Council Tax Benefit Localisation

George Hollingbery Excerpts

Wednesday 27th June 2012 Westminster Hall

[Mr Clive Betts (Sheffield South East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing this important debate. I want to make three points. The first goes back to something that the Communities and Local Government Committee said in October, following the evidence that we took last July. We were against not the principle of the changes but the way in which the Government were going about them. Importantly, we said:

“We recommend that the Government delay the introduction of the new Council Tax support system by a year or more, if consultation with local authorities indicates that this would reduce the risks inherent in introducing many complex changes concurrently.”

That is an important point. Since then, the Local Government Association has repeatedly said that it has concerns with the timetable. In its briefing to us, it said that it urged the Government

“to give councils the necessary time to do this in the most considered, flexible and cost-effective way possible.”

In January, Capita wrote to all the local authorities for which it provides services, saying that it did not think that it could deliver the necessary systems in the time scale. I do not think that that advice has changed. Certainly, when I spoke this morning to Councillor Bryan Lodge, the cabinet member for finance in Sheffield, he said that the advice had not changed. When we had the debate on the Local Government Finance Bill in January, it was interesting that the Minister did not draw attention to that letter from Capita, although he was well aware of it at the time.

What is the situation now? Are the Government saying that despite all the concerns of local councils, the LGA and service providers such as Capita, they believe, in their wisdom, that this can all go ahead on time and without any problems—not just for councils and the administrators, but for the people who receive the benefits at the end of the line?

I just think back to Sheffield in 1999 when we had privatised the housing benefit service and transferred it to Capita in a rushed and botched way. I remember the constituents, often elderly, coming to my surgeries in tears not because they had done anything wrong but because the administration of their benefits was in chaos and, as a result, the arrears on their council tax and rent had risen. They were distraught because they had never been in arrears in their lives. I worry that we will go back to that situation.

The responsibility will be not with local councils but with the Government who will push this through on an unacceptable and unattainable timetable. I say to the Minister that it is not too late to stop. I am talking about not the intention but the ridiculous timetable on which the Government have embarked. If this was simply a question of localism and of saying to local councils, “Do it the way you want,” there would not be a problem.

[George Hollingbery (Meon Valley) (Con)]

rose—

[Mr Betts]

I will give way to the hon. Gentleman, who is a member of the Communities and Local Government Committee.

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[George Hollingbery]

I am a member of the Select Committee and have something to do with the production of its report and the idea behind it. I have always recognised that this is something of a complex area.

Does the hon. Gentleman agree that there are some very real technical complexities in putting this system in place, but there is also an appetite among Ministers for shared systems and projects across large local areas? For example, in Hampshire, there are 16 different district councils, so a shared scheme across the area would make a lot of sense; it would save money in administration and so on. Necessarily, though, it will be a complex system to put in place, with legal agreements that will need to be considered and thought through. A little more time for that might also be very welcome.

[Mr Betts]

The hon. Gentleman makes a good point; we will get a better scheme for having it slightly later. The savings will be better, as will the service to our constituents.

I say to the Minister that if this was simply a question of saying to local councils, “Get on and devise your own schemes,” they could do it. The problem is that they do not know how to devise a scheme in respect of the advice and detailed regulation that come from Government, because they have not got it yet. It is because the Government are insisting on regulating the details of a localised scheme so closely that they are in these difficulties.

I have two further brief points. One is about the 10% cut. If councils cannot devise their own schemes, they will have to opt for the existing scheme, which means that they will have to find the 10%; £4.5 million in Sheffield on top of the £200 million of cuts that the council is trying to make. That goes for every council in the country—cuts on top of cuts. That is the problem that the Government are forcing on local councils. There is the invidious choice of finding this money from other services, which are already being cut very substantially, or making the cuts in the benefits of people of working age on top of the cuts in benefits and working tax credits that those same families are having to take. It is the cumulative effect on those families that the Government have done no proper analysis of.

Finally, we still do not know from the Government how the administration of the system will work. They are localising council tax benefit and centralising housing benefit. There is a simple arrangement now for people whose income changes: they go down to the local council and speak to someone. In Sheffield, there is the home visiting service for the elderly and disabled, where someone comes along and helps them sort out both benefits. Now we will have a council tax benefit that we go to the council for and a housing benefit that we will have to go online for—or on a telephone to someone in Jobcentre Plus. For elderly people, that will be an impossible arrangement.

The Government say they will talk to local councils to find a way forward. As I understand it, there is no clear idea from the Government about how these two complex benefits will be arranged in the future when we will have two completely separate systems that people have to go through to get their problems sorted out.

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[Helen Jones (Warrington North) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Howarth. I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing this debate, and all my other hon. Friends who have spoken. They are too numerous to mention individually in the time available, but all of them have expressed concern about the unfairness of the policy. It is unfair even according to the standards of the Government, who seem to have elevated inequity into a policy position.

