Local Government Finance Bill

Lord Tope Excerpts

Tuesday 10th July 2012 Grand Committee

[Lord McKenzie of Luton]

My Lords, I am happy to confirm that the broad alliance remains intact. We are very happy to support the amendment. The key points have been made. We are in a changed environment where what happens to business rates can have a direct impact on local government and this request is straightforward and honest, as the noble Lord described.

[Lord Tope]

My Lords, I am not sure now whether I am part of an enlarged coalition or a broad alliance, but whatever it is I am pleased to be part of it. I feel comfortable in such a coalition and alliance. My name and that of my noble friend Lord Palmer of Childs Hill have been added to the amendment and we are pleased to support it. The points have been made.

Perhaps I may add one thing. I suspect that it is unlikely that the Minister will stand up in a moment and say, “No, of course the Government will not consult anyone about this; we will just do it”. I do not think that that is going to happen. I am sure that we will receive reassurance that consultations would take place. I expect that we would have reassurance that the results of the consultation would be taken carefully into account. However, it is the next stage that also concerns many local authorities, and it certainly concerns me. If, as is very likely, there are financial implications from any such policy changes, the reassurance that I should like from the Minister is that the cost and effect of such policy changes will be fully funded by the Government, either anyway or under the new burdens initiative. Frankly, that is one of the key points that we are concerned about—not whether the Government will give us warm words and reassurances about consultation, but whether the effects of any such change will also be fully funded. I look forward to the Minister’s reply.

[Lord Beecham]

My Lords, I envisage that “all interested parties” will include business. However, for the avoidance of doubt it would be helpful if—assuming that the Minister gives her blessing to the amendment in one form or another—she would confirm that that is the case. Clearly, since the rationale of the proposal in the first place is to incentivise local government and its business development policy, however valid that may be, it would make sense to involve business in any consultation about changes to the policy.

--- Later in debate ---

[Baroness Lister of Burtersett]

My Lords, I had not planned to speak to the amendment, but my noble friend Lady Sherlock raised a question about whether universal credit would be treated as income or not for the means test for local schemes. I am one of those sad people who has spent some of my weekend reading House of Commons Hansard Written Answers, and I have the answer for her. Stephen Timms asked the same question, and the answer was:

“Local authorities will be free to design their own scheme for localised support for working age people in their area. This includes being able to design any means test they wish to include, and deciding on what that test should and should not take account of”.—[Official Report, Commons, 2/7/12; col. 414W].

Going back to what my noble friend Lady Hollis of Heigham said, what local factor could possibly make it fair for one area to include universal credit as income and fair for another not to do so? It makes absolutely no sense at all. Every local authority, unless it goes for the default scheme, will be reinventing the wheel over and over again, working out their own means test. People will see absolutely no fairness in it whatsoever. It makes no sense not to have a national scheme.

[Lord Tope]

My Lords, there are a rather large number of people here who must have been council leaders during the period of the poll tax—as, indeed, I was. I do not want to rehearse much of what has been said about that period except to say that, in my local authority a few years before the poll tax was introduced, we had 47 Conservative councillors and three Liberal Democrat councillors. By the time we had moved to the council tax, we had 47 Liberal Democrat councillors and four Conservatives. The five remaining Labour councillors were astonished to find themselves the principal opposition. So some good did come from the poll tax.

[Baroness Hollis of Heigham]

Only on the localist agenda.

[Lord Tope]

Only in a localist sense. It is fair to say that this issue has divided opinion throughout the country and, certainly, opinion within local government. When the Government’s proposals were first announced as the localisation of council tax benefit—council tax support, as it now is—many of my colleagues in local government were surprisingly enthusiastically supportive of it, perhaps because of the word “localisation”. That is a seductive word for many of us who would quite rightly describe ourselves as localists; I am very much one of those. I said in the Second Reading debate, and say again, that others including myself have thought throughout this that it properly belongs with universal credit. That is my personal view; it is not shared by all colleagues in my party. To be fair, it is not shared by all colleagues in any party. It divided local government. The Local Government Association still supports the localisation of council tax support in principle, with increasing reservations. On the other hand, London Councils, to which my authority belongs, has always opposed the move. Let us not pretend that there is one universal belief about all of this.

