Folkestone & Hythe District Council Plans 100% Council Tax Reduction: £1.75m Shortfall Looms

Folkestone & Hythe District Council is preparing to launch a public consultation on a bold plan that could restore 100% Council Tax Reduction (CTR) for the district’s lowest-income working-age residents — removing entirely the 25% minimum payment currently required under the local scheme.

The proposal is being framed as a necessary step to reduce poverty, uncollectable debt, and administrative overhead. But it comes with a price: £1.75 million per year in lost Council Tax revenue. And while the district council designs and administers the scheme, the bulk of the financial loss would fall on other authorities — most notably Kent County Council.

Crucially, KCC has not yet agreed to absorb this loss, and there is no guarantee it will.

What Is Being Proposed?

Under the current scheme — unchanged since 2019 — working-age residents can receive a reduction of between 22% and 75% depending on income. Every claimant must contribute at least 25% toward their Council Tax bill, even if they receive Universal Credit or income-related benefits.

The new scheme, scheduled for public consultation (pending Cabinet approval on 16 July), would:

• Increase the maximum support to 100%, meaning eligible households would pay nothing

• Adjust income bands to give more generous discounts across a broader range

• Disregard certain benefit components, including:

  • The “Limited Capability for Work” element of Universal Credit

  • Compensation from schemes such as Horizon/Post Office, Grenfell, infected blood, LGBT military redress, and vaccine damage payments

These changes apply only to working-age households; pension-age CTR is protected by national law.

When Will the Public Be Consulted?

The scheme is not yet open for consultation, but the Council has laid out a clear timeline:

The Financial Gap: Who Pays?

Raising the maximum support to 100% would increase the total annual cost of the working-age Council Tax Reduction scheme from £5,449,794 to £7,201,693 — a rise of £1,751,899.

But this cost is not borne solely by Folkestone & Hythe District Council (FHDC). Council Tax revenue is divided among multiple public bodies. When a household receives Council Tax Reduction, each of these authorities loses their proportional share of income:

The most significant impact is on Kent County Council, which stands to lose almost £1.3 million per year in Council Tax income if the scheme goes ahead in its proposed form.

“Kent County Council have been part of conversations regarding the loss of the incentive scheme payments and have been made aware of the potential financial impacts of changes to schemes as part of budget setting for 2025/26.”

However, KCC has not accepted this loss, and its formal response will be critical to the outcome.

“Major preceptors, including Kent County Council, will be directly contacted as part of the consultation and responses will form part of the final consultation summary.”

This means there is no guarantee that KCC will agree to absorb the financial loss, particularly given its ongoing budget crisis and service pressures. Without their acceptance, the final shape — or viability — of the scheme could be at risk.

FHDC Can Cover Its Share

FHDC’s £210,000 share of the cost is likely to be fully covered by new income from its 100% Council Tax premium on second homes, introduced from April 2025. This premium is projected to generate £2.39 million, of which £309,444 will go to FHDC.

This income gives FHDC flexibility without needing to use reserves, raise Council Tax, or cut services.

KCC Faces Difficult Decisions

KCC, by contrast, has no such new revenue stream and is already under acute budget pressure. The county narrowly avoided a Section 114 “effective bankruptcy” notice in 2024 and continues to face multimillion-pound pressures in adult social care, special educational needs, and children’s services.

With no power to impose a second homes premium, KCC’s options are limited:

1. Use reserves – legally permitted but not sustainable for permanent, recurring losses

2. Raise Council Tax – capped at 5% annually, including the social care precept

3. Cut services – including:

   • SEND transport

   • Early help services

   • Youth and community support

   • Highway maintenance

At this stage, KCC has not committed to accepting the costs, and may oppose the final proposal.

Can Councils Raise Council Tax to Fund This?

No authority can raise Council Tax specifically to fund CTR.

• District councils like FHDC can increase Council Tax by up to 3% per year

• Social care authorities like KCC can go up to 5%, including a 2% adult social care precept

• Anything above these thresholds requires a public referendum

So while general Council Tax increases might offset some pressure, they are tightly constrained and cannot be targeted at CTR.

What About Using Reserves?

Using reserves is legally allowed, but widely considered unsustainable for recurring costs like CTR, which must be funded annually. FHDC may not need reserves due to second homes income. KCC, however, may be forced to consider it.

A Redistributive Proposal — With Risks

The new CTR scheme would shift resources:

• Away from wealthier households with second homes (via the premium)

• Toward low-income residents who currently struggle to pay even the minimum charge

• But at a financial cost to public bodies already under stress — especially Kent County Council

The Council argues that increased support would reduce unpaid debt, phone queries, and crisis payment applications — freeing up staff and saving on administrative costs. In 2024/25, the Financial Support Scheme awarded £225,912 in hardship relief to CTR claimants unable to pay their residual bill.

“The current system generates debt for people who cannot afford to pay, then spends money chasing it. That is neither fair nor efficient,” an opposition Cllr said.

Still, implementation hinges not just on local consultation — but on whether KCC and other preceptors accept their share of the financial burden.

What’s Next?

If approved by Cabinet, the public consultation will run from 4 August to 26 October 2025. A sample of 5,500 Council Tax payers will be invited to participate, and key stakeholders — including Citizens Advice, Shelter, and Kent County Council — will be directly consulted.

The final scheme must be agreed and published by 11 March 2026, and would go live on 1 April 2026 if adopted.

Residents can stay informed via the Council’s website.

The Shepwy Vox Team

The Velvet Voices of Voxatiousness