Local Government Finance Bill
16:55 - Division on Amendment 98A - Ayes: 201 / Noes: 242 - Amendment 98A disagreed.
19:17 - Division on Amendment 103ZA - Ayes: 139 / Noes: 185 - Amendment 103ZA disagreed.
Baroness Hanham
“Estimates of amounts to be disregarded39A (1) The Secretary of State may by regulations make provision for—
(a) calculations of a kind mentioned in paragraph 37(1)(d) or 38(1)(d) to be made on the basis of an estimate of an amount or proportion that is to be disregarded under regulations under that paragraph; (b) for the making of a payment by the Secretary of State to a billing authority or vice versa where it is subsequently determined that the amount or proportion to be disregarded is more or less than the amount of the estimate. (2) Regulations under this paragraph may make provision about the administration of payments under the regulations, including as to—
(a) the time and manner in which a payment is to be made, and(b) the consequences of non-payment.”
Baroness Hanham
“Regulations about calculations and supply of information40A The Secretary of State may by regulations—
(a) make any provision that could be made by a direction under paragraph 40;(b) make provision for the Secretary of State to give a direction that could be given under that paragraph;(c) make any provision made by that paragraph in relation to a direction under it—(i) in relation to provision made by regulations under this paragraph, or(ii) in relation to a direction given by the Secretary of State under regulations under this paragraph.”
Baroness Hanham
“( ) In subsection (1)(b), after “major precepting authority” insert “or the Secretary of State”.”
“( ) under provision made by regulations under paragraph 9A of that Schedule (regulations about payments by billing authorities to major precepting authorities out of deductions from the central share),”
“( ) under provision made by regulations under paragraph 39A of that Schedule (payments by Secretary of State following estimates of amounts relating to designated areas or classes),”
“( ) In subsection (2)(b), after “major precepting authority” insert “or the Secretary of State”.”
“( ) under provision made by regulations under paragraph 9A of that Schedule (regulations about payments by billing authorities to major precepting authorities out of deductions from the central share),”
“( ) under provision made by regulations under paragraph 39A of that Schedule (payments to Secretary of State following estimates of amounts relating to designated areas or classes),”.”
“(2B) The Secretary of State may by regulations make provision requiring a billing authority to transfer from its general fund to its collection fund such amounts as may be specified in or determined in accordance with the regulations by reference to sums received by the authority in respect of non-domestic rates under this Act.””
( ) In subsection (1)(c), after “97(2) or (4) above” insert “or regulations under section 97(2B) above”.
( ) In subsection (3)—
(a) in paragraph (b)(i), for “major precepting authorities” substitute “one or more relevant authorities”,(b) in paragraph (c), for “any major precepting authorities” substitute “prescribed relevant authorities”,(c) in each of paragraphs (d) and (f), for “major precepting authority” substitute “relevant authority”.”
“( ) Before subsection (4) insert—
“(3C) In subsection (3) “relevant authority” means—
(a) a major precepting authority, or(b) the Secretary of State.(3D) Regulations under subsection (3) may make separate provision in relation to council tax and non-domestic rates, with the effect that—
(a) more than one estimate is to be made by a billing authority of whether there is a deficit or surplus in its collection fund for a financial year and, if so, of the amount of the deficit or surplus,(b) each estimate takes into account different amounts to be paid into or met from that fund, and(c) each estimate has different consequences as to the payments to be made, or other functions to be exercised, by the billing authority, major precepting authorities or the Secretary of State.””
( ) at the end of paragraph (b) insert “or”, and( ) omit paragraph (c) and the “or” at the end of that paragraph (which provides for certification of calculations under Schedule 8 to the LGFA 1988).”
Lord McKenzie of Luton
“Council tax benefit scheme
Nothing in this Act shall prevent billing authorities retaining the provisions of the existing national council tax benefit scheme, such schemes to be fully funded by the Secretary of State.”
Lord McKenzie of Luton
My Lords, I did not know whether we were going to get a quasi-statement from the Minister at the start of our proceedings, but perhaps I may comment on the Written Statement we received yesterday and then move directly to my amendment.
We should thank the noble Baroness for her Written Statement, if not the entirety of its content. This is an astonishing state of affairs. Just 24 hours before we are due to commence our final day on Report, we are told that there is, after all, just a little more funding for local council tax support schemes. Of course we should welcome any new money for councils, even if it is just a fraction of the endless cuts they have endured, added to by an extra £1.1 billion cut in formula grant that has emerged from recent edicts. The extra money, £100 million, comes with strings. Yesterday’s Written Statement said that it was about “best practice” and that the money,
“will be available to councils … who choose to design their local schemes”,
according to certain criteria.
However, the design of the schemes has been going on for months. They have been consulted on by local authorities up and down the country. Councils have been agonising over the impossible choices with which many of them have been faced, trying to juggle the near impossibility of protecting the most vulnerable and maintaining vital services. The Government have been sitting back and watching all this happen, denying that the councils needed more time, refusing to accept that there was insufficient funding in the system for all councils to produce decent schemes, and letting them go through the agony. However, this announcement is not, even at this late hour, really about protecting vulnerable people or having good work incentives. The cynical reality is that this is about the Government trying to get political cover as the consequences of their policies strike home.
What does this mean for local councils who wish to access this funding? Some may not have to change their proposed schemes to access the pot, presumably but not necessarily including those who have opted for the default scheme. Some may have to make considerable changes, although they do not yet know how the pot is to be distributed and how this relates to the cost of any changes they may have to make. Some richer councils, through the use of increased flexibility from the empty properties and second homes provisions of the Bill, are in a position to have already funded a compliant scheme and will get a windfall from it.
Minor changes to draft proposals consulted on may not require reconsultation, but more substantial changes might, and we need proper advice and the opportunity to research this. Councils will have to grapple with the sustainability of all this. The funding is for one year only. Using this money to fund improvements in year one and for what would otherwise be affordable for the council may just mean reverting to the original scheme in year two. However, of course, the risk is that political blame will be visited on the council rather than the Government.
Quite apart from the content of the Written Statement, the process has been a disgrace. Springing this on our deliberations at the last moment does not make for a considered legislative process. Perhaps we should not be surprised, because the record shows that the Government have failed to live up to commitments to have full information, including draft regulations available, in good time.
As for our business today and as already mentioned, we have a number of amendments that affect vulnerable people and relate to tapers and work incentives that, in addition to this announcement, need to be considered fully in the context of schemes already consulted on by councils. We need to consider whether to push these today or at Third Reading. We would be grateful if we could have a clear statement from the Minister on the approach that will be taken to Third Reading and whether what we took to be the Minister’s position from our meeting on Monday will become the reality.
For us, of course, this approach is irksome and inconvenient but councils are having to deal with the practicalities of it now. This is not a good way for government to do business. Ultimately, it is abundantly clear that, even after this 12th-hour panic measure, the Government are still not prepared to insist that all the most vulnerable, including those currently passported to full council tax benefit, should be fully protected. It is to their shame that they eschew this responsibility.
I now turn specifically to the amendment, which requires the Government to fund local council tax support schemes up to the level of the proposed default scheme—that is, as now. In seeking agreement to this, we reject the notion that the Government’s newly announced transitional funding is an adequate response to the challenges that local councils face in creating local schemes. I acknowledge up front that the amendment would deny the Government the savings that they are seeking—some £400 million—but, when they are so minded, the Government have a happy knack of finding resources for a council tax freeze, bin collections and even tax cuts for millionaires.
We have made it clear that we consider the move away from a national scheme to be wholly misguided and, ultimately, not sustainable. However, in the interim, the underfunding of the task given to local government has put many councils in an impossible position—one which the transitional funding does not fully address. Even with this transitional funding, which is to last but one year, millions of people around the country will face rises in their council tax from April next year. At the very time when the Secretary of State is lecturing councillors that they have a duty not to increase council tax bills, his own actions are forcing up the bills to be paid by people on the lowest incomes. The Secretary of State is delegating the responsibility of providing council tax support but with 10% less funding than the cost of the current national council tax benefit scheme. As my noble friend Lord Beecham said at Second Reading, it is passing the buck without passing the bucks. However, as we know, the 10% cut in funding is greater because it assumes that claimant numbers for council tax benefit will fall when they are rising, and it will not protect councils to the extent that the benefit is attributable to council tax increases.
Of course, because councils have properly to keep the benefit to pensioners whole and are cynically reminded by the Government of their duty under equalities legislation and—would you believe it from this Government?—child poverty legislation, the burden of the cut has to fall on others: the working-age poor. This awful dilemma is being presented to councils at the same time as they face unprecedented cuts in their funding—bigger than the cuts imposed on any government department. The latest cuts facing local government are significantly higher than those anticipated in the 2010 spending review.
As things stand, we know that some councils are being pushed to financial collapse by all this, and the cuts in council tax benefit funding will hit the poorest areas the hardest. Those that have already endured the largest cuts will suffer the greatest reductions in council tax benefit funding: Manchester will lose £5 million; Liverpool, £6 million; Birmingham, £10 million; and the City of London, to which we gave special consideration just last week, £27,000.
Through the consultations that local authorities are undertaking, we have a glimpse of how, before the one-year transitional money, they are seeking to address these challenges. The LGA tells us that of some 200 councils surveyed, nearly 90% are looking to require a minimum from all working-age claimants. Half will seek a minimum payment of 20%. The transitional funding may impact favourably on this for one year, but this permits—even encourages, one might say—a minimum payment of 8.5%.
Of course, we acknowledge that the Bill presents some councils with additional revenue-raising possibilities from empty properties and second homes but these are not equally spread across authorities. There are not many second homes in Luton. Securing maximum revenue from these sources will not always be possible anyway. According to the LGA, if half the additional potential revenue could be garnered, it would still leave some 307 councils needing to reduce council tax discounts. One way or another we are faced with the prospect of hundreds of thousands of citizens who do not currently have to pay council tax having to do so. Whatever amelioration comes from some one-year funding, it will not dramatically change that. These, of course, will be the poorest citizens. They are likely also to be those most likely to suffer other cuts, especially those in receipt of housing benefit. The Government have seemingly still not woken up to the problem of collecting a relatively small amount of council tax from poor people who have not previously been required to pay. The amounts may be smaller for one year as a result of the extra funding but it potentially makes the problem worse. It seems that the lessons of the poll tax have been forgotten.
There are other admirable amendments before us today, which one way or another seek to lessen the harm that the Bill will inevitably inflict. In our view they do not go far enough. This amendment would require the Government to fund as now, without the 10% cut. We have seen time and again proposals that have a profound impact on the lives of our fellow citizens. We are instructed that they have to be accepted because the deficit must be addressed. The impact is invariably measured on a stand-alone basis without the accumulative consequences being laid out. The alternative is invariably measured in a narrow juxtaposition and not across the whole sweep of what government can really do. It is time to say no. The 10% cut is too far and it is time for us to stand up for poor people. I beg to move.
Baroness Hollis of Heigham
My Lords, I take pleasure in seconding the amendment. What do Westminster and West Oxfordshire District Council have in common? Not much you might think. One is a prosperous inner-city London borough and the other is a prosperous leafy, rural district council, although admittedly the Prime Minister lives in both of them. However, they are very different local authorities. If the localism agenda means anything at all, one might expect two very different schemes in two such very different councils—Westminster and West Oxfordshire.
Both councils are going for the same scheme—the identical scheme and existing national default scheme. Is that because their local needs are the same? Hardly. Is it because they have identical insights into their locality? Unlikely. Is it because they have a similar demographic make-up? Doubtful. Is it because they have similar economies? Of course not. So what then? What they have in common is that they are both prosperous. As they are prosperous they can afford the existing scheme. That is welcome news for their poorer residents, but elsewhere, as my noble friend has said, councils are leaving the existing national default scheme not because they want to but because they have to—not because of vacuous and deeply cynical mantras of localism but because of the reality of the cuts.
These authorities tend to be the poorer authorities, which do not have the pretty second homes to levy or the comfortable reserves to cover their funding gap. Poorer authorities, with poorer residents, will be cutting their council tax benefit, and those with second homes or deep comfortable reserves who can afford not to choose not to. Some of the poorer authorities may try to revise their schemes for one year, but if they do in the light of the transitional grant, and if it is legal to do so, it will mean that their residents will have three different schemes in three years: this year’s scheme, next year’s scheme at 8.5%, and the third year at 20%.
