Whitehall defends decision to cut tax funding which leaves council with £2.6m 'black hole'

WHITEHALL has defended its decision to cut funding for council tax benefit by 10% – a move Derby City Council says has left it with a £2.6 million funding "black hole".

The council says the funding gap means that more than 12,000 people in the city must pay up to 20% of their council tax for the first time from April 1.

Those 12,000 currently do not pay anything for reasons such as being in receipt of jobseekers' allowance or income support.

The city council's cabinet member for finance, Sarah Russell, previously accepted the move would "hit the city's poorest in the pocket".

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Councils get money from the Government to cover the shortfall for people excused from council tax, but this amount has been cut by 10% as part of ministers' plans to reduce national debt.

A spokeswoman for the Department for Communities and Local Government said: "Welfare reform is vital to help tackle the deficit and to deliver savings of £470 million a year of taxpayers' money."

She added that the Government had provided a £100 million "voluntary transition grant" to help councils "develop well-designed local schemes, maintain positive incentives to work and to encourage best practice".

Miss Russell said Nottingham City Council had accepted its grant and used it to help postpone introducing charging for people currently not paying council tax until 2014-15.

She said Derby City Council had not accepted a slice of the Government grant.

Asked why Derby did not accept the money, she said: "In our case, it would have left £1.1 million to cover. We couldn't afford that.

"Nottingham are a larger authority than we are and they have a larger council tax base.

"They may be able to absorb the impact of the cut easier than us.

"Derby, by contrast, has a historically low council tax base."

Asked why the authority could not have accepted the grant and used it to charge lower council tax, Miss Russell said: "We would have had to launch a new system for the 2013-14 financial year and have a costly consultation on this.

"We would then have to do the same again the year after."

A £200,000 hardship fund has been set up by the city council for those struggling to pay the new council tax charges."