Council Tax Support

Kate Green Excerpts

Wednesday 14th May 2014 Westminster Hall

[Mr Raynsford]

My hon. Friend has identified one of the interesting characteristics of the consequences of this change to localisation—the significant and often surprising variations between individual areas. One of the curious characteristics of the change is that, based on figures I have seen, the largest adverse impact appears to be on council tax benefit recipients in the south-west, who are now facing a greater average obligation to pay than those in any other region in England.

[Kate Green (Stretford and Urmston) (Lab)]

I am grateful to my right hon. Friend and to my hon. Friend the Member for Plymouth, Moor View (Alison Seabeck) for pointing out that anomaly. Is it not the case that when local authorities or regions have substantial and disproportionately high numbers of older people and pensioners, the effect will inevitably be felt more adversely in those areas? I guess that is as likely to be an explanation in the south-west as it is in my local authority of Trafford.

[Mr Raynsford]

I am grateful to my hon. Friend for identifying precisely the factor likely to be behind the slightly surprising figure from the south-west. In the north-west one might expect it because there is probably more substantial poverty than in the south-west so there might be a bigger problem with the greater proportion of council tax that individual households must meet, but the number of households with people over pension age who are protected has a significant impact and I suspect that that is the main reason why the south-west features in this way. That highlights the arbitrary and curious consequences of the rules that the Government have put in place.

In the first year of the new arrangements, there was protection with the 8.5% limit provided by the Government’s transitional support, but when that support ended, many authorities increased the amount they expect individuals to pay without support and as a result the overall level of council tax support in 2014-15 will be lower than in the previous year and substantially lower than under the former council tax benefit scheme. Research by the New Policy Institute for the Joseph Rowntree Foundation shows that 2,340,000 low-income families will be paying an average of £149 a year more in council tax this year than under the old council tax benefit scheme. For a Government who continually boast about their efforts to keep council tax demands down, and threaten action against councils that seek to increase council tax, this figure should be a source of deep shame. More than 2.25 million households are being required to pay an average of almost £3 a week extra in council tax purely because of the Government’s actions, and £3 a week is a significant amount to those living on the edge of poverty.

As the Joseph Rowntree Foundation report points out, there is ongoing uncertainty for households who may face further cuts in future years as the system that the Government have put in place not only gives local authorities the option to change the scheme, but provides an incentive to cut council tax support further in future years. If they cannot increase council tax because the Government have blocked that option, a further cut in council tax support is the only available option to increase their council tax revenue. Such perverse incentives to cut help to the poor is a shameful outcome, for which the Government are wholly responsible.

Not surprisingly, the impact of the cuts on entitlement to low-income families has led to increased debt, arrears and bailiff action to recover debt. The New Policy Institute research suggests that the growth in arrears has been most marked in areas where a minimum payment obligation has been introduced. As yet, the detailed evidence available from different parts of the country is patchy, but Citizens Advice believes that council tax debt now accounts for around 10% of all its debt inquiry work and the debt charity, StepChange, reports 45,000 people seeking its help with council tax arrears in 2013—a staggering 78% increase on the previous year.

As we know only too well, the cuts to council tax support are only one of a series of benefit cuts by the Government, and problems become even more acute when there is a cumulative impact of two or more benefit cuts hitting individual households.

--- Later in debate ---

[Kate Green (Stretford and Urmston) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Crausby, and take part in the debate. I am grateful to my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) for bringing the matter to the attention of the House. I have only a few points to add to what my colleagues have said, all of which I support.

I am concerned that the effect of the policy, combined with many other policies on social welfare support, is perverse and extremely harmful to those who experience its effects. I endorse the calls that have been made for the Government to take the earliest opportunity to review it. My colleagues have mentioned the risk that households will encounter work disincentives. In the next few weeks, a universal credit area will begin for some Trafford residents. The work disincentives that the council tax policy may create could, for those claimants, wipe out all the promised advantages of universal credit.

It is ridiculous to bring in one policy with the intention of incentivising employment, and another that may do the exact opposite. Equally, it is perverse to bring in a policy partly on the grounds of efficiency and cost-effectiveness before any clarity has been reached about how local authorities will organise their staffing complements, particularly as in many local authorities, including mine, housing benefit and council tax benefit—the predecessor of council tax support—were administered by a single team.

We are now going through what could be quite a long transition, until every Trafford claimant is on universal credit. Ministers tell us that that could take until 2017, but frankly, I think it could take longer when I see how it is coming along. That creates huge uncertainty for the local authority in planning the staff complement to manage council tax support, which it will continue to administer, and to prepare for the fact that it may not be managing the housing benefit element of what will become universal credit in relation to a diminishing number of residents over time.

It is incredibly difficult for the authority to plan its staffing resource in such uncertainty, and many good staff are beginning to vote with their feet and leave. Not only have local authorities been presented with all the difficulties of managing the budget described by my right hon. and hon. Friends; they also have a difficult administrative and human resources challenge to manage, because of the policy being brought in against the backdrop of other changes.

I agree with my colleagues that the system is right to protect pensioners, because of their limited options for improving their incomes. However, the policy is one more example of the current out-of-proportion tipping of the whole welfare system away from working-age people. It is becoming a residual system for older people only. Our welfare state was meant to be a welfare state for life—from cradle to grave—to protect us all in bad times if and when we needed it, and paid into by citizens to prepare for those bad times.

It is disgraceful for the Government repeatedly to pervert the philosophy that underpinned the welfare state, which they claim to be proud of, as we are. That is not to say that we do not want to offer pensioners the best possible protection. However, it is quite wrong that families with children, disabled people and their carers, and working people on low wages no longer enjoy the protection of the welfare state. Those, too, are precisely the people it was intended to protect.

My colleagues have pointed out an unevenness around the country in the kind of support that people receive from their local authority, and I am concerned about that too. We have a postcode lottery. No one is against the sensible localising of decisions, but postcode lotteries that leave families in some parts of the country at greater risk of poverty cannot be the kind of welfare support that we want.

In some local authorities, some income-related benefits or cash benefits are treated as income when eligibility for council tax support is calculated. Child benefit, child maintenance payments and disability living allowance are being taken into account in calculating someone’s means. However, they are not intended as income replacement benefits; they have the specific purpose of helping families with the cost of raising children and helping disabled people meet the additional cost of living with an impairment. It cannot be right that local authorities must take those benefits into consideration when they assess someone’s ability to meet council tax obligations, or their eligibility for council tax support. That is yet another demonstration of the total lack of regard to—or, perhaps, understanding of—how the welfare state has been constructed, and what the different social security benefits are for.

I endorse the calls made this afternoon for a proper, wholesale, urgent review of the policy, in the context of the coalition Government’s welfare changes. That cannot be just a one-off review, because universal credit and other changes are being rolled out over such a protracted period. I hope that the Minister will tell us a little more about what will happen after the first review and how he expects to keep the policy under careful consideration.

I share all the anxieties expressed this afternoon. The policy is not working for some of the poorest families in our constituencies. Ministers owe such families a duty of care and protection and it is not acceptable for them to wash their hands and pass the problem down to local authorities that have little choice in how they can administer the system.