Welfare Reform Bill

Lord Newton of Braintree Excerpts

Monday 12th December 2011 Lords Chamber

[Baroness Hollis of Heigham]

My Lords, I am moving this amendment precisely because I strongly support universal credit. If the House agrees with me in supporting universal credit, I suggest in all decorum that it should also support this amendment.

At the moment, council tax benefit is a social security benefit—a national benefit—which responds to local need. The DWP reimburses local authority spend. If, for example, a factory closes, the need for council tax benefit in that community may increase, and that need is met because the benefit is national and needs-led. Sensibly, therefore, it should be part of universal credit, along with JSA, housing benefit, ESA and so on, because the need for council tax benefit runs alongside those other benefits and should be related to family need, as universal credit will be. Instead, the DWP’s need to include CTB within universal credit appears to have been trumped by the demand of the DCLG and other departments that it form part of a completely separate agenda—the localism agenda. These agendas—universal credit versus localism—clash, and so far the wrong decision has been made.

What is DCLG proposing? In future DCLG will award a fixed-rate grant to local authorities from which it will have to construct its own council rebate scheme. What is wrong with that, your Lordships may think? Quite a lot, and there are three reasons in particular. First, instead of one national scheme that is common across the country, understood by everyone—claimants, local authorities, staff and advice centres—there will be 400 different schemes. There will be a separate and different scheme for every local authority in the country. Norfolk, for example, will have seven schemes that are all different.

Think of the staff resources involved, when we are trying to save money, in constructing and running such schemes, especially when local authorities already outsource much of their work. Think of the complexity of giving advice to people who come into, say, the Norwich Citizens Advice office from all over Norfolk, trying to understand UC and then having to add on seven different taper arrangements according to which district council they come from within Norfolk. All of the admirable simplicity of UC goes out the window. Think of the possibility of underpayment, overpayment, error or even fraud because there is no standard scheme. Given that there will not be enough money to go round, why would any local authority encourage take-up? They will not.

We in this House are rightly building these problems out of universal credit, and the Minister is to be congratulated on that. But we will be building them back in again if this amendment is not accepted. DCLG has balkanised council tax benefit in the name of localism. It recognises this, and now DCLG urges local authorities to do the opposite of what it was calling for—to share common schemes—in which case, why balkanise it in the first place? It will be financed by a fixed grant and will not be needs-led in future. If a factory closes and local need increases, the grant will not go up. Presumably everybody gets less. Or, it will have to be topped up by the council tax that is already suffering 30 per cent cuts in services and a freeze. Think, my Lords, for a moment if that applied to jobseeker’s allowance, and that what you have if you are unemployed in your district depends not on your needs, or on any national standard, but on the needs of everyone else in your district. Your payment would go up and down according to local employment or unemployment figures in your district.

DCLG in its consultation paper recognises this risk, so it suggests—hopefully, idealistically—that local authorities should voluntarily help each other and bail each other out. Oh yeah? Why balkanise, as DCLG requires, if local authorities are too small to bear the risk, as DCLG recgonises? Worse, that fixed grant will be cut by the DCLG by 10 per cent, perhaps more in future. There will be a 10 per cent reduction in council tax benefit per head, but pensioners are to be protected, so the cuts that fall on others will be 20 per cent. However the council, under pressure from local charities, could decide to protect, say, disabled people—I could understand why they would—and give them the full CTB. The more vulnerable families you protect in devising your own local scheme, the more that families in low-paid work—the last man standing, so to speak—carry the cuts.

The Association of North-East Councils has calculated that once vulnerable families are protected, other working-age claimants will face cuts of up to 50 per cent in their council tax benefit. Then work will not pay and universal credit will be a waste of time. Severe cuts in other words are being smuggled in under the drapery of localism but are they essential? At the same time DCLG is spending £250 million on reinstating weekly bin collection or £800 million to freeze council tax, so that my council tax bills are protected while those with much lower incomes on council tax benefit will face cuts of 50 per cent.