Local authorities did not want to cut their money for their poorer citizens. Councillors of whatever political complexion did not come into local government to make the poor poorer. Not many want to spend hours, unless they are anoraks, fiddling with various models of tapers, capital limits and contribution levels. Nor—and I am certain of this—do they want to undermine the work incentives of the Welfare Reform Act, as some of these local schemes undoubtedly do, as my noble friend Lady Donaghy will explore. That is why Mr Cameron’s West Oxfordshire District Council, for example, has denounced the Pickles plan as damaging to work incentives, and was absolutely right to do so.
Lord Smith of Leigh
My Lords, I support my noble friend’s amendment. I remind colleagues that I am a serving leader of a council and it is therefore my job to introduce a council tax support scheme. We have sent out our consultation, which contains things I can hardly believe I am supporting. We have a gap of £4 million in the amount we can raise through the council tax adjustments. We are already facing £30 million of cuts in our budget, and if I was to put more cuts into the system it would impact only on the same people because it is the poor who rely on our services.
In introducing our scheme for council tax benefits, we tried to work on principles—it was sometimes difficult but we tried to do that—and clearly we wanted to use what we could of any technical changes. We wanted to protect vulnerable groups, but that is not possible in total, and we wanted to make sure that we did not undermine incentives to work. However, that is very difficult with this scheme. I have also set up a discretionary hardship fund because we know that, however we design the system, some people will slip through and I want to be able to do something about it.
Despite the protestations of the Government that they want to help people get back into work, the Bill is an attack on the working poor; it is an attack on people who take low-paid jobs—not because they want to take low-paid jobs but because often they are the only jobs available. If you have low skills or poor education attainment, if you live in areas where pay levels are low or work in industries where profitability is difficult, you are in a low-paid situation. I thought this House wanted to keep people in those jobs and support them.
With apologies to my noble friend Lord Beecham, I wonder sometimes whether the coalition, like Newcastle United, is being sponsored by Wonga.com. The impact of this and the other changes that are taking place is to drive the poor in our community towards payday lenders. It is a growth industry in our country and we ought to be ashamed that a legal lender can charge rates of 4,000% a year on an annualised basis when the bank rate is 0.5%. How can we justify that when it is the poorest who have to pay that amount of money? It is a tragic situation. This change to council tax benefit will force many hard-working, decent families who are trying to do the best for themselves by taking jobs and doing what they thought the Government wanted them to do into the hands of those payday lenders. There are, of course, other lenders in Wigan, Newcastle and Luton who are not legal and whose collection methods are somewhat different. Even so, people go to them.
In Wigan, the average increase in council tax benefit is £3 a week. To noble Lords that sum may represent a glass of champagne in a bar so it is not significant, but if you are among the poor in places like Wigan, it is. It can tip people who are able to survive financially over the edge, and poor families will be put in that position. I should remind noble Lords that the low paid are already suffering under the Government because of the impact of inflation. Since the coalition came to power, the rate of inflation has been 7.1% for the average person. However, food prices have risen by 8.5% and household costs including fuel by 11%, and now even more with what British Gas and the others are up to. When we look at household budgets, we can see that the poor spend disproportionately more on food and household items. The average percentage of income spent on food is 13.2%, but the poorest 10% spend 16% of their income on food, while the richest 10% spend under 10%. The average spend on household items is 19.1%, but for the poor it is 25%—and that on items which are going up by 11%. Again, that is a further squeeze on a low budget. The rich only spend under 10% on household items. It is clear that the working poor are already suffering, and we ought to be helping them more, not targeting them with this increase in council tax benefit.
From my perspective, as my noble friend said, we have already put our consultation out only to discover suddenly at this stage that the Government have found in their back pocket or behind the sofa £100 million that can be put into the system. That is cynical politics and it will not work, because I will make sure that the people who I represent know who is causing this problem and know whose fault it is. We are not going to let them get away with it.
Lord Tope
My Lords, the reference to cynical politics has finally brought me to my feet. Remarkably, we are now on the second to last day of your Lordships’ consideration of this Bill, but we are in fact having a Second Reading debate. I want to give us a bit of a reality check because those listening who have not been part of the proceedings of the Bill through Second Reading, the Committee stage and so on will have much sympathy with all that has been said. I certainly do.
The 10% reduction, which most of us recognise in reality is actually going to be more than 10%, is not part of this Bill. It was one of the deficit reduction measures announced some time ago. It certainly sets the context for the Bill, but it is not a provision of the Bill. The noble Baroness, Lady Hollis, has said many times that she would prefer a national scheme and for council tax support to be part of universal credit. I said at Second Reading, “so would I”, because I believe that that is the sensible way forward. But Parliament has decided otherwise and it has passed the Welfare Reform Act. It may be that in years to come a future Government will change that, but it is not going to happen during the passage of this Bill. That is the reality check I am talking about. We have to deal with the situation as it is, not as we might wish it to be.
We all share the concerns that have been expressed by the speakers to this amendment. I would just say that, recognising where we are rather than where we wish to be, the next amendment we are going to debate provides a very much better solution to all problems that have been described by every speaker thus far. I look forward to the debate, and I particularly look forward to support for that amendment from all sides of the House.
Lord True
My Lords, I associate myself with my noble friend’s remarks, although perhaps not his final point. Those who have heard me take part in these debates will know that I, too, regret very much that the benefit was not included in the universal credit. I think there is very wide agreement in the House on that but, as my noble friend has pointed out, that is not what Parliament has determined, and we must address the situation that we find ourselves in.
As my noble friend Lord Tope also said, there is an expectation for local authorities to deliver reductions in public spending. As I have often said in your Lordships’ House, the state is overspending by roughly £14 million an hour and it is legitimate to ask local authorities to consider playing a part in addressing that problem. We are doing so and, as I have said before in these debates, I would have preferred the Bill to not be too prescriptive in this area.
I agree with the first part of this amendment, that:
“Nothing … shall prevent billing authorities retaining the provisions of the … council tax benefit scheme”.
My problem with the amendment is that it asks your Lordships’ House to make a frontal assault on the principle of deficit reduction. The second part of the amendment effectively gives a put option to any local authority in this country, including the prosperous, leafy authorities that the noble Baroness, Lady Hollis, referred to, such as West Oxfordshire, Westminster and the Royal Borough of Kensington and Chelsea.
If the House passed this amendment, the Government would suddenly have to pick up the costs of Westminster, West Oxfordshire and the royal borough, which are prepared to sustain the existing scheme out of their own resources. This amendment says that your Lordships’ House should ask Her Majesty’s Treasury to pick up those costs, which those boroughs are prepared to meet. Similarly, any local authority in this country, rich or poor, would be able to ask for resources from the Treasury, and the whole effect of seeking to make a reduction in the welfare budget in this area could be negated. That is the fatal flaw in this amendment.
Baroness Hollis of Heigham
I am puzzled by the noble Lord’s remark. He says that if this amendment were carried, it would mean that prosperous authorities such as Gloucestershire, Oxfordshire and some of the inner London boroughs we have mentioned—Wandsworth, Westminster and so on—would be getting moneys from the national scheme that they do not need because they are ready to fund it themselves. Of course, given the council tax rebate scheme, they could still fund it themselves from the 90% grant, but is it not the case that under the transitional arrangements they will be entitled to apply for money they do not need, which they will no doubt keep and which will go to their reserves? In fact, the very thing that he is deploring about this amendment is going to be embodied in the transitional grant arrangements.
Lord True
The noble Baroness presents another possible wrong to defend the particular wrong that I am addressing.
I am sorry that I was slow coming into the Chamber when the noble Lord, Lord McKenzie, started his speech; I heard it on the monitor and I agreed with many of the things he said about the timing of this announcement, which is also implicit in what the noble Baroness has said. But I return to the fundamental point that if your Lordships pass this amendment, the Royal Borough of Kensington and Chelsea can ask the Treasury to go on funding the scheme as it now is. The noble Baroness thought it was absurd that those leafy boroughs should be funded, and I rather agree.
The other thing one has to accept is that surely there is somewhere between no saving from council tax benefit, which is the potential position if this amendment were passed and every local authority put that upon the Treasury, and the extent of saving, the problems of which we have heard described; there must be some amount that can be saved under this heading, because I believe—I do not have the figures before me—that spending on council tax benefit doubled during the Administration of the party opposite. I do not accept that there cannot be reductions. Therefore, because of the technical flaw in the second part of the amendment and because I think that there is scope for making reductions, I cannot support the amendment if it is put to a Division.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, I thank everybody for their contributions and the noble Lord, Lord McKenzie, for the way in which he moved the amendment, which was rather through gritted teeth.
We listened carefully in Committee to what was said about the implementation of this council tax scheme. During the Recess—noble Lords will recall that we have been back in this House for only one week—we looked at whether there was any amelioration that we could offer to local authorities to help them through the first year of the new scheme. That arose from discussions in this House, so, rather than being traduced for that, perhaps people would recognise that we have taken some notice and are setting about trying to help. I grant that the transitional scheme is for one year, but, during that one year, we would expect local authorities to have a much better idea of how they might “smooth in” the scheme.
We were also told that many local authorities were looking to charge people who have 100% benefit at the moment anything up to 30%. Noble Lords have spoken about the difficulty involved in collecting sums of money, but that is just an absurd way of looking at this scheme. We have therefore limited the amount that can be charged to people who are on 100% benefit to 8.5% and effectively enabled local authorities to do that by helping them with a grant along the way.
Local authorities do not have to collect 8.5%; they do not have to charge it. They can accept that it will cost more to collect it than to say, “We will let that go for this year while we look further into our schemes for the future”. That is quite correct. As has already been said, some local authorities will not implement that aspect that all.
However, it is pretty rich of noble Lords opposite to suggest that this is somehow an absolutely dreadful imposition. We are giving money to local authorities to help them through a first year which we have recognised may not be very easy to handle. Rather than noble Lords opposite gasping and continuing to tell us that this is just awful, perhaps they might have given us a little bit of credit for listening and trying to help.
The deficit is serious. The increase in council tax benefit during the past 10 years has been enormous, being, as my noble friend Lord True said, well over 100%. That is just ridiculous. We cannot go on like that and we have to make some room for bringing that down. There are a number of ways of doing it, as noble Lords have pointed out.
I have given the House a Written Statement. I have given the broad outlines of how the scheme will operate. It is not very difficult. It is being made very easy for local authorities to fulfil the criteria and to claim the money. I have already said that we will give fuller details on the amount of money that local authorities are likely to be able to retrieve. I hope to do that this week or, if not, at the beginning of next week.
I do not accept that all the grumbles here are justified. I do accept that local authorities are having quite a difficult time. I also accept that the country is having a more-than-difficult time with its finances and the economy. That is why, as my noble friend Lord True said, everybody, sadly, is having to play a part. I just add that to what has been said. I am sure that this will come in again in other amendments that are on the way. This is not an amendment to the Bill but a transitional relief to the council tax scheme.
Those councils which have already consulted on the scheme or are consulting at the moment will need to decide, when they see about this grant, whether they wish to reconsult. It is very unlikely that that will be necessary because they will have a scheme that is slightly better than the one they were looking at, but it is up to them. If they want to do that, they need to take legal advice on whether the changes to their scheme justify them consulting again in any way, even on part of the scheme. That is up to them. We are giving them a helping hand. We hope that that will at least ameliorate for some of them the concerns expressed here today. As I said, I gave the Written Ministerial Statement at a time when I could really do nothing much about the change because there was not the ability to lay it. This has not been going on for months; we have not been considering it for months. We have considered it ever since we were in Committee in this House.
Amendment 98A would make it explicit that billing authorities can run a local scheme along the same lines as the existing council tax benefit scheme. It is not necessary for this amendment to do that or to put it in the Bill. If a local authority wants to have the default scheme, it may base its local scheme on that, retaining the criteria and allowance of the council tax benefit regime. Of course, it will do that against the background of the 10% reduction, so nobody will make up that 10% if they do that. The amendment would also require central government to continue funding council tax support schemes to the same levels as the existing council tax benefit scheme. As I said, that would be minus the 10% and would not be funded to the full amount.
The reforms we are making provide a vital contribution to our deficit reduction. To requote the figures, council tax benefit expenditure in England increased from £2 billion in 1997-98 to £4.3 billion in 2010-11. It might be interesting for noble Lords to hear and take note of the fact that in 2010-11, we spent more on welfare than on education, defence and health combined. Our reforms give councils stronger incentives to support local firms, promote local enterprise, cut fraud—there is plenty of that within the system—and get people back into work. I heard what the noble Lord, Lord Smith, said, that when people start working they can progress if they wish and are able to. On the noble Lord’s question, I slightly challenge what he said about inflation. My understanding is that inflation fell to 2.29%. I think the noble Lord said that it was 11%. Our reforms give councils stronger incentives to promote local enterprise and help people into work. We are moving on that basis.
