Housing: Availability and Affordability
Lord Smith of Leigh Excerpts(6 years, 7 months ago)
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Lord Smith of Leigh
That this House takes note of the impact of Her Majesty’s Government’s policies on the availability and affordability of housing.
Lord Smith of Leigh (Lab)
My Lords, this is a timely debate for this House and I am grateful for the number of noble Lords who have expressed an interest in participating. I am sure that we will have a lively and interesting debate, and I see that we have a Minister who has considerable experience of housing in the past. I need to start by declaring my personal interests: I am leader of Wigan Council and also a vice-president of the LGA.
Both the Prime Minister and the Secretary of State for Communities, speaking at the Conservative conference last week, told us that the housing market is broken—we can all agree with that statement, I think. But there are many views on the way forward to fix it. The Government are really just tinkering around with the problem, not looking at the fundamental issues that will lead us to improving that market. Whatever way we want to look at housing, the market is in crisis. This country is failing to deliver the number of houses we require by a substantial margin. It is suggested that we need a minimum of 250,000 houses a year—300,000 is probably nearer the mark and was the number in the Conservative manifesto for the last election, so let us see what comes from that. The latest figures show that we are well over 100,000 short of that figure. The contribution of council houses was a mere 1,600—and there are 1.2 million people on council house waiting lists.
We can see the impact of the shortfall on both houses prices and rents in the private sector. In 2000, house prices were about four times average income; they are now about eight times average income. One in seven of those renting is spending more than half their income on rent. This increase in housing costs has the biggest effect on those who are trying to get into the housing market in their 20s and 30s and on those who have the lowest incomes. Too many families are trapped in poor-quality housing. It affects their health, their children’s education and their whole life experience. We are failing to give these families their right to decent housing.
In advance of the Prime Minister’s contribution to the Conservative conference, it was trailed that we would see a return to the era of Harold Macmillan. When he was a rather reluctant—I understand—housing minister in the Churchill Government of 1951, he managed to achieve an amazing 300,000 houses a year, of which 250,000 were council houses—an amazing proportion. The Prime Minister’s statement promised a figure that seemed generous but when it was unspun meant the delivery of an additional 5,000 properties for social rent per annum. That is nowhere near the figures that Macmillan achieved and obviously not the figure we need.
However, I welcome the Government’s recognition of the role of council houses. It is about time that we recognised that local authorities have a role in providing them, but we do not need these little initiatives which will not stimulate the sector. The Government need to change fundamentally the restrictions on council housing to ensure that local authorities have the freedom to borrow for housing. Why can they not do this? They borrow for other things: why not housing? It is incredible.
The right to buy is controversial, but why should local authorities not keep all the moneys from the right to buy, as that would enable them to build more new properties and give them greater flexibility to use the assets of housing as security against borrowing? Councils need not more money but freedom and flexibility to enable them to get on with the task of building more properties.
Local authorities clearly also have a role through housing planning. The Government seem to think that in the last few years a blockage has arisen in the planning system and that local authorities are not approving houses in sufficient numbers, so they have reduced the ability of local authorities to refuse planning permission. However, at the end of the day over 90% of applications to local authorities have been approved. The problem was that not all those approvals led to real building. Sometimes developers held on to land, hoping that its value would rise even more before they would commit to building.
The Government have previously stated that they prefer development on brownfield sites, which is a principle that I think we can all share. However, although the principle is fine, the practice is not quite what it seems, because Defra has reduced the subsidy for remediation of brownfield sites. In many areas such as my own, former industrial sites need to be cleaned up before new developments can be built on them. The Government reduced the grant for that and now it has gone away totally. That affects the balance of costs between building on greenfield sites and building on brownfield sites. The balance is moving more towards building on green-belt, undeveloped land.
The Prime Minister said in Parliament in February that the Government were very clear that the green belt must be protected. However, that commitment is not what it appears, given the pressure to meet housing targets. The Prime Minister ought to have been aware of that as her area, the Royal Borough of Windsor and Maidenhead, has a housing plan which includes putting 6,000 additional properties on green-belt land. I am not saying that is the wrong strategy for the royal borough, but it adds to the pressure on green-belt land.
