Local Government Finance Bill

Lord Smith of Leigh Excerpts

Tuesday 24th July 2012 Grand Committee

[Lord Shipley]

My Lords, I can give some support to the amendment moved by the noble Baroness, Lady Hollis. Like her, I am not a supporter of local income tax. I prefer council tax, which is essentially a property tax but indirectly related to income. A local income tax would primarily be a tax on work, and the case for asset taxation at a local level is strong. If we accept that, however, it follows that the real spread of asset values needs to be reflected in the council tax banding. On the question of a possible band I, the test for me is whether there would have been a band I had we known in 1991 that property values would change as they have. Had we known that in 1991, I think that we would have had a band I. For that reason and all those identified by the noble Baroness, I am in favour of a consultation to try to secure a further band.

[Lord Smith of Leigh]

My Lords, the Committee may recall that on Second Reading I mentioned revaluation of council tax, which is something that I have raised with Governments of all persuasions. Perhaps we should be buying a cake as it is the 21st anniversary of the current valuations—which, as my noble friend said, are totally out of date.

I agree with the noble Lord, Lord Shipley, that the council tax system is a property tax. Although I support it in principle, one of the problems with it is that it was introduced in a rush. It was brought in because there was such a panic about the poll tax and the need to get rid of it—so anything was better than the poll tax. Because of the rush the valuations were not done properly and a national scale was used. Some of the problems that my noble friend mentioned about the difference in values between areas of the country in 1991 were therefore reflecting the fact that, yes, in my authority the vast majority of properties are in band A and B. Band H is pretty irrelevant to us, and a band I would probably not be of much help either. That use of a national scale for valuing is the problem.

When my noble friend cited the areas from which substantial benefits would come with this measure it just illustrated to me the further geographical bias there has been in the housing market over the past 21 years. The fact is that the areas she quoted are all in the south and the south-east and have had economic prosperity during that period, which has pushed up house prices. In other parts of the country economic prosperity has not been on the same level. House prices have gone up for some of that period but in the past two or three years those prices have been going down in many parts of the country, including my own.

I would clearly therefore be interested in some kind of revaluation. What is missing from my noble friend’s amendment, if I may say so, is that it would have such a huge geographical bias in its outcome that we would have to have a different form of equalisation. Those areas in the north, the Midlands and so on, which would not benefit from this, would be in a much worse situation if all we did was to put the amendment through without following it up with some equalisation.

[Baroness Meacher]

My Lords, my concern is about the people at the bottom of the heap and the changes in council tax benefit. I know that many colleagues who are in this Room also share that concern. I would be very interested in having the Minister look at what funds might be raised through this amendment and whether something could then be done about the 10% reduction in council tax benefit. As we know, that reduction will not affect pensioners and will therefore affect other households incredibly heavily and disproportionately. Maybe there is a small possibility here to prevent unbelievable hardship as a result of this cut to council tax benefit. We would then achieve less regression—both by the changes at the top end and by using that money to effect changes at the bottom. I would be grateful if the Minister would respond to that.

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[The Earl of Listowel]

I support the amendment and I raise a particular concern about care leavers and care-experienced adults who might be impacted by this. Of course, many care-experienced adults will be in this group of the very poor who have had poor educational experience and may have experienced long-term unemployment. The Committee has heard about parents and families struggling to survive and not functioning very well. Statistics show that if one has been brought up in care and becomes a mother, one is far more likely to have one’s own child taken into care. I am worried that this is an additional burden on particularly vulnerable families that is unwelcome.

I understand that care leavers will be assisted to the age of 22 with regard to council benefit—I may have that wrong and would be grateful for any correction in that area—but one has to keep in mind that while most young people leave home at the age of 24 nowadays, 20% of care leavers will have left care at the age of 16. The statistics for the mental health of young people in care highlights that 40% have mental disorders, which compares with what may be 10% of young people in the general population. That is what one would expect because of the history of trauma before they enter care, the experience of being taken from their families and often, unfortunately, their having an unsatisfactory experience in the care system. This is one group within the groups we are discussing to which we should pay particular attention.

I would be grateful for clarification about the experience of care leavers. In the All-Party Parliamentary Group for Looked After Children and Care Leavers, I have certainly heard of young care leavers describing their difficulties in trying to manage their finances on leaving care, with their homes eventually breaking down and all sorts of adverse consequences arising from that. I support the amendment and I am grateful to the Zacchaeus 2000 Trust for drawing my attention to this issue. I look forward to the Minister’s response.

[Lord Smith of Leigh]

My Lords, noble Lords are absolutely right that poverty is on the increase. I talked to someone from my local advice agency who told me how in the past month the number of cases that he had been dealing with had gone up significantly. One of the growth industries in my area is payday lending. There are increasing numbers of lenders and people relying on them. Unfortunately, while the use of bailiffs by local authorities is regrettable it is unavoidable and necessary on some occasions. We need to make sure that we use them sensitively. As a result of this legislation, however, there will be more need to use bailiffs because we are putting a tax back on to those who are least able to pay.

I remind noble Lords, as I do on any occasion I can, that the nearest we had to this was in the poll tax era: we were putting a tax on the lowest paid then. There were two elements to the campaign against it. There was a “Can’t Pay, Won’t Pay” campaign, which was reflective of the reaction to it, and we got into a downward spiral where people were unable to pay. The cost to local authorities of collecting the poll tax was rising all the time and less money was coming in. There was greater use of the courts and bailiffs at that time, which was a good income for the courts and probably for bailiffs but not very good for local communities. Noble Lords may recall that the consequences were that pensioners were jailed in certain parts of the country because they had not paid the poll tax. The public reaction that followed meant that we lost the legislation.

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[Lord Lucas]

My Lords, my experience of this comes entirely from the bailiff end of things and in particular from the complaints that people make when the bailiffs come through. The complaints are not necessarily about the bailiffs but about the process that has led to them finding the bailiffs at the door. The level of liability or of the charges is a matter of public record, as is their volume. The policy of councils to make the whole debt due immediately if there is a failure over a couple of months to pay instalments is there on council websites. Both of them are fundamental injustices. The council may be good-hearted in the way that it deals with things. I do not have data on which councils are good or bad; I am merely looking at the overall practice, and I am conscious of the level of complaint and anguish that reaches those who deal with complaints against bailiffs, which is where my understanding comes from.

However, coming back to the basic figures, if you charge £100 for a liability order, it seems to me that you are grossly overcharging, and if you say on your website, as councils do, that if you miss a couple of payments the whole lot is due, that is a fundamentally mistaken way to deal with debt. I therefore like this amendment because I read it as putting some of the onus back on councils, which is where it should be.

[Lord Smith of Leigh]

I thank the noble Lord for setting that out. However, I really cannot accept the two points that he is making, certainly as they apply to my council. First, the cost may well be averaging £100 but that is because of the care that local authorities take in individual cases. They are not simply sending huge numbers of debts to courts or getting orders. Each case has to be looked at properly to make sure of it.

The noble Lord’s second point is, in a sense, a misunderstanding. Essentially, there is a contract between a local resident and the council to pay the council tax. The council says it will withdraw that contract only if the payment has not been received and the resident has not informed the council of a change in their circumstances. If residents come back to councils—certainly to mine—to explain their circumstances, we negotiate a new form of payment. If we did not have that provision, people would simply not inform the council and they would not pay on time—and the costs would be even higher than they are.