I cannot help feeling that today we are having a Second Reading debate that actually happened last year rather than in relation to this Bill. I know that this was much debated—and others here know much better than me; they experienced it—during the passage of the Welfare Reform Bill. The noble Baroness, Lady Hollis, is almost certainly right to say that it was an argument between the DWP and DCLG, the outcome of which we are here today to discuss. I feel now that we have to move on.

The reality is, whatever our dire predictions may be—and I have to say dire predictions that it will be “just like the poll tax” are exaggerated; I cannot know that, nor can anyone else here, but I do not think it will be that bad—it will pose some real difficulties for local authorities. We have heard mention already of the difficulties experienced under poll tax, and in other situations, by local authorities having to attempt to collect relatively small debts, particularly from people who have not previously been paying council tax, and for whom paying it is not the norm or part of the culture. Whether or not these predictions are exaggerated, only time will tell. I think they possibly are but then I joined the Liberal Party in the 1960s—I am an optimist. We wait to see.

As we say so often, we are where we are. This is what is going to happen, and what we need to do today and in future proceedings on this Bill is to see how we can mitigate the very worst effects of what is proposed in it and the accompanying regulations. It was inevitable that we were going to have this Second Reading-style debate now, but we need to move on and accept that, whether we like it or not, we have to implement what is to come in the best way possible. I hope and believe that we will have a constructive debate on how we are going to achieve that.

One of the worst aspects of all of this is actually calling it the localisation of council tax support. Frankly, I do not believe it is localisation; it is passing a scheme to local administration. It is the worst of all worlds. I am sorry to say this to my noble friends: it is not localisation, it is not moving to local authorities the right to determine the schemes for themselves; it is passing them a very prescribed scheme, together with a £500 million reduction. We will not debate the need for that reduction today; I think there are better ways of achieving that, but again that is what is going to happen and this is the way it is to be done.

There is extremely qualified support from me for what my Government are trying to do. I have to speak honestly about that but I hope that from now on we can discuss how we can make it better—or, if Members opposite prefer, less bad.

[Lord Greaves]

My Lords, perhaps my noble friend should have spoken after me.

[Lord Tope]

I was trying to offer some guidance.

[Lord Greaves]

My noble friend was looking for some guidance? He might get some. My noble friend said that the role of this Committee is to look for ways of mitigating what I believe is going to be a potentially disastrous situation. He is right, of course, but before we can understand how to mitigate it, we have to understand what some of the problems are going to be and the effect this policy is going to have.

My noble friend is right in saying that it is not going to be as bad as the poll tax. It only causes one of the problems the poll tax caused, not the two main problems—certainly in my part of the world—and it is not going to affect as many people. But for the people it does affect, some of the problems are going to be the same.

The poll tax had two basic problems. As has been discussed, one was that it resulted in local authorities having to collect relatively small amounts of money from a lot of people. This was extremely expensive and not cost-effective. The second problem was that for people in the kind of houses that exist in large parts of the north of England and other areas—that is, relatively cheap terraced houses, which had very low rates in the past—the poll tax resulted in a huge increase in what they had to pay. In our area, it increased overnight by three or four times for people who were moving into a new house or an old house like that. That was one reason why people refused to pay it. Another was that it was a poll tax, not a property tax.

I was leader of the council at the time. I had the pleasure of introducing the first poll tax budget in Pendle. The consequence of that was that my party got booted out at that year’s elections, was kept out for another couple of years and I was no longer leader of the council. However, these things go round in circles. There is a new leader of the council now. That is what happened. We should learn from history but people simply do not. The noble Baroness, Lady Hollis, mentioned the Poor Law of the 1830s and the poll tax. It seems that people simply are not learning the lessons of history here.

