Local Government Finance Bill

Debate between Lord Shipley and Baroness Hollis of Heigham

Tuesday 16th October 2012 Lords Chamber

[Lord Shipley]

My Lords, I should like to speak to Amendments 107C and 108. The noble Lord and the noble Baroness in whose names those amendments stand will be reassured to know that I support their comments. There are several issues of principle which I hope the Minister will take on board in her response.

There has been a lot of discussion about demand: what the demand is and what it could be. The figure of 60% has been mentioned for current take-up. If that is true, it implies that 40% of those who might take up the entitlement are not doing so. However, the facts on growth and demand can be understood only if there is a clear means of collecting data to a common format. Given that council tax support is being localised, it would need to be to a common format because different councils may do things slightly differently. Therefore, there has to be a means for knowing what actually happens. I think that guidance needs to be given on what that common format should be.

The second point of Amendment 107C, tabled by the noble Lord, Lord Smith, about altering,

“the funding for council tax support to reflect the changes to entitlement”,

is extremely important. It is unclear what the impact of the £100 million transitional funding will lead to because, of course, that money has not yet been allocated. Therefore, in my view it should in theory be allocated to meet need and demand. Depending on how and when that money is allocated and whether it has met the problem identified in earlier debates, an 8.5% cap could be difficult for some councils to deliver without dipping into their own resources. We have to have an information base that is commonly reported and commonly understood.

I agree entirely with the noble Baroness, Lady Lister, about conflict of interest. I did say that it is not even a potential conflict of interest, in one sense because it is just a conflict of interest. If a council advertises council tax support systems very widely it will end up paying out more money. I am absolutely sure that all of them would want to do that but it could mean some difficult choices for those councils. Therefore, there has to be clear guidance on what constitutes publicity that is reasonable. What do the Government expect? It is not about regulating but guiding. What do the Government expect councils will do to ensure that information gets out to those who might wish to apply?

My noble friend Lord Greaves said in Grand Committee that there is an issue about reimbursement. The amendment now calls for a sum in excess of 10% to be reimbursed. Of course, there is now an extra £100 million transitional grant as well. We have to understand it a little better. I think that it means that a cut of 12.5% as opposed to 10% is what will actually happen, based on 2013-14 take-up levels. That £100 million may go some way to meeting that problem of the cut being higher than we had anticipated. How that works through in terms of transitional relief distribution, to which authorities, how much and exactly for what purpose will need to be carefully understood. Those are very important issues of principle and I hope to hear from the Minister how the Government will help us to address those problems.

[Baroness Hollis of Heigham]

I support the amendments, particularly the one spoken to so ably and powerfully by my noble friend Lady Lister which overlapped with the amendment moved by my noble friend Lord Smith, speaking from his Wigan experience.

The Minister spoke earlier in the day about the need to get council tax benefit under control because of its doubling and so on over the past decade, 12 or 14 years. My noble friend, so to speak, revised his statistics by insisting that this was the result primarily of the increase in council tax. Let us do a counterfactual and assume that this system had been in place in 1997. The result is that all of that increase in council tax benefit generated perfectly properly by the increase in council tax would be expected to be carried by the local authority. A grant that starts at 90% would the following year be 75%, the year after that perhaps 50%, and so on. As council tax rose and as claims rose, and as the grant remained capped, the local authority would have to pick up more and more of these moneys. I do not see how it can reasonably be expected to do so. It is not just a question of take-up; where local authorities may differ is in the degree to which they may depend on a single industry. Norwich, for example, is very dependent on financial services, and in particular on the former Norwich Union, now Aviva. If that company was to make a major decision and relocate, for example, to Sheffield, which is a second source of Aviva jobs, it would have a dire effect on the Norwich economy, and on the demand for benefits, including council tax benefit. The local authority would have no obvious resources with which to respond to what my noble friend Lady Lister called an economic shock.

For a number of reasons, there will be an ethical dilemma. First, it is not in the council’s interest to promote people’s entitlement to benefits they should have—and we know that pensioners underclaim. Secondly, the council can be very vulnerable to significant economic shocks such as the closure of a factory or even, with the NHS consultation coming through, of a local hospital, where we could very well see 1,500 jobs go very quickly. Many holders of those jobs will be poorly paid women who will come into the council tax benefit claims system. They will be trying to get money from a limited pot, and the resources available to others will diminish. The third problem is that there will continue to be modest future council tax rises, and unless the money keeps pace with that increase, taking into account inflation and everything else, we will find that people who receive aid with their council tax benefit will get a smaller and smaller share of the moneys that they should get.

This means that we will be asking local authorities each and every year to revise their scheme not so much because of local needs but because the amount of bidding for it has outpaced the resources available. I fear that if the Minister does not take this issue very seriously, she will embed instability into the future projections of local authorities’ need to fund their council tax benefit system, so they will continue each and every year to have to revise their scheme to take account of the new needs and take-up, and of the increase in council tax. Unless we have some back-up mechanism to enable local authorities to fund this, we will have major problems down the road that—bluntly—could make some poll tax issues look quite small by comparison.

Local Government Finance Bill

Debate between Lord Shipley and Baroness Hollis of Heigham

Thursday 5th July 2012 Grand Committee

[Lord Shipley]

My Lords, I first declare my interest as a vice-president of the Local Government Association, which is the first of the afternoon. I apologise for missing Tuesday's Committee when large numbers of noble Lords were making a similar declaration.

[Baroness Hollis of Heigham]

Could we take it for granted that we do not need to continue to declare? If we have done so on our first Committee day it should stand for the rest of the Committee stage.

[Lord Shipley]

I agree.

--- Later in debate ---

[Lord Shipley]

I should be very happy to have a written note about this prior to Report. It would help us enormously. The issue is that the exemption should be fully refunded to local authorities; as I understand it, in the past few years it has not been. It is becoming a problem for places that have large numbers of houses that are wholly exempt because they are wholly occupied by students. There is simply no income at all.

[Baroness Hollis of Heigham]

It would be very helpful if the Minister could clarify a position that is increasingly causing concern. There may be a house for students that is completely exempt from business rates and council tax. Then one of the students goes into a part-time job while continuing their degree. My understanding is that if the student’s income from their part-time work is above the threshold, that brings the whole property into council tax, although the student continues to be eligible for a single person discount. That seems to run directly against the concern about work incentives for universal credit and against the need for students to find part-time work, given the increase in fees that they now have to meet for the first time. Will the Minister clarify whether this affects business rates or council tax?