In my own authority a proposal to build an estate on green-belt land was submitted in an area which already had quite a lot of housing. The proposal was vigorously opposed by the local community and the local council. After we turned it down, the developer appealed, so it went to the government-appointed planning inspector. The government appointee chose to overturn the local authority’s view, permitting development on a green-belt site. The justification was that although we were expected to have a target of around 1,000 new properties a year and the council had given planning permission for them, because the developers had not actually built those houses there was a shortfall of housing and this justified development on the green-belt site. That is my example, but it is not the only one I could give because I know that neighbouring authorities have had similar experiences. So what is the real strategy for green-belt sites? Are the Government being flexible or have they changed their policy? If they have not, why do they tell their inspectors to carry out what is actually government policy instead of doing their own thing?
The most extreme example of the failure of the housing market is obviously homelessness. In big cities and in smaller communities, we can see with our own eyes that the number of people who are rough sleeping has increased dramatically over the past few years. It is a disgrace for us as a society to see that happening. However, people who are rough sleeping are just the tip of the iceberg. I have some figures from Manchester City Council, which has a number of people to accommodate, and it says that it probably has to deal with 75 to 100 rough sleepers. That is bad enough, but on the back of that are 500 families living in temporary accommodation and 500 single people in inappropriate accommodation—but it has housed them—along with a further 900 people in supported accommodation. In other words, the number of people who do not have homes is much greater than the number of people who are sleeping on the streets.
In Manchester the biggest cause of people becoming homeless is eviction by private landlords; the second is domestic violence. Eviction by private landlords is not normally associated with not paying rent; it is simply to do with changes in the strategy of the landlord and moving on and so on. I think we all recognise that. However, we need to admit that the causes of people becoming homeless are many and varied. If we are going to reduce homelessness properly, we need to provide not only appropriate additional accommodation but a range of supporting services to help those who for various reasons have chaotic lifestyles. They often do not have access to health services, particularly mental health services. Many in the north are ex-servicemen who come out of the Army and cannot adjust back into society. They have played their part but they are not given the support they need. As I say, it is not just a problem of getting more accommodation; it is a question of providing support for these people.
I understand that the Prime Minister is visiting Greater Manchester today and will be making announcements on both housing and homelessness. I am not claiming any credit for the fact that the Prime Minister is going to my home patch and making these announcements, but it is likely that your Lordships will recognise that our debates may have an influence on national affairs. I do not want to seem to be ungrateful. If the Prime Minister is giving some more money to Manchester, I will accept and thank her for it, but for me it is just an example of more tinkering at the edges and not looking at the fundamental causes of the housing crisis in this country. If the Government could only develop a strategic plan to get more houses built nationwide, that would provide support not only for Greater Manchester but for the whole country. This House would be behind such a strategy.
The housing crisis of course is not just about bricks and mortar; more importantly, it is about people whose lives are being blighted because of its impact. Housebuilding should be regarded as an investment in both the physical and social fabric of our nation. Let us commit ourselves to that investment, and I am sure that in the long term we will reap the benefits.
Lord Smith of Leigh
My Lords, I thank everyone for their contribution to the debate today. I think there was an overwhelming consensus on the scale of the problem. Considerable expertise and knowledge were shown. As the Minister reflected on, there were obviously criticisms of government, but they were criticisms of outcomes. There were a lot of positive suggestions from across the House on what we should do and what changes are to be made to see results.
I also felt a lot passion, again from across the House, with speakers understanding that if we are to help people achieve that aspiration for decent houses we have to do better than we are doing today. The Minister is well respected in the House and gave us a good summing-up—we will obviously read all that. It is an issue of supply, although it was not mentioned that the Governor of the Bank of England has already advised us that interest rates are likely to rise in the near future, which usually impacts on housing—and of course we do not know the impact of Brexit. My noble friend Lord Morris of Handsworth suggested that we might put as much emphasis on housing as we do on Brexit. I hope that he was not suggesting that we put David Davis in charge of housing, because that is something that I do not think that we could agree on.
