Local Government Finance Bill

Andrew Gwynne Excerpts

Wednesday 31st October 2012 Commons Chamber

[Robert Neill]

I believe they can. Manchester is an interesting example. Indeed, my hon. Friend must be intuitive, because I was about to say that pooling can often fit sensibly with the other development that we have seen—in which Manchester has been something of a pathfinder—which is the establishment of joint authorities. It is a classic means of dealing with co-operation by local authorities from the bottom up without the need for—dare I say it in the current climate?—unitary reorganisation. The ability to form a joint authority creates the ability to procure jointly, pool business rates jointly and, therefore, invest jointly, as well as a raft of other things, which are beyond the scope of this Bill.

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

I am with the hon. Gentleman on pooling and how economies such as those in Greater Manchester work, but he should not get too carried away with the Manchester example, because my understanding is that Tory Trafford and Liberal Democrat Stockport are not very keen on the idea of pooling resources.

[Robert Neill]

All those authorities signed up to the concept of the joint authority. Any pooling will have to involve sensible negotiation between the various authorities about what is in their mutual interest. I would have thought that a degree of caution was perfectly understandable at this stage in the process. The important thing we are doing in this Bill is putting in place the legislative means to enable areas such as Manchester and other areas with pooling to take up more of the opportunities as, I hope, confidence grows. I hope that my hon. Friend the Minister will confirm that the ability to pool is yet another reason the Government have no intention of going down the route of imposing top-down unitary reorganisation—I am sure this is a timely moment at which to remind ourselves of that point. I hope that the opportunity to pool will also encourage other conurbations to develop a similar approach to that being taken in Greater Manchester. Pooling would provide a means of achieving many of the benefits of what were once described as city regions, without the need for the top-down imposition that went with those arrangements.

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[Robert Neill]

I agree, and I am sure we will be able to find ways to address that. The amendment in question and the pooling of business rates is one of the tools, and it is an important one, but it is not the only tool the Government are putting into the local authority box.

[Andrew Gwynne]

Greater Manchester provides a good example for pooling resources, and not only in terms of business rates. The 10 district councils of Greater Manchester have already decided to pool their local transport fund allocations. That is a gamble for some of them, because they are not getting the direct benefits of the new Metrolink extensions, while other parts of the county are.

[Robert Neill]

That was a helpful intervention, and I hope that it will go some way to helping my hon. Friend the Member for Birmingham, Yardley (John Hemming), because one important source of funding for passenger transport authorities is the allocations that come to the constituent local councils, which they can then use. This is about ensuring that there can be a sensible linkage. If they pool the allocations, it will be logical to find a mechanism whereby they can pool the product of the retained business rate, so that the two can be aligned. The hon. Gentleman makes a very important point.

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[Helen Jones]

Amendment 3 was moved in the other place by my noble Friend Baroness Hollis of Heigham. It calls for one very simple thing: a review of how the new system for council tax support is working three years after the Bill as enacted comes into effect. We tabled amendment (a) to make clear the original intention of the amendment in applying only to England because this is a devolved matter in Wales. When my noble Friend introduced the amendment in the Lords, she made a clear and persuasive case that was supported by a good majority.

The Government opposed the measure at the time, but I understand that they may now decide to accept it; the Minister will tell us. Opposition Members may wonder why that is, but in fact, we know why. The Government know that their policy on council tax is a shambles. It is so bad that they cannot even convince their own Members to support it. Their councils in North Yorkshire, including the Foreign Secretary’s council, have campaigned against its unfairness. The departmental Secretary of State’s own county council says that it has major implications for some of the most vulnerable members of the community. West Oxfordshire, the Prime Minister’s council, has refused to implement any scheme at all and will rely on the default scheme. Westminster, the Tories’ flagship local authority, which we hear so much about, says that it will not implement it because residents are already adversely affected by changes to local housing allowance and other benefit cuts. This is what Westminster said in one of the documents that it submitted:

“The previous Community Charge (Poll Tax) experience shows that there are inherent difficulties in asking benefit claimants to pay small sums of Council Tax. This can make the debt difficult, and in some cases uneconomical, to collect.”