The policy represents a circle that is impossible for councils to square. The shift from annually managed expenditure to cash-limited expenditure, coupled with a 10% budget cut—while pensioners must be protected, which we support—means that the brunt of the cuts will fall on the most vulnerable people in the community. Who are those people? Many of them are poor working families. The cuts that they will bear—entirely arbitrary, depending on how many pensioners are in the local authority—will range from 13.4% to 25.2%. The national average will be 17%. If councils try to protect other vulnerable groups such as disabled people and carers, as the Government default scheme suggests they should, the cut for working families could be as much as 40% of benefit.

The Government trumpet that they have taken people out of tax by raising the tax threshold. Those gains, such as they were, have already been wiped out by increases in VAT and changes to housing benefit and tax credits. For many poor families, they will be wiped out yet again by the increase in council tax. The sad thing is that the Government do not even recognise the existence of such families. The Minister for Housing and Local Government, the right hon. Member for Welwyn Hatfield (Grant Shapps), said to the Select Committee that

“if somebody is in work they will not be receiving the benefit because they will not need to”.

How wrong can one be, and how wilfully blind? A parliamentary answer that I received from a Department for Work and Pensions Minister, the hon. Member for Thornbury and Yate (Steve Webb), told me that 743,600 people are non-passported recipients of council tax benefit and in work. There are others on passported benefits, of course, who are in part-time work.

Looking at the local authorities of which my hon. Friends have spoken, there are 3,430 such people in the Wigan borough and more than 2,000 in my own. Stockport has 2,860, Tameside has 2,830, Rochdale has 2,900 and County Durham has an incredible 5,810. Do the Departments talk to one another, or is this, as most of the Opposition believe, a piece of Government spin designed to convince everyone that the benefits go to people who are out of work?

The implication, of course, is that people are out of work through their own fault. That would be nonsense even if it were true, given that there is a double-dip recession and 2.6 million people are unemployed, but it is not true. The benefit often goes to families trying to do the right thing by going out to work for low wages because they believe in the value of work and in setting an example to their children. The hon. Member for Suffolk Coastal (Dr Coffey) said that councils that pay higher wages can attract more businesses. That is interesting, given that Government policy is clearly to depress wages in many areas of the country by targeting regional pay in the public sector. They are driving wages not up but down.

Who else will be hit by the legislation? There is no protection at all in the Bill for people with disabilities—even those in the support group for employment and support allowance, who are not expected to seek work even if it is available, which in the current double-dip recession is unlikely. Nor is there any protection for those in the work-related activity group, who by definition are not expected to seek paid employment to increase their income. How ludicrous it is, then, for the Government to claim that their purpose is to spur councils on to create more jobs when many of the people affected are in work or defined as unable to seek work.

Another group who will suffer, mentioned by my hon. Friend the Member for Edinburgh East (Sheila Gilmore), is carers. Carers are defined by the national insurance credit regulations as caring for 20 hours a week or more for someone in receipt of certain benefits. Carers are the people whom the Prime Minister called the unsung heroes of society in 2010. Now they will be rewarded with a council tax increase. What are they supposed to do? If they stop caring and go out and get a job, the state will pick up a burden costing millions of pounds for the social care that they were providing. A tax increase for carers and disabled people and a tax cut for millionaires—nothing could better sum up the Government’s distorted priorities.

As some of my hon. Friends have mentioned, as with the Government’s plans for business rates, the poorest areas will be hit hardest. I have already given some figures. The number of people in Manchester who are in work and receiving council tax benefit is more than 8,000. In Liverpool, it is more than 6,000. In Salford, a much smaller authority, it is 3,500. By contrast, South Bucks has 420, Melton has 440 and the City of London has 40.

That means that councils with a lot of people in that category are being hit by a triple whammy. First, defaults will rise. As my hon. Friend the Member for Makerfield reminded us, that is an imprisonable offence. Secondly, it will be much harder for councils to mitigate the effect on people in work, simply because there are more of them. Thirdly, they will lose a significant amount of money from their local economy, as people try to make up the shortfall with income that they would otherwise have spent in local shops and businesses. My own local authority, for instance, will lose £1.3 million. Wigan will lose £2.6 million, Tameside £1.9 million and County Durham a whopping £5.5 million.

[George Hollingbery]

Is it not true that from an individual rather than a collective point of view, the cuts will actually fall hardest on those areas with the oldest demography rather than the greatest poverty? That is where the most distortion will happen. Collectively, there are areas with more people in receipt of benefit, but of course the budgets reflect that already.

[Helen Jones]

Actually, they do not. If the hon. Gentleman looks at the Local Government Finance Bill, he will see that its impact falls on the poorest authorities in the country. I have no doubt that there are difficulties in some areas with pensioners, but let me give him figures on what some of the wealthier areas will lose: Hertfordshire will lose £293,000 and Melton £246,000. Like the rest of the Government’s financial initiatives, this is designed to hit the poorest areas most—and, of course, it transfers all the financial risk to local authorities.

If more pensioners claim, as is likely under this system, that will be a good thing, but the money will have to be found in a cash-limited system. If unemployment increases, especially if a big employer closes down, the money will have to be found either from the poorest people receiving benefits or from cuts in benefits elsewhere. When the Government say that they wish to include council tax in the local business rate system, they fail to say that safety nets will kick in only if a council’s income falls between 7.5% and 10% below the baseline.