From now on, local authorities will have real control over how they design their council tax support scheme for people of working age, enabling them to offer council tax reductions that match local circumstances and funding. This amendment potentially removes any saving and as such would constitute a spending commitment. I am not sure whether noble Lords opposite have cleared that with their Front Bench in the other place. If so, it might be helpful to know that. Local authorities already have choices and levers to design and manage their schemes, making their essential contribution to this deficit reduction.
As I think noble Lords will understand from that, I cannot accept the amendment, though I have listened to the concerns raised—as I did in the past. One reason that we have a transitional scheme today is that we as a Government have listened.
The noble Lord, Lord McKenzie, asked how we were going to manage the handling of the transitional scheme. The answer, as I understand it, is that given by my noble friend Lord Strathclyde. There are very precise ways to come back at Third Reading. I do not think that bringing this issue back at Third Reading would constitute one of them. Noble Lords must take that into consideration. I hope that the noble Lord will feel able to withdraw his amendment.
Lord Smith of Leigh
Before the noble Baroness sits down, perhaps I can clarify what I said. I was using cumulative figures of inflation to show the impact on different items. We heard from the noble Lord, Lord True, and the Minister that the problem was that council tax benefit doubled under the previous Government, and, in a financial sense, it did. However, underlying those figures is the fact that the number of claimants did not rise; it fell between 1997 and 2002 and then began to rise, reflecting the changes in the economy, as one would expect. If we look again at the figures for the difference in council tax—if we smooth out the increase in council tax—there was a decrease in payment on council tax benefit, not an increase, so the problem is not council tax benefit, it is council tax.
Lord McKenzie of Luton
My Lords, I am grateful to all noble Lords who have spoken in the debate on the amendment. I am particularly grateful to my noble friend Lord Smith for his interjection on some of the data.
As for procedure at Third Reading, I was not suggesting that we would necessarily consider bringing back this amendment at Third Reading. I was referring to some of our other amendments—on issues such as tapers and vulnerable people, for example—which are affected by a greater understanding of the transitional funding that has just been announced. From the briefing session that we had on Monday we very much took it that there would be some flexibility because of the timing of the announcement. If the noble Baroness is saying that that is not the position then we will have to take account of that as we proceed later today.
Baroness Hanham
It may help the noble Lord if I repeat what my noble friend Lord Strathclyde said. As the noble Lord knows, it is my noble friend and the Whips who guide business in this House, as well as the Companion. The Companion states:
“The principal purposes of amendments on third reading are: to clarify any remaining uncertainties; to improve the drafting; and to enable the government to fulfil undertakings given at earlier stages of the bill”.
Those are the three purposes for coming back with amendments.
Lord McKenzie of Luton
Well, my Lords, it seems that clarifying remaining uncertainties could keep us going for a month of Sundays, given what is outstanding on the Bill and the tardiness with which some of its provisions have been made available.
The noble Baroness talked about the 8.5% maximum that would be required for people to access the scheme. She referred to it meeting the cost. What we do not know is the extent to which it will cover the costs for councils which move from the existing scheme on which they have consulted to the new arrangements. We do not yet even know how it is to be allocated and apportioned. We may know that later in the week; we may not.
The noble Baroness said that it is easy to fulfil the criteria of the new scheme. It may be easy to identify what those criteria are, but how you move from where you are on the scheme on which you have consulted to that position is a completely different matter. There will be a whole variety of arrangements on which people have consulted. I doubt whether the Government have done any analysis on how practical or easy it will be or how costly it will be for people to move from where they are to where the Government want them to be. In any event, even if that were accomplished, that does not deal with the issue of what will happen in year two. I do not see the connection between knowing that this is available in year one and having a better idea of how councils can smooth it in for subsequent years if the plug is to be pulled on the transitional funding.
The noble Lord, Lord True, went on about the deficit and of course the deficit has to be addressed. Our point is: why does this have to be a component of it? Does every line in the government accounts have to cough up some sort of proportion? Why this one? Surely it is right that the Government have to evaluate the consequences of each cut that they are trying to make—and not only each cut. What the Government have singularly failed to do is to look at the cumulative effect of cuts on people. My noble friend Lady Hollis made the point about housing benefit and council tax benefits. We know that those two things often go together and that some people will get dramatic reductions in housing benefit because of underoccupancy provisions: an average of £14 a week. My noble friend Lord Smith referred to the importance of £3 a week for people in some of the poorer areas for which he has responsibility. How are those judgments made? The reality is that they are not, which is why we are justified in bringing forward an amendment on this basis.
The noble Lord, Lord Tope, said that this really was not something for the Bill but if we want to constrain the Government and cause them not to create the upset that they are going to cause by this legislation, what other mechanism do we have? He referred to the amendment of the noble Lord, Lord Best, which we will come on to in due course. We believe that this amendment is a better way of dealing with the situation. The noble Lord, Lord Tope, may disagree but, at the end of the day, the root problem that we are trying to deal with here is the so-called localising of council tax benefit and the massive cut that goes with that process. So long as the colleagues of the noble Lord, Lord Tope, support that approach, they cannot challenge us on where we end up on these issues.
When we heard from my noble friend Lord Smith, your Lordships heard then the voice of somebody who has to deal with these issues on a day-to-day basis and in challenging circumstances. It is not only about the council tax costs that people are suffering and the increases that this will bring but about housing benefit, about what is happening on food prices and about inflation generally. As my noble friend put it, there is also the growth of payday loans and worse forms of lending. That is the authentic voice of someone who is dealing with the chaos that these measures are creating. As he put it, there are no more cuts that can be made in the system and the Government should recognise their responsibility for that. My noble friend Lady Hollis spoke with her usual passion and the great analytical approach that she has to things. Again, that is the authentic voice of someone who is dealing with housing on the ground and knows local government through and through.
We do not have a meeting of minds on this. We see this as a very important issue—
Lord True
Before the noble Lord sits down, will he answer the central point that I put to him? I accept all his strictures about wishing to reduce spending on welfare. However, the effect of his amendment on every council in this country, including my own, is to have responsibility for this decision transferred from where it has been decided—in the other place and in the Cabinet room in Downing Street—to cabinet rooms and town halls up and down the country. If this were passed, I might well say to the Chancellor of the Exchequer, “Right, you pay for it, mate”. I do not think that your Lordships’ House should give the power to local authorities to take those decisions away from the Chancellor of the Exchequer. Is that not the effect of this amendment? Will the noble Lord answer that point?
Lord McKenzie of Luton
Does the noble Lord think that the House should have the opportunity to say to some councils, “You have the right to slash people’s council tax benefit and put them into further poverty”? Does he think that that is the right equation? Of course there are consequences if you have a scheme that covers all councils, just as you would have the same consequences if you went back to a unified system through universal credit or otherwise. However, I would put the obverse to the noble Lord, who seems to be arguing that because some councils should not benefit, we have to hit the poorer councils to stop that. I do not think we can have a meeting of minds on this. To us this is a line in the sand, as my noble friend said, and I would like to test the opinion of the House.
“Power to make discounts discretionary
(1) Section 11 of the Local Government Finance Act 1992 (discounts) is amended as follows.
(2) In subsection (3) leave out from “or” to the end and insert “such other percentage as the billing authority may determine”.
(3) Omit subsection (4).”
Lord Best
My Lords, I declare my interest as president of the Local Government Association, which has formulated this amendment, and I pay tribute to the LGA and its leadership for its commitment to progressing this important issue. Noble Lords may have seen the letter from the group leaders of all the political parties at the LGA urging the Secretary of State to give local authorities the discretionary powers which this amendment would provide.
Amendment 98B is in my name and that of the noble Lords, Lord Jenkin of Roding and Lord Tope. I am extremely grateful to those two supporters and their colleagues on the Conservative and Lib Dem Benches who have given invaluable backing to the amendment. It is my strong impression that this is an example of your Lordships’ House drawing the attention of the Government and all Members in the other place to a matter that, earlier in the life of the Bill, did not have the recognition that it deserves.
I have been thrown a bit by the Minister’s announcement of a new transitional grant, to which I shall return. However, ignoring it for the moment, the situation can be set out quite simply. In localising the council tax benefit scheme, the Government will reduce by 10% the amount they currently pay to fund support for poorer households. This will contribute some £460 million towards deficit reduction in England. However, no changes are to apply to those in receipt of council tax benefit who are pensioners, which means that if the overall 10% cut has to be paid for by non-pensioners, they will face a reduction in their support not of 10% but of an average of nearly 20%, and up to 30% in areas where very many recipients of the benefit are currently pensioners. This payment of tax, which is equivalent on average to 20% of the local council tax, from around £3 per week to more than £5 per week, will have to come out of the very low wages or benefits calculated to be barely sufficient to cover people’s food, heating, clothing, et cetera.
The Bill gives local authorities discretion to raise council tax, which could compensate for this loss of their income by reducing the discounts currently available for empty properties and second homes. In some cases, these sources of additional income will raise much of the lost funding, particularly in more affluent areas where there may be many second homes and relatively few people receiving council tax benefit. For example, we heard earlier that the Royal Borough of Kensington and Chelsea, where the Minister was a distinguished leader, will be able to leave the council tax position alone and raise enough money from other sources to cover this loss of central government support.
In the vast majority of places, however, using discretion to vary discounts for empty and second homes will not raise enough to balance the books if councils wish to preserve the level of council tax support currently going to the poorest households. Many local authorities will therefore find themselves having to tax those on very low incomes. Quite apart from their concern for those households struggling with rising food and fuel bills, as the noble Lord, Lord Smith of Leigh, spelt out, those local authorities are deeply worried that this new requirement imposed on them raises enormous difficulties in extracting taxes from people who do not have the money to pay. It is true that local authorities have the powers to go to the courts and send in the bailiffs, but chasing the poorest households for small sums of money each week is a nasty business that is fraught with administrative and moral hazards.
I am delighted that pensioners are to be protected from this new benefit cut. I want to see the same support continuing for people with disabilities who are dependent on benefits, those working on the lowest wages, those on jobseeker’s allowance looking for work, and single parents with young children, all of whom are trying to get by through difficult times. A number of these households are already facing reductions in the support that they receive for their housing costs; and many hundreds of thousands will be charged the new bedroom tax—averaging £14 per week for those deemed to have one spare bedroom and £25 per week for those deemed to have two—from the same day, 1 April 2013, on which they could have to start to pay council tax for the first time.
The lesson we learnt clearly when this House expressed concerns over the similar issue of that bedroom tax was that there was no point in simply opposing a benefits cut since the other place would immediately claim financial privilege and throw out the offending amendment, even where your Lordships’ passed an amendment with a very large majority, as it did before Christmas when there were two iterations of amendments to diminish the impact of that other measure. The amendments were not even considered in the other place because of their financial implications. Amendment 98B, therefore, is not intended to have any cost implications for central government. It is cost-neutral.
The saving of £460 million in England will still be achieved. As I understand it, this actually represents a better contribution to deficit reduction than would now be the case next year following the Government’s new announcement of the transitional £100 million grant for 2013-14. However, this amendment would enable local authorities to raise the funds to bridge the gap in their funding without having to pursue those on the very lowest incomes. How can this saving be achieved? The amendment would give local authorities the discretionary power to vary the single person discount, currently fixed at a standard 25%, which goes to all single person households, including some who may be in this House. Indeed, this discount gives proportionately more to those living in the most valuable homes. The amendment provides local authorities with the flexibility to raise the money needed but to do so without taxing those who currently receive the council tax benefit.
The Bill already gives councils the discretion to reduce discounts for empty properties and second homes. This amendment would also give them the discretion to vary the single person discounts. If across the piece these SPDs were to be reduced from 25% to 20%, those single person households would still get four-fifths of the discount they currently receive, and the extra revenue for councils would almost exactly compensate for the loss of £460 million of central government grant and would enable local authorities to maintain support with the council tax at current levels for all households. In fact, because councils will be able to raise extra revenues from their other discretionary powers in respect of second homes and empty properties, the LGA’s calculations show that pensioner single households at all income levels could continue to receive their full single person discount. That includes some Members of this House, I mention again. A reduction in the SPD for non-pensioners from 25% to 20% would still raise enough—some £313 million—to balance the books.
Lord Jenkin of Roding
My Lords, the noble Lord, Lord Best, has made an extremely good case and has made it very clearly. It is a case which, when he first put it to me, attracted me. Although there are disadvantages—and we shall no doubt hear some of them during this debate—I took some heart from what the noble Lord, Lord McKenzie, said in the first debate this afternoon: this could be one way to address the problem to which the noble Lord, Lord Best, referred and was identified in that debate.