The noble Lord, Lord Smith of Leigh, talked about the kind of housing in Wigan, of which we have large amounts in east Lancashire. He is absolutely right. Although we have a relatively high vacancy rate in such properties—perhaps 5% or 6% in some areas—it will be extremely difficult to collect the money from those properties. Again, there is a question of cost-effectiveness. You cannot really send the bailiffs round to an empty house. You have to pursue the owners, who may be in other parts of the country and often are.

I will just put forward one or two facts from my own small district authority that illustrate the problem. All authorities will differ in the proportion of people who fit into different categories and so on, but the basic problems will be similar, certainly in the north of England. At the moment, 10,457 people in total receive council tax benefit. Of those, 42% are pensioners. In some areas the figure is higher—much higher in some—and in some it is lower. In addition, there is the question of identifying vulnerable people, who will also be protected. That in itself will cause a problem to local authorities. There will be different definitions in different authorities, which may be seen as unfair, as the noble Baroness pointed out.

In total, those protected will account for between 40% and 50%. Of the rest who are not pensioners—50% to 58%—the number who are passported claimants of working age is around 64%. That is, of the people of working age who claim council tax benefits, around 64% are passported benefit claimants who get, in most cases, 100%. In other words, around 36% of people—around 2,200 of them—are being means-tested by their local authority. They are the people who are, by and large, being given part-payment. Some get 100% but most get part-payment. That is the sort of scale. They are the people who, between them, will cause problems.

Of those 10,457 people, 8,816 are in properties that are classified as band A for the purposes of council tax. They are mainly terraced houses but some are flats and bungalows and so on. This means that those 58% of people of working age will be lumbered with the whole cost of the 10% reduction if the local authority chooses to pass it on to them by charging them a council tax. If it is all done that way, the council tax benefit reduction under the new scheme will be around 18% for persons of working age. Some of those persons are on benefits. Some are working but, by definition, they are not in a position to pay more tax or to pay tax when they do not at the moment. In any case, if they get housing benefit and so on, they are often already suffering from cuts in what they will receive. So it will not be easy and the collection will be a problem.

--- Later in debate ---

[Lord True]

My Lords, I cannot claim to have been a council leader at the time of the community charge, as I will carry on calling it.

[Lord Tope]

The noble Lord was too young.

[Lord True]

However, in the early 1990s I worked for Sir John Major at No. 10, where one of our main responsibilities was finding an alternative to the community charge. Therefore, I was in a different place but working on the same issue. In many ways I am also in the same place as other noble Lords who have spoken today. I made a number of points at Second Reading that were taken up by noble Lords. I support to a large degree the intellectual case that was put. My noble friend Lord Tope spoke wise words. The Committee must address practically the issues that have arisen. We have all made our position clear. I said at Second Reading and will say again that I would rather we were not here and that the benefit was part of universal credit. However, given the position that the Government are in, we must try to make this work in the best way possible.

This debate has taken on the tone of that on Amendment 1. I agree with some of the analysis, but if the logic is that the burden will go on a narrower and narrower base, and that base will tend to be lower-income working families, we will have to wrestle with these issues very carefully in Committee. A number of amendments suggest all sorts of other exemptions, some defined, some less defined. Some call for the Government to define who the vulnerable are; that is an interesting concept. The risk is that the Committee could make the work incentive situation worse with a well meaning intent to try to protect broad categories of people who obviously deserve our consideration.

I throw that into the discussion because it will be an interesting tension given that we are also told to take it as read—like my noble friend Lord Tope, I accept the position of my Government—that pensioners are to be excluded. However, as my noble friend Lord Greaves and others have said, that of course narrows the ground. In my authority, too, pensioners make up around 44% of claimants and 43% of council tax benefit spending.

I am not going to claim any credit of prior speaking on this. The point is well made; I made it at Second Reading. However, I hope that as we go forward to look at the amendments in detail we will remember that some well meaning amendments might have the perverse effect of making the work incentive situation even worse. I hope that we can now go on to look at the matters in detail.

