Local Government Finance Bill

Andrew Gwynne Excerpts

Tuesday 31st January 2012 Commons Chamber

[Mr Raynsford]

Amendment 79 and the linked amendments, 78 and 80, aim to put this part of the Bill, which devolves responsibility for council tax rebates to local authorities, on the same basis as the earlier parts of the Bill, which we have debated over the past two weeks. Those parts sought to localise business rate revenue. Hon. Members will recall that, during the debates on the business rate localisation, Ministers were emphatic in insisting that the baseline from which the new business rate arrangements would operate should not involve any local authority losing revenue. In other words, the scheme was designed to be revenue neutral in year 1. That is precisely what the amendments seek to achieve for the new local council tax reduction schemes.

My hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Select Committee, seeks to achieve a similar result through his amendment 85, which is linked to this group. My hon. Friend the Member for Warrington North (Helen Jones) has tabled new clause 11, also linked to this group, which seeks to protect local authorities from any additional costs that might fall on them during the course of a year. That might happen, for example, as a consequence of more people becoming eligible to claim benefits if a local factory were to close, or if more people were to lose their jobs for other reasons. Currently, local authorities are reimbursed for unforeseen expenditure, and Government grant meets the full cost of the benefit scheme, which is of course an integral part of the overall national scheme of welfare benefits, including housing benefits, that are the responsibility of the Department for Work and Pensions.

Some would query the logic of separating council tax benefit from the other benefits at a time when the Government are arguing for simplifying the whole benefit structure through the universal credit. However, I do not propose to pursue that argument today. There are good reasons for localising this aspect of benefits to local authorities, but there is no justification for doing it in a way that imposes harsh cuts in benefits from the outset and leaves local authorities, and therefore benefit recipients, vulnerable to further cuts because they have to take the downside risk of any increased expenditure caused by additional benefit claims in-year.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Do not the Government’s proposals introduce some quite substantial financial risks for local authorities, not least that there are no real needs-based criteria for authorities, as we discussed in earlier sittings of the Committee? Every local authority is different in its make-up and economic circumstances might change within financial years, so there needs to be a mechanism to reflect that need.

[Mr Raynsford]

My hon. Friend makes an important point about the assessment of need. The framework imposed by the Government will certainly require local authorities to make very deep cuts in benefit payments to certain categories of people. We will go on to explore some of the implications in later debates; suffice it to say for now that it really is a travesty of localism to say to local authorities, “We are giving you this new responsibility, but we are shackling your ability to do the job properly by imposing, first, an immediate 10% budget cut and, secondly, a total transfer of risk for any future increases in cost; and, thirdly, by requiring you to do this to a rushed timetable that does not allow you adequate time to consult local residents to test the impact of different models for the new scheme, posing a serious risk that the software will not be ready in time to allow orderly implementation.” I am afraid to say that this is a very sad example of a badly conceived scheme being rushed through by a Government who are not themselves going to face the consequences. Local authorities will face the consequences of a lot of very angry and very unhappy residents.

--- Later in debate ---

[Mr Betts]

I could not have put it better myself; that is precisely right—there will be a perverse incentive. If a council gets the older people who are entitled to claim to do so in greater numbers, other council services will be cut, council tax might increase at some point or, if no more money is spent on the scheme, the benefits of people who are not pensioners will be affected. That is precisely the point.

The problem is not with the Government’s attempt to rebadge the scheme or to localise it, but with the 10% reduction at the beginning, all in one go, and the way in which the Government have framed the restrictions on the extent to which local authorities can implement the reduction. Local authorities can always find extra money to increase the cost of the scheme, but is the Minister really suggesting that it will be possible for any local authority in the current circumstances to find extra resources at a time when services all round are being cut for reasons we all know about?

The 10% restriction or cut in the available Government funding comes in from day one in 2013. Pensioners are going to be protected, and no one in the Opposition is going to argue about protecting pensioners because we want to increase the number of pensioners taking up their entitlements, but that obviously means that the 10% reduction will fall on other people who claim the reduction. That is self-evident. I asked the Minister about this yesterday, because the Local Government Association has kindly put forward the information that about half those claiming the benefit are pensioners, which means that half are not pensioners. So if pensioners are protected, that means a reduction of about 20% for other claimants, does it not?

[Andrew Gwynne]

My hon. Friend makes an excellent point. Is it not worrying that if one section of society is to be prioritised, another, very needy, section is to be penalised, and does not that place councils in the very tough position of deciding who are the deserving poor and who are not?

[Mr Betts]

Absolutely. We are told that vulnerable people—perhaps people on very low incomes with children—are going to be protected, or have to be protected, by councils under the scheme, but are they going to be or not? Are the Government going to insist on that? We are not quite sure. We are told that local authorities have to take account of the tapers under universal credit, but what does that mean? Are they obliged to respect completely the 65% taper element within universal credit or not? If so, will that mean that a smaller and smaller number of people will have the totality of the cuts in benefits imposed on them? That is the reality. Will the Government explain what they think is going to happen?