As he said, we need to address the problem of councils seeking to extract small sums from large numbers of people who have never paid council tax before. That seems to be at the heart of what we have to address. I say this with some awareness of the past. I was the Secretary of State who, with my colleagues, the noble Lords, Lord Baker and Lord Waldegrave, devised what became known in the press and by everyone as the poll tax. We called it the community charge. For various reasons, one of which was that we never effectively had the support of the Treasury, it had a lot of very rough edges. However, one thing that it did was to ask councils to collect very small sums from large numbers of people who had never before paid a local tax—they had always had the benefit of the relief. Of course, then it was the rates but the principle is the same.
We all know how that ended—with riots across the major cities and particularly here in London. I am in no doubt whatever that one of the major causes of the distress that provoked the riots was councils trying to collect what were inevitably small sums of money from large numbers of very poor families who had never before paid rates. I think that my noble friends in government are running the same risk with the current situation.
Of course, there are other ways that one could address this problem. One was proposed by the Front Bench opposite in the previous debate but the House clearly disapproved of it. However, of any proposal that I have heard, this solution put forward by the noble Lord, Lord Best, seems to come the nearest to avoiding having to go to large numbers of people who have never paid council tax before and trying to extract money from them. I have heard it suggested that if councils find that they have to collect one or two pounds a week from families, they will not bother. To my mind, that is a counsel of despair. I see that an article in today’s Guardian suggests that a very large number of councils will be asking themselves whether it is worth the cost of collection. We cannot put local authorities in that position.
The amendment of the noble Lord, Lord Best, to which the noble Lord, Lord Tope, and I have put our names, proposes giving councils an extra discretion which they can use in appropriate circumstances, subject to local conditions, to help to close the gap which would otherwise have to be closed by removing council tax relief from people who would find it very difficult to pay, by putting up council tax generally or by cutting expenditure. Of course, one knows that if local authorities cut expenditure, that often affects the poorest people, whereas the proposal here is for a discount. It is a discount that has existed for many years and one understands the logic of it—that single people impose fewer burdens on local authorities and therefore it is not unreasonable that they should pay a lower council tax. It is not going to be all taken away but, even if a reduction from 25% to 20% were adopted across the board, that would go a very long way to closing the gap that we are talking about.
The other argument that I have heard is that the discount has been part of the system from the beginning and it is not the same as applies to second homes or empty properties and so on. However, it is still a discount. It is exactly the same as where local authorities give relief under certain circumstances but in this case it is for single households.
I totally agree with those who say that we have to look at the situation we are in and not the one that we might want to be in, but this is the problem that we face. If the measure as set out in the Bill goes ahead, then I am afraid we shall be heading—I am not saying that we shall have riots in Grosvenor Square—to many of the problems that provoked those earlier riots. The benefit of experience is that you learn from it. I think that those of us who lived through those years will not forget the problem. I am not proud of having launched the community charge—the poll tax. It is not one of the more lambent chapters of the book that I will never write but nevertheless it is there and there are lessons to be learnt. To support this amendment would be to learn those lessons and avoid making the same mistake twice.
Lord Tope
My Lords, my name is also added to this amendment. The noble Lord, Lord Best, has introduced the amendment characteristically fully, clearly and precisely. Equally characteristically, the noble Lord, Lord Jenkin, has once again confessed to his errors of the past, but more particularly, pleaded with us eloquently to learn from experience. That is so important.
Our discussions on this part of the Bill through all its previous stages have been characterised by the number of speeches that have begun by people saying, “I don’t know anything about local government finance, but”. We will probably hear quite a number of figures quoted and quite a number of complex issues will be raised. It is a complex issue. None of us who has had a lifetime in local government will pretend that local government finance is anything but complex. But what we face today is a very simple and basic question. There is a shortfall. Many councils are facing a shortfall in having to introduce the council tax reduction scheme. Is it fair that the shortfall is met by those who can least afford it in our community, such as those on benefit? As has been explained, they will be affected even more because, quite rightly, pensioners and the most vulnerable, however defined, are excluded from this. They will face a huge disadvantage in terms of their income. Is it fairer that they should meet the shortfall or should it fall on the wider community? I think that everyone here would agree that it is fair and right that that shortfall should be met by the wider community. It is a complex issue but it is a simple question that is at the heart of the debate today.
I was a little surprised at the rather churlish response from the Opposition to the, albeit very late, announcement from the Minister on the transitional funding. I can well understand that there are many questions and difficulties about that, but I would much rather have Ministers coming forward at a late stage saying, “We have been listening and we want to try and help so this is a change”. From that point of view I welcome this move, but is it a solution? Well, £100 million is always welcome to local government. It will help but it will help for one year only. It is not a solution to the problem, as the noble Lord, Lord Best, has rightly said. It will help perhaps for one year. There are a lot of complexities. We will get further details about it later this week or, as I think I heard the Minister say, maybe next week. I hope that it will be here by Monday morning as we certainly need it in time for Third Reading. I hope that it will be this week, otherwise what will be doing next weekend?
The transitional relief will not solve the problem. The amendment, as explained very clearly by the noble Lord, Lord Best, will give local authorities the discretion—it is not a requirement—in the light of their local circumstances, priorities and demographic make-up. In all of those things it will give them the discretion to vary the single-person discount. That will be different across the country. That is the nature of localism. I said earlier that I might have preferred still to have a national scheme with universal credit, but that is not what we will have. We have a localisation of council tax. What could be more in keeping with localism than giving local authorities the discretion and the power to produce a scheme that best suits their local circumstances? That is what this would do. As the noble Lord, Lord Best, said, some may wish to put limits on that discretion. The Liberal Democrats would certainly support a limit on the 20%—no lower than 20% on the single-person discount—so there would be a variation of between 20% and 25%. That alone would solve the problem that most local authorities are facing. Some may feel that pensioners should be exempted. All that is possible but it is only possible if there is some movement and some negotiation on the issue.
One of the surprises is that the Government have thus far been unwilling to negotiate at all on the single-person discount. The Secretary of State has firmly set his mind against any change. That contrasts starkly with the Localism Bill that we spent so many happy hours on in your Lordships’ House last year when we managed to achieve 440 amendments by agreement, albeit on rather a bigger Bill than we are discussing today. Not one of those amendments needed to be carried on a vote. Therefore, I am very disappointed that this year we cannot even negotiate on finding a solution to this issue.
If this amendment is carried today, as I very much hope it will be, obviously it will go to the other place and those negotiations will have to take place before it comes back to this House. I regret that we will have to come right at the end of this to force negotiations in this way, but if that is how it has to be done then so be it. The noble Lord, Lord Best, made this point and I want to stress that this amendment and the relaxation on single-person discount is strongly supported by every political group in the Local Government Association. I stress that that includes the independent group—I am never quite sure whether it is a political group or not, but the party leaders of all four groups have signed a letter to the Secretary of State urging him to accept it. It has all-party support. Nowhere is that support stronger than in the Labour group and on the Labour councils which are facing the real pain of this. It is inexplicable to me, after a lifetime in local government, that the Labour Benches have been unwilling to sign up to this amendment or even to discuss the wording to make it more acceptable to them. That is genuinely quite inexplicable. I hope even at this late hour, having made their stand on the previous amendment, and the House having decided on it, they will reflect on that and recognise that if we can pass this amendment today we can negotiate on it when it eventually comes back to our House.
To summarise, the amendment is fair. It is a far more equitable solution to the problem that local authorities are facing. That is why every local authority of every political complexion that I know of strongly supports it. It is localist, and this is supposed to be about the localisation of council tax benefit. It trusts local authorities and gives them some discretion—perhaps limited—on how to devise the scheme to face what we are legislating for. Above all, it is practical. It can be implemented quite easily even at this late hour. Local authorities have to publish their draft scheme by the end of January although it does not come in until April. They can do that now. Councils choose to vary the single-person’s discount which will be collecting very small sums of money. The figure being quoted by the Local Government Association is 30p a week from people who are already paying council tax and who are already on record, rather than larger sums of money from people who can much less afford it and who in many cases are not paying council tax at all because their income does not justify it.
In our debate on the previous amendment, the noble Baroness, Lady Hollis, referred to a red-line moment. That was perhaps a red-line moment in an unreal world; this is the real red line. It is perhaps an appropriate colour. It is the real red line in the real world and I urge noble Lords on all sides of the House—perhaps particularly those on the Labour side of the House—to support the amendment, as I do.
Lord Bichard
My Lords, I support the amendment and declare an interest as a vice-president of the Local Government Association, as many of us are. I support it for two very simple reasons. First, in the light of the previous vote, this is perhaps the last opportunity to offer some help to protect the most vulnerable in our communities, who stand to suffer most from the proposed legislation if it is passed as drafted. Like the noble Lord, Lord Tope, I implore all noble Lords who I know have a passion to protect the interests of the most vulnerable in our society to support the amendment. I suggest that this is not the time for political tactics. Nor could a vote for the amendment be taken as supporting in any way the policy in the Bill. It should and would be taken as a practical way of helping those most in need when they need it most.
The second reason is that I support the cause of localism and devolution, which is after all a key priority of the coalition Government. For me, devolution always involves the devolution of power. It is not just about the devolution of responsibility or, on occasion, of the right to be blamed. The devolution of power is what the amendment moved by the noble Lord, Lord Best, offers.
Devolution is also about devolving choice, and giving local authorities the chance to make a choice about where money is spent and what their priorities are. Once again, that is what the amendment is about. It gives local authorities the chance to make a judgment, taking into account their local knowledge, about what their priorities are and where their money should be spent. For those two simple reasons I implore the House to support the amendment.
Lord Palmer of Childs Hill
My Lords, I was pleased to hear the noble Lord, Lord McKenzie, say in debate on the previous amendment that we must stand up for poor people. That is what I, in supporting the amendment of the noble Lord, Lord Best, ask noble Lords to do today. I hope that noble Lords from all sides of the House will do that.
Like other noble Lords, I welcome the £100 million. It is good, but it is transitional. It is good for this year, but it is not the solution for the future.
Points were made about the collection of small sums from people who could least afford it. Comparisons were made with the suggestion that a single-person discount should be varied if the local authority concerned wished to do so. Perhaps noble Lords should look at the simple arithmetic. Let us say that someone who is paying council tax lives in an authority where the council tax is £1,000 per annum. I will keep the figures simple. With a 25% discount, the single person will have a bill for only £750. If the local authority changed the 25% to 20%, instead of having a bill for £750, the council tax payer would have a bill for £800.
If their house was more valuable and highly rated, for example at £2,000, the council tax payer who got a 25% discount would pay £1,500. Under the 20% solution of the noble Lord, Lord Best, they would pay £1,600. One does not have to break one’s brain to see that they would accept this. They would probably not even look at the calculation. They would see that on a bill of £1,000 they were paying £750 and now have a bill for £800. Perhaps they would realise that they had a bill for an extra £50. However, they are used to paying council tax, which does not normally stay the same every year. On £2,000 the bill would be £1,600 rather than £1,500.
Lord Shipley
My Lords, I first declare my interest as a vice-president of the Local Government Association. This is a helpful debate. I agree entirely with the noble Lord, Lord Bichard, that this is not a time for political tactics. That is because it is a time to help those most in need.
Last week the Deputy Prime Minister stated that as we have to tighten our belts and,
“as we have to make more savings as a country … you start at the top and work your way down, not the other way round”.
I agree with him that those who are poor should be protected. The reason I give my full support to the noble Lord, Lord Best, is that his amendment does that: it protects the poor far better than the Bill does.
We are about to enter the third year of a council tax freeze for most councils, amounting to a 9% reduction in real terms over that period. The Government have paid more than £2 billion to keep council tax bills down. Rightly, this has been widely welcomed by council tax payers—but it is causing higher cuts now because the sums granted to local councils this year and next are for one year only. The baseline is not built up. Crucially, this has meant that those with high incomes, living in a high-band property, have benefited in cash terms much more than others.
Today, around 750,000 people work but get council tax benefit. They get it because their income is low. However, in future a very large number of them could have to pay between £3 and £5 a week because of benefit loss, while higher earners will have no increase at all. As proposed, this will be a regressive step on the working-age poor and it has to be wrong. The amendment of the noble Lord, Lord Best, provides a solution.
