A COUNCIL tax discount paid to Colchester residents on the breadline could be cut by two thirds, it is feared.

A total of 13,035 residents do not have to pay part of their council tax bill, worth a combined £12million a year.

But a Government proposal would see this £12million cut by 10 per cent, with Colchester Council now taking on and responsibility for deciding who gets what.

However, the council faces a number of conditions. The benefits paid to pensioners, who make up a third of Colchester’s population, must remain the same under the proposals.

And the council believes the borough’s poorest residents will have to continue to receive all their benefits – or face becoming homeless.

This would leave the £1.2million having to come from about 2,800 residents, many of whom have low-paid jobs or are single mums working part-time.

A council report predicts if the changes go ahead they could see their support drop from £14-a-week to £5.

Paul Smith, councillor responsible for resources, said the plan could force people out of work or leave them claiming even more from the state.

He said: “This is a very poorly thought out policy.

“It would bear disproportionately hard on those on low incomes, particularly those trying to move off benefits and into work. We think that’s very unfair, when the Government is trying to encourage people to work.”

Mr Smith said cutting the benefit for people who got the full council tax from the Government would not work.

He said: “It does no one any good for them having to pay tax when they haven’t got money to pay. It could lead to an increase in arrears and may encourage some people not to go to work.”

A communities and local government department spokesman said: "The new system will be a fairer one, where hard-working families and pensioners are not left to pick up a spiralling benefits bill and where work always pays.

"Councils will be much better placed to attract new business and industry, better placed to help their residents get off welfare and reap the benefits of work instead. They will directly benefit from improving the prosperity of the local area that will in turn drive down their benefit bill.

"Local authorities will have much greater freedom to administer rebates in a way that best meets local needs and best supports local people whilst safeguards will be put in place to protect the most vulnerable, including pensioners, from any reduction in the support that is on offer."