Local Government Finance Bill

Lord Smith of Leigh Excerpts

Monday 22nd October 2012 Lords Chamber

[Lord Smith of Leigh]

My Lords, last week, I reluctantly supported a similar amendment and, within a week, I have not changed my mind thoroughly—although I preferred the previous amendment because it was more localist than this one, which is more restrictive. I need to declare an interest as a vice-president at the LGA, but that is not why I support the amendment. I support it because I am a leader of a council and will have to make the kind of decisions that noble Lords have described. This may be the least-worst option for some of us. I do not quite agree with the noble Lord, Lord Best. The amendment will not save the day. As I said last week, it will be a help, but it will not save the day, because the gap between what my authority needs to raise to meet the shortfall in the council tax benefit scheme could not be raised under this particular text. However, it will help to mitigate some of the worst impacts that would be felt by other members of my community who are poor and cannot afford to pay the large amounts that they will have to pay if the council tax benefit scheme is introduced in the manner proposed. While I am reluctant to support the amendment, it is much better than having to do some of other things that, without it, I would have to do.

[Lord Shipley]

My Lords, I agree entirely with the noble Lord, Lord Smith, that this is the best of the options that we have available. Crucially—and it is the reason why I thought that the Government might be willing to accept it—the amendment would cost them nothing.

In her Written Statement last week announcing a £100 million transitional grant, the Minister said that it was,

“to help those councils who choose to do the right thing”.—[Official Report, 15/10/12; col. WS164.]

The problem with that is that it does not recognise that many councils cannot do that. There are several reasons why this is the case. We have heard reference to the council tax freeze—last year, this year and now next year. Last year was fine, because the Government built into the baseline of all local authorities the amount that they had lost through the tax being frozen, but, in this financial year and the next financial year, no money has been or will be built into the baseline. That means in practice that councils will have to absorb inflation and rising costs.

There was an expectation that councils, in being able to tax at 100% empty or second homes, would be able to make up the gap in their finances. The problem is that many councils do not have many empty homes or second homes and therefore cannot use that means to make up the gap in their finances.

We should also note, as I reminded the House on Report, that according to figures from the Institute for Fiscal Studies, councils in poorer parts of England have had budget cuts since 2010 at almost three times the rate of councils in the south of England. That is partly a result of the loss of working neighbourhoods funding.

The consequence of all these factors is that many councils have no flexibility or room for manoeuvre. This amendment would give them some extra flexibility. It would mean a small extra weekly sum from a large number of working-age, single person households, most of which have had a freeze in council tax for the past two years and would otherwise have a freeze next year. It would be enough in most cases to take poor working-age households out of paying council tax, thereby preventing a regressive tax being implemented.

Last week, at Report, I reminded the House of a statement made by the Deputy Prime Minister a few days ago. I shall repeat his words because I think they are hugely relevant. He said:

“As we have to tighten our belts … 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 that those who are poor should be protected. The reason why I give my full support to the amendment is that it does just that: it protects the poor better than the Bill. Given that it has the full support of all political groups on the Local Government Association, I hope that your Lordships’ House will feel able to support it.