We have heard that the £100 million transitional grant is welcome, but it is also the case that the 8.5% cap is underfunded for some councils, which will have to make other cuts to deliver it—and it is only one-year money. We have heard about empty and second homes and that the Government have argued that a 100% levy on empty and second homes could meet the 10% cut they have imposed—except that, with rising demand, it is not a 10% cut but nearer 12.5%. The truth is that whereas some councils can make up the difference on empty and second homes, many councils simply do not have enough empty and second homes to make up the loss, even if they do charge 100%.
The evidence collected by the Local Government Association demonstrates this. More than 100 councils are now in this position and the vast majority of schemes propose to introduce a minimum payment for working-age claimants. Half propose to set the minimum payment at 20% or more, about another quarter propose to set it between 10% and 20%, and the £100 million announced yesterday will make little practical difference because of rising demand.
A deliverable, fair solution is needed which can be introduced with minimum loss to any individual. That solution is to give councils the option to reduce the single-person discount from 25% to 20% while maintaining a pensioner’s current entitlement. It costs the Government nothing. It costs single people very little: just £1 per week for those in bands A and B and just over £2 per week for those in the top two bands. Given the council tax freeze over the past three years, for most of these people these sums seem modest.
The noble Lord, Lord Bichard, raised an issue of principle about localism. Despite ostensibly being localist—having passed the Localism Act and decided that council tax benefit would not be part of universal credit but would be devolved to councils—surely it should follow that policy on exemptions to discounts should be localised too. Too often the Government seem to want to prescribe and proscribe when localism means giving away power and responsibility. We are ending up with part localism, whereby the Government choose some bits that they want to regulate but not others and leave crucial issues unresolved, such as a definition of “vulnerability”.
We have heard that local government is united: all parties on the Local Government Association have signed up to this amendment. The chair of the Local Government Association, Sir Merrick Cockell, said in June:
“The poorest regions and the most vulnerable people will be hardest hit by this cut unless the Government offers councils more flexibility over all forms of council tax discount. It is the only way that councils can ensure that the greatly reduced funding for council tax benefit is targeted at the local people who need it most”.
Would single parents be better off or worse off under the amendment of the noble Lord, Lord Best? They would be better off. Seventy per cent of lone parents are in the bottom two income deciles. They could lose a little from the reduction in the discount to 20% but they would lose far more if they have to pay 20% of the overall charge, albeit 8.5% in year one.
There will be a clear impact on child poverty. In a letter to the noble Lord, Lord McKenzie, in July, the Minister said:
“Local authorities should design localised council tax schemes in a way that best suits local circumstances and consideration should be given to child poverty in the local area”.
I agree entirely with the Minister that council tax schemes should be designed in a way that best suits local circumstances, but it begs the question of how the impact on child poverty should be considered. The noble Lord, Lord Best, has produced the answer. His amendment would require a modest reduction in the single person’s discount for non-pensioners and would then prevent a further, larger burden being placed on the poor.
My final point relates to income tax gain and council tax loss. The Government have done excellent work in removing low-income earners from income tax by raising the threshold before tax needs to be paid, and another tranche of this will occur in April next year. I am still puzzled as to why they are proposing that some of the very same low earners should have to pay more council tax as a consequence of the Bill. From the perspective of the recipient, it amounts to giving with one hand and taking away with the other.
I hope the amendment will pass. It is fair, deliverable and prevents the introduction of a regressive tax. It reflects the experience from the poll tax days. As I have said, all parties on the LGA are signed up to this amendment and I hope that all in your Lordships’ House will be signed up to it too.
Lord True
My Lords, I declare an interest: I am not a vice-president of the Local Government Association, and after the remarks that I am about to make, I am unlikely to be invited to become one because I intend to challenge the unanimity that we have had so far on the amendment.
I pay tribute to the Local Government Association for the work that it has done on the Bill. On this issue, however, I think that it is wrong. I also disagree with a considerable number of my fellow council leaders, including Conservative council leaders, who see this proposal as a kind of 5th Cavalry which is coming over the hill to deal with a problem that, as I have repeatedly said in the House from Second Reading onwards, should not have arisen in the first place. I have lately been described by people inside the Government—or my authority has been described—as a “serial offender”, so I am sure that my noble friend on the Front Bench will be surprised to hear me speaking in this way. I am part of the serial offences, but I also think that, in policy terms, the construction of this Bill is unwise
My old grandmother always told me that two wrongs, as noble Lords know, do not make a right. What is proposed here is effectively a new tax—a broadening of the tax base and an increase in council tax. The amendment proposes that to address a problem which should be addressed, we should challenge the central structure of the council tax as it was first conceived. I can go down memory lane as well, because I was deputy head of the policy unit in No. 10 when John Major formed his Government. At that time, one of the things that we had to do was wrestle with the legacy of the community charge, the poll tax. We had another legacy in our minds at that time—the rates. I have not heard the word “rates” mentioned in this debate but the existence of the rates was thought by many to be a profound injustice. That is how the Government of Margaret Thatcher got into conceiving the solution of the community charge.
One of the central principles agreed across the political spectrum when council tax was created was that the perceived injustice in the rates—that everyone paid the same; that single persons had to pay the same as everyone else—should be addressed. Masquerading under the guise of flexibility, this proposal detracts from that central principle. There is nothing in the amendment about 20% or saying that some can do it, or whatever. As Amendment 98B is written, it is a licence to tax. It is a licence for any local authority. My noble friend Lord Tope said that it is an opening shot in a negotiation. If my noble friends on the Lib Dem Back Benches want to propose a further property tax—in effect, an increase in council tax for every person and household in the country—then, given the time interval in the transitional arrangements, we can have that debate inside the coalition and inside the country. However, I do not know of any public debate about the principle of removing the single-person discount.
It was right that the anomaly in the rates should have been addressed, and addressed well, in the council tax, and I would defend the principle—and it should be defended centrally—that was established in 1992. If we pass the amendment, it will mean a broadening of the tax base. We have heard that this tax is easy to collect. My goodness, yes, of course it is—and I am afraid that some local authorities will think they are quids in. The figures from my finance director show that if we were allowed to get rid of the discount in my local authority, we could cash in £8.5 million. I would not do it but, given the powers in this amendment, will every local authority say, “No, we will restrain ourselves. We will take only the little bit needed to offset the other elements in the Bill that the Government have brought forward”? No, single-person households across the country could suddenly find themselves facing an increase in council tax which no party ever put to them in a manifesto, and no party ever put to them as a point of principle. Perhaps it is because I was involved in the original design of council tax that I do not think we can resile from this principle so lightly.
I do not wish to trespass too much on the time of noble Lords but I am the first person to put the opposing case in reply to five other noble Lords. There has been talk about helping the poor but, as I understand it, the single-person discount goes primarily to low-band households, those in bands A to D. From memory, I think that the percentage might be as high as 90%. I have no doubt that the Minister has the figures. It is not a question of the Rolls-Royce classes suddenly having to stump up an extra bob; council tax increases will be experienced by many. If the discount was abolished in band D in my own authority, it would cost those who are affected £6.40 a week. We are a high-tax authority because we are poorly funded centrally. Even at 20%, however, it would be £1 a week. That is not a negligible sum. Even in my leafy authority, of the 23,000-plus people who would lose the discount as the amendment threatens, 14,000 live in households in bands A to D—and we are rather heavy on higher band households. I would counsel against the easy view that adopting this amendment would help the poor. We might find instead that it hits them.
I may be wrong or I may be right, but taking away a central core of the structure of council tax is a major switch in tax policy. In effect, it would represent a return to the old rates system without public debate. For my part, I could not support that principle without much further and deeper debate than the remaining stages of the Bill will allow.
The Earl of Lytton
My Lords, I rise to speak in support of this amendment. I do not have any function in the Local Government Association, but I am the president of the National Association of Local Councils, which is the parent body of parish and town councils. However, that is not a particular interest here because they are not billing authorities.
I believe that flexibility is desirable within certain rules. A large number of issues come into play here: wholesale reductions in local authority funding, a reorganisation of the benefits regime, moving the process away from central government to local government and, perhaps I may say, a considerable increase in the complexity that attends us in relation to the measures in this Bill. There is an increased risk of turmoil, uncertainty and unpredictability of revenues and indeed of benefits, and how the reliefs are going to apply.
Like the noble Lord, Lord Jenkin, my memory goes back to the unified system of general rates—and, yes, I can fulfil the desire of the noble Lord, Lord True, by mentioning the rates. He very appropriately drew attention to the fact that they had not yet been mentioned. As I say, there was a unified system under the General Rate Act 1967, but of course that has now been split asunder. However, the tax base that represents council tax on the one hand and business rates on the other has never been subject to the care, maintenance, management and upgrading that is necessary. In short, it is an outdated tax base, and we are using it as the basis for implementing this ostensibly desirable change as the financial expression of localism and a reduction in centralist government. I support that move in terms of localism, and the implicit re-engagement of local people and businesses with local tax raising, so I take it as read. However, I question the use of some seriously worn out components as part of the process.
I am grateful to the noble Baroness’s department for allowing me to take some fellow professionals to meet with officials, but I am bound to say that I had the impression that the issues I have been raising are not ones for this particular Bill. I do not want to rehearse that again because I get the message and I have taken it on board. None the less, that has implications for what we are trying to do in the context of this Bill. It seems that the coalition wants to have its cake and eat it. It wants to hand things over to the billing authorities but not to relinquish the levers of control. The noble Lord, Lord Shipley, mentioned this point and I certainly relate to it. It does not seem to be true localism. It perpetuates what I see as an essential incoherence in top-down government in this particular area of endeavour.
I understand the messages of the past, some of which were mentioned by the noble Lord, Lord True. It predated my existence on the planet, but in the 1930s a well-known south coast local authority paraded itself as having the lowest rates in the country while conspiring to achieve the highest level of property values. That was part of the reason why, for the general rates, which then covered both residential and non-residential property, the assessment of property values was taken out of the hands of local government.
I can also well remember the arguments about the community charge, the poll tax, on which I made my maiden speech in this House. I recall the many issues around trying to attach a tax to a highly mobile group of individuals and the problems that that would incur. I recall the discussions on council tax when it came in, particularly in connection with banding and the defined relationship between the top and the bottom band. There was the case of a single person rattling around in the former family home or a single person living on their own in a smaller or, indeed, a larger property, but either with greater means or, more particularly, using the services of local government to a much greater extent. I understand the issues, and we have not plumbed the depths of how to approach local taxation, although it is part of where these arguments seem to be coming from. Is it for services supplied by local government or is it a tax according to the value of a property? We still have not worked out what we are going to do. We are trying to set up a unified system, whether it be for residential properties in terms of council tax or the business rate, which is the non-domestic rating system, but we are trying to look in two directions at once. We have not rationalised how to deal with the contradictions.
Here I depart a little bit from the views of the noble Lord, Lord True. I well remember the rates being paraded as the unjust and unfair system. In a sense it was but it was highly efficient and nothing else that we have produced since would have survived to this day were it not for the information technology that now enables us to manage a highly complex system. I do not think that it has become any fairer, for all that complexity.
Only central government has the power to resolve the contradiction between a tax on property values and a tax for services provided, and that resolution still eludes us. The reality is that neither council tax nor business rates achieves either of those objectives particularly effectively.
So what do we do? I have tried, in the context of this Bill, to suggest that something needs to be done about the management of the tax base. I accept that I am not going to get a comprehensive review of either business rates or council tax this side of this Bill coming into force and being implemented. I am not expecting any concession on that at all, but it seems to me that the only thing that this House can deliver is to give some sort of discretion and flexibility in how these things are organised. If we are to rejuvenate business, if we are to re-engage the electorate, we have to have some sort of local flavour to that. Otherwise, it is simply central control of the type that we have had for many years.
This piece of legislation is going to bring into sharp focus bills as against benefits. I do not put that forward as a mantra of any sort; I just feel that that is what is going to happen. If we are going to see this justified locally, we have to remove some of the stranglehold of the past and allow issues such as poverty, deprivation and need not to be laid down from on high but assessed locally. I see no option but to do that, and it is for that reason that I support this amendment.
Baroness Sherlock
My Lords, I was not going to speak to this amendment but I have been provoked into doing so by the debate. I will be very brief because I know that noble Lords are anxious to move on.
I want to lay down a couple of markers, having been prompted by the reference to lone parents. As many noble Lords will know, I spent some time as the chief executive of the National Council for One Parent Families, and I have very strong memories of more than one lone parent coming to me and saying, “The toughest thing is that my husband walked out and overnight our income dropped but my bills did not go down by a single per cent. The rent stayed the same, the electricity bills stayed the same and we didn’t need a smaller house, but one of the very few things that at least made some allowance for the fact that there was only one adult in the house was the single person discount for council tax”.
