Local Government Finance Bill

John Healey Excerpts

Tuesday 31st January 2012 Commons Chamber

[John Healey (Wentworth and Dearne) (Lab)]

My hon. Friend talks about the tight time scale and the argument for the Government seriously considering putting implementation back for a year. Does he accept that although it is a year today that councils have to have an approved scheme in place—otherwise they will have to use the present scheme—we do not yet know when the Government will require schemes to be submitted for approval, or how quickly they undertake to turn those decisions round, or the principles by which they will require the schemes to operate and therefore be able to get approval—

[The Temporary Chair (Mr Edward Leigh)]

Order. We are in danger of straying into the next group. Please keep in order, Mr Betts.

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Although the Government have said that they will assess the transitional costs of the scheme—whether authorities will be reimbursed for all those costs remains to be seen, because there is not a great track record on this—that does nothing to tackle the inherent financial risks, and the built-in disincentive to encourage people to make claims. In the past, many local authorities have done excellent work encouraging people to claim the benefits to which they are entitled. I am sure that many of them will still do so, but now, if a council encourages more people to claim, it will have to bear the costs, and that is a ridiculous system.

[John Healey]

My hon. Friend is making the clear and strong case that the new scheme will increase the financial risks to local authorities. Does she accept that local authorities will therefore have to increase their financial reserves, and to do that, they will have to increase the cuts that they make to expenditure, and possibly to services?

[Helen Jones]

My right hon. Friend has got it exactly right. In fact, throughout the passage of the Bill, we have seen that much more instability will be built into the system, whether that is on business rates or council tax localisation. The inevitable consequence is local authorities building up bigger reserves, because no local authority finance officer would advise their authority to do anything else; it has to be prepared for the worst-case scenario.

[John Healey]

My hon. Friend is making the case very cogently that council treasurers will take a prudent view; does she agree that that runs completely counter to the advice that councillors are getting from the Secretary of State, who is talking about reserves being “piggy banks”, and who says:

“These untapped funds exist to ensure councils can respond to unexpected situations like the pressing need to tackle the nation’s unprecedented level of debt”?

That advice clearly runs contrary to the principles of good local government, and it simply will not and cannot be followed by councils.

[Helen Jones]

My right hon. Friend is again absolutely right. The Government are a little schizophrenic on this, saying to local authorities, “Don’t build up big reserves,” while at the same time building instability into the system, which will require local authorities to build up bigger reserves.

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[George Hollingbery]

Some persuasive points have been made in the debate so far and I urge the Government to take them on board. However, I also find the Minister persuasive and I look forward to hearing what he has to say.

I wish to speak briefly about a funding issue that is not strictly related to the amendments. I hope that you will allow me to stray slightly off the selection list, Mr Crausby, on the basis that we are unlikely to have a stand part debate. I wish to talk briefly about parish councils. The hon. Member for Mid Dorset and North Poole (Annette Brooke) talked about horizontal and vertical integration, but I want to go downwards to look at parish councils and where their funding comes from.

At the moment, certainly in my constituency of Meon Valley, several parish councils take in council tax—or rather in precept—pretty much the same as the district council. As far as I can see from the Bill and the consultation on the Bill, there is no provision to pay any of the grant for reducing council tax to parish councils. There is mention of district councils, first-tier councils and precepting authorities such as fire authorities and the police, but as far as I can see there are no arrangements to compensate councils at parish council level for moneys they might forgo because people require council tax benefit. It seems to me that this issue needs to be dealt with.

In my area, Bishop’s Waltham and Denmead parish councils would rely entirely on the beneficence and good nature of the city council to fund their activities if they were not directly grant-aided. I would love to hear the Minister’s thoughts.

[John Healey]

It is a real pleasure to serve under your chairmanship, Mr Crausby.

I rise to support the amendments and new clause in the names of my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) and my hon. Friends the Members for Sheffield South East (Mr Betts) and for Warrington North (Helen Jones). The problem, which my right hon. Friend the Member for Greenwich and Woolwich hits on directly in his amendment 79, is that council tax reduction schemes will be undermined from the start by the 10% funding cut and the constraints that the Government are putting in place to compensate for the problem that it will create.

Throughout the part of the Bill dealing with council tax, we consistently see hallmarks of the scheme that run contrary to the Government’s declared aims. It shows a lack of true localism and a transfer of considerable financial risk from central Government to local government, which promises to have a severe impact on support for many current recipients of council tax benefit. The Bill also sets out an unrealistically and unfeasibly tight time scale.

The Secretary of State is more sophisticated than the image and manner that he often cultivates would suggest, but his politics on this matter are brutal and brutish. In my view, the intention is simply to transfer to local authorities the financial risk of the increasing cost of support for council tax costs. The Government want to get local authorities to take the blame for the cuts being imposed by central Government.

