Lord Shipley
Main Page: Lord Shipley (Liberal Democrat - Life peer)Local Government Finance Bill
Lord Shipley Excerpts
Lord Shipley
My Lords, I first declare my interest as a vice-president of the Local Government Association. This is a helpful debate. I agree entirely with the noble Lord, Lord Bichard, that this is not a time for political tactics. That is because it is a time to help those most in need.
Last week the Deputy Prime Minister stated that as we have to tighten our belts and,
“as we have to make more savings as a country … you start at the top and work your way down, not the other way round”.
I agree with him that those who are poor should be protected. The reason I give my full support to the noble Lord, Lord Best, is that his amendment does that: it protects the poor far better than the Bill does.
We are about to enter the third year of a council tax freeze for most councils, amounting to a 9% reduction in real terms over that period. The Government have paid more than £2 billion to keep council tax bills down. Rightly, this has been widely welcomed by council tax payers—but it is causing higher cuts now because the sums granted to local councils this year and next are for one year only. The baseline is not built up. Crucially, this has meant that those with high incomes, living in a high-band property, have benefited in cash terms much more than others.
Today, around 750,000 people work but get council tax benefit. They get it because their income is low. However, in future a very large number of them could have to pay between £3 and £5 a week because of benefit loss, while higher earners will have no increase at all. As proposed, this will be a regressive step on the working-age poor and it has to be wrong. The amendment of the noble Lord, Lord Best, provides a solution.
We have heard that the £100 million transitional grant is welcome, but it is also the case that the 8.5% cap is underfunded for some councils, which will have to make other cuts to deliver it—and it is only one-year money. We have heard about empty and second homes and that the Government have argued that a 100% levy on empty and second homes could meet the 10% cut they have imposed—except that, with rising demand, it is not a 10% cut but nearer 12.5%. The truth is that whereas some councils can make up the difference on empty and second homes, many councils simply do not have enough empty and second homes to make up the loss, even if they do charge 100%.
The evidence collected by the Local Government Association demonstrates this. More than 100 councils are now in this position and the vast majority of schemes propose to introduce a minimum payment for working-age claimants. Half propose to set the minimum payment at 20% or more, about another quarter propose to set it between 10% and 20%, and the £100 million announced yesterday will make little practical difference because of rising demand.
A deliverable, fair solution is needed which can be introduced with minimum loss to any individual. That solution is to give councils the option to reduce the single-person discount from 25% to 20% while maintaining a pensioner’s current entitlement. It costs the Government nothing. It costs single people very little: just £1 per week for those in bands A and B and just over £2 per week for those in the top two bands. Given the council tax freeze over the past three years, for most of these people these sums seem modest.
The noble Lord, Lord Bichard, raised an issue of principle about localism. Despite ostensibly being localist—having passed the Localism Act and decided that council tax benefit would not be part of universal credit but would be devolved to councils—surely it should follow that policy on exemptions to discounts should be localised too. Too often the Government seem to want to prescribe and proscribe when localism means giving away power and responsibility. We are ending up with part localism, whereby the Government choose some bits that they want to regulate but not others and leave crucial issues unresolved, such as a definition of “vulnerability”.
We have heard that local government is united: all parties on the Local Government Association have signed up to this amendment. The chair of the Local Government Association, Sir Merrick Cockell, said in June:
“The poorest regions and the most vulnerable people will be hardest hit by this cut unless the Government offers councils more flexibility over all forms of council tax discount. It is the only way that councils can ensure that the greatly reduced funding for council tax benefit is targeted at the local people who need it most”.
Would single parents be better off or worse off under the amendment of the noble Lord, Lord Best? They would be better off. Seventy per cent of lone parents are in the bottom two income deciles. They could lose a little from the reduction in the discount to 20% but they would lose far more if they have to pay 20% of the overall charge, albeit 8.5% in year one.
There will be a clear impact on child poverty. In a letter to the noble Lord, Lord McKenzie, in July, the Minister said:
“Local authorities should design localised council tax schemes in a way that best suits local circumstances and consideration should be given to child poverty in the local area”.
I agree entirely with the Minister that council tax schemes should be designed in a way that best suits local circumstances, but it begs the question of how the impact on child poverty should be considered. The noble Lord, Lord Best, has produced the answer. His amendment would require a modest reduction in the single person’s discount for non-pensioners and would then prevent a further, larger burden being placed on the poor.
My final point relates to income tax gain and council tax loss. The Government have done excellent work in removing low-income earners from income tax by raising the threshold before tax needs to be paid, and another tranche of this will occur in April next year. I am still puzzled as to why they are proposing that some of the very same low earners should have to pay more council tax as a consequence of the Bill. From the perspective of the recipient, it amounts to giving with one hand and taking away with the other.