I understand that the distribution of single parents tends towards the bottom, but the reality is that if the council tax liability for a single parent rises, the minute she moves into work, especially with what is happening to tapers around the country, she will find it very hard to be better off in work. At a time when the Government are forcing more and more lone parents into work, the reality is that the very, very poorest may not benefit from this, but these people are still very poor and this does not seem to be the way forward.
Finally, we had a debate some time ago about child benefit and whether or not people in the higher income group should have child benefit taken away from them. That was advocated as being justice, but it is a very narrow view of justice, which sees justice as being only between the rich as a group and the poor as a group. Of course, child benefit is actually a horizontal redistribution, a transfer from the population as a whole to those who have children because society recognises that their costs are higher. Any simplistic view of the tax system that takes no account of anything other than income seems to be heading for difficulty. If we are going to revisit the whole basis of council tax, which of course was meant to take account of individuals as well as property, we need to do so in a much more systematic way than this debate will allow us to do.
Lord Smith of Leigh
My Lords, I think I should make a contribution on this as well. I declare my interest as a vice-president of the LGA and, in view of the remarks made by the noble Lord, Lord Best, about the discussion he had with the chairman, I should say that I am also the vice-chairman of SIGOMA.
As I said in the debate on the previous amendment, I am having to make some very practical decisions on this matter, and I still think that it ill behoves Members opposite to say that Members on this side are not interested in poverty issues, when they voted Not Content on the previous amendment. Putting that to one side, I found the contributions really interesting. It has been confession time. One noble Lord confessed to being the author of the poll tax and another to being the author of the council tax. Had we time, I am sure that we could debate those issues to a great extent.
However, I agreed with the noble Lord, Lord Jenkin, when he said that one issue about what is being proposed here is that local authorities are going to have the agonies of collection that we had under the poll tax. In fact, before coming down this morning, I spoke to the North West Legal Consortium, which is a group of local authority lawyers. I said I was coming down to your Lordships’ House to participate in this Bill and I assured them that while one outcome may well be that it creates more poverty, it will also create more work for lawyers.
We are getting round to the fact, as I said earlier, that this is actually the poll tax mark 2. We are now in a situation where we are going to take money from the poorest, and to collect it will be very expensive. Local authorities will have that dilemma of whether and how to collect very small sums, when the cost of collection will outweigh the amount of money they will get. But we will have to make those decisions.
I would not have thought that an adjustment in the single person discount would be something that I would be able to support, except in the most exceptional circumstances. I have to tell your Lordships that these are those most exceptional circumstances. This is not a panacea by any means. In Wigan, the shortfall in the council tax support scheme is about £4 million. About a third of households receive the single person discount, just under 50,000 properties, and they get the benefit of about £10.4 million. In my area, a band D property is regarded as something that is not a poor household, but it obviously depends on where you live. The vast majority are in bands A and B, which are poor properties. If I was to try to raise the £4 million simply out of the single person discount, I would be reducing the single person discount by a very significant amount, which would be far more than I could do. So it is not a panacea to the problems that authorities like my own face.
However, and this is probably where I part company with some on my own side, we have already got our hands tied behind our backs because we cannot do anything about pensioner discounts, and we are now having them further tied behind our backs in the sense that we are not allowed to look at flexibilities in other areas. I am having to make really tough decisions about the working poor. Some of the decisions that I might make, such as reducing the single person discount, would not have as great an impact on the poor people of the borough and I would like the flexibility to do so.
As the noble Earl, Lord Lytton, said, there is an interesting contradiction here, where, on the one hand, the Government want to support a single person discount, which allows people to be rattling around in properties that are perhaps too big for their actual needs but, on the other hand, we have agreed to a system where if you are on housing benefit you have to pay bedroom tax. If you want the privilege of that, you actually pay more for living in a property that is deemed too big for you, and here we are giving people money to support them doing that. That seems to be a lack of coherence in policy.
We should trust local authorities. If we believe in localism, local authorities should be trusted to implement the scheme in a way that best meets the needs of all the people in their area. I would not want to reduce the single person discount by a significant amount, but it would help me make more palatable some of the cuts that I shall have to make in council tax benefit.
Lord McKenzie of Luton
My Lords, we have heard from the noble Lord, Lord Best, an authoritative case. As ever, he approaches the issue from the point of view of protecting the poorest in our society. I guess that that makes my task slightly more difficult than it otherwise would have been, because, to be clear, we are not convinced that the proposition is the best solution to the problem that local authorities face. I can understand—my noble friend Lord Smith has just emphasised the point—that local authorities, desperate for some source of funding, could see it as a ready means of getting that, but, as my noble friend Lady Sherlock and the noble Lord, Lord True, said, to change the structure of a tax system just for that reason without a broader approach and analysis is not the right thing to do.
We are concerned that the wording of the amendment does not exclude pensioners. It gives local authorities the discretion to exclude pensioners but does not of itself exclude them. It does not exclude a reduction in the single person discount which is greater than 5%; it would be up to local authorities to do that.
We broadly accept, on the basis of numbers that we have seen and the LGA analysis in particular, which picks up some of the IFS data, that the proposition would in comparison to what is in the Bill produce a generally better redistribution outcome, particularly for poor people. However, if you look at that outcome in the context of the debate that we have just had and the adverse decision that we now face, you see that it is not so favourable. I have not seen from the data that have come across my desk how the proposition works at individual authority level. I concede that, when you look at things in aggregate, you have a less regressive, or perhaps a more positive, redistribution, but what is the impact down at individual authority level? If an authority has lots of second homes and is very rich, it is more likely than a poorer authority to be in a position where it does not have to change the single person discount. In terms of redistribution, that is going in the wrong direction. I accept that the proposition would result in a redistribution that is better than is in the Bill, but it is not as good as we can get and where we should leave it.
The noble Lord, Lord Palmer, charged that we want poor people to suffer. If I may say so, that is a disgraceful thing to say. If he were to look at the record of this side of the Chamber, the propositions that we have advanced, what we have voted for and what we have voted against, I hope that he would see that that is not true. We have just tried to stand up for poor people more positively and more strongly than the noble Lord is seeking to do now. The noble Lord, Lord Tope, said that it was quite inexplicable that we could not put our name to the amendment and engage in the wording. We find it quite inexplicable that the Lib Dems, who have in many ways a proud tradition of liberal thinking and action, should allow the Government to put in place a system that leads to the problem that we are trying to ameliorate with the amendment. That is the fundamental problem that we face. As the noble Lord said, we know that the Government are not going to move on the single person discount. We seemingly know that the Government are not going to move on the 10% cut, so where do we go? This amendment seeks one route to break that logjam; we have tried another which would have a better outcome. That is why we have some concerns with this approach. I accept the strong intent behind it and I accept that there are circumstances where it could lead to a better outcome because the pain is being spread over more people, but that pain would still be spread to some who are fairly low down the income scale, which is not the right thing to do.
I agree with the noble Lord, Lord Jenkin, about collection issues, as I think does pretty much every noble Lord who has addressed this issue. That will be a real problem with the system that we face. Dealing with the single person discount might change that a bit at the margins, but it, and certainly the transitional funding, do not change the problem fundamentally—arguably, they make it worse, because authorities are encouraged to reduce council tax benefit by 8.5% rather than 20% or 30%. They therefore have a smaller sum to collect with at least the same, and arguably greater, costs because of the problems with collection. That is the real issue which I hope will cause the Government to wake up and say that we should deal with this differently.
It is a pity that we did not pursue the issue of a report on the tax base, a theme returned to by the noble Earl, Lord Lytton, and how it would operate in practice, because it would have served us well in due course. The noble Lord, Lord Shipley, talked about child poverty. I simply make the point again: if the noble Lord and his colleagues are seriously concerned about child poverty in our country, they will know that there have been plenty of opportunities during the past couple of years for them to stand up and address that issue in a far more positive way than just supporting this amendment would do. The Lib Dems need to think strategically about where they are going on this rather than pick at something which I accept is very well intentioned and would ameliorate the problem to a certain extent but which in the wider scheme of things is just a sticking plaster on the problem when we need to address the problem itself. We cannot alone cause the Government to change their mind. We and the Lib Dems, with help from Cross- Benchers, arguably could, so that ball is in the noble Lord’s court.
I always hesitate to disagree with the noble Lord, Lord Best, because my colleagues and I have been shoulder to shoulder with him on many important issues where we have challenged and overturned the Government’s wishes even if they have subsequently been pushed back to us. I know that he raises this issue with the best intent, but there are some technical problems, if none other, with his approach which mean that this amendment cannot be supported. It is with some regret that I say that.
Baroness Hanham
My Lords, I thank the noble Lord, Lord Best, for introducing this amendment. I do not like not agreeing with him either—he is someone whom I think everyone admires in this Chamber and whom I have known for a long time—but disagreement there is going to be. I note that the noble Lord opposite said the same thing.
I start by declaring an interest in that I receive a single person discount, and very welcome it is, too, but I am not starting out from that basis today. The amendment is about the local authority’s discretion to change the rate of council tax to a single person, which it can discount by 25% at the moment. The noble Lord suggests that that could go down to 20%. As has been pointed out, that is not what the amendment says. It says that you could remove the discount. Local authorities could be left going from 25% to 0% on the back of it. There is nothing in it at all to limit this to a reduction to 20%. If the noble Lord did that, I am absolutely certain that there would be objections from all around that that was not localism, it was restrictive, and that if we wanted to go further down this discount route the right thing would be to have the full range. We have to be very careful about this.
It is also true, as my noble friend Lord True said, that we have never consulted on reducing council tax discounts. This is a tax and there has been no consultation on that at all. In effect, even if we accepted that the discount would go down to 20%, it would be a potential tax increase for over 8 million people who at present receive the single person discount. It would hit them. There has been some sort of idea all through this debate that this would have no effect on people who are poor. That is ridiculous. Lots of people who are poor pay council tax. They are in a position of being in property, having to pay council tax and getting suitable benefits for that. They might be single parents, lone pensioners or—there was an aside about this—people living in a big house. People live in big houses because they start in them. They do not particularly want to sell that house, and would probably get to the state where they do not know how to because it is so complicated. Why should they move? Why should they not be entitled to that single person discount? That does not mean that they are rolling in money. They are not. We have to dispel the idea that everyone who receives a single person discount can afford to give it up. That is a false impression and we cannot allow it to go on.
To reinforce that, over three-quarters of the claimants of the single person discount live in bands A to C, with over a third living in band A. Only 10% of claimants live in properties that are band E or above. This is not a tax that can be reduced just for the rich. It is very much a tax borne by people who are not particularly well off. However much we might say that they “only” have to lose a certain amount of money, they would only have to lose, as other people would, money that they cannot afford.
The amendment would undermine the fundamental principle behind council tax. I was fascinated by how the noble Earl, Lord Lytton, trailed through all the forms of property and council tax that there have been. Rates were certainly not popular. The principle behind council tax is that it is part property and part personal tax, and is based on two people in occupation. It is clearly defined. The discount reflects the fact that there is only one person in the property, where it is clear that one person does not make as much use of services as a family would. It also has a wide range of support. It is clear and easy, and people understand that it is a relief just for a single person. As my noble friend Lord True and I said, the Government did not consult on changing this discount, as it is a tax, in the consultation on technical reforms to council tax and have no plans to change that.
Noble Lords have previously commented on the amount of revenue that might be raised by reducing the rate of discount. I sound a note of caution on that. People losing the single person discount under this amendment, such as single pensioners and lone parents, might ultimately find themselves in greater need of help to pay their council tax. They might need benefit, so that would not be very helpful. This would mean curtailing the impact of any additional resources, putting more people in need of state support and creating unintended pressures on councils. I am sure the House would agree that that is not quite the hoped for consequence of the amendment.
The technical reforms to council tax in the Bill change the way empty properties are treated with a view to bringing them more quickly back into use. That may also generate welcome additional revenue for local authorities. However, as I said, changing the single person discount would lead to a significant hike in tax on a very large number of people. The amendment would also affect the operation of council tax discounts for empty dwellings. The default discount that applies where there is no resident of a dwelling could be varied by the billing authority. This change is not necessary as the Government already plan to extend authorities’ discretion over discounts for empty dwellings. We discussed that in Committee.
I understand that noble Lords have concerns about local authorities’ ability to make savings and to raise revenue from the flexibilities in the system at the moment. We have offered transitional support, which has been sneered at a bit today. I hope that with a little more time and consideration noble Lords and local authorities might appreciate that that is a helping hand, even if it is for a year at this stage. It is important that we recognise that the Government have made a significant move here. As a result of what I and other noble Lords have said, and the fact that this is a government initiative—so the coalition is wrapped up in it—I cannot support the amendment of my friend the noble Lord, Lord Best. I am sad about that because I normally like to do so. I hope he will withdraw the amendment.