Financial risk is crucial for any local authority when it considers the future. Authorities are being asked to take on the new risk without the flexibility to allow them to discharge the responsibilities that they are taking on fairly, effectively or appropriately for their area. Whether the 10% cut leads to pressure on councils’ funding, pressure for them to find cash from other sources or greater cuts for those who are not protected will depend on how the cut is distributed across local authorities, local decisions on the design of the scheme, the make-up of the population within an authority’s area, the proportion of people who are protected by central Government and the degree to which the move from a council tax benefit to a council tax discount encourages take-up among people who are already entitled to support but do not claim it.

Central Government would not make this move if it affected themselves. As my hon. Friend the Member for Warrington North said, they are transferring what is currently annually managed expenditure—the current costs of the council tax benefit scheme are driven by factors that are not under the control of councils—to funding that is covered by the local government departmental expenditure limit. That will put an unrealistic and unfair funding noose around the neck of local government, because the year one base level will involve a 10% cut. My fear is that what could and should be a good move for local government and the people it serves—a locally designed council tax support scheme—is damaged and discredited before it starts by the design of the scheme.

[Mr Mike Hancock]

May I say how nice it is to see you in the Chair, Mr Crausby?

I wish to raise my concern about the fact that we are approaching 7 o’clock and will hardly get halfway down the selection list. The time available is totally inadequate. Goodness knows what the Government were thinking about, giving us just three days in Committee. It is an absolute travesty. I only hope that they will give us at least one whole day, and possibly two, on Report to allow debate on many of the matters that have not been discussed in Committee.

If the House is to do justice to the Bill, we should at least get a chance to discuss some of the very important amendments that have been tabled. I see them not as wrecking amendments but as helpful, creative amendments that would show the Government the strength of feeling in the House. Legitimate concerns have been raised from both sides of the House on this group of amendments alone, and if I were the Minister leading the Bill I would like to give the House more time to discuss them properly. If we are not careful, we will end up with a dog’s dinner, which cannot be right or fair to local authorities.

The most important issue in this group of amendments is raised in new clause 11, with which I agree entirely. It gets to the very essence of what the Committee has discussed on previous days. It is about the stability and sustainability of local government and its ability to stay clearly focused on its task. Support for new clause 11 is essential to give local authorities a fair chance of implementing the scheme.

The Government have expressed no clear and positive view about what they can do to help local authorities. I ask Ministers what is wrong with new clause 11 if they believe in fairness and in giving local authorities a proper opportunity to get the scheme right. Who will benefit if it is got wrong? No one, least of all the people who claim benefits. Most of the blame will fall on local authorities, and once again we are going down the well trodden path whereby the Government decide to disrobe themselves of their responsibilities and pass them off to local government, but forget to put the resources in place to help things happen.

I do not suppose that at the end of this debate the Minister will dish out to Members a scheme that has already been concocted, so that they can take it back to their local authorities and say, “This is the scheme we want you to use. We’ve paid for it, we’ve got it in place, and all you’ve got to do is tweak it a little. It’s tried and tested, and we’re prepared to give it to you.” That is not going to happen, is it?

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[Mr Howarth]

The hon. Gentleman is right. That underscores the point that he and others made earlier: to some extent, we are taking a leap in the dark. Several hon. Members have said that one of the difficulties with local government finance is that, when you change it, the impact is unpredictable. I do not need to rehearse the history of the poll tax to show that. The position that we are considering is exactly the same in that it is unpredictable and volatile.

[John Healey]

The effect is uncertain, but it is possible to make some projections. In my authority of Rotherham—a member of the SIGOMA group—if the pensioners are protected in the way in which the Government clearly believe that they will be, everyone else who is currently entitled to support, including many who work but get low wages, and therefore require and have a right to that support, will take a cut of not 10% but 19.5%.

[Mr Howarth]

My right hon. Friend makes a strong point, which I hope to tackle shortly.

Currently, many people, especially young people, have to accept jobs, often well below the level of their qualifications, on a minimum wage, at the same time as having to forge an independent existence from their families. I fear that they, or young couples with families, in which the principal earner is on a low wage, will be most affected and put in an impossible position, unless the discretionary powers that the Bill describes are spelled out clearly so that the outcomes cannot be arbitrary. We deserve to know at least what the Government are planning, and that should appear on the face of the Bill. Who are the classes of people? There are vague descriptions in schedule 4, but nothing is spelled out clearly.

I said I wanted to talk about Knowsley and the Liverpool city region. I am indebted to the director of finance in Knowsley for the impartial briefing he has given to me—it is a Labour authority, but he has provided advice on the basis of his financial experience and qualifications. His view is that the 10% cut combined with pensioner protection means that the benefit of other claimants will have to be cut by 18%. If there is provision for others in a local scheme—they could be singled out or ring-fenced—that 18% cut could increase to as much as a 100%, because people could be excluded altogether, as the hon. Member for Poole said.