It also says:

“A decision to pass on the funding cut to claimants would be a reputational risk for the Council, as residents will perceive the cut as a local authority decision (rather than a central government given benefit cut).”

[Andrew Gwynne]

In their consultations, Tameside suggested that it would need to make £3.575 million of savings, while Stockport said that it would need £2.4 million of savings in relation to any new council tax support scheme. If Stockport or Tameside applied for and were eligible for the DCLG’s support mechanism, Tameside would get only £460,379 and Stockport £385,550. This is so unfair.

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[Andrew Gwynne]

My hon. Friend is being incredibly generous in giving way. I have mentioned the £3.575 million that the Tameside council scheme will lose. That comes on top of the council’s delivery of £43 million of savings in 2010-11 and 2011-12 and £22 million of savings this year, and it estimates a further £70.4 million of savings over the next three years. That is the real unfairness of this—it is hitting the same communities time and again.

[Helen Jones]

My hon. Friend makes his point eloquently. The Government have always failed to acknowledge not only that this policy affects the same economies again and again, but that it has a devastating effect on local attempts to grow their economy. The very people who are losing money are those who went out and spent money in local shops and businesses, because, by the very nature of their low incomes, they have to spend everything they get. Councils are now faced with the most awful decisions and the people being hit hardest are people with disabilities, their carers and, most of all, the working poor—the people who this Government try to pretend do not exist.

We all remember the former Housing Minister, the right hon. Member for Welwyn Hatfield (Grant Shapps), telling a Select Committee that if someone was working they would not get council tax benefit, because they would not need it. He did not believe that people who were in work received council tax benefit. He did not believe in the existence of those 743,000 people who are on non-passported council tax benefit and are in work. I admit that I sometimes find it difficult to believe in the existence of the right hon. Gentleman, because he has so many different identities—I often wonder whether he is an internet marketing guru masquerading as a member of the Government—but those working people on low incomes are certainly there and cannot be ignored.

Among the options that councils are consulting on are: paying no award less than £5 a week; restricting awards to the cost for a band D and, in some cases, even a band A property; restricting awards between 80% and 90% of value; increasing the taper; and abolishing the second adult rebate. The list goes on and it gets worse. One council—Tendring—is proposing residency criteria, so that people will only become eligible for support if they have lived in the district for five years. If someone moves there for work—after all, the Government want people to move for work—and happens to lose their job, hard luck: they will not get a penny. Those of us who know our history will recognise that proposal immediately for what it is. It is a reinstitution of the Poor Law—if someone needs relief, they should move back to their own parish, or in this case their own borough. On that basis, I wonder whether the Government live in the 21st or the 18th century.

It is no wonder that the Government have introduced a £100 million transitional relief fund. There is no better proof of the shambles that they are in than the fact that they have made that announcement after local authorities have begun consultations on their schemes.

[Helen Jones]

I am tempted to say to my hon. Friend, who is the distinguished Chair of the Committee, that I cannot think of a more cack-handed policy, but then again this Government constantly surprise us by coming up with something more cack-handed than we had ever thought of. He is right about the problems with the transitional relief fund. Councils have begun consultation on their schemes, but now the Government want them redesigned to qualify for a transitional grant. Their conditions include the requirement that those currently receiving 100% relief should pay no more than 8.5% of tax, that the taper does not increase above 25%, and that there is no sharp decline in support for people entering work. Having embarked on a system that they insisted should rest on local decision making, they are now dictating how the scheme should be designed.

Even so, that does not solve the problems. There is no legal clarity on whether councils will now have to consult again on these new schemes. Could the Minister give councils some advice about that? There is no indication of how, if they have to do another consultation, its cost will be met, and there is still a £400 million funding gap, even according to the Government’s own figures.

[Andrew Gwynne]

To return to Tameside council, one of the two authorities in my constituency, it tells me that the recent announcement on transitional funding will cause it added difficulties and that

“the indicative grant would be insufficient to bridge the funding gap, and the money is for one year only.”

