Local Government Finance

Debate between John Hemming and Brandon Lewis

Wednesday 12th February 2014 Commons Chamber

[Brandon Lewis]

Actually, it has not. A council that has some of the greatest cuts is my own local authority in Great Yarmouth, which was left a black hole by the last Labour Government through the working neighbourhoods fund. I gently say to the hon. Lady that she might want to remind Mayor Anderson that Liverpool’s authority has £116 million in reserve, one of the highest spending powers in the country in the first place, a regional growth fund and a city deal. This Government are working with such local authorities.

[John Hemming (Birmingham, Yardley) (LD)]

I thank the Minister for meeting MPs from Birmingham to look at this issue, and I congratulate hon. Members generally on highlighting the difficulty of working out what a fair system is for allocating local government finance. The Government have focused on percentage reductions in spending power. Does the Minister agree that, after incentives, looking towards the reduction in percentage spending power, not absolute spending power, provides an equality of pain that gives us a way forward? It takes into account the fact that in areas like Greater Birmingham, where people work in Birmingham but live around it and require services from Birmingham but are not contributing towards—

Council Tax (Benefit Claimants)

Debate between John Hemming and Brandon Lewis

Tuesday 29th January 2013 Westminster Hall

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

It is a pleasure to serve under your chairmanship today, Sir Roger. I am grateful to my hon. Friend the Member for Birmingham, Yardley (John Hemming) for providing us with the opportunity to debate the policy of localising council tax support, which will be delivered through the Local Government Finance Act 2012. I will touch on the salient points generally as well as the specific points about the council in Birmingham if time allows.

There is widespread recognition that welfare spending needs to be targeted better. My hon. Friend made that point. More needs to be done to tackle poverty by getting people off benefits and into work. Council tax benefit expenditure more than doubled between 1997 and 2010 under the Labour Government. Localising support for council tax delivers a 10% saving on council tax benefit expenditure, making a vital contribution to deficit reduction.

Importantly, however, this reform also gives local authorities control over how this saving is delivered, and it gives them a direct financial stake in supporting local people into work. I am clear that councils are best placed to understand local priorities and the needs of residents on low incomes. Localisation enables them to take local factors into account when deciding on levels of support and programmes.

Localising council tax support gives local authorities a real stake in the economic future of their areas. We want local authorities to do more to grow their local economy and reap more of the benefits of local economic growth. Making local authorities responsible for council tax support reinforces the positive benefits of driving economic growth in their areas. Funding for local council tax support schemes is being provided through the retained business rates system itself, further strengthening the incentive for local authorities to grow their local economy and get more people into work in the first place. In doing so, local authorities will not only be helping to create jobs, but will be increasing the income from increases in business rates and, therefore, the amount that they can spend on other valued local services.

Through our other local government reforms we have been clear that we want local authorities to be fully accountable for the decisions that they take. At present, councils can put up council tax without considering the impact on council tax benefit costs. Localising council tax support will change that and encourage greater local financial accountability. It will also strengthen the incentives to drive down fraud and error. We have shown that local authorities can do far more about that.

Councils have choices about how to design their schemes and manage the reduction in funding. As well as being able to choose whether some awards should be reduced, they can also manage the reduction by reconfiguring funding for other services through efficiency savings, using reserves, or using the flexibility that we have now given over council tax charges. I am aware that some local authorities, such as East Hampshire district council, Bristol and the London borough of Merton have decided to do just that, so that council tax benefit claimants in their areas see no reduction in the support that they receive, which shows that it can be done.

Local authorities have until this Thursday to agree their local schemes. I am aware of a range of options that are being considered across different authorities in addition to the examples I have given.

[John Hemming]

Will the Minister confirm that if a local authority has not agreed a scheme, central Government will impose a scheme where people on JSA pay no money?

[Brandon Lewis]

I will come back to that point in a moment.

Let me give another example. Mansfield district council has agreed a scheme that will see claimants pay a maximum of 8.5% of their council tax bill and no change to the support that they receive on top of that for six weeks after returning to work, which is better than the current four. The council has also set up a hardship fund to assist people who experience genuine financial difficulties as a result of the changes. That is the kind of sensible, forward-thinking approach that I hope to see other local authorities adopting. The debate is a good opportunity to put on the record some of the great work that authorities are doing.

[Brandon Lewis]

I will touch on a comment that was made by my hon. Friend the Member for Birmingham, Yardley earlier. To be fair, he made the point very well. Some hon. Members are confusing their role as Members of Parliament in representing their residents when they criticise my hon. Friend and make comments about supporting Birmingham. The job of an MP is not to support the council; it is to support, defend and stand up for the residents. There is nothing wrong with a Member of Parliament standing up for the residents and challenging the council on whether it is doing the right thing and putting in a good scheme. I have already given examples of councils that are doing the right thing by their residents. If Birmingham does not choose to do that, that is a decision that Birmingham residents should consider carefully when they get their opportunity at the ballot box.

[John Hemming]

Does the Minister agree that if the council produces massive figures by exaggerating, for instance, inflation, it gets misleading results?

[Brandon Lewis]

That is a fair point. Obviously, anybody can use figures in a way that suits them. The reality is that we have put in some money to help councils through the first year or so, and I will come back to that in a moment. However, if councils have not done anything by Thursday, the current scheme stays in place.

I see the most variation in the amount that local authorities propose to charge benefit claimants who have previously received 100% support. Suggested amounts range from 6% to 30% of council tax bills.