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Rating Reform

Volume 131: debated on Thursday 14 April 1988

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To ask the Secretary of State for the Environment whether he is yet in a position to update his estimates of the impact of the community charge on individual households.

[pursuant to the reply, 13 January 1988, c. 278]: The Government have now decided on the taper to be used in calculating entitlement to community charge rebates under the new system.Under the Government's existing proposals, all those receiving income support—the successor to supplementary benefit—will have their rates, or in future their community charge bills, reduced by 80 per cent. so they will pay only 20 per cent. of the community charge for the area in which they live. In addition, their income support will include an amount to help meet the 20 per cent. charges that they do have to pay.Those with incomes above the income support level will also be eligible for rebates of up to 80 per cent. according to their circumstances. In 1988–89, with domestic rates, the amount of their rebate is reduced by 20p for each £1 increase in their income. The Government have now decided that, when the community charge is introduced, rebates should be calculated on the basis of a lower "taper", of 15p for every additional £1 of income. This means that the amount of community charges of those on low incomes will rise more slowly as their incomes increase. Their rebate will be reduced by only 15p for every £1 rise in their net earnings above the income support level.This reduced taper will come into effect when the community charge is introduced—in Scotland in 1989 and in England and Wales in 1990.Four million people will receive the maximum 80 per cent. reduction. If a 20 per cent. had been used for the community charge, about a further 4 million people would have received reductions of up to 80 per cent. With a 15p taper, rebates will extend further up the income scale, One million additional adults will have their community charge bill reduced. About 9 million people will pay reduced charges, and about 5 million people with incomes above the income support level will have larger reductions in community charge than they would have had with the 20p taper.Of these 5 million, about three quarters are people who do not pay income tax.This improvement in the rebate proposals achieves a better targeted result than the new clause I proposal for a 50 per cent. community charge for those who do not pay income tax. But it does so by a simpler and much less bureaucratic route, with no anomalies, and one that avoids the earnings trap which new clause I would produce. It does not require an amendment to the Local Government Finance Bill.