--- Later in debate ---

[Lord Jenkin of Roding]

Perhaps I misheard the noble Lord. I understood that he was asking the LGA to reconsider its view. He is perfectly entitled to do so, but it is against the background that the association has considered its opinions on this extremely carefully and has made its decision. Of course it is not unanimous; no one is suggesting that it is. If there were unanimity, the millennium would have arrived. In matters of local authority finance, there are many different points of view. Perhaps we may leave it at that.

In speaking to this amendment, I am looking for some assurance from the Government on how they see the future of this structure. Local authorities are anxious that, after the next comprehensive spending review, they will find themselves bearing a significantly larger proportion of the total cost than is envisaged at the moment. If my noble friend could give any assurances on that, I know they will be very well received.

[Lord Tope]

My Lords, I am not a vice-president of the Local Government Association and I certainly do not claim to speak for it. I said in a debate on an earlier amendment that the views of local authorities within the Local Government Association, as most are, have differed on this issue, regardless of political control. There are certainly Labour-majority councils that have supported what they thought was the localisation of council tax. There are some in my own authority. However, as people have come to realise the implications of what we are debating today, that support has become more questioning. I shall put it no more strongly than that. The briefing that I imagine we have all had from the LGA today states:

“The LGA supports the principle of localising responsibility for decisions about the incidence of council tax”.

The question is whether that is what we are getting now but maybe that is for another debate.

I support my noble friend Lord Jenkin. My noble friend Lord Shipley and I have added our names to Amendment 73A, which the noble Lord, Lord Jenkin, explained very well. The concern that we address with this amendment is the expectation that, for a range of reasons, the cost of council tax support will increase. More people are likely to claim it because, sadly, they will fall into that category, perhaps because the change in wording from “benefit” to “support” will—wrongly, maybe—encourage more people to feel able to claim it. Therefore it is highly probable that the costs will increase in years to come. We seek from the Government an indication of how they intend to deal with that and, more particularly, an assurance that it will fit under the new burdens doctrine and that the increased costs, assessed annually by the Government, will be met in full in accordance with the doctrine. That is the purport of the amendment in my name and that of the noble Lord, Lord Jenkin. We seek reassurance from the Government.

[Baroness Sherlock]

My Lords, unaccountably I have never been invited to become a vice-president of the Local Government Association—

[Lord Tope]

The noble Baroness is in very good company.

--- Later in debate ---

[Baroness Hollis of Heigham]

Particularly pensioners.

[Lord Tope]

My Lords, I said in the previous debate that simply changing the name from council tax benefit to council tax support is likely to increase the number of people who feel able to claim support, having, for whatever reason, felt uncomfortable about claiming benefit. That change alone, which was not produced by local authorities, in intended to increase take-up.

My advice to the Minister is that when in a hole, one should stop digging. We are getting a bit stuck here. I have heard it said by Ministers—although never in this House—that it is necessary to give local authorities an incentive to get more people back to work. I find that both patronising and deeply offensive. Some local authorities are better able to do it and have better circumstances in which to do it. However, I cannot believe that there is a local authority anywhere in the country that would say it has no incentive and does not want to get its local people back into work. Performance may differ greatly but I am sure that the intention is the same. Therefore, we are a bit stuck on this. It is an unanswerable question—as the noble Baroness well knew when she asked it. Perhaps we should spare the Minister his suffering and move on with the rest of the debate.

[Earl Attlee]

My Lords, on this point, not all eligible pensioners take up their council tax benefit. A number of factors affect the take-up rate. One is the stigma attached to the word “benefit”. That is why the Royal British Legion campaigned for a change in 2009. However, it is just one factor affecting take-up. There are many others, including the complexity of making a claim, people’s confusion about whether they are entitled to it and their aversion to disclosing information in answer to questions that they feel are intrusive. The noble Baroness, Lady Hollis, is nodding in agreement. In estimating future demand, local authorities will want to consider all these factors together.