Local Government Finance Bill

Alex Cunningham Excerpts

Tuesday 31st January 2012 Commons Chamber

[Annette Brooke]

I wish to make some brief comments and refer to the impact assessment on the localisation of council tax benefit, which looks at many of the issues raised by the hon. Member for Warrington North (Helen Jones). I note in particular that the impact assessment flags up some local authority responsibilities. The Child Poverty Act 2010 imposes a duty on local authorities to have regard to and address child poverty and, with their partners, to reduce and mitigate the effects of child poverty in their local area. The Disabled Persons (Services, Consultation and Representation) Act 1986 and the Chronically Sick and Disabled Persons Act 1970 include a range of duties relating to the welfare needs of disabled people. The Housing Act 1996 places on local authorities a duty to prevent homelessness, with special regard to vulnerable groups.

Given that local authorities have those duties on them, is there any need to propose the amendments? These issues are important for the very reasons that have been identified—the 10% cut, the different numbers and proportions of pensioners in different authorities and the different balances that mean that some authorities could get more money through the changes to discounts for second homes and empty homes. Some authorities will have great difficulty in protecting vulnerable people. The number could be quite small, but that possibility is there because of the different demographics of different areas.

I understand that local authorities might have to go through an equality needs assessment and I should like to know from the Minister how they should address these issues, which are in the impact assessment on the localisation of council tax benefit. Will there be any question of councils having to go through judicial review? It seems to me that there are going to be protections in the detail of the schemes to be introduced, but also some challenges for local authorities given the difficulties that we are outlining over and over again—the 10% cut, the different proportions of pensioners, and authorities’ different abilities to raise money with the new freedoms and flexibilities. With all those differences across areas, could some areas be faced with judicial review if they cannot address the duties placed on them by existing legislation?

[Alex Cunningham (Stockton North) (Lab)]

I support the amendments on the impact of the scheme. This debate is about people’s lives, about families and people who live on the edge financially, but it is also about local authorities’ ability to deliver services at the standards we have come to expect in our communities. It is a debacle: the Government’s proposals on council tax benefit will simply heap greater burdens on the most vulnerable households and families at a time when the Secretary of State for Work and Pensions is already making life tougher for them. I would have hoped that the Secretary of State for Communities and Local Government had at least talked to his counterpart at the Department for Work and Pensions to ensure that their policies did not conflict in the way they clearly do. The amendments would help to deal with some of that conflict.

“Make work pay.” That is what the Prime Minister has said over and over again, and he is determined to make that happen. No one could or should argue with that statement, but it is vital to create incentives so that it is always better to be in employment than on benefits. The Government’s proposals on council tax benefits will totally undermine that objective. They are simply yet another attack on hard-working families.

I know that council tax benefit is available to those on low incomes who need financial help to pay their council tax bill, but I am shocked that Ministers appear to believe that a 10% cut to the benefit will somehow—perhaps magically; we talked about magic earlier on—reduce the number of people who need it. In these harsh economic times, with high and rising unemployment as well as rising energy and food bills, this tax relief is to be squeezed precisely at the point when there is the greatest need for help among low-income households. As others have said, pensioners and vulnerable households are to be protected, and rightly so, from the cuts, but that means that the whole of the 10% saving that local authorities must make will fall on the unprotected group—mainly the working poor.

[Mr Kevan Jones]

In his response to the previous debate, the Minister suggested that gap could be filled by councils being able to levy extra tax on second homes, and his hon. Friend the Member for Bradford East (Mr Ward) said there were plenty of those in Bradford. How many does my hon. Friend think there are in Stockton?

[Alex Cunningham]

That is an interesting question, which I wish I could answer. I do not see many empty homes, never mind second homes, in our area, so I think it might be a challenge for us to find some. I am sure we have a few, but I doubt they would fill the gap as the Minister suggests they could. In an authority such as Stockton, with high numbers of older people, the burden on the people the measure hits will be tremendous.

The burden will get higher and higher on ever fewer people. In many cases, the gains made by the working poor from the recent £1,000 increase in the income tax personal allowance will be completely wiped out by the reduction in council tax benefit and the knock-on effects. Surely that is exactly the opposite of what the DWP says it is trying to do? Are the Secretaries of State talking to each other? I wonder. Alongside the rise in VAT and other benefit changes, we are faced with these regressive policies that will hit some people extremely hard—people who already work hard for little reward. These proposals are simply a slap in the face for their efforts to improve their lives.

