Lord McKenzie of Luton
Main Page: Lord McKenzie of Luton (Labour - Life peer)Local Government Finance Bill
Lord McKenzie of Luton Excerpts
Lord Ahmad of Wimbledon
My Lords, I shall speak first to Amendments 104A, 105A and 106B. These amendments are technical, ensuring that we, the Government, can deliver our policy to protect pensioners, enabling regulations to provide for a default scheme that largely replicates current council tax benefit, while at the same time providing reassurance to local authorities that their schemes can incorporate certain work-incentivising features of current council tax benefit, where they choose to do so. The amendments also allow such provisions to be applied in Wales.
Taken together, these amendments to Schedule 4 achieve this by ensuring that regulations prescribing requirements for schemes, prescribing the default scheme and providing for schemes in Wales may incorporate provisions equivalent to those that are, or indeed could be, provided for in or under sections of existing legislation relating to council tax benefit, with modifications. Specifically, I refer to Sections 32 to 34 of the Welfare Reform Act 2007.
The amendments will provide the Secretary of State, billing authorities and indeed Welsh Ministers with powers to draw up schemes that achieve largely the same effect as the council tax benefit system with respect to extended payments. Extended payments are a work incentive, included in both the default scheme regulations and prescribed requirements regulations. They allow for a person, for four weeks, to continue to have their council tax support calculated as if they were still in receipt of certain prescribed benefits when entitlement to those benefits ends.
These technical amendments will enable regulations prescribing the requirements for pensioner protection, and the default scheme, to make sure schemes can be constructed in a way broadly consistent with existing arrangements under council tax benefit for extended payments. In relation to local schemes, this will assist local authorities who wish their first scheme to work in a way very similar to the existing scheme.
These technical amendments will promote work incentives and ensure that the Government can give effect to their policy on protecting pensioners. They will also, under the default scheme, ensure that this type of reduction can be offered to low-income taxpayers in authorities that have failed to bring forward their own scheme in time. It also provides local authorities with the flexibility to incorporate extended payment features of the current system into their local schemes, where they choose to do so, and, I have mentioned previously, it provides for Welsh Ministers to do so in their own context.
I turn to Amendment 106ZA. This amendment is necessary to ensure that the Government’s intention to allow flexibility over the payments that must be made by authorities in regulations about funds, such as instalment of the precept, applies, as intended, only to payments relating to council tax receipts. As noble Lords will know, new paragraph 6 of Schedule 1A to the Local Government Finance Act 1992 enables billing authorities to vary the payments or instalments that are required to be made under the collection funds regulations enabling cash flow pressures to be shared with major precepting authorities, subject to their agreement. The intention is to assist with concerns over cash flow pressure that billing authorities may face if, for example, job losses in an area lead to an increase in the demand for council tax reductions. This power can be used only where the authorities concerned agree the approach. We do not plan to require local authorities to enter into any such agreement or to amend regulations about funds to prescribe the approach to reducing payments in year. However, we want to make it clear that this power enables authorities to vary the payments required to be made in regulations under Section 99 of the Local Government Finance Act 1988 about funds relating to council tax only. This is because the same regulation-making power in the Local Government Finance Act 1988 will also be used to make regulations in relation to the new business rates retention system.
As I mentioned at the start, these are technical amendments to ensure that the power in the Bill for major precepting and billing authorities to come to an agreement to vary payments or instalments applies, as intended, only to payments in relation to council tax. I trust that noble Lords will support these amendments.
Lord McKenzie of Luton
My Lords, I am grateful to the noble Lord, Lord Ahmad, for explaining the government amendments. We have no particular issue with them. In respect of the extended payment arrangements, I understood the Minister to say that they would be the subject of local discretion. Is there anything in the requirements of the transitional funding pot that would encourage or discourage the use of these arrangements, or is it neutral?
Lord Ahmad of Wimbledon
If the noble Lord is referring to the new funding, there is not.
Lord Jenkin of Roding
I shall speak also to Amendment 106. I was caught by surprise when the noble Lord, Lord Smith of Leigh, did not move his amendment, or I would have spoken to all three of my amendments together.
Amendment 105 is very straightforward. I do not understand the need for the sub-paragraph that I want to take out. It gives the Secretary of State power to make regulations about the procedure for preparing a local scheme for council tax reliefs. The Government seem determined to get right down into minute detail controlling local authorities. I wonder why this is necessary. When rereading the Hansard report of when I moved this in Committee, I found that my noble friend said that the amendment would,
“remove the default scheme from the Bill altogether”.—[Official Report, 19/7/12; col. GC 176.]
None of us can begin to understand why that should be so. This is nothing whatever to do with the default scheme. It is simply a question of the Government wanting to have regulations to tell local authorities the procedure for introducing a scheme or an amendment. I do not understand that.
