Local Government Finance Bill

Lord Greaves Excerpts

Tuesday 10th July 2012 Grand Committee

[Lord Tope]

Only in a localist sense. It is fair to say that this issue has divided opinion throughout the country and, certainly, opinion within local government. When the Government’s proposals were first announced as the localisation of council tax benefit—council tax support, as it now is—many of my colleagues in local government were surprisingly enthusiastically supportive of it, perhaps because of the word “localisation”. That is a seductive word for many of us who would quite rightly describe ourselves as localists; I am very much one of those. I said in the Second Reading debate, and say again, that others including myself have thought throughout this that it properly belongs with universal credit. That is my personal view; it is not shared by all colleagues in my party. To be fair, it is not shared by all colleagues in any party. It divided local government. The Local Government Association still supports the localisation of council tax support in principle, with increasing reservations. On the other hand, London Councils, to which my authority belongs, has always opposed the move. Let us not pretend that there is one universal belief about all of this.

I cannot help feeling that today we are having a Second Reading debate that actually happened last year rather than in relation to this Bill. I know that this was much debated—and others here know much better than me; they experienced it—during the passage of the Welfare Reform Bill. The noble Baroness, Lady Hollis, is almost certainly right to say that it was an argument between the DWP and DCLG, the outcome of which we are here today to discuss. I feel now that we have to move on.

The reality is, whatever our dire predictions may be—and I have to say dire predictions that it will be “just like the poll tax” are exaggerated; I cannot know that, nor can anyone else here, but I do not think it will be that bad—it will pose some real difficulties for local authorities. We have heard mention already of the difficulties experienced under poll tax, and in other situations, by local authorities having to attempt to collect relatively small debts, particularly from people who have not previously been paying council tax, and for whom paying it is not the norm or part of the culture. Whether or not these predictions are exaggerated, only time will tell. I think they possibly are but then I joined the Liberal Party in the 1960s—I am an optimist. We wait to see.

As we say so often, we are where we are. This is what is going to happen, and what we need to do today and in future proceedings on this Bill is to see how we can mitigate the very worst effects of what is proposed in it and the accompanying regulations. It was inevitable that we were going to have this Second Reading-style debate now, but we need to move on and accept that, whether we like it or not, we have to implement what is to come in the best way possible. I hope and believe that we will have a constructive debate on how we are going to achieve that.

One of the worst aspects of all of this is actually calling it the localisation of council tax support. Frankly, I do not believe it is localisation; it is passing a scheme to local administration. It is the worst of all worlds. I am sorry to say this to my noble friends: it is not localisation, it is not moving to local authorities the right to determine the schemes for themselves; it is passing them a very prescribed scheme, together with a £500 million reduction. We will not debate the need for that reduction today; I think there are better ways of achieving that, but again that is what is going to happen and this is the way it is to be done.

There is extremely qualified support from me for what my Government are trying to do. I have to speak honestly about that but I hope that from now on we can discuss how we can make it better—or, if Members opposite prefer, less bad.

[Lord Greaves]

My Lords, perhaps my noble friend should have spoken after me.

[Lord Tope]

I was trying to offer some guidance.

[Lord Greaves]

My noble friend was looking for some guidance? He might get some. My noble friend said that the role of this Committee is to look for ways of mitigating what I believe is going to be a potentially disastrous situation. He is right, of course, but before we can understand how to mitigate it, we have to understand what some of the problems are going to be and the effect this policy is going to have.

My noble friend is right in saying that it is not going to be as bad as the poll tax. It only causes one of the problems the poll tax caused, not the two main problems—certainly in my part of the world—and it is not going to affect as many people. But for the people it does affect, some of the problems are going to be the same.

The poll tax had two basic problems. As has been discussed, one was that it resulted in local authorities having to collect relatively small amounts of money from a lot of people. This was extremely expensive and not cost-effective. The second problem was that for people in the kind of houses that exist in large parts of the north of England and other areas—that is, relatively cheap terraced houses, which had very low rates in the past—the poll tax resulted in a huge increase in what they had to pay. In our area, it increased overnight by three or four times for people who were moving into a new house or an old house like that. That was one reason why people refused to pay it. Another was that it was a poll tax, not a property tax.

I was leader of the council at the time. I had the pleasure of introducing the first poll tax budget in Pendle. The consequence of that was that my party got booted out at that year’s elections, was kept out for another couple of years and I was no longer leader of the council. However, these things go round in circles. There is a new leader of the council now. That is what happened. We should learn from history but people simply do not. The noble Baroness, Lady Hollis, mentioned the Poor Law of the 1830s and the poll tax. It seems that people simply are not learning the lessons of history here.

The noble Lord, Lord Smith of Leigh, talked about the kind of housing in Wigan, of which we have large amounts in east Lancashire. He is absolutely right. Although we have a relatively high vacancy rate in such properties—perhaps 5% or 6% in some areas—it will be extremely difficult to collect the money from those properties. Again, there is a question of cost-effectiveness. You cannot really send the bailiffs round to an empty house. You have to pursue the owners, who may be in other parts of the country and often are.

I will just put forward one or two facts from my own small district authority that illustrate the problem. All authorities will differ in the proportion of people who fit into different categories and so on, but the basic problems will be similar, certainly in the north of England. At the moment, 10,457 people in total receive council tax benefit. Of those, 42% are pensioners. In some areas the figure is higher—much higher in some—and in some it is lower. In addition, there is the question of identifying vulnerable people, who will also be protected. That in itself will cause a problem to local authorities. There will be different definitions in different authorities, which may be seen as unfair, as the noble Baroness pointed out.