The word that we heard across the House was “investment”: investment in buildings and investment in people. That should remind us that the benefits of housing are financial across the range for the Government. If we did a proper cost-benefit analysis of getting affordable housing right, we would see that we would save on housing benefit, on social welfare costs and right across the piece. I welcome the Government’s commitment to housing. We want to see a positive outcome—that was the mood across the House. I again thank noble Lords for their contributions.
Local Government Finance
Lord Smith of Leigh Excerpts(6 years, 10 months ago)
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Lord Smith of Leigh (Lab)
My Lords, in thanking my noble friend for securing this debate I must apologise to him for missing his first sentence. I was coming down on a train today and unfortunately it, like the Government, had a loss of power. Fortunately for Virgin Trains, the loss of power was only in Milton Keynes, not over the whole country.
I need to declare my interests in local government. I am leader of Wigan Council, a member of the Greater Manchester Combined Authority, a vice-president of the LGA and vice-chair of an organisation called SIGOMA.
In looking at the Government’s loss of power, one of the factors that affected the election in June was the impact of austerity. As the campaign went on and as issues such as school funding, police funding, the loss of police numbers when the Prime Minister was Home Secretary and social care, which was a total disaster, came out, it made people understand that if you cut back public services you cut back on the way they affect people’s lives—and people had had enough. I shall say a bit more on this later.
In Wigan, one of the things we do now which we did not do before is that we go around to the different communities to explain to them what we are doing and answer questions from the local community. We were in a former mining village the other Wednesday. It was one of those rare evenings in Wigan when the heat was blasting down and I would rather have been in the garden with a long, cool drink than in the venue—but enough people turned up and they listened to my explanations, and then we got to question time. Again, austerity was the dominant issue.
The first question people asked was about the increase in anti-social behaviour by young people and the lack of police response. In the last few years, Greater Manchester Police has lost 2,000 officers and does not now come out. If somebody now rings the police and says: “We have an anti-social”, the police reply, “It’s category 3 and we only come out to category 1 and 2. You’ve had it. We don’t turn up at all”.
In the same area, people criticise the council for not having enough youth workers on the scene. As the noble Lord, Lord Greaves, was implying, this was a discretionary spend. Where we are looking to make the kind of savings we have to make, we do it, but not as much as we did before.
One gentleman raised the issue of transport. People cannot get in and out of the place early in the morning or in the evening because there is no public transport; the buses stop running. Why is that? Because Transport for Greater Manchester lost funding and can no longer subsidise non-profitable routes, so they go. He made the point that if you want to get a job on a shift pattern, you could not do it. We have also reduced street cleaning. To be precise, I think about £3 billion has been taken out of the neighbourhood services budget nationally.
I think the Government were sleep-walking when they went into the election, not understanding the way austerity was hitting people. In some ways, there is an excuse. The former Prime Minister—as I was stuck on the train, I have not heard on the news today whether the current Prime Minister is still with us, but I assume she is—David Cameron said, “We are all in this together”. That was a totally untrue statement. The unfairness in the way that austerity is applied has come through quite dramatically. In cash terms, local government lost 20% of its budget from 2010 to 2016. There will be a slight increase between 2016 and 2020—which is distorted, as the noble Lord, Lord Greaves, pointed out. Huge amounts are not going into local government services, except for the better care fund for dealing with some of the problems. My authority, Wigan, lost far more in that period. In real terms, we have lost over 40% of our budget, as has the noble Lord, Lord Storey, in Newcastle. All the northern authorities lost out.
If we turn to a place such as the Royal Borough of Windsor and Maidenhead—not perhaps unknown to the Prime Minister—the losses are much less. It has not taken the hit; there has actually been an increase in funding in some of those areas. The cuts taken in more affluent areas have not been the same.
I also want to talk about the continuing unfairness of one of the ways in which the Government tried to fund the social care increase: namely, through the increase in council taxes, the so-called social care precept. The level of cash that can be raised by authorities depends on the level of council tax banding in those areas. In a place such as Wigan, there are not many £1 million properties, I have to confess. Most of the properties are in band A or band B. So if we put a 2% or 3% increase on council tax, it does not raise as much money as more affluent areas raise. SIGOMA gave me some figures that show that in SIGOMA authorities, for every dwelling that raises £713, the figure for the rest of the authorities that run social care is £857—quite a significant 17% difference between the amounts that can be raised in that way. Clearly, those in urban areas and the most deprived areas are having to put more money in to solve the problems of social care.