The Local Government Association has calculated that councils are being asked to share the £500 million cut among 1.3 million claimants, which works out at an average loss of £320 each. That is a significant sum for low earners, especially when the Government claim they are trying to protect work incentives for them. It has been estimated that council tax support for pensioners makes up 50% of the total funding, and roughly a further 25% recipients would also be exempt from the reductions in support because of councils’ duties to support vulnerable groups and tackle child poverty. Such people should of course be exempt, but that could lead to the 10% budget cut falling on the remaining 25% of recipients—on the support provided to low-paid people in work. Those people are working hard for their families, trying to do their best. They have pride in what they are doing, yet this Government are just kicking them.

[Ian Mearns]

I have just had a brainwave about where an awful lot of these second homes that will fill the gap will come from. When the housing benefit changes kick in, and people are evicted from their properties because they can no longer afford the rent as the property was under-occupied, those empty properties that belong to private sector landlords will be empty second homes. Of course we can raise the revenue from them. Does my hon. Friend think that is a possibility?

--- Later in debate ---

[Alex Cunningham]

I have known my hon. Friend for many years, and I am used to his brainwaves, which normally apply to education. Of course, he is perfectly right.

The people who will be affected already face higher food and energy bills. Sadly, however hard they work, they are unlikely to get any of the fancy bonuses that will be pouring into the coffers of bankers and everybody else over the next few weeks and months. Quite simply, the proposals merely transfer one of the national costs of rising unemployment to councils and local taxpayers, creating a serious risk that every resident will see further service cuts beyond those already threatened.

In my constituency of Stockton North, the theoretical 10% reduction in council tax benefit will equate to around £1.2 million; within the Stockton borough, the figure is £1.7 million. In reality, as pensioners are excluded from the change, those affected are likely to suffer a 20%, rather than a 10%, reduction. I must add that Stockton-on-Tees borough council’s revenue budget, along with that of every other council across the country, already faces tremendous reductions. In Stockton, there is to be a reduction of £26.5 million. Where will it find the extra money to bolster this budget, when it will need to pay out to an increasing number of people who will have to claim council tax benefit? The cuts that the council is suffering are in addition to cuts of £12.3 million to specific grants; the early intervention grant was cut by £3 million, and of course there was the future jobs fund, which the Government do not appreciate.

Frankly, the Government are giving to those on low incomes with one hand, and taking away with the other. There is no regard at all for the implications for people’s standard of living, and people are living on the edge. I know; I see these people at my surgeries. They do not have that extra £2, £3, £4, £5 or £6 a week to spend on council tax. They need to spend that money on feeding their children. The money to pay extra council tax is not there.

The amendments would save the Government from themselves. They would help the Government to fulfil their commitment to joined-up government—that is if the Secretaries of State bother to talk to each other. The amendments would also ensure that the huge hit to the working poor did not happen. If the Government accept the amendments, they will be recognising the real need, and will have the opportunity to do something about it. Without the amendments, many more people will be plunged into poverty, undoing much of the good work that the Labour party did in government to improve the living standards of the poorest in society. The Government may well find that they have not made work pay; instead, some families will find themselves better off back on benefits and out of work. Where is the pride in that?

Furthermore, the Institute for Fiscal Studies predicts that as a result of the changes in council tax benefit, individual councils could reduce the benefits to such an extent that it would encourage low-income people to move out of the area. The think-tank also points out that the changes would create a complex, two-tier benefit system, with both local and central Government setting policy. That runs counter to the idea of the streamlined universal credit to which my hon. Friend the Member for Warrington North (Helen Jones) referred, which is being introduced by the Work and Pensions Secretary.

The incentive that changes to council tax benefit will give local authorities to encourage low-income people to move elsewhere is totally undesirable and unacceptable, yet the Government seem intent on banishing the poorest in our society from our towns and cities. Let me give one example of the chaos that could result from the council tax changes and other changes: it is estimated that 20,000 families could move out of central London to find accommodation elsewhere. What an effect that could have on jobs, children and services. If several thousand children move out of central London, inner-city schools may no longer be viable, and other areas may not have the capacity to take them in. We know that the plans of the Secretary of State for Work and Pensions will have that effect, but surely the Secretary of State for Communities and Local Government does not need to help him.

Removing council tax benefit from vulnerable people is not the answer. In-work poverty is getting worse as wages are frozen and the cost of living rises sharply. Around 61% of children living in poverty live in working households with parents who are working hard to feed them, clothe them and send them to school. The figure in 2005-06 was 50%, so more people are now working to support their families, but they are doing so on paltry incomes. Surely no one in this Committee believes that that number should go any higher. That is why the Government must think again about these damaging changes to council tax benefit and adopt the amendments that will protect, if no one else, the working poor.