[Helen Jones]

My hon. Friend is entirely right. It is not sufficient to bridge the funding gap. It seems from the indicative amounts that my own local authority will get back £320,000, including money for the police and fire authority precepts, but lose £1.3 million. Birmingham will get back £2.4 million out of £10 million, Manchester £1.1 million out £5 million, Liverpool nearly £1.5 million out of £6.1 million and Haringey £888,000 out of £3.8 million.

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[Helen Jones]

My right hon. Friend is entirely right. I suspect that if a council found itself in financial difficulty and did not have reserves, Ministers would be the first to stand up and accuse it of failing to plan prudently for that eventuality.

The scheme will last only one year. Will schemes have to be redesigned again after that? If so, people will have had to cope with three different council tax benefit systems in three years. Currently, they might pay nothing, but next year they might pay 8.5%. After that, who knows—15%, 20%, 30%? There is huge uncertainty for the poorest people in the community.

As my right hon. Friend says, local councils will also be left with huge financial uncertainty. The Government believe that the number of pensioners claiming council tax benefit will drop, but everyone who deals with benefits believes that it will rise, because in future the sum in question will be shown as a reduction in someone’s council tax bill rather than a separate benefit. If unemployment goes up in an area, if a major employer closes down or if there are increases in part-time working, as there have been recently, local authorities will bear all the financial risk.

[Andrew Gwynne]

Does my hon. Friend share my confusion about the Government’s thinking and the lack of joined-up decision making between Departments? Universal credit is being introduced, which was supposed to simplify the benefits system, yet here we have the Government making the council tax benefit system more complicated and setting it aside from the universal credit proposals.

[Helen Jones]

My hon. Friend is quite right. One problem with the system that the Government are introducing is that people will face two tests for benefits, possibly with two different tapers. For someone in the universal credit pilot, it will have to be decided whether the council tax benefit taper is applied before or after the universal credit taper. That clearly has not been thought through.

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[Helen Jones]

My hon. Friend is entirely right. We have said throughout discussions on this Bill that it is about centralising power and devolving the blame—after all, Tory-run Westminster council recognises that. That is the test the Minister set for his Government—the sign of a compassionate society in a modern democracy—but I am afraid the Government have failed that, and failed some of the poorest, most vulnerable people in our society. Benefits for people who are disabled will no longer depend on their disability, but on where they happen to live. We are talking about people who are sacrificing their careers to look after members of their family who are ill or disabled, and those who go out to work every week for poverty wages, because they believe that working—when they can work—is the right thing to do.

The Government seek to stigmatise those people as scroungers and they should hang their head in shame. Those people are doing the right thing, contributing to society and doing their best on a low income. The amounts they are being asked to pay may not seem much to people on the Government Benches, but to an individual or family living on the edge, they are unobtainable. Every penny they have is accounted for and there is nothing left for emergencies. To try and find even a couple of pounds at the end of the week is out of the question; it is just not there. That is why council treasurers are expecting to collect only 40p in every £1, and why we risk a repeat of the poll tax fiasco, when thousands of people left the electoral register to try and avoid the tax, and 5,000 people went to prison.

[Andrew Gwynne]

My hon. Friend makes a powerful point about how the council tax benefit scheme is likely to hit some of the poorest and most vulnerable people in society, in particular the working poor. They are likely to be the same people who are also caught up with changes to housing benefit, and potentially with under-occupancy rules, and who have seen their tax credits reduced.

[Helen Jones]

My hon. Friend makes the point I was about to come to. We are talking about many of the same people who have lost tax credits because they cannot get extra hours at work, and many will also be losing housing benefit, as well as having to find money for extra council tax payments. I know the Government do not want to hear this, but we are going to say it again and again because it is true: the Government are introducing these measures on the same day as they fund a tax cut for millionaires. Nothing could demonstrate better how out of touch this Government are with the lives of most people. I wonder whether the Minister is proud of the system he is introducing.

