Kiran Stacey Row intensifies over council tax benefits

And now for the big story of the day…

A row has been rumbling since the beginning of the year between cabinet ministers Iain Duncan Smith and Eric Pickles about $4.8bn worth of benefits.

To recap: Last year’s spending review decided the government should localise council tax rebates, giving councils the right to cut rebates for poorer residents and use the money instead on tax cuts or service provision. But that could lead some low-earners paying an effective tax rate of 90 per cent, something IDS worries will undermine the incentive to work that he is trying to create through the single universal credit. IDS wants instead to roll council tax benefits into the universal credit so it reflects claimants’ earning status.

So far this argument has been conducted in private. But as the local government department gears up to issue its consultation document on how to localise these benefits, work and pensions ministers are ratcheting up the pressure on them to include the option of wrapping it into the universal credit.

Last week, pensions minister Steve Webb said openly that rolling council tax benefits into the universal credit should be an option. He told the work and pensions select committee:

Grant [Shapps, housing minister] will publish the consultation document and local authorities and others will say how they think they would best deliver this… We might get feedback that said, “There’s the universal credit available… Did they want to decide the CTB structure locally, but then feed the figures into the UC and deliver the cash through that route?”

Shapps was sitting next to Webb, looking furious, according to a mole. He replied through gritted teeth:

This is a very genuine consultation where we need the feedback we can’t design it without this consultation it’s as simple as that.

But the work and pensions department has the wind in their sails, and a source close to IDS tells me he is confident he has Number 10 policy advisers onside too.

This may be an issue that takes a while to sort out, but it could have a major impact on those who stand to lose a big chunk of their council tax rebate under current plans.