Local Government Finance (England)

Debate between Andy Sawford and Hilary Benn

Wednesday 13th February 2013 Commons Chamber

[Hilary Benn]

I am grateful to my hon. Friend for reminding us. I do not know whether the Secretary of State will indicate whether he will accept the kind invitation he has received. There is no answer at the moment, but perhaps my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) will find out subsequently.

One of the problems councils face is that there is some uncertainty in the system, because of the big change the Government are bringing in as a result of this statement. The truth is that it remains to be seen how local authorities will benefit from business rates localisation, particularly because the Government have given themselves so many ways in which they can take some of that growth in business rates for themselves. The business rate projection for each local authority has been averaged out over two years. Why did the Minister decide on a two-year period, rather than averaging out over a five-year period as his own consultation suggested?

On business rate appeals, although the Government have increased the adjustment of that to £593 million, will the Minister say whether he is confident that that will be sufficient given that the LGA says that appeals in the pipeline could be considerably larger than this, thus exposing local government to an unacceptable level of risk? Why did Ministers change the 2012-13 baseline to include cuts that would not take place until the next financial year? Was it to try to make the reductions in spending power look less than they actually were? I welcome the increased allocation for the public health grant, but because it is ring-fenced it does not really change the reduction being imposed on councils for all the other services for which they are responsible.

Finally—a lot of other Members want to speak—I turn to council tax benefit. Last year in this debate, I suggested to Government Members that they take a long, hard look at what this would mean for their constituents, including in areas where the proportion of pensioners was higher than average. Now that the change is almost upon us, many people in all our constituencies frankly have no idea what the coalition Government have in store for them.

[Andy Sawford]

May I draw my right hon. Friend’s attention to the evidence presented to the Communities and Local Government Committee on council tax benefit, including from councils such as Conservative-controlled Croydon, which is predicting a crisis when this comes in, particularly a huge rise in homelessness?

[Hilary Benn]

My hon. Friend makes a powerful point. As I was about to say, a number of families will be hit, not just by one thing, but by several of the changes. It is the accumulative impact that will be so striking.

In its briefing for today’s debate, the LGA wrote:

“Authorities will have to introduce council tax support schemes against the backdrop of a ten per cent cut in funding for this scheme. In practice this means that many councils will have no choice but to pass the cut on to the working age poor.”

The technical details are causing concern. London Councils, in its briefing on the settlement, wrote that it was disappointed with the lack of transparency around the funding for council tax in the future. It wrote:

“From 2014-15 the funding calculations for council tax support will be lost within the wider formula funding allocations and will be subject to the broader cuts to local government funding. However by including this funding within overall formula funding, it means that this already reduced sum could well be altered again”.

It wrote that it would become almost

“impossible to identify what a local authority actually receives for its local scheme”.

Will the Minister confirm that and explain the reasoning behind his proposed change?

We know that last autumn the Government panicked and announced their transition scheme worth £100 million, because they knew there was a car crash heading their way. Especially since councils finalised their council tax support schemes, which they had to do by the end of last month, it has become clear that a large number of councils, including the Secretary of State’s council of Brentwood, are not taking any of the transitional grant. Why is that? The report that went to Brentwood council made it clear that it would have cost it more to do so. It would have received just over £100,000 from the transitional fund, but it would have cost it an extra £300,000 to have taken it. That is not much in the way of help. It is more the economics of the madhouse.

We know that councils are trying to do their best to protect the vulnerable, but the 10% cut in funding, which comes on top of the further cuts announced in this settlement, leaves many with no option but to increase council taxes for the poorest. What does this mean for families? It is a tax rise on people who work hard—do not forget that some people receiving the benefit are in work—carers, the disabled and single mums, and it is happening because while the Secretary of State has spent a lot of time these past two years touring the country, pointing the finger at councils and saying, “You must freeze council tax”, all along he has been masterminding a council tax bombshell for those who can least afford it.

About 2 million people will remember April this year for the bills that will land on their door mats—bills that will tell them either that they have to pay council tax for the first time or that they face an increase. Why will those people, including those in authorities that decide to freeze the council tax, have a bill on their doormat? They are being singled out by the Chancellor and the Secretary of State because they have one characteristic in common: they do not have a lot of money. I say to the Minister that that is what I call a kick in the teeth.

Those same families will be looking at the TV and the papers and discovering that something else is happening in April. Bigger payslips will be dropping on to other doormats—those of people earning more than £150,000 a year, and those earning more than £1 million a year, because the Prime Minister, the Chancellor of the Exchequer and the Secretary of State have decided that those people really need a tax cut of £100,000 a year. How is that fair?

I will tell the House what this will mean in Leeds. According to the council, an estimated 41,000 families will be hit by this tax increase and by the Government’s equally unfair bedroom tax. In some cases, families will be hit twice over. In practical terms, it will mean that £9.4 million will be taken out of the pockets of people on the lowest incomes in Leeds to pay for higher rent and for higher council tax. Councils will be forced, once again, to start chasing people for money that they might not have—in some cases, small amounts of money—in a way that we have not seen since the days of the hated poll tax.