The one area of local government activity that was in the Queen’s Speech with a promise was the fact that the Government are looking for a solution to social care funding. I think that all sides of the House would welcome a proper approach to that funding, but it cannot be done by the Government. It has to be done working with local government and across parties, because we need a solution that will be satisfying and sustainable in the long term. If we do not do that, a number of local authorities and health services will be overwhelmed by the increase in pressure of the ageing population. I believe this is an urgent problem. It is not an immediate problem but it is certainly urgent, because the longer we do not solve it, the greater the pressures are going to be.
I also want to echo what my noble friends have said about business rates. We need to know what is happening with this promise to return business rates to local authorities, in two ways. The questions that my noble friends asked are absolutely right, but I also want to know what is going to happen to the pilot schemes which are in progress but which we are told will run only until the end of this year. The pilots are meant to teach us things, but how can we learn if we do not know when that will happen? We need to see what we can get from those.
The other issue around business rates is of course the mess the Government got into of their own making on valuations. I remember arguing with the Government—it always seemed to be at 11 pm—along with my noble friend Lord McKenzie of Luton and the noble Earl, Lord Lytton, about their plans to defer the regular revaluation of business rates. We tried to point out to them that if you defer it and then try to come back to the scheme, you will actually get into more of a mess—and of course it proved to be that way. The figures for revaluation were so high in many cases that, as soon as the Government saw what they were like and got such bad publicity, they had to bury it. The third issue around business rates is equalisation because, clearly, the ability of different areas to raise funds through business rates is quite variable. I fully support the principle of return, but the Government still need to find a mechanism by which they can make sure that places that are not able to raise such a big amount of money can do it.
Then of course the other main source of income now for local authorities is council tax, and I welcome the comments of my noble friend Lord Desai on this matter—again, I am banging on. It is over a quarter of a century now since we last revalued houses for council tax. The council tax was brought in as a desperate measure to replace the poll tax: “What can we do? We need to replace the poll tax?”. So allegedly the noble Lord, Lord Heseltine, as he is now, sent round teams of estate agents to run up and down streets with fairly arbitrary rules saying, “Band A, band B, band C”. These bands have stuck for all that period and have not been revalued since. But of course there have been huge changes in the values of properties over that period, and changes in quality. A house built in 2017 will have broadband and different facilities that were not available in 1991. How do you say, “Ah, but if this house had been built in 1991, what would it be valued at?”. It is a rare art to be able to look at a house being built in the current year and think what it might have been valued at all that time ago. As my noble friend said, if we do not have the change in valuations, we have no buoyancy in the tax. Unlike with income tax, VAT and other taxes, the only way to raise more money through council tax is to raise the rate of the tax—and that is not the best way to do it, so we need to do this.
It is easy to have a glass-half-full or even a glass-quarter-full mentality, but I like to see opportunities from what has happened. Many local authorities, including my own, have responded to the cuts in as positive a way as we can by looking to see what we can do for public service reform. Again, I have spoken before about this in the House, but the Government have not really taken much of a lead on this. In a programme that we call “The Deal”, we are looking to see how much more we can help people. We take what is called the asset-based approach on individuals, looking to see what their needs are and what their benefits are. When you do that and look at people, what you find is that the individuals we are dealing with as a local authority are often undergoing health treatments for various things—often mental health problems—or may have housing issues, and probably the police know them. So if we can get a holistic approach to families, we can begin to start turning them around. Rather than waiting until a child has problems and we have to put them into care, we try to support the family so that they can remain in the heart of the family.
We have to do much more on integration, working with all the different agencies to ensure that we can look at the family and help to address those issues. One of the problems we have is getting people back to work. We do not ask people just to rewrite their CVs, as they were often asked to do under the previous job creation scheme; we get them to understand what their issues are. If you do not have a home, you are likely not to be able to get work, so we need to address that.
