Lord Best
Main Page: Lord Best (Crossbench - Life peer)Local Government Finance Bill
Lord Best Excerpts
Lord Shipley
My Lords, I rise to speak in support of this amendment. My reason is that we need to understand better than I believe the Government do the impact of various changes being implemented at the same time over coming months.
Next year, a large number of people will be taken out of income tax because of the rise in the threshold. At the same time, universal credit, and its housing elements in particular, will begin implementation. We should note that demand for housing benefit is now rising because rents are going up, as opposed to going down, as the Government expected would happen a few months ago. At the same time, council tax benefit will be devolved to councils, being renamed “council tax support”, and it is likely that demand will rise because of the name change alone. In addition, there is a 10% cut in the grant given to local authorities for council tax support, and in actuality, many think that that cut is nearer to 12.5% because of that rising demand.
The Government have said that councils can make up the cut by charging 100% on empty homes and second homes. We know that that can work for some councils because they have enough numbers of one or the other, or both, to do it. However, it will not work for all. Many councils do not have enough empty or second homes to enable an increase to 100% to deliver the 12.5% cut in the budget. Even the transitional relief announced last week, prior to Report, will not solve the problem for all, and in any case, that transitional relief is only for one year.
The Local Government Association—I declare my vice-presidency—thinks that the Government’s package substantially underfunds the 8.5% cap on what an individual household would pay and that councils will need to find another £100 million to make up their loss. Putting aside the problems of councils, the problems for individuals could be very severe in the face of so much change at once and the need, in particular, of many working-age households to start paying some council tax.
I agree that as a minimum the Government should commission an independent review to report as speedily as it can, but certainly within three years, on how all the changes are working. I realise that the Government keep things under review but the problem is that more than one Whitehall department is involved and the Government need the support of an independent body such as the Institute for Fiscal Studies or the Joseph Rowntree Foundation to assess the impact in an independent way.
I regard this amendment as modest and the Government could and should accept it. I hope that the Minister will accept it as a helpful contribution to our understanding across government of the impact of these substantial changes.
Lord Best
My Lords, I hope that the Minister is able to accept this amendment or something akin to it. I agree with the noble Baroness, Lady Hollis, that it will be important to review the effects of localising the council tax benefit system. Down the line we will need to ask whether this change has led to a chaotic situation of dozens of different schemes and whether this localist approach has produced variations in benefit schemes that reflect not what local financial circumstances force on councils but what genuinely fits local conditions. We also need to ask whether it would be better to return to a national scheme incorporated into the universal credit arrangements.
My own emphasis for a review, however, would be on analysing the consequences of the cuts to council tax benefit on the households affected and on those councils which find it necessary to start collecting council tax from the lowest-income families who did not previously have to pay. What has been the cost in extracting these new taxes? What has happened to those who could not pay? It is a very serious matter deliberately to reduce the income of those who are trying hard to get a job, are not able to work or are in work but on the very lowest earnings. No government would want to hurt those of our fellow citizens who are living on the breadline and finding life a considerable struggle.
As I noted in Committee, the Institute for Fiscal Studies, the Joseph Rowntree Foundation and others have shown that it is those of working age on the lowest incomes who have seen the least improvement to their living standards over the past decade. The gap between rich and poor has widened and income inequalities have increased. It is those in relative poverty who expend the highest proportion of their incomes on fuel and food, and so now face the greatest pressures in making ends meet.
The various welfare benefit cuts introduced since 2010—with the largest still to come—are bound to have a cumulative effect. The same households that are hit by one cut may well be affected by another. Thus, many of the 660,000 households affected by the forthcoming “bedroom tax” will also be caught by having to start paying council tax from the very same day—1 April 2013. What will be the knock-on effects of the council tax benefit measures when added to all the other benefit changes? What unforeseen consequences may emerge from these measures? Are there impacts on physical and mental health, with consequential costs to the NHS? Are there burdens for children’s services? Are mounting rent arrears leading to homelessness, with higher costs for central and local government? When do these cuts reach a point when any reasonable person would see them as punitive and unacceptably harsh?
In response to an amendment in my name to the Welfare Reform Bill, the noble Lord, Lord Freud, agreed to a thorough-going and high-quality review of the impact of housing benefit cuts. He has made the point that he wants government policy to be based on sound evidence, which good research should bring forward. That can enable in-flight corrections to policy. For example, the noble Lord, Lord Shipley, mentioned the hopes of the noble Lord, Lord Freud, that cuts to local housing allowances and housing benefit would lead to rent reductions but they have not materialised. If the researchers for the review of the noble Lord, Lord Freud, show clearly that rents have instead been rising, Ministers may be wise to think again about their approach. In the case of council tax benefit, the cuts, unusually, are outside the remit of the Department for Work and Pensions, and an evidence-based review will need to be undertaken by the noble Baroness the Minister’s Department for Communities and Local Government. A parallel exercise there to the DWP’s would seem essential if lessons are to be learnt in time to rectify deficiencies in the new system. For example, I have learnt from working on this Bill that the Secretary of State has had the power since 1992 to vary the 25% single person discount for households. A review of the kind proposed by this amendment could be the catalyst to persuade the Secretary of State to use that power and allow a different discount level where the local authority concerned needs this change. It is this kind of policy change that a review could stimulate.
This is a modest amendment with minimal financial implications. It could prove of immense value to the Government and to those who could be hugely disadvantaged by the benefit cuts in the Bill. I heartily commend it.
