Root-and-branch reform of the council tax benefit system could slash bills for a third of households in England and Wales and help six million people living in poverty, according to a new report.
The New Policy Institute study, commissioned by the Local Government Association (LGA), recommended extending council tax reductions and doing more to encourage applications for the £1.8 billion that goes unclaimed annually.
About one in three households are eligible for council tax reductions but many are unaware they qualify.
Meanwhile, six million people in poverty live in homes which pay full council tax, while "structural shortcomings" in the system stop people claiming their entitlement, the report concluded.
Sir Jeremy Beecham, vice-chair of the LGA, said: "The system has been failing society's most vulnerable for too long. Root-and-branch reform is sorely needed. An eye-watering £1.8 billion goes unclaimed every year.
"Part of the problem with take-up is that benefit is wrongly seen as something only for the very poor. Around one in three households are eligible and many are simply unaware that they can get help with their council tax bills."
He added: "One and a half million children and one million pensioners in poverty are living in households that pay full council tax. Physically going to people's homes and helping them to apply is just as important as publicity campaigns."
The report noted that working tax credit recipients usually lose council tax benefit and that claimants lose council tax reductions even before they start paying income tax.
It recommended raising the level of income and savings people can have before forfeiting council tax reductions.
Changes were also needed to stop working tax credit and council tax benefit cancelling each other out, alongside a major publicity drive to boost take-up.
