Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) (Amendment) (Wales) Order 2013
(Limited Text - Ministerial Extracts only)
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Baroness Randerson
That the Grand Committee do report to the House that it has considered the Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) (Amendment) (Wales) Order 2013
Relevant documents: 20th Report from the Joint Committee on Statutory Instruments
The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson)
My Lords, this order will allow local authorities in Wales to make arrangements for an external provider to undertake some of the new administrative functions created by the introduction of council tax reduction schemes from 1 April when council tax benefit is abolished. These changes are part of the Government’s wider policy of decentralisation.
I will provide a little more detail on the contracting out order. It will amend the Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) Order 1996. Currently under the 1996 order, local authorities in Wales can contract out functions connected with the administration and collection of council tax—for example, the calculation of an individual’s council tax liability or the serving of demand notices. Local authorities in Wales can also currently contract out the operation of the council tax benefit system under the Contracting Out (Functions of Local Authorities: Income-Related Benefits Order) 2002 if they choose to do so—arrangements that will cease once council tax benefit is abolished.
While some of the new administrative functions related to the introduction of council tax reduction schemes are already covered by the 1996 contracting out order, such as the processing of applications, some are not. To ensure that local authorities in Wales have the freedom to contract out all the new administrative functions, this order amends the 1996 contracting out order for Wales to add the following new administrative functions: first, the issuing of council tax reduction decision letters; secondly, the payment of a reduction amount under certain circumstances where the billing authority is of the opinion that it would be appropriate; thirdly, the serving of a penalty notice in connection with an offence committed with a reduction; and, fourthly, the repayment of amount paid in connection with a penalty under a local scheme—a penalty that has been subsequently quashed.
Because the abolition of council tax benefit also means that local authorities in Wales will no longer be able to rely on their current investigatory and enforcement powers for social security benefits, Welsh Ministers are making regulations to provide local authorities with replacement powers to tackle fraud in relation to council tax reduction schemes. These regulations will introduce new penalties, the collection of which has also been included as a function that could be contracted out under the 2013 order. Local authorities that choose to contract out functions will be expected to monitor the services delivered by their contractors. We expect the decisions taken by the contractor to be of the same standard as that of a local authority officer and subject to the same levels of confidentiality and data protection.
Local taxpayers’ rights will not be affected by this legislation. The same rights of appeal to the local authority and to the Valuation Tribunal for Wales will remain. While this order does not expand on the current provisions for the administration of council tax reduction schemes, it will carry out an essential function by enabling local authorities in Wales to choose how to deliver their local schemes, whether by using internal resources, external providers or a mixture of both. It is important that we provide local authorities with the tools they need to deliver a cost-effective council tax system. I commend this order to the Committee.
Lord Wigley
Perhaps I may ask for clarification on a couple of points by the noble Baroness. First, am I right in saying that the interpretation of this order is the provision of greater powers of privatisation for local authorities if they choose to use them? Is that the implication—services that would otherwise be in-house in local authorities can be undertaken by private companies on their behalf?
Secondly, I refer to Article 2 on,
“Amendment of the Local Authorities (Contracting Out of Tax, Billing, Collection and Enforcement Functions) Order 1996”.
In subsection (2), there is reference to,
“the Detection of Fraud Regulations”.
Are these regulations that have already been made? Are they made by the Assembly or here? Is there already a statutory instrument in effect on that, or are we awaiting something to be confirmed?
Baroness Gale
My Lords, I thank the Minister for placing this order before us today. As she has outlined, its purpose is to amend the Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) Order 1996. From April 2013, council tax benefit will be abolished and council tax reduction schemes will be introduced in Wales under the Local Government Finance Act 2012. In future, instead of receiving council tax benefit, low-income families will receive a reduction in their council tax. Currently, local authorities can contract out of administering the collection of council tax. The order we are debating is required to ensure that the new administrative functions are part of the council tax reduction scheme and can also be contracted out if local councils wish to do so. Those functions include such things as sending out decision letters and serving penalty notices. The noble Lord, Lord Wigley, and my noble friend Lord Rowlands asked some very interesting questions on those issues and I look forward to the Minister’s reply to them.