The final area is working better with the community. I think we are one of the few authorities that puts more money now into the community than we did in 2010. We call it investment because it is an investment. We have attracted visits from various parts of the UK and Europe and we are holding a conference in September 2017, so if any noble Lord wants to come, they should get in touch.
I agree in part with the noble Lord, Lord Greaves, on how we deliver services. We have to go back to units that people understand in terms of delivery. However, we need a strategic role in local government, which is where the larger authorities can work together. I am a great supporter; it has been a challenge and a privilege to be a leader of local government, it continues to be so, and I continue to be positive.
Local Audit and Accountability Bill [HL]
Lord Smith of Leigh Excerpts(10 years, 11 months ago)
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Lord Beecham
My Lords, I am a vice-president of the LGA but I am not sure that I will retain that position after what I have to say. I am afraid that I do not entirely concur with the sentiments and positions taken by the two noble Lords who have spoken thus far. I said in a previous Committee sitting that I had a concern that, although the Audit Commission was, in fairness, asked by the previous Government to over-regulate, overprescribe and over-report, it nevertheless performed a valuable role in looking particularly at the interface between services and the comparisons between different types of authority. Actually that information, contrary to what the noble Earl, Lord Lytton, said, should inform local debate. It does not supplant it. It should help to facilitate the citizens to hold their local authority to account, because they must have some comparative data to see how well or badly they are doing in relation to other authorities. That will be one of the things that we will miss. I express a hope—or, put another way, a fear—that with only six value-for-money studies to be carried out by the NAO, which I understand is the position, we would lose that independent assessment of what local authorities are doing.
I am a great supporter of peer review and of the work that the LGA has done in promoting improvements across the sector, and it has done very well in that regard, but when it comes to an objective assessment, the perception will be that that is an in-house job. It is better in my view that there should be a role for a body like the Audit Commission was—and currently still is, temporarily—or the National Audit Office will be. That is something that this amendment would very much restrict. Yet the formulation here depends on a division of resources, and whence comes the money? Of course, increasingly we will see national organisations, be it in the health service or other bodies—the Chancellor again mentioned what was called “total place” and is now called whole community budgeting—
Lord Beecham
Yes, whole place. It is playing with words, and of course Labour words such as “total” are not acceptable. Within these areas there will of course be collaboration, and the proportion of funding will vary considerably. For example, in public health, less than 50% of government money will be coming in, so the Audit Commission would presumably be prohibited from taking a look at the effectiveness of that. It is not an audit job in that sense, but it is particularly desirable that it should address the issues of effectiveness and outcome, not purely in financial terms but across the piece as well, and that in itself should facilitate the work that the LGA and individual local authorities are doing, particularly in their scrutiny functions, to see how they are faring relative to others, and for that information to be communicated to the people who elect them. So I certainly could not support these amendments. I understand what the noble Lords are saying, but I think that a mission creep has overtaken their amendments as well. They were going too far in the interests of local democracy and the effectiveness of local government.
Lord Beecham
My Lords, with the leave of the Committee, I will speak to both this amendment and the following one, Amendment 19BC, since they both relate to council tax referendums, which is a highly contentious issue—to use the noble Baroness’s phrase—about which no doubt several authorities would be only too pleased to be able to lobby. I do not think a telephone call would suffice to deal with this issue.
Amendment 19BB deals with a particularly objectionable part of the Government’s proposals. I remind your Lordships that the ad hoc committee on the Bill had no opportunity of considering these amendments, or indeed the code of practice that we have just discussed, because these matters came very late in the day and were added to the Bill as a convenient vehicle for the Secretary of State’s obsessions, to which I have already referred. In terms of the council tax referendum, what is particularly objectionable is that there is a potentially retrospective effect here, because decisions already taken in the past can be used as the basis for requiring a referendum in the future. That is particularly objectionable where the decisions might have been taken by a body that is not actually the individual local authority. If it is a precepting authority or, as this Bill is seeking to require, a levying authority, that is even more objectionable. There is no justification whatever for this element of retrospectivity and I hope that on reflection the Government will see that it is a departure from normal practice and one that cannot be justified except in the most exceptional circumstances. In my submission these simply do not arise.
