EAST Ayrshire Council faces a £1.5m gap between the drop in council tax charged to struggling residents and the amount of money they receive from the Scottish Government to cover costs.
Officials admit that some of the additional money they are using to fill the gap comes from residents who are having difficulties paying their bills.
The authority says Scottish Government funding is insufficient to meet the full local cost of council tax reductions for eligible households.
Council tax reduction helps qualifying households meet their council tax liabilities by reducing the amount they are required to pay.
The Scottish Government gives East Ayrshire Council around £9.5m to support council tax reduction, but the fall in council tax through deductions is around £11m.
The council is obliged to apply the scheme to residents who meet the relevant eligibility criteria.
Head of finance Colin Hastings explained that the council receives around £9.5 million in Scottish Government support towards council tax reduction.
He said the funding distributed across Scotland had remained relatively static while changes in demand and the allocation between local authorities had affected East Ayrshire’s share.
As a result, the council was having to meet a greater proportion of the cost from its own resources.
The report states that the £1.5 million pressure is partly offset by £800k of funding identified elsewhere within the authority’s financial arrangements.
This comprises £500k of planned contingency and an additional £300k associated with council tax recovery income.
During the discussion, councillors asked how the additional income was generated and whether it was linked to residents falling behind with payments.
Officers explained that some of the income arose from statutory recovery charges applied when unpaid council tax had to be pursued.
Mr Hastings acknowledged that although the additional revenue improved the council’s financial position, it also reflected wider difficulties facing households.
He said: “It is still recognition that people are struggling to pay their council tax”.
The meeting heard that the council had built assumptions about council tax reduction into its annual budget.
However, officers said it was important to report the additional cost transparently so that councillors could understand the pressure being placed on local resources.
Questions were also raised about the relationship between council tax reduction and water and sewerage charges.
In Scotland, councils collect water and sewerage charges on behalf of Scottish Water alongside council tax.
Councillor Neal Ingram asked whether any of the council’s recovery figures related to those charges and highlighted the need for residents to understand that council tax reduction does not necessarily remove their liability for water and sewerage charges.
Officers confirmed that the figures presented in the performance report related to the council tax element.
They explained that water and sewerage payments collected on behalf of Scottish Water were passed on and were not treated as income retained by the council.
The meeting also heard that support and information were available to residents receiving council tax reduction, including advice about remaining liabilities.
Officers said they continued to liaise with Scottish Water on matters involving outstanding charges.
Despite this pressure, the council’s wider financial position has improved since the first quarter of the year.
Its projected deficit has fallen from £2.9m to £1.8m, although significant financial pressures remain.
Council tax reduction is largely out of the council’s hands as it cannot simply withdraw support from eligible households to reduce expenditure.
The latest performance report therefore anticipates that the council will continue to meet the difference between available funding and the cost of providing the scheme.
Share