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[Robert Neill]

My hon. Friend is absolutely right. There is nothing compassionate about that. The attitude of Labour Members is blinkered—to put it as charitably as I can. They think the only way to deal with people compassionately is by continuing with a rigid and failed system.

[Andrew Gwynne]

For a split millisecond, the hon. Gentleman had me sold on the idea that he was convinced about a simplified benefits system. If he is convinced, why does he believe council tax benefit should not be part of the universal credit system? The proposals will result in a different council tax benefit system for every local authority area in the country.

[Robert Neill]

The hon. Gentleman, whom I respect in these matters, makes an interesting point. I have two points to make in response. First, we consulted prior to the design of the system, and one question that came up is whether we should include council tax benefit in the universal credit. The cross-party local authority associations did not want that, which we reflected in the Bill. That was their view at the time and I still believe they were right. We adopted a localist stance, and we need take no lessons on that.

Secondly, the hon. Gentleman says there will be different approaches in different areas, but I should gently tell him that he betrays the error of the Labour party’s thinking. Labour Members take a monolithic approach, but local economic circumstances, the demands on people who are not in work, and the demand that they place on council budgets, vary from place to place. The whole point of localising the scheme is to recognise that local authorities are generally better placed than a monolithic and centrally administered scheme to recognise the particular influences on the jobs market and routes back into work in different places.

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[Brandon Lewis]

I will deal first with the points raised by the right hon. Member for Greenwich and Woolwich (Mr Raynsford). I am still relatively new to the House, having joined in 2010, and I am certainly new to the Dispatch Box. I have to say that the opening remarks of his speech were the most undignified I have heard in this Chamber in my short time here. I therefore do not intend to comment further on what he had to say.

The hon. Member for Warrington North (Helen Jones) made a point about the scheme in general, and I shall respond to it directly. She seemed to suggest that her party would like to see a centrally controlled policy scheme, rather than trusting local councils. I must point out that the Local Government Association does not want this provision to be part of universal credit; it wants it to be localised, if it needs to change. I was disappointed that Labour Members seemed to lack trust and faith in local councils and local councillors to do what is right for their communities. We have far more trust and faith in them than Labour does.

I was astounded to hear at least one Member complain that the Government’s pledge of a further £100 million to help local authorities with the transition was unhelpful. That provision is of course voluntary; local councils do not need to take part and do not need to take up any of the money. It is simply a transitional grant that will be available if councils wish voluntarily to take up the offer of it. Some councils will come up with different schemes. It is part of localism that they will do what they think is right for their local communities. Some might have large reserves. If, for example, a council had about £45 million in reserve, it might use some of that to prepare for the changes. The Government’s position is that that should be a local decision. This is about local councils having the political will to do the right thing, to look at what is right for their communities, and to work to develop economic growth to get more people off benefits and into work. That goes hand in hand with the business rate retention that we discussed earlier.

[Andrew Gwynne]

It is important to record the fact that no Labour Member is saying that localism is a bad thing. The Minister cannot have it both ways, however. Either the Government take a localist approach, in which the arrangements for council tax benefit will be different from one local authority to another, or they do what the Minister says he wants to do, which is to simplify the system. That would involve one nationwide system.

[Brandon Lewis]

I am not quite sure what point the hon. Gentleman is trying to make. This is a localised scheme in which local councils will do what they want to do. Different councils are consulting on different schemes, and in response to some of the consultations the Government have made provision to allow local authorities some transitional money to help them to move to what might be a better scheme for their area. But—this is the key point—that money is part of a voluntary scheme. It is up to local authorities whether they take part in it, or whether they go ahead with what they believe is the right scheme for them.

[Andrew Gwynne]

By the Minister’s own admission, then, this is not a simplified scheme. It is a localised scheme, but it is not simplified. Every local authority will have a different system in place, which will add to complexity.

[Brandon Lewis]

I think the hon. Gentleman is starting to understand that localism means that local councils can do what they think is right for their local communities, understanding that what might work in one local community would not necessarily be right in another local community in respect of the schemes they devise to secure economic growth, to create more jobs or to get more people off benefits in the first place.