Local Government Finance Bill

Lord Shipley Excerpts

Thursday 19th July 2012 Grand Committee

[Baroness Lister of Burtersett]

My Lords, in moving Amendment 80, I will speak also to Amendment 81 as they are linked in terms of their objectives.

The Government’s recent report on the 2010 child poverty targets noted that one reason why the child poverty target was not met was that,

“not enough families got the support that they were entitled to”.

It cited the 2009 Child Poverty Unit report that estimated that,

“there were 400,000 children living in relative income poverty as a result of their families not receiving all the benefits and tax credits to which they were entitled. Improving take-up and support for families with children was identified as an important element of the agenda to tackle child poverty”.

However, the report continues:

“DWP take-up statistics show a downward trend in the take-up of most major benefits among families with children since 1998”.

Amendment 80 is drafted to address this concern, although it is not confined to families with children. Whereas in the past increasing take-up has always been a win-win situation for local authorities, improving living standards for their residents and helping the local economy, under the new cash-limited council tax reduction schemes, it is a zero-sum game, in which improved take-up for one group, particularly pensioners, means less money available for others. We have already had a preliminary skirmish around this issue involving in particular my noble friend Lady Hollis, who cannot be in her place today, and the noble Lord, Lord Greaves.

For the first time ever, we have an incentive to depress take-up written into the template of a statutory income maintenance scheme. That cannot be right. Take-up of means-tested benefits is a perennial problem and take-up of council tax benefit is among the lowest. The latest government statistics show that between 31% and 38% of those entitled did not claim council tax benefit, although that may be a slight overestimate of non-take-up. In other words, it is possible that as many as nearly two-fifths of those eligible are not claiming. Take-up is particularly low among pensioners, of whom between 39% and 46% are not claiming, and among couples with children, of whom between 41% and 48%, nearly half, are not claiming. Overall, the trend in take-up of council tax benefit has been downward. Since 1993-94, take-up has fallen by at least 6 percentage points for pensioners, by around 7 percentage points for non-pensioners, and by a massive 15 percentage points for couples with children. However, all those figures are approximate.

In its 2009 report, Take Up the Challenge, the Child Poverty Unit set out what it called,

“a strong argument for local authorities and partners to focus on increasing take up of benefits and tax credits by poor families with large unclaimed amounts”.

It explained that take-up can contribute to tackling child poverty and related issues such as social exclusion and health inequalities. There are also benefits for the local economy with money claimed in benefits and tax credits being spent in local communities. It continued:

“Furthermore, improving take up will help local authorities and partners to ensure that hard to reach and vulnerable families are receiving support, and are in contact with services”.

It pointed out that:

“A significant amount of benefits go unclaimed by people who are working”,

so that the:

“Lack of awareness of in-work financial support available through benefits and tax credits can be a barrier to parents entering and sustaining employment”.

To the extent to which the new localised schemes will still cover working people, improving take-up will reinforce the Government’s aim of tackling poverty through paid work.

The report concludes that,

“spending on increasing take up can provide good value for money”.

Given that, it was disappointing and surprising that in a Written Answer to my noble friend Lord Beecham, to which he referred in an earlier session, the noble Lord, Lord Freud, stated that the Department for Work and Pensions,

“does not promote benefits … The department has not spent money in the 2011-12 financial year on promoting the take-up of welfare benefits, and we have no planned expenditure to promote take-up of welfare benefits for the next financial year”.—[Official Report, 23/4/12; col. WA 302.]

It was even more disappointing and surprising to learn the other day that the DWP proposes to cease publishing estimates of take-up of means-tested benefits. I found that out by accident. I did not find it out as a Member of this House; I found it out as a social policy academic. I also found that my colleagues here were unaware of that really rather serious step.

Can the Minister tell the Committee what the Government’s position is on improving benefit take-up? Do they still believe that take-up is an issue? It would appear that they are content for people on low incomes not to receive the money to which they are entitled, despite the arguments put by the Child Poverty Unit, and now it would appear that they want to bury the evidence of such non-receipt.

As the Government are, in effect, washing their hands of the issue of take-up, it is therefore left to local authorities and voluntary organisations to do what they can to improve take-up. Local authorities have an honourable history in this area. They played a key role in countering the impact of benefit cuts in the 1980s by instigating often very successful take-up campaigns. The Child Poverty Unit report and an earlier DWP best practice guide give examples of the kind of take-up work that local authorities still do, including improving take-up of council tax benefit. Indeed, under the Social Security Contributions and Benefits Act 1992, local authorities now have a statutory responsibility for council tax benefit take-up. Each billing and levying authority,

“shall take such steps as appear to it appropriate for the purpose of ensuring that any person who may be entitled to council tax benefit in respect of council tax payable to the authority becomes aware that he may be entitled to it”.

Amendment 80 builds on this and would write a similar, if differently worded, responsibility into this legislation.