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[Mr Jones]

My hon. Friend says that the figure is 56%. Only 2% of properties in Surrey are in band A. The ability of councils in the north-east to raise additional funds is severely limited.

[John Healey]

My hon. Friend is talking about plugging the hole caused by the 10% cut and highlighting the feeble arguments from Ministers about the flexibility around the second home discount. Has he asked himself why the Government have not considered the single person’s discount, which is worth £2.4 billion in total—more than five times the 10% cut?

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As for ensuring that the timetable is adhered to—the right hon. Member for Greenwich and Woolwich (Mr Raynsford) raised some issues in this regard—we are already working with local authorities and IT suppliers to identify how we can ensure that any new processes and systems are in place for April next year. We are committed to ensuring a steady flow of information to local government on our plans for delivery and the framework in which local authorities will operate. We will also look at what tools we can provide for local authorities to help them in their planning.

[John Healey]

The Minister talked about the IT suppliers and working to ensure that their new systems are in place by April next year, but they are going to need to be ready, fully designed, tested and operational well before the end of this year during the period when local authorities will be consulting on and designing their schemes and reassuring themselves that they can be put in place. Is not the reality more likely to be that the options on schemes will be restricted by the designs that the software suppliers will have ready to go?

[Andrew Stunell]

That is an important consideration for local authorities when they look at the speed and pace of change in the schemes they devise, but I have to say that practically everything that Labour Members have contributed to the debate has been on the basis of trying to preserve the existing scheme and associated costs. [Interruption.] I think that local authorities will probably take a cautious approach to changing their local schemes in the first year. I have to say, however, that we believe it is absolutely the case that those that wish to make a more radical change will be able to do so. I am encouraged to hear that IT suppliers are considering the possible changes to existing software and are working with local authorities to—[Interruption.]

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[Andrew Stunell]

Thank you, Ms Primarolo.

As I was saying, IT suppliers are considering possible changes to existing software and they are working with local authorities. I recognise, of course, that local authorities and suppliers need as much information as possible as soon as possible. For that reason, we intend to publish draft regulations while the Bill is still before the House. We shall shortly make available a design tool to make it easier for local authorities to model their case load and the impacts of any changes to the framework, which should also clarify the extent of any IT changes that the design of their scheme might require.

[John Healey]

I must say that it is welcome to hear the Minister say that the Government are committing themselves to draft regulations published while the Bill is before the House. Will he make it clear whether that means this House or the other House?

[Andrew Stunell]

I am looking for a nod somewhere, but let us stick with this House.

Amendment 71 states that the Secretary of State should have regard to the impact of any guidance on those of pensionable and working ages and those on benefits, particularly disability benefits. However, the Government have already made clear their intention to use the guidance to set out the importance of supporting work incentives through the design of local schemes and will consider how to ensure that local authorities are aware of their duties in respect of vulnerable groups. It is unclear whether amendment 71 would add to the Government’s commitment in this regard.

There are things that councils can begin to do now to help in their preparation—in understanding the circumstances of those in their area who currently claim support, in ensuring that elected members are aware of the decisions they need to take and in engaging with precepting authorities such as police and fire authorities. The Government have been clear that local authorities must ensure that they are on the front foot in preparing for this reform.

In summary, I must recommend that the Committee reject the Opposition amendment on this occasion.

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[John Healey]

The hon. Gentleman is making a persuasive case, which is consistent with pooling principles elsewhere in the Bill, and I hope he makes some headway with Ministers. Does he not agree that, with only four minutes left when we started this group of amendments, only the third of 10 on the selection paper, there are some important issues that we have not reached, and that if they are to be aired we will have to return to them on Report?

[George Hollingbery]

I am grateful to the right hon. Gentleman for his intervention, in which he makes a reasonable point. However, if I may, I shall continue to develop my theme a little further.

I believe we would achieve a commonality of expectation across a pooled area, such that people could begin to understand what they would get from a council tax rebate scheme. Simply put, we would avoid the strange situations where streets are split in such a way that there is one expectation of the scheme on one side of the street and a different expectation on the other. The Bill makes no mention of such schemes, but chapter 3 of the Government’s response to the consultation on localising support covers the issue, and it makes the case that such schemes are possible under existing powers. It would be useful if the Minister briefly outlined his thoughts on how that would work, and which existing powers might allow local authorities to draw up schemes—assuming, of course, that he will have the time to do so, which is unlikely.

Even if legislation allows such schemes to be put together, it might be useful for there to be a standard, approved scheme, produced by Government, to reduce cost still further.