Amendment 19BC acknowledges—as do both amendments—the fact that we are living with a provision about council tax referendums. Many of us opposed them when they were inserted into what is now the Local Government Act but they are there and we have to live with that. What this amendment deals with is the position that might arise as a result of not simply a decision in the past but a decision in the past with a continuing effect on expenditure. So, for example there are authorities—I understand that Leeds has raised this—with city deals that have entered arrangements which would require expenditure over a period which, if the current referendum provision is applied, might severely impact on the schemes to which the Government are party.
The city deal, which one welcomes, is an opportunity for the Government, local government and private sector partners to work together. It involves a commitment of expenditure on all parts. If such decisions are not to be thwarted, given the ever tightening situation affecting local authorities, at the very least the Government should be making transitional provision to ensure that decisions fairly recently arrived at, but which will have a continuing impact, will not merely be on the finances but on the economic state of the area with which these arrangements are very largely concerned. The Government’s proposed changes could cause very severe problems, whether they are over transport—which I think was the case in Leeds—or about city deals such as that in which my own authority has been involved. No doubt we shall hear from my noble friend Lord Smith about Greater Manchester Combined Authority and its arrangements.
Referendums are both costly and unpredictable in their outcome. You cannot have that situation when you are dealing with third parties and have entered into arrangements that could be disrupted as a result of the change which is now being proposed. I think that the Government should take both of these matters back. The first point is really a matter of principle about retrospective legislation and requirements. The second is to deal with what appears potentially to be a significant issue for a number of authorities which are endeavouring to do their best in many respects to work with government on agreed programmes that could be rendered difficult—no doubt unintended—as a result of the provisions. I beg to move.
Lord Smith of Leigh
My Lords, before I speak on this matter I shall declare my interests. I am a vice-president of the LGA and also, as my noble friend indicated, the chairman of the Greater Manchester Combined Authority. Greater Manchester is one of the areas where the Secretary of State was somewhat upset by the level of council tax rises which were entirely consistent with the law as it stood. Before I begin I would like to quote from a document published by DCLG on 12 January 2012 on council tax referendums.
“The definition of ‘relevant basic amount of council tax’ . . . is essentially an adjusted Band D amount which is derived from a calculation of the authority’s basic amount of council tax. This amount is modified by omitting local precepts issued to or anticipated by a local authority, and levies issued to or anticipated by an authority, from the calculation. This is to ensure that increases in levies, over which authorities have minimal or no control, are not a factor in triggering a council tax referendum”.
Those were the words of the department in issuing guidance on council tax. As my noble friend indicated, levies come in to local authorities in a number of different guises. In Greater Manchester last year, two particular things impacted on the levy situation. First, not quite like Leeds, we had an agreement between authorities on transport expenditure, which will put a 3% increase above the day-to-day spending needs of the transport authority to invest in transport infrastructure. That programme began in 2009 with the commitment of the 10 authorities in Greater Manchester—which took some getting, I assure you, but we got there—to put that money in for six years. When we went to the Government and negotiated our city deal—we were the first conurbation to get a city deal—this transport expenditure was seized upon by the Government as an innovative way forward for local authority spending. It has taken some time, but we have devised an earn-back model and have now agreed that the Treasury will reallocate some of the increased taxation back to Greater Manchester. We will be able to spend that money on future investment. It is a good deal, and I understand that it will be part of the announcement on the public spending review.
Last year, the increase for the Greater Manchester transport levy was 3.6%. In other words, it was 0.6% for day-to-day transport needs—the cost of fuel and other things; this meant that there were big impacts on costs. The other 3% was that commitment made back in 2009, which continues to roll forward in future years—a contribution to investment and transport. We can prove that the transport investment is taking place. If noble Lords go to Manchester, they will see that the new Metrolink system is up and running, and new bus ways beginning in my area. There are all sorts of things going on which meet our commitment, and government commitments, to reduce greenhouse gases and all sorts of things. We thought that we would agree that with the Government but, obviously, they pushed up the levy.
