LAs £4.1 billion - 11% of gross council tax bills • 2.4 million working-age claimants - £1.8 billion - average award for those claimants of £770 per year
  9. 9. Background • 90% of English councils had made changes to their CTS scheme by 2018– 19; - almost all of them cuts. - up from 82% in 2013–14. • The most widespread change was the introduction of minimum council tax payments, by 2019: - most common level of minimum payment was 20% - a fifth of councils had no minimum payment, - fifth have minimum payments of over 20%, (highest being 50%) • In general, minimum payments had increased since 2013-14
  10. 10. Background Often multiple changes:
  11. 11. Implications for claimants • Working-age households in England are now eligible for 24% (£196 a year) less on average - 1.0% of their income - £706 million reduction in entitlements: • Cuts are now 70% more than in 2013–14. • There are now 1.4 million households who have to pay some council tax who would not have had to pay - 63% must pay more than £100 - 33% must pay more than £200 - 10% pay more than £300. • Reducing a household’s CTS entitlement significantly increases the probability that it reports being in arrears on its council tax. • CAB enquiries increased by 15-20% when minimum payments introduced mostly relating to council tax debt
  12. 12. Implications for collection/arrears • A quarter of the additional council tax liability is not collected • For council tax claimants this is 10 times higher than the 2.5% in 2012–13, before the cuts to CTS. • The effect on the aggregate rate of non-collection is still relatively modest increasing it from 2.5% to 2.7% on average. • Arrears twice as likely in those moving from zero payment to those increasing payment - previous research showed a jump at 14% and 25% • Lone parents and renters are more likely than average to fall into council tax arrears as a result of changes in support
  13. 13. What are the drivers for change? • Cost • Administration • Impact on collection rates • Fairness • Overarching council objectives • Elections But MOSTLY…. • Universal Credit - supporting the aims of UC or mitigating against loss under UC
  14. 14. Drivers for change: Universal Credit • Residents will need to re-assess income as they migrate to Universal Credit so changes in Council Tax Support can be part of this • A scheme to go alongside Universal Credit or to support those who are adversely affected by Universal Credit • The opportunity to use the Universal Credit assessment of income • Realisation of the relative cost of administration against awards once Housing Benefit is removed. Administration costs may be up to 25% of scheme costs once CTR assessment is standalone • Re-assessments with monthly Universal Credit changes / RTI
  15. 15. . Drivers for change: understand context  2.8m households would receive less support under Universal Credit (38% of households) than under legacy benefits. The average loss is £52/week  2.0m households would gain more support under Universal Credit (29% of households) than under legacy benefits. Average gain is £26/week  2.2m households will receive similar levels of support (31% of households) if they were in receipt of Universal Credit or legacy benefits 38% households worse off 29% households better off 31% households no change The impact of Universal Credit Worse off Better off No change
  16. 16. Groups losing support: • People living with disability • Self-employed • Working homeowners in receipt of tax credits • Working lone parents • Families with more than two children Drivers for change: understand context -£76.00 -£42.00 -£43.00 -£16.00 -£40.00 -80 -70 -60 -50 -40 -30 -20 -10 0 Disabled Self-employed Working owner occupiers Working lone parents Familes with more than 2 children Average weekly change in support (£/week)
  17. 17. Drivers for change: administration Number of claims • Some councils may see a drop off in numbers under the default scheme as households move to Universal Credit. Number of re-assessments • Data analysis of a full service site revealed the average number of re-assessments in one year under legacy benefits is 3. The average re-assessments for households in receipt of Universal Credit is 6 • Scheme design can minimise administration • Introduction of additional elements such as de minimus rules and using average income Complexity of assessment • Using Universal Credit assessment can minimise administration time • Schemes can be simpler e.g. no tariff income, single non-dependant deduction etc
  18. 18. Tracking trends: key changes 2019/20 schemes reveal some key trends: 1. Increase of prevalence of flat rate non-dependent deductions by 30% 2. Wide adoption of vulnerable and protected groups 3. Increasing minimum payment appears to have stalled 4. A move towards banded schemes
  19. 19. Trend: flat-rate non-dependent deductions • The number of flat-rate non-dependant deductions are increasing • Levels of deductions are reducing Number of flat-rate non-dependant deductions are increasing but reductions are reducing Deduction (1) Deduction (2) 2018-2019 27 councils average: £30.78 21 councils average: £45.66 2019-2020 35 councils average: £29.79 29 councils Average: £42.48
  20. 20. Trend: protection for vulnerable groups • The groups chosen for protection differ according to local authority priorities. • Usually include those in receipt of disability benefits, lone parents with younger children, those in LCWRA, carers • Protection is typically based on 100% of liability • A new groups is emerging as vulnerable: younger single households with no dependents Protection for vulnerable groups is increasing Lone parent child U5 Lone parent child U3 ESA support ESA WRAG Disability benefits Carer Couple child U5 Child DLA 2018-2019 17 16 21 8 51 21 9 4 2019-2020 22 17 36 8 62 29 15 18
  21. 21. Trend: increase in income-banded schemes An increase in income-banded schemes Income-banded schemes 5 bands 4 bands Addition for 1 child Addition for 2 + children Addition for couples 83% 12% 56% 56% 56%
  22. 22. Snapshot of now: the data • The average max CTS in 2019/20 is 85% (a decrease of -2.7%). • A third of councils have savings limits. Average is £12,911, lowest is £3,000. • A third of councils have CT band cap limits. Most commonly at band D; 9 have Band A limit. • 65 councils have minimum awards, average is £11.92/month • 28 councils have income-banded schemes.
