Local Government Finance Bill

Lord Beecham Excerpts

Tuesday 10th July 2012 Grand Committee

[Lord Tope]

My Lords, I am not sure now whether I am part of an enlarged coalition or a broad alliance, but whatever it is I am pleased to be part of it. I feel comfortable in such a coalition and alliance. My name and that of my noble friend Lord Palmer of Childs Hill have been added to the amendment and we are pleased to support it. The points have been made.

Perhaps I may add one thing. I suspect that it is unlikely that the Minister will stand up in a moment and say, “No, of course the Government will not consult anyone about this; we will just do it”. I do not think that that is going to happen. I am sure that we will receive reassurance that consultations would take place. I expect that we would have reassurance that the results of the consultation would be taken carefully into account. However, it is the next stage that also concerns many local authorities, and it certainly concerns me. If, as is very likely, there are financial implications from any such policy changes, the reassurance that I should like from the Minister is that the cost and effect of such policy changes will be fully funded by the Government, either anyway or under the new burdens initiative. Frankly, that is one of the key points that we are concerned about—not whether the Government will give us warm words and reassurances about consultation, but whether the effects of any such change will also be fully funded. I look forward to the Minister’s reply.

[Lord Beecham]

My Lords, I envisage that “all interested parties” will include business. However, for the avoidance of doubt it would be helpful if—assuming that the Minister gives her blessing to the amendment in one form or another—she would confirm that that is the case. Clearly, since the rationale of the proposal in the first place is to incentivise local government and its business development policy, however valid that may be, it would make sense to involve business in any consultation about changes to the policy.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, I thank the alliance for its comments on the amendment. In particular I thank my noble friend Lord Jenkin for his explanation of the proposed new clause. I do not suppose that any noble Lord will be surprised to hear me say that I do not consider that such a provision is appropriate or necessary.

I fully understand that in the current system, where business rates are not retained locally, changes to national business rates policy do not affect the level of funding that authorities receive. However, in future such changes could impact on the level of funding available to a local authority. I am sure that Members of the Committee will understand that the Government may need at some stage to make changes to the national business rates policy for a variety of reasons. In the majority of cases it is likely that any changes will have been consulted on, but this may not always be the case. Changes to reliefs are a matter for the Chancellor, and a deferral system that gave businesses the opportunity to defer payment of 60% of the increase in their 2012 business rate bills as a result of the RPI uprating was announced in the autumn Statement. If the Government had consulted on that, businesses would have had to wait at least two or three months longer to receive the benefit, which in some cases could have meant the difference between shutting or remaining open. I use that as an example.

I assure my noble friend that where the Government implement a change to national business rates policy that will involve a net additional cost to local government—a point that was raised by my noble friend Lord Tope—this will be picked up through the new burdens policy. It will be treated as a new burden in line with our commitment to keeping the downward pressure on council tax as far as possible. Given this clear commitment that provides an assurance to local government, I hope that my noble friend will feel able to withdraw his amendment.

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[Lord True]

However, in the early 1990s I worked for Sir John Major at No. 10, where one of our main responsibilities was finding an alternative to the community charge. Therefore, I was in a different place but working on the same issue. In many ways I am also in the same place as other noble Lords who have spoken today. I made a number of points at Second Reading that were taken up by noble Lords. I support to a large degree the intellectual case that was put. My noble friend Lord Tope spoke wise words. The Committee must address practically the issues that have arisen. We have all made our position clear. I said at Second Reading and will say again that I would rather we were not here and that the benefit was part of universal credit. However, given the position that the Government are in, we must try to make this work in the best way possible.

This debate has taken on the tone of that on Amendment 1. I agree with some of the analysis, but if the logic is that the burden will go on a narrower and narrower base, and that base will tend to be lower-income working families, we will have to wrestle with these issues very carefully in Committee. A number of amendments suggest all sorts of other exemptions, some defined, some less defined. Some call for the Government to define who the vulnerable are; that is an interesting concept. The risk is that the Committee could make the work incentive situation worse with a well meaning intent to try to protect broad categories of people who obviously deserve our consideration.