Finally, what you will get in CTB will, of course, be determined by your income. Families facing the means test of universal credit will now find that they also face a second means test—that of CTB. How on earth will the value of moving into work be calculated, which is what universal credit is all about, when people face two means tests, two tapers—one with national rules and one with 400 separate local rules—that are layered on top of each other? As the noble Lord, Lord German, rightly said in Committee,

“if you believe in a universal credit, and you have a postcode lottery for what that amount of money might mean to you, how on earth are you going to be able to judge whether or not work is beneficial for you?”.—[Official Report, 6/10/11; col. GC 381.]

Exactly so; I could not have put it better.

UC was designed to bring all working-age benefits together into one so that every one of us would know what we would get and why work paid. Under the localism agenda, council tax benefit—a social security benefit—is being plucked out of UC, thereby destabilising it and balkanising the system. Forgive me, but this is administrative madness. All of this is being proposed in the name of localism but do local authorities want it? City authorities, like the one I used to lead in Norwich, hate it, as they will see some of their poorest citizens unable to pay their council tax and facing arrears and debts. Equally, some small rural districts are now wondering where they will get the staff resources to devise and run their own in-house schemes. East Devon district council’s cabinet has said that the scheme means: “costs, costs, costs”. A councillor said:

“This should be strangled at birth. It is a disgrace . . . We haven’t got the resources and we haven’t got the time”.

Nearly 6 million people receiving council tax benefit will in future not know what they will get because they will have no entitlement—just a handout from the local authority whose generosity or meanness will vary from district to district, from factory opening to factory closure, and from year to year. We took social security away from local authorities when we finally abolished the Poor Law after the Second World War. Now one of the worst effects of the Poor Law—the postcode lottery—is being reinstated for council tax benefit under the name of localism. That is wrong. To add extra means-testing on top of universal credit’s means-testing is insane. It will undermine universal credit without a shadow of a doubt. I and almost every other Member of your Lordships’ House want to see it working, so what then is the point of this Bill? Worse, this guise of localism will make poor people poorer, and local authorities, in whose name this is being done, will be powerless to help them. Council tax benefit needs to be brought back within UC. I beg to move.

[Lord Newton of Braintree]

My Lords, I shall be brief because I know that the House wants to get on. I am a supporter of the universal credit, so I am opposed to anything that is inimical to its success, and the exclusion of council tax benefit is exactly that; it is totally inconsistent with the Government’s proposals.

It is an open secret, although I do not expect the Minister to confirm this from the Front Bench, that the DWP does not want council tax benefit to be excluded, that there has been a battle with the DCLG and that for the moment, although heaven knows why, the localism agenda has prevailed. When anyone asks about 400 different social security systems, we are told that it will not be allowed to happen—so the localism agenda, we are told, will not be allowed to be localism because the local systems will be made to come into line in some sensible way. That is daft, but it is what we are confronted with.

I have two or three points to make. This is said to be cash limited, and indeed a cut. What is going to happen in an area where there is a big factory closure and the money has already been spread out? Does everyone already on council tax benefit have to take a cut in order to finance those who have just come on to it? In areas where, say, a big Tesco opens and 400 new jobs are created, does everyone get a bonus because a lot of people have been taken off council tax benefit? It is mad.

My first constituency boundaries straddled a parish boundary; number 36 Havengore was in Braintree and number 34 was in Chelmsford, but the houses were semi-detached. Can we really have totally different benefit systems for the people living in those two houses? Again, this is mad. Do the local councils want it? The answer is no, it is a nightmare for them. We should stop it, and if this amendment is pressed to a vote, for the first time today I shall not be able to vote for the Government.

[Baroness Meacher]

I support the amendment of the noble Baroness, Lady Hollis, on the importance of including council tax benefit within the universal credit structure and payments system, and I reinforce what the noble Lord has just said. As always, the noble Baroness has set out the arguments extremely cogently, and I know that the Minister needs no reminding of these arguments from me. I want only to reinforce the important point about the resentment of local authorities and their resistance to the proposal to leave them with the council tax benefit problem.

The head of the benefits department of a particular local authority explained on Friday that because they have so little time to change the council tax benefits system radically, they are going to have to use the current system with a 20 per cent taper. This means that they will have to impose a minimum percentage that every claimant of working age will have to pay. This will apparently vary from one local authority to another, depending, as the noble Baroness, Lady Hollis, has said, on the numbers of pensioners living in particular communities and of other vulnerable people who will have to be protected. This particular local authority will have a basic council tax rate of 25 per cent that will have to be paid—a sort of poll tax of 25 per cent of council tax. The local authority in question is far from happy about that, and I understand, as others have said, that anger on the part of local authorities is widespread.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, we support this amendment, and consider, as my noble friend Baroness Hollis does, that council tax benefit should be dealt with as part of the universal credit.