Amendment 106 is slightly more complex and may take me a moment or two longer. The sub-paragraphs on page 62 of the Bill require local authorities wanting to make revisions to the local scheme or to replace it to do so by 31 January in the preceding year. This is another amendment that I moved in Grand Committee. We were trying to understand whether the Government had considered the impact of the proposed legislation on the local authority budget and council tax setting process, particularly when there is a procedure under the Localism Act whereby an excessive increase in council tax can be the subject of a referendum.
In response, at col. GC 171 of the Official Report on 19 July, my noble friend suggested that the authorities will need to take their funding levels into account when designing local schemes. Those advising on this believe that this response simply does not reflect fully the conflict of timing between the two requirements and the impact on local authority financial freedom. By putting in a limit of 31 January, the current provisions would prevent an authority revising its local scheme after that date, even though it was necessary to reflect potential new financial realities on the outcome of a local referendum. Again, this seems to be a further and rather undesirable way of controlling local authority decisions.
I am sure that my noble friend will take the point that if you have a power in the Localism Act for the referendum, and the referendum overturns the council’s original proposal, the local authority would have to make a fresh assessment of levying council tax. I do not see how they can do that by 31 January because it would take two or three months for the referendum to come to fruition and for the result to be known. Perhaps between now and Third Reading my noble friend might look at that again in the light of the combination of having to revise the scheme and then being faced with the consequences of a referendum.
If the referendum is lost, there would be nothing to worry about and the original budget and council tax would stand. But if the referendum is successful, as I understand it, the council would have to renew it and make a new one that complies with the requirements that will follow from the referendum. I hope that my noble friend may be able to offer some comfort on that. I beg to move.
Lord McKenzie of Luton
My Lords, as regards Amendment 106, we have a deal of sympathy with the point raised by the noble Lord. My noble friend Lord Beecham thought that the referendum date was May, which in a sense just reinforces the point made by the noble Lord. I am aware that when we discussed it in Committee, the Minister said that the Government were not keen on in-year adjustments, which one can see as a general principle. However, it seems to me that a major point is being raised.
We are less comforted by Amendment 105. It depends on what is encompassed within the concept of procedure for preparing a CT scheme. One of the things that presumably needs to be addressed is the cut-off point between the existing council tax benefit arrangements and the new arrangements, particularly when people, if they are able, are making backdated claims. At the moment, someone can make a claim and it can be backdated. If you make a claim after 1 April and seek to get it backdated, you need something in place to settle those cut-off points. I do not know whether that is a procedure but you can certainly see the Secretary of State having some interest in those sorts of arrangements.
Certainly, Amendment 106 seems to make quite a powerful point. I might add that if the discovery of this £100 million and the transitional fund had happened a couple of months later than it has, that would be good cause for needing this flexibility as well.
Baroness Hanham
My Lords, Amendment 105 would remove the ability of the Government to make regulations about the process by which a council tax reduction scheme is prepared, such as requiring certain documents to be prepared, and the manner in which those documents are published. I should make clear that the Government’s intention was set out in the statement of intent published on Thursday 17 May. In that policy statement we stated our intention not to make regulations at this stage about the procedure for making a scheme, which still holds.
The rationale for not regulating is on the basis that local authorities already routinely consult on a range of issues, and additional prescription should not be required. In other words, they ought to know when they should need to consult.
I am pleased to note that at least 305 councils—or 94% of them—have already commenced their consultations on the schemes, during which vulnerable people will continue to receive protection. However, as with all aspects of policy, we will keep this under review. As the need to consult on schemes for local council tax support is a new requirement, it may become apparent that it is desirable to prescribe certain elements of the process in future years. Retaining this power ensures that, if necessary, we are able to take steps for future years to ensure that the consultation process is fair for the taxpayer.
The effect of Amendment 106 would be to remove the deadline of 31 January for making and revising schemes, and to remove the Secretary of State’s power to change that deadline by order. It is important to maintain the 31 January deadline to ensure that local schemes can be in place in time for April 2013 and that people continue to receive protection from the scheme. Allowing changes after this date would create uncertainty for the people who are benefiting from the scheme as they would face having their awards changed part way through the year. It would also create uncertainty for taxpayers generally, as reductions are reflected in the tax base on which council tax is levied; I do not think that this would be helpful.