The drafting of the order is relatively uncontroversial but it is unfortunate that we have it at all. It comes about as a result of the Government’s decision to abolish council tax benefit. They are scrapping the national benefit and passing responsibility for it to local authorities in England and to the Welsh and Scottish Governments, and cutting funding by 10%. We accept that the Welsh Government have responsibility for the details of any schemes and are fully involved in setting up these details. The principle of getting rid of council tax benefit dismays us very much. In England, we see people on low incomes being asked to pay sums of money that they simply cannot afford. Most councils have had no option but to pass on some of the cuts. As a result, many low-income households currently exempt from council tax will have to pay it for the first time. Typically, they will have to pay between £96 and £225 a year. In Wales, a 10% cut would amount to an annual cut of some £74 per council tax benefit claimant. I wonder whether the Government fully understand the impact this will have on low-income families. Government Ministers have praised the freeze on council tax, which may, indeed, be welcomed by those on modest and high incomes. However, the removal of council tax benefit from those on the lowest incomes means an increase in what they will have to pay.
The Government say that pensioners must be protected from the cuts, which means that others face larger cuts, depending on the number of pensioners in a local authority. If councils also try to protect other vulnerable groups, such as disabled people or carers, the cuts enforced on working families will be even more severe. Because of the number of pensioners the average reduction across local authorities will work out at some 16%. In January the Welsh Minister for Social Justice and Local Government, Carl Sergeant, announced a £22 million support package to continue offering the full council tax discounts in Wales, and under prudent financial management the Welsh Government have been able to fund their proposals out of their reserves.
It has been a difficult time for the Welsh Government. They have had to balance an enormous number of cuts and manage them while facing a difficult budgetary situation. Towards the end of the winter they were able to see the effects on households of other welfare benefit cuts. They knew that they were perhaps not going to have so many payments for such things as severe winter weather. They were in a position to use that money for council tax discount. However, that prompts the question as to whether it can continue to be used in the future. It will certainly not be easy and councils are aware of the pressures on them.
Given that the Government are going ahead with the change, the Welsh Government and Welsh local authorities need the regulations in place as soon as possible. We will not oppose these regulations tonight.
Baroness Randerson
My Lords, I thank noble Lords for their questions and remarks this afternoon. In principle this order does not change the way that councils deal with council tax. To deal with the first point of the noble Lord, Lord Wigley, it has always been possible for councils to contract out billing, collection and enforcement. Councils have been able to appoint an external provider to undertake some administrative functions. This order simply enables this to continue under the new arrangements from 1 April when council tax benefit will no longer exist.
As always I will try my best to answer the questions that noble Lords have asked. The noble Lord, Lord Wigley, asked whether this would mean greater privatisation. This order does not extend the powers that the local authorities already have to contract out their administrative functions in relation to council tax. As I have said, it allows them to apply them to the new council tax reduction schemes that are no longer part of the social security benefit system.
Lord Wigley
The Explanatory Note says that the order provides additional functions by way of authorising contractors. In other words, it goes beyond what was there before. Otherwise, presumably, we would not need it.
Baroness Randerson
I could attempt to look at the Explanatory Notes as I stand here but I think that it is better if I write to the noble Lord on that point. It is not practical for me to read the Explanatory Notes at the same time as trying to answer.
The noble Lord, Lord Wigley, has also asked about the detection of fraud regulations. These are the responsibility of the Assembly and that might be to what the noble Lord is referring in his question. Those regulations have been debated today in the Assembly, and Welsh Ministers will have made those regulations. We could not here, in the House of Lords, deal with this order until the detection of fraud regulations had been dealt with in the Welsh Assembly. I hope that that makes the responsibilities clear.