I throw that into the discussion because it will be an interesting tension given that we are also told to take it as read—like my noble friend Lord Tope, I accept the position of my Government—that pensioners are to be excluded. However, as my noble friend Lord Greaves and others have said, that of course narrows the ground. In my authority, too, pensioners make up around 44% of claimants and 43% of council tax benefit spending.

I am not going to claim any credit of prior speaking on this. The point is well made; I made it at Second Reading. However, I hope that as we go forward to look at the amendments in detail we will remember that some well meaning amendments might have the perverse effect of making the work incentive situation even worse. I hope that we can now go on to look at the matters in detail.

[Lord Beecham]

I suppose that we must be grateful to the noble Lord, Lord True, for the part he played in mitigating, to use the phrase of the day, some of the worst consequences of the poll tax. However, he should be gently reminded that an element of the poll tax remains within the present system. That was a most astute piece of reconstruction of the poll tax, somewhat akin to the three-card trick. I do not blame the noble Lord, Lord True, for that; I think that the Secretary of State of the day, the noble Lord, Lord Heseltine, trod the path rather carefully. It certainly was an improvement but, as we all know, it leaves us even now with a system of local taxation more regressive than it should be.

However, we are not really debating the poll tax; we are debating these proposals. It seems to me that my noble friend Lady Hollis’s amendments are designed to have precisely that mitigating effect that the noble Lord, Lord Tope, cannot discern but which the noble Lord, Lord True, rightly encourages us to find. That is because of the link to universal credit. However, frankly, we should stop talking about a 10% cut. It is much more likely to be a higher figure anyway. The £500 million is widely regarded as a substantial underestimate. Then, as implied or explicitly mentioned by other noble Lords this afternoon and at Second Reading, the impact of the exemption of pensioners from this—which I support, contrary, once again, to the ministrations of the Local Government Association—will obviously increase the burden on everybody else. We have heard the noble Lord, Lord Greaves, refer to an 18% figure. The impact assessment talks of a 16% figure. It is interesting to look at what the impact assessment says about the whole issue. Paragraph 34 of the recently updated impact assessment reads:

“Although the net impact of the policy is simply a transfer from council tax payers to Government”—

a phrase worth thinking about—

“(and therefore a reduction in demands on general taxation, by bringing decisions about local tax reliefs closer to those responsible for raising local taxation), there will be some groups who see a reduction in their income. These groups may be: working age council tax benefit claimants”,

as already referred to,

“council tax payers or any recipients of local services that may be reduced in order to meet any funding shortfall”.

Again, this is implicit but is worth making explicit. Then it says:

“However, an accurate analysis of the reduction in income of these groups is not possible since the design of any council tax support scheme for working age people will be at the discretion of local authorities. In addition, the means by which a local authority recovers any shortfall in funding will be for themselves to decide”.

Once again, the buck is passed but accompanying support is not there.

--- Later in debate ---

[Lord Beecham]

My Lords, I must reply to the noble Lord, Lord Jenkin. It is certainly true that that is the association’s position; I did not say that it was not. However, the association’s position is dictated by the two largest parties in it—the Conservative group and the Liberal Democrat group. It is not the consensual view of the association. When I was its chair, that was something that we tried, and usually managed, to achieve. It is the view of the two parties that just happen to support the coalition Government—at least until 10 pm tonight. I do not say that the LGA is misrepresenting the situation; I suppose a majority within the association represents the majority of councils. However, that is not the view of the entire association. Even if it were, it would still be wrong and I would not be backward in criticising my political colleagues in the association if they supported the position that it has taken.

--- Later in debate ---

[Lord Beecham]

I take it that we have finished that little discourse. I shall just revert to the question of the noble Lord, Lord Greaves, about what happens if more people claim benefits. What would happen if councils, or indeed the Government, went so far as to encourage people—particularly pensioners, 60% of whom do not claim—to do so? There is, I believe, £1.8 billion of unclaimed council tax benefit. What happens if those people start to claim? That would presumably take us beyond the £500 million. Who pays for the benefit for those people? Will the Government pay 90% of it or will it all fall on the local authority?

[Earl Attlee]

My Lords, it is clear that a local authority could devise a scheme that would increase the number of claimants. It would then have to take account of that in its budget. Whether local authorities choose to do that is a matter for them.