When we discussed this amendment in Committee, my noble friend Lord Jenkin asked about the relationship between the setting of the scheme and council tax referendums. Indeed, this point has just been made again tonight. If I may, I will briefly repeat what I said in Committee:
“Local authorities will need to take account of the potential impact on council tax when designing their schemes. They will already know their provisional funding allocations, and the Government expect to have published the proposed referendum principles at the same time as the provisional local government finance settlement”,
and that information will be available. I confirm that any referendum that took place would have to take place in May, after the setting of the council tax should have taken place. In Committee, I went on to say:
“The need to consider the affordability of the proposed scheme and its impact on council tax is no different to taking decisions about the level of funding for other services and their potential impacts on council tax”.—[Official Report, 19/7/12; col. GC 171.]
Any authority that considers that it might breach the referendum principles must prepare a shadow budget setting out how it would carry on its services under a lower rate of council tax.
It is correct to say that it will not be possible for local authorities to go back and change their scheme if a referendum is triggered and a council tax increase vetoed, but it is absolutely right that we do not create unnecessary uncertainty for people in financial need about the amounts of support that they can claim. I hope that with that explanation the noble Lord might be willing to withdraw his amendment.
Baroness Hanham
My Lords, I have written to the noble Lord, Lord Beecham, who raised the question of when an empty home was an empty home, and whether it was based on whether it had furniture in it. The situation is that the six weeks will matter regardless of whether it has furniture in it. It will end up in the same situation and local authorities can make their decisions on the basis that the home is empty.
Lord McKenzie of Luton
My Lords, I am grateful to the noble Baroness for sending us a letter on this in advance of our discussions today. We are happy with the proposition included in the amendment. I think that we had an amendment in Committee that may have prompted the thought but, on reflection, perhaps it was not precisely on point. This amendment is precisely on point and intended to stop-up a loophole. We support it.
Lord Smith of Leigh
My Lords, my view of the political process these days is somewhat prejudiced because I watch “The Thick of It”. I can understand the meeting taking place in the Department for Communities and Local Government with government advisers and civil servants when the idea was mooted for changing the council tax benefit, saving £500 million as a contribution towards deficit reduction but at the same time raising money through changes to the council tax scheme by technical adjustments which would actually fund it. In previous times, that might have been called a stealth tax, but we do not use those words any more.
That might seem superficially attractive, but the major flaw, as my noble friend Lord McKenzie of Luton said earlier, is a misunderstanding of geography. It works very differently in different parts of the country. As we said earlier, the capacity of local authorities to raise money through technical changes depends on a number of factors, including the number of second homes. I made the point that Wigan is not seen as a place in which people live in second homes, and we understand that we might raise £20,000 from that source. I suspect that in the London Borough of Kensington and Chelsea, which the noble Baroness used to run, a single house might raise that. So we are limited in the amount that we can afford.
Secondly, there is a mismatch with the need for council tax benefit support. Those authorities with the least capacity to raise it probably have the greatest liability to pay out council tax support. In Wigan, 25% of our households are on some form of council tax support at the moment, and 65% of those are on full benefits. That is because we have a large number of people on low incomes as well as a large number of pensioners.
The Institute for Fiscal Studies, in its report on the cuts which my noble friend Lord Beecham mentioned, showed that the geographic distribution is not fair. Places such as Wigan, Newcastle and many others have the triple effect of having difficulty raising funding through the council tax adjustment, the need for expenditure on council tax support and the biggest level of cuts to implement.
Last week, when we were debating business rates, I noted with interest that the noble Baroness stressed the importance of equalisation to provide fairness in the distribution of business rates. The amendment is there to say: if it is right to do it for business rates, to ensure that there is a fair playing field for local authorities, we should do it also for the amount of money that can be raised through council tax administrative changes. Then we would have a level playing field and would not need to fritter away £100 million in a strange manner; it could simply be applied and the system would be fair. I beg to move.
Lord McKenzie of Luton
My Lords, my noble friend Lord Smith raises an interesting point in his amendment. There are two bits to it. One is the extent to which local authorities have the capacity to raise revenue under the new freedoms that they get under the Bill; and the second is how that should be dealt with under the revenue support grant as an equalisation process. One difficulty with this in the longer term is that, as I understand it, we do not know whether we will have revenue support grant on an ongoing basis. That is tied up with the issue of the central share, how it is to be used and what redistributive mechanism there will be. Obviously, the greater the local share, the smaller the central share. The more that the central share is used in Section 31-type grants or their equivalent, the less capacity there is in the system to equalise—to do what my noble friend rightly says should be done.
I am not sure what the resources component of the current revenue support grant in the three-part calculation is, or the extent to which that would pick up those issues. It certainly should if it does not. This is an imaginative and appropriate amendment and I look forward to hearing the Minister’s response.