Lord Wigley
I do not want to go on unduly about this but, as I understand it, the legislation that we are dealing with today, here, was not scrutinised in the Assembly because it did not fall within the Assembly’s powers. If I understand correctly what the noble Baroness is saying, part of it—the part dealing with the fraud—does fall within the Assembly’s powers. The only point that I would make is that this underlines the need to simplify all this; matters are either devolved or they are not. That would make life very much simpler for everybody.
Baroness Randerson
The noble Lord makes an interesting point. It is something that we have come across on a fairly regular basis, that responsibilities are split in a way that is sometimes not obvious and sometimes surprising.
I move on now to the points made by the noble Lord, Lord Rowlands, who asked if there is more contracting-out now. I simply point out that this has always happened—for example, currently only three of the 22 local authorities in Wales have in-house bailiffs. Contracting-out on billing and bailiff services is very common. But a great deal of work has been done by the Welsh Government and by individual local authorities to have codes of conduct and best practice examples to ensure that bailiff services are run by improving standards over the years. A great deal of progress has been made on those issues.
Lord Rowlands
I apologise for interrupting the Minister again. I can understand the situation with bailiffs, but my feeling would be that a bailiff would not receive detailed personal information of the individual’s financial circumstances in the same way as some of the other services that are contracted out. That would give the external provider direct access to people’s personal finances, in a way that a bailiff probably would not have.
Baroness Randerson
I believe that external services will have no more access than they have had in the past, but they will continue to have an obligation to treat that material as confidential and deal with it in a responsible manner. Local authorities will continue to have—this is not new—a responsibility to ensure that any organisation or individual whom they appoint as a contractor to work on their behalf operates to the highest standards, and maintains confidentiality of personal data. To address here the remarks of the noble Baroness, Lady Gale, as a very keen advocate of local authorities and someone who believes fervently in local government—and I am very proud of our local government system throughout Britain—I believe that councils are raising council tax, which is the tax that funds a lot of their spending. It is right that they have responsibility for the whole of the functions associated with the raising of that tax. It is important that we have confidence to delegate power to local authorities throughout Britain in order to enable them to raise tax and spend it as efficiently and practically as possible.
Finally, I turn to the remarks made by the noble Baroness, Lady Gale.
Lord Rowlands
If some of these services are contracted out to an external provider and an individual feels that he or she has a grievance at the way that services are being administered, to whom does the individual appeal? If the local authority were doing it, it would be the Local Government Ombudsman. If, for example, an external provider committed a potential act of maladministration, could the individual go to the local ombudsman for redress of the grievance against the external provider?
Baroness Randerson
They will continue to appeal in the normal manner, the way in which they have been appealing since the establishment of council tax. The appeal will be to the valuation tribunal in the normal manner.
The noble Baroness, Lady Gale, expressed concern about the ending of council tax benefit. I do not believe it is an issue of concern in principle that council tax reductions will be done by councils rather than through the benefits system. I think it is very sensible to unite the reductions in council tax for those of limited means with the organisation that levies the tax in the first place. It is part of the Government’s policies of decentralisation and trusting local authorities. In this case, the Welsh Government have made a central scheme, and there are certain limited exceptions that local authorities can make decisions upon, but there is a largely standard scheme throughout Wales.
The concern that the noble Baroness expressed related to people who she believes will not receive the council tax reduction in future. I assure her that throughout Wales, if you are entitled to council tax benefit now, you will be entitled to a council tax reduction in future because the Welsh Government chose to supplement the funding being provided.
I hope that I have addressed all the points that noble Lords have raised. I am now in a position to answer the question asked by the noble Lord, Lord Wigley, about the Explanatory Memorandum. This order adds new administrative functions to the 1996 order which relate to council tax reduction schemes, but under the Contracting Out (Functions of Local Authorities: Income-Related Benefits) Order 2002 local authorities could in the past have carried out those functions for council tax benefit.
It may be useful if I review the record and check that I have answered all questions fully. I will pay particular attention to the point raised by the noble Lord, Lord Wigley, about additional functions. I commend the order to the Committee.