  23. 23. 242424 Poll: What kind of scheme change are you considering?
  24. 24. 25
  25. 25. 262626 Over to Megan
  26. 26. 272727 Our modelling: Comparing different CTRS schemes and modelling case studies
  27. 27. Why use modelling when comparing schemes? 1. To understand the impacts of change to inform decision-making. In particular to have data to inform final scheme modelling, for councillor enquiries, and for public consultation 2. To understand the impact of Universal Credit on scheme cost and award level 3. To avoid excessive gains and losses in support
  28. 28. How we model We use administrative data capturing detailed information on low income households We combine these datasets together over time, and model policies across four government departments combined, to examine the impacts both now and in the future CTR support now and in a future scenario, both under the current system or under UC
  29. 29. What we have modelled this year 150+ schemes for nearly 50 local authorities
  30. 30. Case study1: income-banded scheme Model 1 - Income-Banded Scheme ● Scheme design is based on Newcastle’s current income- banded scheme. ● The income bands and related discounts have been modified to maintain cost neutrality with the expected cost of the council’s current scheme in 2020/21. ● Those on passported benefits are protected by being automatically awarded the highest level of support. Model 2 - Simple Discount Scheme ● Using the Universal Credit working allowances to determine the level of discount. ● As in Model 1, those on passported benefits are protected, in this case receiving a higher discount than all other households.
  31. 31. Case study1: income-banded scheme Income-banded scheme Simple discount scheme Cost £13.58M £13.57M Administration There is likely to be containment of administration costs due to simplified assessment and fewer re-assessments. There is likely to be a reduction in administration costs due to simplified assessment and significant reductions in re- assessments. Claim #’s 182 claimants lose all support. These are predominantly higher-earning households. No reduction in claim numbers. Social and Political impacts 182 households lose all support. 967 households would lose more than £5/week. Couples without children are most likely to lose more than £5/week. 1,011 households would gain £5/week. Households with children are most likely to gain £5/week. This model moves support to households with children. No households loses support altogether. 720 households would lose more than £5/week. Couples without children are most likely to lose more than £5/week. 1,000 households gain more than £5/week. Households with children are most likely to gain £5/week. This model moves support to households with children.
  32. 32. 33 Income-banded scheme Simple discount scheme % change in CTR compare to retention of current scheme, by household type % change in CTR compare to retention of current scheme, by household type
  33. 33. Income-banded scheme Simple discount scheme % change in CTR compare to retention of current scheme, by tenure % change in CTR compare to retention of current scheme, by tenure
  34. 34. Case study 2: First discount scheme We did an impact analysis on a new kind of scheme being adopted by a council next year, the discount model. In this scheme, discounts on liability are based on household characteristics, rather than income. This model would substantially reduce administration costs and will simplify the scheme both for those administering it. Why the radical change ? ● Substantially reduces administration costs ● Simplifies the scheme both for those administering it, and for the residents ● The council no longer has to undertake income or capital assessments ● As more households move to Universal Credit administration costs are likely to increase due to the expected re-assessment of claims
  35. 35. Case study 2: First discount scheme Model 1 is based on the current scheme with changes to contain costs, simplify administration and increase fairness Model 2 is the discount scheme where discounts on liability are based on household type rather than income Households with children Discount In receipt of PIP, DLA, or AA 85% Passported or in receipt of Universal Credit and not working 72% All other households with children and net earnings under £300/week 51% Households without children In receipt of PIP, DLA, or AA 85% Passported or in receipt of Universal Credit and not working 62% All other households without children and net earnings under £225/week 41%
  36. 36. 37 Model 1: Current scheme with changes Model 2: Discount scheme Cost £0.76M more than the current scheme (2018/19) and £0.49M less than if the current scheme was retained into 2020/21. £0.79M more than the current scheme (2018/19) and £0.45M less than if the current scheme was retained into 2020/21. Administration As more households move to Universal Credit administration costs are likely to increase due to the expected re-assessment of claims. Significant administrative savings expected compared to retention of current scheme into 2020/21. Claim #’s 691 households lose support 235 households lose support Political and social impact 1,642 households will see their support reduce by over £3/week – this is 16% of all working-age claimants. 503 households are likely to gain more than £3/week – this is 5% of all working-age claimants. These are likely to be self-employed households in receipt of Universal Credit. 2,515 households will see their support reduce by over £3/week – this is 25% of all working-age claimants. 1,752 households will see their support increase by over £3/week – this is 17% of all working-age claimants. These are more likely to be employed and self-employed households and households with children. Distributional impact This model distributes reduction in support fairly evenly across groups This model is redistributive. It redistributes support from those on legacy benefits to those in receipt of Universal Credit
  37. 37. Key considerations Universal Credit is coming and the status quo will not be neutral The best scheme for a local authority will depend on: • Demographics • Current scheme • Political climate • Members’ objectives and local priorities The effectiveness of your scheme can only be understood through detailed cost and social impact analysis
  38. 38. 393939www.policyinpractice.co.uk Questions and answers
  39. 39. Next steps • Download Universal Credit Roadmap • Download CTR modelling flyer • Follow up email with this recording and slides, with links Short 5 question survey now: 1. We value your feedback 2. Ask questions or clarifications 3. Request your own look at CTR modelling 4. Auto sign up to our next webinar: Designing effective data led local authorities on Wed 15 Jan at 10:30
  40. 40. www.policyinpractice.co.uk Thank you Zoe Charlesworth zoe@policyinpractice.co.uk Megan Mclean megan@policyinpractice.co.uk hello@policyinpractice.co.uk office 0330 088 9242

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