Lord Ahmad of Wimbledon
My Lords, this series of amendments is necessary to provide a route of appeal to a valuation tribunal in England or Wales against any penalties that may be created in regulations under the powers provided in this Bill. Moreover, it gives Her Majesty’s Treasury the power to increase the level of any such penalties in line with inflation. Minor amendments are also being made to enable provision to be made for new penalties to be collected and enforced in the same way as existing penalties under the council tax system. These amendments make no assumptions about the penalties themselves or the offences that may be imposed as an alternative to prosecution, as these have yet to be determined. These amendments seek to ensure that, when such penalties are created in regulations, be it by Welsh Ministers or by the Secretary of State, with Parliament’s approval through the affirmative procedure, there is an available route of appeal.
The amendments also ensure that where there is a change in the value of money, the amount of any penalties may be varied by order made by the Treasury, subject to the negative resolution procedure, without requiring the affirmative procedure to make the necessary regulations. This is consistent with the procedure for increasing the existing penalties that authorities may impose in relation to council tax under Schedule 3 to the Local Government Finance Act 1992. This ensures that where a decision is taken to increase these penalties in line with inflation, any new penalties may be increased by the same order.
Amendment 107E provides that the creation of any new penalties would not impact on the well established system of penalties within the council tax system.
Amendment 107F amends existing powers to make regulations to deal with a situation where a person dies and was liable to pay a penalty, so that provision may also be made in relation to any new penalties created in regulations under new Section 14C.
Amendment 107G provides a clear route of appeal against the new civil penalties that may be imposed by local authorities under regulations made under new Section 14C. Where regulations allow for the imposition of a penalty as an alternative to prosecution, the amendment enables a person to appeal the amount of that penalty. This would be to the Valuation Tribunal for England for penalties affecting English authorities, while such penalties as the Welsh Ministers may decide to create would have a route of appeal to the Valuation Tribunal for Wales.
These amendments seek to make technical changes to ensure that any penalty regime that may accompany these schemes works alongside and mirrors the existing council tax penalty regime. I must admit that this exhausting list of penalties conjures up pictures of football. However, I shall not talk about this at such a late hour. With all the penalty explanations that I have given, I ask noble Lords to support Amendments 107D to 107G.
Lord McKenzie of Luton
My Lords, I thank the Minister for his explanation of these amendments, with which I do not believe we have a problem. I was slightly intrigued by references to the Treasury being able to act where there has been a change in the value of money. Amendment 107D states that,
“the Treasury may by order substitute for that sum such other sum as appears to them to be justified by the change”.
I had a joke about the value of the pound in your pocket, but I think the Minister is too young for that.
From what the Minister said, this simply replicates existing arrangements that are in the system somewhere. The thought of the Treasury being able to roam at will and take a view on changes in the value of money, and therefore being able to bring forward changes to the level of penalties by order, was a bit of a concern. The amendment does not say anything about the regularity with which that can be done. On the basis of the wording, it seems that it can be done at any time; it is not once a year or uprated by other issues. Indeed, when it comes to changes that appear justified to the Treasury, we all know that what the Treasury thinks is justified is not necessarily anything that we will be comfortable with. However, I will not press this matter. If the Minister says that this simply replicates existing arrangements, I am happy with that—or not unhappy.
Lord Ahmad of Wimbledon
I confirm that it is in line with council tax. I am sure that Her Majesty’s Treasury has enough to do without sending people roaming around the country.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister for his explanation of this amendment. I would like to read the record and ponder a bit, but I accept what he says. This is not an issue of contention for us. Perhaps he will recap. I believe he said there was an updated consultation in August with town and parish councils about working together with billing authorities. He will correct me if I am wrong. If that is right, will he say when the Government’s response—if that is not the Government’s response—is likely to be ready?
Lord Ahmad of Wimbledon
The response is being prepared and will be ready in November.
Lord Ahmad of Wimbledon
My Lords, in moving Amendment 109A, I will speak also to Amendment 109B. Both are minor amendments. They would remove the requirement for two months to elapse between Royal Assent being given to the Bill and the date on which provisions allowing for HMRC information to be supplied to local authorities in England, Scotland and Wales for purposes relating to council tax, and to the relevant Northern Ireland departments for purposes relating to rates, come into force.
As noble Lords will I am sure be aware, local authorities in England will have the freedom to design their own schemes for working-age people. It is very likely that most, probably all, local authorities will choose to take into account income and tax credit information, information which originates with Her Majesty’s Revenue and Customs, as well as information pertaining to entitlement to benefits, in determining the level of support they wish to provide to applicants under their schemes.
As currently drafted, the provisions in the Bill containing the power for HMRC to share information with local authorities will come into force only two months after Royal Assent is given. These amendments are a sensible measure to take, allowing for information sharing to begin two months earlier than currently provided for, which will give greater certainty to local authorities as they design and implement their schemes regarding the information they will have and the purposes for which they may use it. I trust that with this brief explanation your Lordships’ House will support these amendments.