Council Tax Support

Brandon Lewis Excerpts

Wednesday 14th May 2014 Westminster Hall

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

It is a pleasure to serve under your chairmanship in such an important debate, Mr Crausby. It is always good to debate a topic such as this with someone as knowledgeable about local government as the right hon. Member for Greenwich and Woolwich (Mr Raynsford). I congratulate him on securing the debate.

Some comments have been made, not least by the hon. Member for Corby (Andy Sawford), about where we are with council tax levels more generally. That is a bit off topic—I know that the hon. Gentleman made a similar comment earlier—but it is worth recapping why the policy was introduced. We must remember that, as my hon. Friend the Member for Brigg and Goole (Andrew Percy) said, council tax doubled under the previous Government, hitting families right across the country.

To address the comments just made by the hon. Member for Corby, it is worth being clear that a Conservative-run authority is cheaper on average than a Labour or Liberal Democrat council, for a band D property. Conservative councils charge on average about £89 less than Labour councils and more than £100 less than Lib Dem councils on band D, so they are still the best value for people across the country, as I am sure he well knows in reality. We have also seen Conservative authorities in London and other parts of the country, such as Rugby, actually cutting council tax by managing their finances very well.

Council tax benefits spending doubled under the previous Government, costing taxpayers more than £4 billion a year, equivalent to almost £180 a year per household. Welfare reform was vital to bring such spending under control and tackle the horrendous budget deficit we inherited. Localising support for council tax is part of a wider policy of decentralisation, giving councils increased financial autonomy and a greater stake in the economic success of their local area. As council tax is a local tax, we believe that it makes sense for councils to have power and responsibility for making decisions about the levels of reduction to be granted to low-income, working-age claimants—their residents—and for providing the required support. Local schemes should reflect local needs, and local authorities are best placed to make the decisions, not someone sitting in Whitehall.

The Government have offered local authorities a great deal of help and support as the programme has rolled out. We must remember that £3.7 billion was provided for council tax support in 2013-14 and 2014-15, and we will be providing the same in 2015-16. There was new burden funding of £30 million in 2012-13 and a further £33.5 million in 2013-14. Tomorrow, 15 May, we will be paying out £34.8 million towards new burdens for 2014-15. That funding relates to costs incurred for the consultation and design of schemes, appeals, IT costs and communications. As some Members mentioned, the Government made an additional £100 million transition grant available for 2013-14, which helped councils develop well-designed council tax support schemes and maintain incentives to work. Claims totalling roughly £53.5 million were made by 196 billing authorities, and 69% of all authorities received funding. We also provided local authorities with guidance on work incentives and their responsibilities for vulnerable people.

The hon. Member for Corby misunderstands the difference between decentralisation and the abrogation of responsibility. The previous Government amazingly managed to centralise and abrogate responsibility at the same time. This Government decentralise; we move power to local authorities. Even Labour voices in Manchester have noted that this Government have done more in three years to decentralise than any previous Government, let alone the 13 years of Labour centralisation. That does not mean, however, that we take a vow of silence. It is right that we outline to councils best practice and what we and the country expect is right for residents.

Local authorities have a wide range of choices about both how they manage their funding and how they design their schemes. For example, apart from asking some claimants to meet some or all costs, they also have new flexibilities on empty homes, on making efficiency savings, on reducing fraud and error and on using reserves. Let us remember that local authorities have built up a record level of £19 billion in reserves, and figures from the National Fraud Authority show that they lose £2.1 billion annually from fraud and error, let alone what better collection rates can bring in.

So all councils have had options about whether they pass on all or any of the changes and about what groups they protect. It is for councils to ensure that the effect on particular groups is proportionate and fair, and to consult on local schemes. In year 1, for example, all 326 councils adopted schemes that continued to apply the same level of premiums as council tax benefit for vulnerable claimants; 52 councils protected the same vulnerable groups as council tax benefit; 89 offered some protection for particular vulnerable groups; and 84 introduced a hardship fund.

Most councils retained the work incentives that applied under council tax benefit: 307 maintained the taper at 20% or reduced it; 324 maintained the four-week period of extended payments, or increased it; and 324 councils maintained the level of earnings disregards, or increased it. Year 2 schemes, which came into force in April this year, continue to take a wide range of approaches that are locally appropriate and locally consulted on.

I recognise there are challenges in working with people who may be paying council tax for the first time, and I am encouraged to see that councils are taking a variety of approaches to help people adjust to the change. They are working out better payment arrangements that suit those people. They are looking at waiving costs as an incentive to encourage payment or a reward for clearing debt; proactively engaging with people who have not previously had to pay council tax; and looking at additional and earlier reminders to help people understand the situation and what they are dealing with.

Final year 1 data on collection rates will not be available for a few weeks yet. However, £20.3 billion of council tax was collected in England over the first nine months of 2013-14. That is £771 million—3.9%—more than in the same period in the previous year, despite the comments made earlier. The policy is now embedded, and councils have experience in designing and operating local schemes. However, the work we are doing on the policy has not ended, and should not end, yet.

In 2014-15, the Department will work with the Department for Work and Pensions to consider the allocation of the local council tax support administration subsidy, and to understand the ongoing costs of administering, reviewing and revising council tax support schemes. The Department is working closely with the DWP and local authorities in advance of the roll-out of universal credit to develop data sharing arrangements and to ensure that the savings that can be made through data sharing will be realised.

An independent review of schemes will be carried out within three years, as required by the Local Government Finance Act 2012. As set out in the Act, the review will examine effectiveness, efficiency, fairness and transparency; the impact on the localism agenda; and whether local schemes should be brought within universal credit. The Department is currently working with the council tax partnership forum and local authorities to identify appropriate and proportionate data for the review. The timetable, coverage, process for data collection, and detailed terms of reference will be agreed and published in due course.

Councils have challenges—nobody denies that—but there is much they can do in using their reserves and in cracking down on fraud and error in collection rates. Some authorities have seen increases. The increases that the hon. Member for Corby referred to should be celebrated, because those councils are doing good work. Their increases are a result of their benefiting from the new homes bonus, an incentive that we put in place. Business rates are an opportunity, in a way they never had before, for local authorities to see their money increase as they develop business and get more people into work locally.

Our reforms to localise council tax support are delivering national and local benefits. The programme is delivering a 10% saving on the forecast council tax benefit expenditure from 2013-14. We must be clear about that, and we should remember that it is an important contribution to the Government’s vital programme of deficit reduction. In 2013-14 the saving equates to £414 million, which is not a sum to be sniffed at. Despite the previous Government’s profligacy with money, we believe those sums are important in reducing the deficit.

At a local level, councils now have a stronger incentive to support and develop local firms and to see more jobs in their local areas, as reflected in today’s employment figures. I am delighted that even in my own constituency of Great Yarmouth, which Labour left behind, we have had a 27% fall in unemployment. Councils can cut fraud and promote local enterprise to get people into work, as the Government’s programme is clearly doing.

I thank the right hon. Member for Greenwich and Woolwich for securing this debate, and I hope hon. Members appreciate that we have got the power in our local authorities to really make a difference.