I step back slightly from the second impact because Wigan is not part of the Greater Manchester waste disposal authority. The waste disposal authority signed a new PFI deal a couple of years ago because it did not have the facilities to deal with modern waste and needed expenditure on a new facility. So often with PFI deals, the early years have a really high cost which inevitably falls over future years. The effect on the waste disposal levy was 4.5%; obviously a very big increase for those authorities. A number of authorities in Greater Manchester therefore raised their council tax by more than the 2%, which the Secretary of State said would trigger a referendum. This was entirely legitimate within the rules of council tax referendums as they then were. In fact, the ironic thing was that a number of authorities, including those which seemed to have the biggest increase, actually reduced the proportion of the council tax take for their own services to meet the needs of external levies. That means that if this clause goes through, then the threat of the Secretary of State—the revenge of Eric Pickles—will be that any authority which raised its council tax by, say, 3.5% while the guideline figure remained at 2% can only increase its council tax next year by 0.5%. The rules have changed.
Who knows what would have happened if the council had known that that was the situation last year? Different decisions might have been made. How can we predict the mind of the Secretary of State and the mind of the department when it wants to change the rules in this manner? It is grossly unfair that some authorities, in addition to the awful amount of cuts that they are taking on board, will have to make savage cutbacks in services to cope with this part of Clause 39. This is bad and retrospective legislation and the Committee should think very carefully before it commits to Clause 39.
Lord Tope
I begin by reassuring the noble Earl, Lord Lytton, that he may be in a minority of two. I share his concerns and would ask the Minister a question for clarification. Is it the case that, if a referendum on what is deemed to be an excessive levy is lost, that so-called excessive levy will still apply but the local council will have to cut its own budget in order to levy an appropriate council tax to meet the levy demand? Noble Lords opposite are saying yes; that is clearly the answer I am going to get and I want it to be clear and specific on the record. If so, we need to understand the implications of what we are doing. I can pick many examples, but flood defences might be appropriate. One can well understand where a drainage board wishes to put in a so-called excessive levy for particular work in a particular area and the public at large, who pay the council tax, may well feel that they do not want to contribute to that. As others have said, it can lead to unforeseen and undesirable consequences.
In addition to supporting the noble Earl, I also rise because my noble friend Lady Eaton is unable to be here today; she is at the Council of Europe. She has asked me to raise an issue in respect of the West Yorkshire transport fund. I will read into the record the contents of an e-mail she has received from the director of finance of the City of Bradford:
“You asked about the implications of the proposal that rises in levies, as well as Council Tax levels, could trigger a referendum.
The most significant implication for Bradford relates to current plans across the Leeds City Region to create a West Yorkshire Transport Fund. This fund is planned to grow to a total of £1bn by 2025/26 to pay for investment in the transport infrastructure. It will comprise, roughly, £150m from Dept for Transport, £100m from Local Transport Plan, £750m from the participating Councils, each of whom will contribute an increasing amount each year, by way of a levy. The current plan means that Bradford Council would put in £1.2m in Year 1, £2.4m in Year 2, £3.6m in Year 3 etc. The total investment over the period to 2025/26 from Bradford would be £161m.
It’s worth pointing out that the Transport Fund is a central plan in the Leeds City Deal, a key part of the Government's regional policy. While the Transport Fund is not the only element, it provides the underpinning infrastructure investment on which other investment activity builds.
Now, before the proposal to treat the levy by the same referendum rules as Council Tax, this plan held good. For citizens, the plan did of course mean that, while the Council Tax element of their bill would be restrained at below 2%, they would pay an increasing amount for transport investment. (And leaving aside the referendum issue, the decision to create and sustain the Fund ranks among the most significant decisions in the next budgeting rounds for participating Councils.)
The Bill’s proposal means that the Transport Fund can only be afforded in its current form if offsetting reductions are made across other services in the Council. So, by Year 3, for example, savings in other services would need to be roughly £2.4m higher than otherwise, for Bradford to afford its currently planned contribution of £3.6m in that year.