Lord Best
My Lords, I am enormously grateful to all noble Lords who have participated in this debate. I will pick up on one or two points that have been made. I am deeply grateful to the noble Lord, Lord Jenkin, who reminded us of the poll tax riots and told us to learn from experience. Those were wise words. I am extremely grateful to the noble Lord, Lord Tope, who made the point that there is a shortfall that must be met. Can it not be met by people other than the poorest? I was grateful to my noble friend Lord Bichard, who felt that this was a practical way of helping those in most need and was a last chance to do something. My noble friend Lord Palmer had done the arithmetic and made the point that it would be very easy to collect a reduction in the single person discount as opposed to the incredible difficulty of trying to collect from people who have never paid tax before. The noble Lord, Lord Shipley, made the point that with no increase in council tax because of the freezes, the better off will be paying no more tax next year, but the poorest, rather paradoxically, will pay for the first time. He emphasised the value of localism.
The noble Lord, Lord True, was the first voice contrary to the mood of the House at that stage that this amendment was well worth pursuing. His comments were reflected in some of what the Minister said. I will take those points together. The noble Lord made the specific point about Richmond that if the single person discount was abolished altogether, people would face a council tax increase of £6 per week. He pointed out that that would clearly be significant. However, he mentioned that if the reduction was confined to a reduction from 25% to 20%, the worst situation for those people would be nearer to a £1 a week rise, which does not sound as bad. That was certainly the intention behind the amendment.
The noble Earl, Lord Lytton, gave us a wonderful history lesson and supported the whole essence of localism that is built into the arrangements that we would be extending with flexibility under the amendment. The noble Lord, Lord Smith of Leigh, with some reluctance, felt it important to support the amendment. There are better ways, but we have to be careful that we do not go for the best and drive out the good. This is our best shot to make a significant difference. The noble Lords explained that the amendment would be very helpful to places such as Wigan, even if it is not a panacea that would solve all the problems there.
I turn to the noble Lord, Lord McKenzie. I fully recognise that without the support of the opposition Benches, the arithmetic of this House means that it is impossible for me to carry an amendment tonight. I am sorry that political differences came into play outside the scope of Cross-Benchers. The noble Lord makes the point that a broader approach is needed. No one would disagree with that. He makes the same point as the noble Lord, Lord True, and the noble Baroness that the amendment could mean more than a reduction from 25% to 20%. Because it is an open amendment, it could mean abolishing the single person discount altogether. That could be painful to people on lower incomes. He makes the point that the amendment does not exclude pensioners. Many would argue that, at whatever income level, they should be removed from the equation. He is not sure about how the distribution from council to council would work. Richer local authorities may do better, and we need some more work on that. However, the better amendment proposed from the noble Lord’s Benches has failed to get support. Therefore, I hope that something lesser might find acceptance on his Benches. It has not so far.
The Minister also made the point that some restriction on such an amendment, so that it could not lead to the single person discount being removed altogether, is important. She points out that the single person discount has a justification and a purpose. The noble Lord, Lord True, also mentioned that. It is hard to argue that a 25% reduction for single people equates with any precision to the difference between the services required by a single person household and a household with more than one person. Indeed, as pensioners are included, single pensioners require a lot of services which a household with two pensioners does not require, because those people look after each other. It does not follow that if you are on your own you necessarily cost less. If you are a single parent with several children, you may be costing the local authority a good deal. It does not follow that a single person household necessarily uses fewer services from the council.
As a general principle, I do not argue that the single person discount does not have some merit, but a reduction from 25% to 20% can be argued just as easily as the retention of a 25% line. Any amendment that would find favour in your Lordships’ House is likely to be more precise about that. It is likely to state that the level of discount should never be less than X—perhaps 20%. There should continue to be such a discount. Perhaps it should state that pensioners should be excluded. As the Minister pointed out, that would reduce the amount of localism in the amendment, but perhaps an amendment that contains such an element would be more likely to find favour with your Lordships. My colleagues and I need more time to see how the £100 million transition plays into that. Every little helps, and I know that local government is grateful for that amelioration, relatively modest as it is.
This is not the time for me to press the amendment. I, and I hope others, have learnt that different forms of an amendment might find favour across the House, and I reserve the right to return with a different amendment at Third Reading. At this stage, I beg leave to withdraw the amendment.
“( ) The Secretary of State shall issue guidance to local authorities as to what persons or category of persons shall be deemed to be vulnerable.”
Baroness Hollis of Heigham
This amendment has now been cut across by the Government’s statement about the transitional grant. I may wish to return to the issue at Third Reading, but for the moment, I ask the House’s permission to withdraw the amendment.
“( ) Any dwelling which receives a band reduction in its council tax by reason of disability adaptations (or in the case of Band A properties, the relevant discount), shall not be deemed to be under-occupied for the purposes of housing benefit.”
Baroness Hollis of Heigham
My Lords, I will be brief. Many years ago, as a Norfolk and Norwich councillor, I found that the then MAFF, the Ministry of Agriculture, Fisheries and Food, was giving grants to Norfolk farmers to drain the Broads wetlands and that the then DoE was at the same time giving the same farmers grants not to take up the grants. We have a similar problem here in the interaction of the Bill with the Welfare Reform Act. That is not helped because the interaction between the two departments, at least on this issue, is clearly fraught. That is most obvious over housing benefit, which came up in our previous debate.
DCLG has a more appropriate definition of bedrooms to families than has DWP. DWP’s new HB rules penalise couples where one has a moderate disability—asthma or arthritis—and needs a separate bedroom but will receive HB not for the two bedrooms that they currently have and need but for a one-bedroom flat, if they or their social landlord can find one. Middle-aged couples, one with disturbed and disturbing sleep, but who are reduced to a one-bedroom flat, will be sofa-surfing in their new home if they cannot afford to take the benefit cut that they would face if they stayed put. Someone with asthma or emphysema, sofa-surfing at 55 in their own home—it is awful.
We could perhaps help one small group of disabled people with more severe needs. They are those disabled people whose socially rented property has an extra bedroom and would normally be in a higher band—say, band C—but, because of their disability needs, have had their council tax banding dropped from C to B. However, for housing benefit purposes, they may well be judged to be underoccupying and have their benefit cut. The amendment states simply that anybody who has had a band reduction by DCLG should not thereby be caught by DWP’s underoccupation rules for housing benefit purposes; they should be exempt.
We are not talking about large sums here. Sam Lister from the Chartered Institute of Housing has kindly produced for me an estimate of those affected, based on top-down departmental statistics, for which I am most grateful. It is an estimate, but it accords with my own hunch work, bottom-up from several authorities and grossing up those figures. There are 125,000 properties in England with a band discount, usually on grounds of disability. Leaving aside band A, which would not normally be overoccupied, that gives 110,000 people in discounted properties. Excluding owner-occupiers, whom HB would not affect, and pensioners, who would not be affected by HB, we estimate that the number of households affected across England—and, perhaps, Wales—would be between 2,200 and 3,000. The cost of protecting their current HB levels so that they are not hit by an underoccupation charge would, including Wales, come to between £1.8 million and £2.1 million.
In some cases, their properties may have been adapted for them by the social landlord, and DWP has allowed that it would be a false economy to shuffle them into somewhere smaller and then have to readapt the new property. However, many such couples—perhaps most—are simply in large properties, such as the middle-aged couple who need all three bedrooms of their flat or bungalow, one each for sleeping and the small, third bedroom for equipment. Anyone who has cared for a disabled person, as many in this Chamber today have, knows how much equipment can be needed: the wheelchair, the oxygen tanks, the nearly new mattress that has been temporarily replaced by a water mattress, the commodes, the tray tables, the cradles, the backrests and the banana boards. I could go on.
Under the new HB rules, those 2,500 disabled families with a reduced CTB because, according to DCLG, they need that extra space, could still be hit by the bedroom tax contrived by DWP, which says that they do not need that extra space, at a cost to them of between £15 and £20 or more. This amendment would simply allow those with a reduced band by virtue of their disability, as recognised by one part of government, to be exempt from the bedroom tax imposed by another part of government. This would bring consistency between the two departments and would be the right thing to do for families who are usually poor and certainly disabled. It seems self-evidently just. It may be that the Government propose to protect such families and I very much hope that the Minister can say that they will do so, in the same way as she was helpful in Committee in telling us that council tax band reductions would continue. If not, I hope that your Lordships will support this amendment. I beg to move.
Lord Best
My Lords, I have put my name to this amendment as well. As a long-time campaigner on the famous bedroom tax, I am very supportive of this amendment, which I think affects only between 2,000 and 3,000 households. For them, however, it would be very important and to have a double whammy would be disastrous for that group. I support the amendment.
Baroness Hanham
My Lords, we discussed this in Committee and, while I appreciate and understand the intention behind the amendment, the trouble is that this would reopen debates that I know have already been had on what is now the Welfare Reform Act. The Government do not plan to revisit what is in that Act. Blanket exemptions for specific groups, including for disabled people and those living in adapted accommodation, were extensively discussed then. I appreciate that the noble Baroness has now reduced this exemption to thousands of people rather than tens of thousands, but the fact of the matter is that it reopens something which I do not think we can reopen here.
Blanket exemptions can also be an inefficient and complex way of targeting resources, so the Government favour discretionary housing payments to help meet any shortfalls between a person’s rent and a housing benefit award. Noble Lords will recall that we announced that an additional £30 million would be added to the discretionary housing payments fund from 2013-14. This is aimed specifically at two groups: disabled people living in significantly adapted accommodation and foster carers. Local councils make the decisions on them on their individual circumstances. However, I assure the House and the noble Baroness that the Government have no intention of changing the long-standing council tax disabled band reduction scheme and that anyone in receipt of a reduction will not lose it as a result of the underoccupation measure. As I say, I cannot support this amendment and I hope that the noble Baroness will feel able to withdraw it.
Baroness Hollis of Heigham
My Lords, I am extremely disappointed by the Minister’s reply. She has made two points: first, basically, that we cannot reopen something that has already been discussed. Forgive me, but that is precisely the point of the Report stage on this Bill. We are opening up issues on housing, particularly disabled persons’ right to housing support. After all, council tax benefit is part of the housing support that families receive. They pay rent and council tax, and in the past those two have been brigaded. To say that while DCLG recognises their need and reduces their council tax bands, the department’s colleagues a few stones’ throw away are perfectly able to penalise them for the very same discount that they are receiving from DCLG is really quite shocking.
The Minister said, secondly, that they could go to discretionary housing payments. By my calculations, that money has already been spent about three times over, given the number of families who will be capped and the like. I know that we are running very late for all sorts of reasons. I would dearly like to test the opinion of the House but I may leave this to Third Reading. I beg leave to withdraw the amendment.
Baroness Sherlock
“( ) No council tax reduction scheme shall, taking account of withdrawal of other benefits, have a taper which produces an overall withdrawal rate greater than that which would result from the application of the default scheme.”
Baroness Sherlock
My Lords, I do not propose to move this amendment. I would like the opportunity to revisit the analysis that underpins it in the light of the impact on tapers of yesterday’s announcement on transitional support and in the hope that I might get sight of the treatment of tapers in the revised regulations for universal credit in the new default scheme.
“( ) In exercising its powers under subsection (2)(b), the authority must have regard to the impact of the scheme on carers in the area.”
Baroness Lister of Burtersett
My Lords, the purpose of this amendment is to ensure that carers are included in the list of classes of persons considered to be in financial need for the purposes of drawing up council tax discount schemes. They were described as vulnerable people in the guidance issued by DCLG in May 2012, Localising Support for Council Tax: Vulnerable People—Key Local Authority Duties. That document states:
“The Government has been clear that, in developing local council tax reduction schemes, vulnerable groups should be protected”.
The impact assessment, as one would expect, refers to carers as one of these vulnerable groups, yet the guidance on vulnerable people does not mention them.
When I raised this issue in Grand Committee, I was not able to get a satisfactory explanation for this discrepancy and for why a group with special needs that is currently recognised in the council tax benefit scheme is now being ignored. In our first exchanges on the issue, the noble Earl, Lord Attlee, simply said:
“The guidance is not exhaustive”,
and that a,
“competent local authority will take the needs of carers into account. Why would a local authority not? That is part of its duties”.