My noble friend delivered a devastating critique of the proposal in Committee and has done so again today. Indeed, I thought I saw the Minister nod in approval at one stage. If he did not nod in approval at my noble friend, perhaps he did for the contribution of the noble Lord, Lord Newton.

[Lord Newton of Braintree]

He welcomed it.

[Lord McKenzie of Luton]

Very good. Of course, this issue is having to be considered, as has been said, against the backdrop of the overall funding for council tax benefit being reduced by 10 per cent but with commitments to protect awards of council tax support for pensioners and possibly for other vulnerable groups. This means, as has been said, that support for working age claimants is to be squeezed dramatically.

The consultation on this proposition, the Localism Bill, closed two months ago, and perhaps we can know when the Government’s response to this will be forthcoming. Quite apart from the administrative consequences of the proposed localism of the benefit, there is, as my noble friend pointed out, a fundamental difference compared with what happens currently. Under present arrangements, council tax benefit is demand led. Whatever the calculation shows is due is made available to the claimant, by offset against the council tax bill, with full reimbursement from the DWP. It is, as my noble friend explained, the AME—annually managed expenditure—bit of government spending.

This will in effect change under a localised system. If claims under a localised system exceed the budgetary amount locally, authorities will have much more limited resources from which to meet the increased demand. They might dip into reserves, if they have any, or they might make the system less generous in a subsequent period. They might switch expenditure from other local authority spend, but given the savage cuts to local authority budgets that have been made recently, there does not seem to be much room for manoeuvre to do that.

It is suggested that local authorities might approach a localised system on some consortium basis, and therefore that other local authorities will help out. I suggest that the prospects for this are not strong. One consequence of these constraints will be that local authorities will inevitably budget on a prudent basis, building in contingencies that will further diminish the resources available to claimants of a localised system. That indeed is what the risk assessment will dictate.

The main reason advanced by the Minister, Grant Shapps MP, in evidence to the CLG Committee for the localisation of council tax benefit was that for local authorities,

“the big advantage is that they will have a stake for the first time in what people who live in those homes are doing; in other words, an incentive to help get the person back into work”.

This is a rather strange view: that it takes possible savings from a benefit pot for local authorities to have an incentive to help people back to work. It is a view that ignores, or is ignorant of, the proactive and imaginative work that many local authorities do to help local residents into work. However, in any event, the driver for having clear incentives to support work is supposed to be the universal credit itself. If there is any incentive in the system, there is a risk that local take-up campaigns will diminish, as any wider take-up will come from the resources of the council.

We have yet to know how much central direction there will be for a localised system. If the Government run true to form, there will be quite a lot. This was certainly the outcome of the Localism Bill, which espoused localism and gave additional powers to local authorities but came with lots of strings attached, as the noble Lord, Lord Newton, will recall, despite some of those strings being removed in your Lordships’ House. There will clearly have to be central direction if the position of pensioners is to be protected, and some form of direction to deal with tapers and work incentives.

We understand, to follow the line of questioning by the noble Lord, Lord German, that the Minister will say that he cannot support a change to the universal credit to include a council tax benefit now. However, there is nothing to stop it being included in the future, as the Bill now stands. If this is the Government’s position, will the Minister confirm that he considers that regulations under Clause 11 will be the route to effect this?

The noble Lord, Lord German, also raised some fascinating questions about how this works for Wales and Scotland. Can the Minister say whether the proposition that he will advance tonight will be, “Don’t worry about it now—you can get it all back in due course.”? What changes would have to be made to the systems that are currently being built to put this into effect? Including council tax support as part of universal credit is of course not without its challenges, particularly the payment issue, so perhaps we can hear whether there has been any thinking around that matter.

However, we support my noble friend’s strong contention that the sensible, practical and principled way to deal with council tax benefit is to include it as part of universal credit. We believe that the Minister, a very logical person, must have come to the same conclusion. If a strong vote today will help his cause, we are more than prepared to play our part.