From a financial perspective, the proposal means … If investment in transport remains a priority, and the planned regional-level investment makes sense, there is now much sharper trade-off between transport and other choices. … If investment in transport has to be significantly reined in to satisfy the ‘below 2% rise’ rule, the investment returns will be significantly curtailed, with the reduced economic impact (which in turn would expect to feed through to a weaker taxation base of citizens in work and firms in business paying rates) ... For individual citizens/households, a lower aggregate taxation burden than they otherwise would face”.
That ends the quote from the director of finance at the City of Bradford, which I undertook to raise today. I hope the Minister is able to respond, if not today then later, particularly to the noble Baroness, Lady Eaton, on whose behalf I have raised this.
Lord Smith of Leigh
My Lords, I agree with the noble Earl about the problems of the electoral cycle. It was a bit disappointing that this is the fallow year for metropolitan authorities so we did not have elections. Noble Lords may recall that Wigan won the FA Cup and the feel-good factor was particularly good; obviously there have been fantastic comments on social media, but unfortunately we did not have any local elections to take advantage of that.
It was really interesting that the noble Lord, Lord Tope, read out the views of the director of finance from Bradford. The answer that the Minister gave to the earlier amendment was that, under Clause 39, the current provisions of the Localism Act, which define the relevant basic amount of council tax increase, will change from being what the council itself sets to include levies and other charges. Therefore, decisions that were entirely within the law as it stood earlier this year in March will be affected.
We had a debate earlier on the council tax referendum principle. The Government say they are not capping but actually they are. In my long experience of local government, I cannot believe that once the Secretary of State sets out the guidelines to which a referendum will apply, any local authority would want to set an amount of council tax increase above that guideline. If it does, it is on to an absolute loser. There is no way it will win a referendum on that. Which council tax payer is going to vote for higher council tax? They are not asking, “What services are being cut?”. It is a simple referendum on the increase in council tax and nobody wants it. The Secretary of State may want and need that part of it but effectively it is capping local authorities.
Capping does not always have the longer-term political impact that Governments may think. When capping was first introduced, my authority was one of the 22 Labour authorities that were all capped at once; no Conservative authorities were. We set a budget, but the Government said we could not and that we had to reset it and make significant cuts. When we came to the elections that May, we had a really big increase in our majority, so it did not have any negative political impact. I have great sympathy with the noble Earl’s position. Do we need this clause? I do not think so.
Lord Beecham
My Lords, I shall be brief. The position is a curious one in relation to what the Government regard as an area of excessive increases and what they regard as something else. An increase of more than 2% in council tax is excessive but an increase of 5.8% in social housing rents is acceptable. Indeed, the Chancellor has said today that social rents will increase by CPI plus 1% a year for virtually a decade. That actually will be rather less than the increases imposed in this past year but whichever way you look at it, it means that what is an unacceptable increase for council tax payers is well below what social housing tenants will be expected to pay. It is an interesting anomaly.
However, on the referendum point, it should be noted that three sets of organisations are involved in local government finance at the local level—the council, the levying bodies and the precepting bodies such as police commissioners. Several police commissioners increased their levies by significantly more than the 2% figure. That was acceptable because it did not raise the overall increase significantly. On the other hand, technically, their regime is rather different and rather more generous in terms of potential increases. However, if they breach the limit for precepting authorities, I understand that they would have to have a referendum. Therefore, there are two referendum systems here, as it were. It is odd that there are in effect two external bodies—some bodies, admittedly, comprise a combination of local authorities, but many do not—which can, by means of a levy, potentially force the council to have a referendum on its overall council tax levy, whereas precepting authorities are in a different category. That anomaly certainly raises questions to which we may want to return on Report.
I anticipate that the noble Earl will not seek to test the opinion of the Committee tonight. Given the fact that referendums are now, unfortunately, part of the system, despite the opposition of many of us when the Local Government Bill went through, I am not sure that we will get very far in that regard on Report. However, in this curious area of anomalous situations and differential rates of what is acceptable and what is not, we might at least provoke the Government into thinking about the system they are creating and the degree to which it is being made more elaborate, complex and, ultimately, less accountable to people with every successive announcement.