Lord True
My Lords, I also spoke at Report so I will be brief. It gives me some distress to say to my noble friend Lord Tope that, when he said that this amendment addresses the arguments against the amendment that we debated at such huge length on Report, I cannot agree with him. It does not address certain fundamental points of principle. I acknowledge that it is supported widely within the Local Government Association and by many council leaders who will be glad for a penny if they can get hold of one. However, the reality is that when you are making decisions about council tax you are not making decisions within a single box relating to benefit, you are looking at the totality of a local authority’s budget and budgetary decisions.
I hear my noble friend Lord Jenkin of Roding, who I unreservedly admire and whose expertise on these matters the House respects hugely. With respect, however, I must say that I think he is wrong to try to construct a doctrine whereby the Government are saying that because they had not consulted, Parliament cannot determine—because of course Parliament can determine. I made that point on Report. I say as a local authority leader that we have not consulted on this matter. We have not asked the public about it because it was not within the parameters of the scheme that was proposed.
Were Parliament suddenly to decide that this new broadening of the tax base should take place, it would be an enormous surprise to the council tax payers in almost every authority up and down the land suddenly to discover that a new tax was falling on many single person households. While I acknowledge that the popular and sensible move to protect pensioners is being taken, that only means that this change will bear down more heavily on other people involved as recipients of this discount, such as lone parents. We discussed that on Report. The amendment would mean that it would fall even more disproportionately on those heads.
Regardless of whether the provision is a doctrine of government, I do not think that the amendment addresses the problem. I have said throughout the course of the Bill’s passage that I would have preferred for this to be wrapped up in universal credit. I have been open about that. But it is a bit like the lady who swallowed a fly and then had to swallow a spider to catch the fly. It would make a further structural change in council tax benefit, which by definition has not been thought through or considered, to impose taxation on a large subset of single-parent households. I do not know whether we are talking about 8 million or 5 million of them; it could be fewer. Perhaps the Minister will tell us. But I do not think that that is a good way to make policy. It seems to be making policy on the hoof. Some of us might think that we are having rather a lot of that lately and I do not think that this House should add to it.
Lord Best
My Lords, I rise to support this amendment. Indeed, it would be very strange if I did not support it since I have worked on this issue for some months. With help from my indefatigable colleagues at the LGA, we have formulated this revised version of my earlier amendment after last week’s debate. So perhaps I should explain why it is not me who chose to bring this back before your Lordships.
The original amendment would have given full discretion to local authorities to vary the single person discount. This would have enabled councils to raise the necessary funds to compensate for the Government’s 10% cut to council tax benefit, making it unnecessary for them to start levying council tax on the poorest non-pensioner households. The modifications in this new version of the amendment, as set out by the noble Lord, Lord Tope, seek to address the criticisms raised in the debate last Tuesday. They limit the flexibility for councils to reduce the single person discount from 25% to no less than 20% and maintain the full 25% discount for single pensioners, regardless of their income. These constraints would very probably have been adopted by local authorities in any case, but having them in the Bill means there can be no cries of, “It’s a widow’s tax” or “It could mean lone parents being asked to pay another £5 per week”. The revised amendment means that most widows would be excluded and virtually everyone paying council tax in the bottom council tax bands would be charged well under £1 per week more. The relatively few single people in the most valuable properties, those in the top council tax bands, would be likely to see an increase of only a little over £2 per week if their council chose to use the discretionary power to the full. Since the single person discount reduction would come in a year when the Government are requiring another freeze for the overarching level of council tax, the reduction from 25% to 20% could not be even a fraction as painful and problematic as cutting council tax benefits by £3 to £5 or more for the poorest.
I had hoped very much that the Government and those of your Lordships who were hesitant to support the more open-ended amendment would be brought on board by the modified version. The LGA has articulated the very strong support of council leaders for this amendment, most particularly those leaders representing less affluent areas where more people are in receipt of council tax benefit and there are fewer opportunities to raise more taxation from high-value empty properties or second homes. This is the lifeline that could save councils from having to cut services or support to the most economically and socially vulnerable.
I promised my Cross Bench colleagues, who have been incredibly supportive, that if I failed to secure any movement in the position of the Government or the Labour Benches, I would not try their patience further and take up the time of the House with a battle that could not be won. Sadly, the Minister has made clear to me that despite the strength of feeling of the LGA and local authorities of all political persuasions, the Government will not budge. Equally, noble Lords on the opposition Front Bench have remained adamant that despite the strongest representations by Labour councils, they cannot support any change to the fixed 25% single person discount. I have had to conclude that my efforts have failed and it is not for me to bring back this matter to the Floor of the House. It would be like entering Frankel for a final race in the knowledge that he was bound to lose. However, I entirely respect the efforts of the noble Lords, Lord Tope and Lord Shipley, in continuing the fight, and of course I am hugely appreciative of the magnificent support that I and the LGA have had from the noble Lord, Lord Jenkin of Roding, throughout this lengthy saga.
Maybe there will be a last-minute change of heart by the Government or the opposition Front Bench. Certainly, all concerned have had a chance to see if the Government’s transitional £100 million grant could save the day. The verdict, I fear, is that although it will put back the day of reckoning for a year in some areas, it will not save the day in the least well-off areas, and for future years, of course, the position remains untenable in very many more places.
It may be that all that is left is a protest vote, but if protesting is all that we can do at this stage then protest I do. It is terrible to impose on councils the task of collecting taxes from people who do not have the money to pay; and it is terrible to subject those already struggling to survive on the very lowest incomes to a further reduction in their living standards. I do protest and, of course, I strongly support this amendment.