Local Government Finance Bill

Debate between Lord Shipley and Baroness Sherlock

Tuesday 10th July 2012 Grand Committee

[Baroness Sherlock]

But I hope that the letter will arrive any day now, despite the fact that I have never served as a councillor.

I do not support the principle of the localisation of council tax benefit—as my earlier speech may have made clear. Even if I did, under these terms I would not be happy about it. I would think that I had been sold a pup. One reason for differing views within local authorities—I hope that the Minister will help me understand this better—is that potentially there will be significant regional differences in the impact of this policy.

I will refer again to the report on council tax benefit of the Institute for Fiscal Studies. The IFS note that the pain of this cut will fall disproportionately on poorer areas. It states that in cash terms, the cut in funding will be larger in areas where council tax benefit spending is highest—the more deprived areas of Britain. The report goes on to point out that almost 90% of local authorities face a funding cut of between £10 and £25 per dwelling. It would seem that the risks described by other noble Lords are all downside. That must be of serious concern to local authorities. What does the Minister envisage happening? Will the Government be able to take account of the different positions?

I will give an example. The OBR forecasts a reduction in the number of people claiming passported benefits as a result of the combined effect of presumed economic growth and welfare reform—an increase, therefore, in the number of low earners. The effect on CTB would be to see fewer people claiming maximum council tax benefit or its successor, and more people claiming partial council tax benefit as a result of moving into work. Has any work been done by the OBR to see how even those cost assumptions would be? The most recent quarterly Northern Economic Summary from IPPR North showed two things that spring to mind. First, the number of young people not in education, employment or training is highest in the north of England, at 19%, compared to an average of 16% in England. Given the trends in youth unemployment, that could see more people moving into the unemployed category rather than out of it.

Secondly, the report found that the amount of time people are spending on jobseeker’s allowance is increasing. Almost half—47%—of those claiming JSA in the north have been doing so for more than six months. The average time people have been claiming benefits is more than double what it was during the previous 2008-09 recession. Here I am trying to tease out an understanding of whether the assumptions underlying the costings of the impact on local authorities, and the extent to which they have been future-proofed, have taken account of north-south divides and differences, and what assumptions have been made about changing patterns.

Finally—I will come back to this when we debate later amendments—the Minister will be aware that 85% of council tax benefit at the moment goes to the lower-income half of households, and that almost half goes to the lowest-income quintile. Inevitably, any cuts are bound to be borne by the poorest households. Given the combination of poor households and poor areas being hit, is the Minister not concerned about what will happen to the economies of those areas? I know from talking to at least one northern authority that such a significant proportion of its households are in receipt of a variety of means-tested benefits that cuts in the Welfare Reform Bill alone will, it is anticipated, produce a reduction of demand in the economy as a whole. Have the Government modelled any of those impacts on a regional basis?

[Lord Shipley]

My Lords, first, I do not share the concern of the noble Baroness, Lady Hollis, about the capabilities of local government and councillors. Councillors are perfectly able to produce fair and equitable council tax support schemes. However, one problem we have is that timescales are driving the publication of draft schemes very quickly. Inevitably, draft schemes that go out to consultation will be different. After all, lots of things that local government does are different. Council tax rates are different. It would not be surprising, given differences between local authority areas that there may be differences in council tax support schemes. However, timescales are likely to prove too tight. I think that there will be a problem over equalities impact assessments and the timescales that they require. I would prefer a start date of April 2014, but we will come to that in a moment.

The real issues remain financial support, the level of financial support going into those schemes, and the new burdens doctrine. Amendment 73A matters quite profoundly because we are having a debate about the 10% cut and how it should be applied, and I absolutely subscribe to the view that it cannot simply be loaded on to the working poor. I would prefer it, if it is to be applied, to be spread across council tax payers generally.

Secondly, it has become clear to me that 10% is at the low end of what the reality will be. It will be significantly higher than that and, for the reasons that my noble friend Lord Tope outlined, demand is likely to rise and the change of title from “council tax benefit” to “council tax support” is likely to produce more people applying for it. Economic conditions remain difficult and will continue being difficult for the next two to three years; therefore, more people are likely to be applying.

Thirdly, the fixed-grant system that the Government are likely to introduce seems dubious in terms of who will actually decide on which data the government estimates are based. I fear that the estimates of demand over the first two years of the scheme will prove to be understatement. Therefore, the Government should manage the risk. In the context of 28% front-loaded cuts in the current and previous financial years, which have had a great impact on councils’ ability to meet all their obligations, there is a major principle at stake. If we have a new burdens doctrine, it ought to be applied; otherwise there is no point in the Government having a new burdens doctrine. Given the sum of money involved—£500 million, 10% of the £5 billion annual commitment to council tax benefit—this is an acid test of whether the new burdens doctrine has a future.

I sincerely hope that the Government will look again at this whole issue. I have subscribed, in my role as vice president of the Local Government Association, to the view that if you are going to localise—we are trying to devolve and localise—it is entirely appropriate for local government to take responsibility for this. They are the ones who set council tax. Therefore, they are the ones who are capable and should be responsible for setting the level of council tax support, but they have to be able to do it in the context of knowing that that cash will be available and the risk will be managed against rising demand by a Government that is supportive of them.