In total, those protected will account for between 40% and 50%. Of the rest who are not pensioners—50% to 58%—the number who are passported claimants of working age is around 64%. That is, of the people of working age who claim council tax benefits, around 64% are passported benefit claimants who get, in most cases, 100%. In other words, around 36% of people—around 2,200 of them—are being means-tested by their local authority. They are the people who are, by and large, being given part-payment. Some get 100% but most get part-payment. That is the sort of scale. They are the people who, between them, will cause problems.

Of those 10,457 people, 8,816 are in properties that are classified as band A for the purposes of council tax. They are mainly terraced houses but some are flats and bungalows and so on. This means that those 58% of people of working age will be lumbered with the whole cost of the 10% reduction if the local authority chooses to pass it on to them by charging them a council tax. If it is all done that way, the council tax benefit reduction under the new scheme will be around 18% for persons of working age. Some of those persons are on benefits. Some are working but, by definition, they are not in a position to pay more tax or to pay tax when they do not at the moment. In any case, if they get housing benefit and so on, they are often already suffering from cuts in what they will receive. So it will not be easy and the collection will be a problem.

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[Lord Greaves]

My Lords, I am grateful that the Minister specifically responded to some of the points I made. He asked, “Who will pay the bill?”, and answered, “The taxpayer”—by which of course he meant the Government, although clearly most government funds come from taxation of every kind. He pointed out that in future the Government will pay only 90% of the costs, which is, in other words, a 10% cut in the requirement to pay from government funds—taxation in general. What he did not explain was why it was fair to cause what most councils will find themselves doing by imposing that 10% on a small group of people—those of working age who claim council tax benefit. It is a clear transfer of that burden from everyone in the country who pays all different sorts of taxes to a very small number of people. The Minister did not explain why that was fair.

Secondly, he said that it would be an opportunity for councils to align council tax benefit—the new council tax reduction scheme—with existing council tax discounts. I do not understand what “align” means, and perhaps he would like to explain it.

[Earl Attlee]

My Lords, unfortunately, I did not catch the noble Lord’s final question. In response to his first point, he said that the difficulty with the scheme was that it would hit a small proportion of the population. The local authority will devise a scheme but, more importantly, it could at the same time also reduce its budget a little, if it wanted to. It is at the local authority’s discretion.

[Lord Greaves]

I wonder if the Minister could write to me on my question about the word “align”? He specifically said, if he checks, it would be possible to align—that was the interesting word—council tax reductions with existing council tax discounts. They seem to be very different things at different levels and I do not know what “align” means at all.

[Earl Attlee]

My Lords, I can assure the noble Lord that we will be very careful to answer all questions.

[Lord Greaves]

Thank you.

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[Noble Lords]

Oh!

[Lord Greaves]

It has been said that the existing claimant count is about 60% of people entitled to it. Is the Minister saying that it is wrong for local authorities to encourage those people who are entitled under the present or new system to actually claim? Under the new system, there would be a real incentive for local authorities to discourage people from claiming. Effectively, because it is a discount, the more people that claim, the lower the council tax base will be in that authority.

[Earl Attlee]

No, my Lords, I am not saying that. People should claim the benefits to which they are entitled. I am saying that the system is designed to encourage local authorities to go for local growth in order to reduce the claimant count. I fully accept the noble Lord’s point that people should claim the benefits to which they are entitled. The local authority may—

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[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.

[Lord Greaves]

Let us assume that a local authority does not devise a scheme that encourages more claimants, but the number of claimants in that area goes up for whatever reason; and that the local authority runs a scheme to means-test people for housing benefit. My authority will probably do that in the first year, although it will be put out to consultation. What if the 60% of people who claim at the moment goes up to 80%? At the moment, it is a national benefit and the Government would automatically pay the cost of the extra 20 percentage points. Under the new scheme, the cost would fall on the local authority because it is a discount, not a national benefit. Increasing the number of people claiming by 20 percentage points would effectively reduce the council tax base of that authority. It is not money that is paid out to people; it is simply deducted from their bill.

We all, I hope, want people to claim benefits to which they are entitled. However, if the local authority, local campaigners for welfare and benefits, or local councillors with the interests of their residents at heart organised a campaign to increase the number of people claiming under the new system, it would reduce the amount of money coming into that authority. Will the Government adjust the grants to that specific authority over a period to take account of that, and how would that be done?

[Earl Attlee]

My Lords, I accept the noble Lord’s analysis of what would happen but the question is: why does it not happen now? Why do we not suddenly see a 20% increase in claimants? The noble Lord is describing a hypothetical situation.

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[Earl Attlee]

My Lords, I need to make progress.

[Lord Greaves]

I agree that the Minister needs to make progress, but will he reflect on this with his officials and write a clear letter about what will happen and who will pay the extra cost if the take-up rises? That is the issue that worries us. It is clear that we will not resolve it today, but reflection by the Minister and some information in writing would be extremely helpful.

[Earl Attlee]

My Lords, I will cover that in my concluding remarks. The noble Baroness, Lady Hollis, suggested that schemes would be determined on the basis of councillors’ prejudices. I refute this, as does my noble friend Lord Shipley. Schemes will have to be constructed by the council, not on the basis of individual councillors’ prejudices. They will not be in a position to take decisions on individuals but will agree to the best system after considering any changes they think they need to make to the current scheme—or they can use the default scheme which, as noble Lords know, is more or less the current scheme.

The noble Lord, Lord Smith of Leigh, made an interesting observation. He said that he supported the localisation of council tax benefits, but not this scheme. If that is so, what scheme would the noble Lord support?