It has been suggested that the change of name from a benefit to a reduction or discount could in itself improve take-up, especially among pensioners. The noble Lords, Lord Tope and Lord Shipley, suggested that in an earlier discussion. I have no objection to the change of name, which could be helpful, but at the same time I return to the fundamental point that the cash-limited nature of the scheme will, as many organisations have pointed out, create a disincentive to local authorities to encourage take-up. This is particularly with regard to take-up among pensioners, whose entitlement, as we have already discussed, is protected by law. As many noble Lords have warned, the more money is paid to pensioners the less there is for other so-called vulnerable groups and for low-income working people.

In the face of this dilemma, it will be very tempting for local authorities to keep quiet about council tax reduction schemes and it is therefore crucial that there continues to be some form of statutory responsibility placed upon them to encourage take-up, hence Amendment 80. Another element in the dilemma is that even lower take-up could exacerbate another problem identified by organisations such as Citizens Advice and the IFS, which is of more people not meeting their council tax demands and there being extra work for local authorities trying to collect the arrears. Already, according to a recent report in the Guardian, the Consumer Credit Counselling Service has seen a 27% increase in the number of people contacting it for help with council tax arrears between 2010 and 2011.

As long as local authority council tax reduction schemes are funded by central government on a cash-limited basis, the traditional presumption that it is in the interests of both authorities and those eligible for assistance that take-up is maximised will, as I have said, no longer hold. Personally, I believe it is unethical to establish an income maintenance scheme for people on low incomes on this basis and I hope that the Government will think again. If they are not willing to do so, however, there is one step that they can take to mitigate the double-edged sword that improving take-up would now become. The money transferred to local authorities, whether or not they are subjected to a 10% cut—it goes without saying that I am opposed to such a cut—should be based on estimates of the numbers currently entitled to council tax benefit, rather than on the numbers actually claiming. The difference is considerable. In 2009-10, between £1.7 billion and £2.42 billion was unclaimed in council tax benefit. This should be included in the money devolved to local authorities, whether or not they are subjected to a 10% cut.

Amendment 81 is designed to address this issue in a different way by requiring the Secretary of State to ensure that there is sufficient funding available to meet the council tax reduction for all eligible claimants, so that if take-up improves it does not pose the dilemma that I have outlined for local authorities. In the absence of such a provision, can the Minister tell the Committee what the Government’s advice to local authorities will be as to how they should deal with the take-up dilemma created by the cash-limiting of the grant they will receive to run council tax reduction schemes? I hope that in the interests of maximising take-up the Government will be minded to accept Amendment 80, or to introduce their own amendment to retain a local authority responsibility to promote take-up, but that in doing so they will also address the perverse incentive they have created to depress take-up through an amendment on the lines of Amendment 81. I beg to move.

[Lord Shipley]

My Lords, I support Amendment 80, so ably moved by the noble Baroness. I will also speak on Amendment 81, which is slightly more problematic. It perhaps does not cover all of the issues quite as it might. First, there is an issue with the non-claiming of council tax benefit. There is a whole set of numbers; the noble Baroness mentioned £2.4 billion. These things are notoriously difficult to be certain about, but we can all agree that it is a very big number. A large number of people who are eligible to do so are not claiming council tax benefit. That gives rise to a conflict of interest for local authorities. That is a serious and important issue. That must be addressed. It may be in the financial interest of a local council not to promote or advertise the council tax support scheme. That cannot be right.

--- Later in debate ---

[Lord Shipley]

My Lords, I make a brief contribution on the amendment. I am strongly in favour of there being a report, but April 2016, although that is in the end no later than three years, is too far away. Indeed, if there were to be changes consequential to that date, implementation of those changes may take even longer. I would have thought that it would be possible to have a report no later than two years from the implementation of the Act, which would be April 2015. I hope that the Minister will bear that in mind in her response.

[Lord Deben]

My Lords, I have a real difficulty with the amendment because it seems to be another example of trying all the time to limit localism. There are too many mechanisms for that. One is to stop it being localised in the first place and the other is to make it so difficult for people by having to report in so many ways that you remove the whole advantage.

For me, the advantage is that localities make their own decisions. If there are circumstances in which the Secretary of State feels that concern is so widely held that he ought to find out more about it, he has all the powers to do that. We really do not want a situation where every time we give powers to localities, the clever Dicks from the centre say, “We can’t let them get away with it. We have to have a whole series of ways to make sure that they report on everything”.

My real objection is that this is all part of a pattern that we have seen for years. We promise localism, but do not quite give it to them. If we get away with a bit of localism, then let us make sure that that there is a whole lot of reporting, measurement and all the rest of it. I would like local authorities to make their decisions about this. Only if there is a real reason and a real concern should we take any further action at all. When there is a real reason and real concern, I am all in favour of immediate action, but putting this sort of thing into operation is otiose.