I hope the amendment will pass. It is fair, deliverable and prevents the introduction of a regressive tax. It reflects the experience from the poll tax days. As I have said, all parties on the LGA are signed up to this amendment and I hope that all in your Lordships’ House will be signed up to it too.
Lord True
My Lords, I declare an interest: I am not a vice-president of the Local Government Association, and after the remarks that I am about to make, I am unlikely to be invited to become one because I intend to challenge the unanimity that we have had so far on the amendment.
I pay tribute to the Local Government Association for the work that it has done on the Bill. On this issue, however, I think that it is wrong. I also disagree with a considerable number of my fellow council leaders, including Conservative council leaders, who see this proposal as a kind of 5th Cavalry which is coming over the hill to deal with a problem that, as I have repeatedly said in the House from Second Reading onwards, should not have arisen in the first place. I have lately been described by people inside the Government—or my authority has been described—as a “serial offender”, so I am sure that my noble friend on the Front Bench will be surprised to hear me speaking in this way. I am part of the serial offences, but I also think that, in policy terms, the construction of this Bill is unwise
My old grandmother always told me that two wrongs, as noble Lords know, do not make a right. What is proposed here is effectively a new tax—a broadening of the tax base and an increase in council tax. The amendment proposes that to address a problem which should be addressed, we should challenge the central structure of the council tax as it was first conceived. I can go down memory lane as well, because I was deputy head of the policy unit in No. 10 when John Major formed his Government. At that time, one of the things that we had to do was wrestle with the legacy of the community charge, the poll tax. We had another legacy in our minds at that time—the rates. I have not heard the word “rates” mentioned in this debate but the existence of the rates was thought by many to be a profound injustice. That is how the Government of Margaret Thatcher got into conceiving the solution of the community charge.
One of the central principles agreed across the political spectrum when council tax was created was that the perceived injustice in the rates—that everyone paid the same; that single persons had to pay the same as everyone else—should be addressed. Masquerading under the guise of flexibility, this proposal detracts from that central principle. There is nothing in the amendment about 20% or saying that some can do it, or whatever. As Amendment 98B is written, it is a licence to tax. It is a licence for any local authority. My noble friend Lord Tope said that it is an opening shot in a negotiation. If my noble friends on the Lib Dem Back Benches want to propose a further property tax—in effect, an increase in council tax for every person and household in the country—then, given the time interval in the transitional arrangements, we can have that debate inside the coalition and inside the country. However, I do not know of any public debate about the principle of removing the single-person discount.
It was right that the anomaly in the rates should have been addressed, and addressed well, in the council tax, and I would defend the principle—and it should be defended centrally—that was established in 1992. If we pass the amendment, it will mean a broadening of the tax base. We have heard that this tax is easy to collect. My goodness, yes, of course it is—and I am afraid that some local authorities will think they are quids in. The figures from my finance director show that if we were allowed to get rid of the discount in my local authority, we could cash in £8.5 million. I would not do it but, given the powers in this amendment, will every local authority say, “No, we will restrain ourselves. We will take only the little bit needed to offset the other elements in the Bill that the Government have brought forward”? No, single-person households across the country could suddenly find themselves facing an increase in council tax which no party ever put to them in a manifesto, and no party ever put to them as a point of principle. Perhaps it is because I was involved in the original design of council tax that I do not think we can resile from this principle so lightly.
I do not wish to trespass too much on the time of noble Lords but I am the first person to put the opposing case in reply to five other noble Lords. There has been talk about helping the poor but, as I understand it, the single-person discount goes primarily to low-band households, those in bands A to D. From memory, I think that the percentage might be as high as 90%. I have no doubt that the Minister has the figures. It is not a question of the Rolls-Royce classes suddenly having to stump up an extra bob; council tax increases will be experienced by many. If the discount was abolished in band D in my own authority, it would cost those who are affected £6.40 a week. We are a high-tax authority because we are poorly funded centrally. Even at 20%, however, it would be £1 a week. That is not a negligible sum. Even in my leafy authority, of the 23,000-plus people who would lose the discount as the amendment threatens, 14,000 live in households in bands A to D—and we are rather heavy on higher band households. I would counsel against the easy view that adopting this amendment would help the poor. We might find instead that it hits them.
I may be wrong or I may be right, but taking away a central core of the structure of council tax is a major switch in tax policy. In effect, it would represent a return to the old rates system without public debate. For my part, I could not support that principle without much further and deeper debate than the remaining stages of the Bill will allow.