The whole point is that the guidance does not currently spell that out as part of its duties. I quite accept that the guidance will not be exhaustive but I am sure that noble Lords will agree that it is strange to exclude this important group who, as that Minister himself accepted,
“provide a vital role in society”.—[Official Report, 16/7/12; cols. GC 38-39.]
Given the financial pressures that local authorities will be under, is it realistic to think that having worked their way through the vulnerable groups listed—if indeed they do that—many local authorities will then say, “Let’s see if there are any other vulnerable groups we should be taking into account”? Carers UK has pointed out that in Hertfordshire, for example, of the 10 district councils there only one is proposing specifically to protect carers. It says:
“Our existing experience of councils recognising carers around Council Tax discounts and reductions is also not good”.
That does not exactly inspire confidence.
When we came back to it in Grand Committee the noble Baroness, Lady Hanham, responded:
“The difficulty is that once you include carers, you have to include a whole lot of other people, which reduces the discretion”.—[Official Report, 19/7/12; col. GC 177.]
Leaving aside the fact that the whole guidance is discretionary anyway, a whole lot of other groups are already included and I am not aware of any calls for any further groups to be added to the list. Having made no progress in Committee, I subsequently e-mailed the noble Baroness to point out that the draft care and support Bill, which had been published while the Grand Committee was sitting, will place a new duty on local authorities to meet carers’ eligible needs for support. The Care Minister has been quoted as explaining that the care and support Bill puts carers,
“right at the heart of the system”.
Well, they are currently right at the margins of the council tax discount scheme.
In a letter in response to my e-mail, the noble Baroness said that she would now discuss the issue with the Department of Health, suggesting that,
“we could, perhaps, draw local authorities’ attention to this Bill (though not as an existing statutory duty)”.
I am grateful to the noble Baroness for her helpful response. This is really a probing amendment, designed to elicit what progress has been made and to reinforce the case for ensuring that carers’ needs are properly taken into account under the localisation of council tax support. As noble Lords will be aware, these needs are significant. To take just one recent survey carried out by YouGov for the Carers Trust, as reported in the Independent:
“Britain’s army of unpaid carers are isolated, depressed, physically exhausted and broke as they struggle to cope with caring for sick and disabled relatives without adequate support”.
Some 60% of those polled reported,
“mental health problems due to the strain of caring and juggling other responsibilities”.
I fear that if they now have to find money for their council tax, that could be the straw that breaks the carers’ backs. I hope therefore that the Minister will be able to bring positive news about the outcome of her discussions with the Department of Health. I beg to move.
Baroness Hanham
My Lords, I acknowledge immediately that carers play a vital role in society. We all know of people who have provided enormous support and care to their families and others, and I accept exactly what the noble Baroness says in that some of them must feel very isolated and find things very difficult.
The Government expect local authorities to consider what provision to make for carers as part of their broader responsibilities to those with protected characteristics under the public sector equality duty. In exercising that duty under the Equality Act with regard to the design of their council tax reduction schemes, local authorities should have regard to the treatment of carers associated with those who are, for example, disabled or older people, given their general duty to eliminate discrimination. I am happy to clarify this point for the record and to bring it to the attention of local authorities that they have that responsibility.
County council tax benefit makes provision for people who are carers through a specific income disregard and a premium towards their applicable amount. Local authorities will be free to do the same under localised council tax support. To facilitate this further, the Department for Communities and Local Government, as I said last time, is working with the Department for Work and Pensions to ensure that local authorities will continue to receive data on current benefits and the universal credit. I cannot give the noble Baroness the news that I think she is asking for, but as soon as those consultations are in position I will make sure that she is made aware of them.
As I have said, local authorities already have an existing framework of statutory responsibilities in relation to individuals who are vulnerable, and I do not think it necessary to create new guidance or highlight specific groups, which would risk cutting across this. I reiterate that the introduction of the transitional grant will give those authorities that undertake to avoid significant cuts to awards in the first year time to find other, more helpful ways of managing the reduction.
Amendment 107ZD would remove the powers to make regulations creating criminal offences in new Section 14B of the Local Government Finance Act. The noble Baroness is looking slightly puzzled. Have we not got to Amendment 107ZD?
Baroness Hanham
I apologise; I noticed the noble Baroness’s face and was getting a bit alarmed.
We have been asked about how we are talking to local authorities about this and other recent legislation. We are regularly communicating with them and will use this regular communication to bring to their attention recent legislation relating to carers. I think that we had some guidance, which I am also happy to discuss with the noble Baroness and, if necessary, reissue.
I apologise to the House for not realising that Amendment 107ZD had not been moved. I hope that the noble Baroness will feel satisfied with my response and will withdraw her amendment.
Baroness Lister of Burtersett
My Lords, I thank the Minister for moving perhaps an inch further along, even if it is not quite as far as I would have hoped. We have heard that the transitional grant is for only a year and has all sorts of strings attached to it. It does not provide an answer but it will at least provide some authorities with a breathing space. Could the Minister keep this issue on the agenda and not lose sight of the needs of carers? As the scheme develops over the next year, perhaps this could be returned to. I beg leave to withdraw the amendment.
Baroness Meacher
“(2A) Schemes under subsection (2) shall include 100% council tax rebate fully and additionally funded by central government for persons in receipt of—
(a) less than the income support applicable amount;(b) the universal credit maximum award under section 1(3) of the Welfare Reform Act 2012.”
Baroness Meacher
My Lords, I shall speak briefly in view of the hour; I am sure that the Minister and everyone else would like to get away shortly. The amendment provides for a 100% council tax rebate, fully funded by central government, for people with out-of-work incomes at the income support or JSA level, or when the universal credit is implemented, at the maximum award level under Section 3 of the Welfare Reform Act 2012. I should say that the noble and right reverend Lord, Lord Harries of Pentregarth, had planned to speak to this amendment but at this time he has had to go to an appointment.
The Government may argue that this is a “money” amendment that would increase government spending, but I would refute that suggestion. The basic income of people depending on JSA, for example, as your Lordships will know, is £71 per week for a single person and £111.45 per week for a couple. This is some £20 per week below the Joseph Rowntree assessment of income required to cover the basic costs of food, heating and travel, and one has only to think that there will be a few more costs than that to realise that these people are in dire trouble and need. Such households cannot and will not pay a tax on their home out of that tiny income. I understand that already 2 million households are failing to pay their council tax, a number which will put 2010-11 in the record books for the level of council tax default—that is £1 billion lost to taxpayers, a very large sum—while 3 million liability orders are being sought annually by local authorities through the courts, a 37% increase between 2000 and 2007. The poorest citizens will simply swell these numbers. The amendment would therefore not increase public spending, and that is before we consider the subsequent costs that the Government would have to pick up when these poor households failed.
The Government’s statement refers to transitional council tax benefits between 0% and 8.5%, which to me suggests a positive number. Whatever the number, though, it will be only for a limited period and therefore, as I hope the Minister will appreciate, does not in any way address the concerns that I and others have. I know that she does not really like to be reminded that this is the poll tax mark two, but that is what it will be unless this amendment is accepted by the Government, who could then bring forward their own amendment. I suppose you could say that we are trying to rescue the Government from themselves.
The New Policy Institute refers in its recent report to the return of one of the principles of the poll tax: that every household will pay. It was surely that principle that lay at the heart of the revulsion of the country against the poll tax and which brought down the Prime Minister of the day—Mrs Thatcher, as she was then. It is not surprising, then, that John Major promised Parliament that the council tax would provide up to 100% benefit for the unemployed and those on low incomes. Council tax benefit was expected to protect the poorest in the community, particularly from enforcement action in the courts. I cannot imagine anything more distressing, when you have no money and cannot buy any food, than spending your time going to court to defend yourself.
Now, however, the principle of the DCLG seems to be that instead of a 100% council tax benefit for the poorest, all shall pay something, and the favoured minimum has been 20%. My feeling is that once the transitional plans and arrangements are over, that is the sort of figure that we will probably return to, which means something like £5 per week for these very poor households to find out of income that I believe none of us in this House could survive on. Why issue demands if it is any less than that? Why issue a demand for £1 or £2 a week when even those sums cannot and will not be paid by these people on the lowest of incomes? Already these households will be losing benefit as a result of the move from RPI to CPI as the index used to upgrade benefits. Also many will lose from the housing benefit cap, as my noble friend Lord Best always argues so eloquently. There are disability benefit cuts and lots of other cuts. It is difficult to imagine how they are going to cope.
When these poorest households default, as they will, a liability order will be issued adding £120 to the liability. Then the unregulated bailiffs will turn up with a further cost to the household of £75 or £210 depending on whether they have to make a visit. These costs are piled upon council debt of, let us say, £1 to £2 a week or perhaps £4 to £5 a week. I am sure the Minister can see the nonsense of all this. We can call it nonsense, but for the family or household at the other end, it is not nonsense. It must be absolutely terrifying. People who owe small amounts of money at the beginning can find themselves owing thousands of pounds in a relatively short period. I welcome the Government’s statement, but I ask the Minister to assure the House today that she does not want to introduce poll tax mark two and that the Government will provide a 100% council tax benefit for those at the very bottom of the heap. That is what we are asking today. As other noble Lords have said, these very poorest people are not the right target for the cuts that, as we all know, were made necessary by the banks of this country.
Lord Cormack
My Lords, coming in to listen is fatal. I was very taken by what the noble Baroness, Lady Meacher, said. As somebody who did not support the introduction of the poll tax in Scotland and voted against it on every conceivable occasion thereafter, I would hate to think that we are in any sense moving in that direction. I say briefly, but with great feeling, that I hope the Minister, for whom I have genuinely high regard, will be able to give us some comfort in her response, either now or on Third Reading, because the problems that the noble Baroness sketched are for us theoretical, but for those who suffer, they can make the difference between a life and an existence.
Lord McKenzie of Luton
My Lords, we fully support the amendment moved by the noble Baroness. It touches the issues of justice and of practicality. The noble Lord, Lord Cormack, has just emphasised the challenges of collecting small amounts and revisiting the poll tax. This is, in part, genuinely saving the Government from themselves. I hope the Minister will not pray in aid the transitional funding because that simply does not address the problem. It might ameliorate it at the margins, but it does not deal fully with the very substantial issue that the noble Baroness has raised.
Baroness Hanham
I could do that, but I notice the words of the noble Lord and for the moment I will leave out the transitional arrangements because what the noble Baroness is asking for is not transitional but permanent. I am afraid that again I am not going to be able to accept the amendment.
The noble Baroness will be aware that we have consistently made clear that local authorities must take into account the needs of vulnerable groups in designing their schemes. Our draft regulations set out how the default scheme will take universal credit into account. Local authorities may wish to take this into account as they finalise their schemes in relation to people of working age. Under our proposals for the default scheme, universal credit income will be assessed as part of the means test for council tax support. Therefore the level of income, whether from universal credit or earnings, will be calculated in the means test determining the level of award. It is open to local authorities to take a similar approach in their own schemes.
The amendment would require that central government provides sufficient additional funding for councils to cover them to provide 100% support for the groups the noble Baroness was speaking about. As I explained earlier in relation to the set of amendments on funding, the saving from localisation is an essential contribution to tackling the deficit. The amendment also completely undermines the strengthened incentive for local growth. Making councils financially responsible for providing support brings incentives to get back to work.
I note what the noble Baroness said about the small amounts that potentially have to be collected from vulnerable people. I reiterate that we have drawn vulnerable people to local authorities’ attention and indicated that we think they must be taken very much into account. These proposals leave this in the hands of local authorities, and we are not prepared to change that for this group. Therefore, I hope the noble Baroness will withdraw her amendment.
Baroness Meacher
I thank the Minister for her response. The difficulty we have is that local authorities are squeezed to pieces. I have been very close to local authorities until very recently. They are cutting CAMHS services. They are cutting all sorts of things such as care homes and support for elderly people in their homes. They are desperate. Therefore, they are not going to be able to be generous to people in the situation we are talking about today. It is only at central government level that one can make rational decisions about where the pain should strike. The argument of this amendment is that it should not strike the very poorest people any more. They have already been pinched a very great deal. On that basis, I want to test the opinion of the House.
Lord Ahmad of Wimbledon
My Lords, I beg to move that further consideration on Report be now adjourned so that the House may take its well deserved dinner break business on the Motion in the name of the noble Lord, Lord Hunt of Kings Heath. In doing so, I suggest that Report stage should begin again not earlier than 8.29 pm. In suggesting that time, I am in no sense suggesting a time limit on the debate on the Motion tabled by the noble Lord, Lord Hunt, but am assuring those working on the Bill that the dinner break will be at least an hour.