Local Government Finance Bill

Lord Tope Excerpts

Tuesday 16th October 2012 Lords Chamber

[Lord Smith of Leigh]

My Lords, I support my noble friend’s amendment. I remind colleagues that I am a serving leader of a council and it is therefore my job to introduce a council tax support scheme. We have sent out our consultation, which contains things I can hardly believe I am supporting. We have a gap of £4 million in the amount we can raise through the council tax adjustments. We are already facing £30 million of cuts in our budget, and if I was to put more cuts into the system it would impact only on the same people because it is the poor who rely on our services.

In introducing our scheme for council tax benefits, we tried to work on principles—it was sometimes difficult but we tried to do that—and clearly we wanted to use what we could of any technical changes. We wanted to protect vulnerable groups, but that is not possible in total, and we wanted to make sure that we did not undermine incentives to work. However, that is very difficult with this scheme. I have also set up a discretionary hardship fund because we know that, however we design the system, some people will slip through and I want to be able to do something about it.

Despite the protestations of the Government that they want to help people get back into work, the Bill is an attack on the working poor; it is an attack on people who take low-paid jobs—not because they want to take low-paid jobs but because often they are the only jobs available. If you have low skills or poor education attainment, if you live in areas where pay levels are low or work in industries where profitability is difficult, you are in a low-paid situation. I thought this House wanted to keep people in those jobs and support them.

With apologies to my noble friend Lord Beecham, I wonder sometimes whether the coalition, like Newcastle United, is being sponsored by Wonga.com. The impact of this and the other changes that are taking place is to drive the poor in our community towards payday lenders. It is a growth industry in our country and we ought to be ashamed that a legal lender can charge rates of 4,000% a year on an annualised basis when the bank rate is 0.5%. How can we justify that when it is the poorest who have to pay that amount of money? It is a tragic situation. This change to council tax benefit will force many hard-working, decent families who are trying to do the best for themselves by taking jobs and doing what they thought the Government wanted them to do into the hands of those payday lenders. There are, of course, other lenders in Wigan, Newcastle and Luton who are not legal and whose collection methods are somewhat different. Even so, people go to them.

In Wigan, the average increase in council tax benefit is £3 a week. To noble Lords that sum may represent a glass of champagne in a bar so it is not significant, but if you are among the poor in places like Wigan, it is. It can tip people who are able to survive financially over the edge, and poor families will be put in that position. I should remind noble Lords that the low paid are already suffering under the Government because of the impact of inflation. Since the coalition came to power, the rate of inflation has been 7.1% for the average person. However, food prices have risen by 8.5% and household costs including fuel by 11%, and now even more with what British Gas and the others are up to. When we look at household budgets, we can see that the poor spend disproportionately more on food and household items. The average percentage of income spent on food is 13.2%, but the poorest 10% spend 16% of their income on food, while the richest 10% spend under 10%. The average spend on household items is 19.1%, but for the poor it is 25%—and that on items which are going up by 11%. Again, that is a further squeeze on a low budget. The rich only spend under 10% on household items. It is clear that the working poor are already suffering, and we ought to be helping them more, not targeting them with this increase in council tax benefit.

From my perspective, as my noble friend said, we have already put our consultation out only to discover suddenly at this stage that the Government have found in their back pocket or behind the sofa £100 million that can be put into the system. That is cynical politics and it will not work, because I will make sure that the people who I represent know who is causing this problem and know whose fault it is. We are not going to let them get away with it.

[Lord Tope]

My Lords, the reference to cynical politics has finally brought me to my feet. Remarkably, we are now on the second to last day of your Lordships’ consideration of this Bill, but we are in fact having a Second Reading debate. I want to give us a bit of a reality check because those listening who have not been part of the proceedings of the Bill through Second Reading, the Committee stage and so on will have much sympathy with all that has been said. I certainly do.

The 10% reduction, which most of us recognise in reality is actually going to be more than 10%, is not part of this Bill. It was one of the deficit reduction measures announced some time ago. It certainly sets the context for the Bill, but it is not a provision of the Bill. The noble Baroness, Lady Hollis, has said many times that she would prefer a national scheme and for council tax support to be part of universal credit. I said at Second Reading, “so would I”, because I believe that that is the sensible way forward. But Parliament has decided otherwise and it has passed the Welfare Reform Act. It may be that in years to come a future Government will change that, but it is not going to happen during the passage of this Bill. That is the reality check I am talking about. We have to deal with the situation as it is, not as we might wish it to be.

We all share the concerns that have been expressed by the speakers to this amendment. I would just say that, recognising where we are rather than where we wish to be, the next amendment we are going to debate provides a very much better solution to all problems that have been described by every speaker thus far. I look forward to the debate, and I particularly look forward to support for that amendment from all sides of the House.

--- Later in debate ---

[Lord Tope]

My Lords, my name is also added to this amendment. The noble Lord, Lord Best, has introduced the amendment characteristically fully, clearly and precisely. Equally characteristically, the noble Lord, Lord Jenkin, has once again confessed to his errors of the past, but more particularly, pleaded with us eloquently to learn from experience. That is so important.

Our discussions on this part of the Bill through all its previous stages have been characterised by the number of speeches that have begun by people saying, “I don’t know anything about local government finance, but”. We will probably hear quite a number of figures quoted and quite a number of complex issues will be raised. It is a complex issue. None of us who has had a lifetime in local government will pretend that local government finance is anything but complex. But what we face today is a very simple and basic question. There is a shortfall. Many councils are facing a shortfall in having to introduce the council tax reduction scheme. Is it fair that the shortfall is met by those who can least afford it in our community, such as those on benefit? As has been explained, they will be affected even more because, quite rightly, pensioners and the most vulnerable, however defined, are excluded from this. They will face a huge disadvantage in terms of their income. Is it fairer that they should meet the shortfall or should it fall on the wider community? I think that everyone here would agree that it is fair and right that that shortfall should be met by the wider community. It is a complex issue but it is a simple question that is at the heart of the debate today.

I was a little surprised at the rather churlish response from the Opposition to the, albeit very late, announcement from the Minister on the transitional funding. I can well understand that there are many questions and difficulties about that, but I would much rather have Ministers coming forward at a late stage saying, “We have been listening and we want to try and help so this is a change”. From that point of view I welcome this move, but is it a solution? Well, £100 million is always welcome to local government. It will help but it will help for one year only. It is not a solution to the problem, as the noble Lord, Lord Best, has rightly said. It will help perhaps for one year. There are a lot of complexities. We will get further details about it later this week or, as I think I heard the Minister say, maybe next week. I hope that it will be here by Monday morning as we certainly need it in time for Third Reading. I hope that it will be this week, otherwise what will be doing next weekend?

The transitional relief will not solve the problem. The amendment, as explained very clearly by the noble Lord, Lord Best, will give local authorities the discretion—it is not a requirement—in the light of their local circumstances, priorities and demographic make-up. In all of those things it will give them the discretion to vary the single-person discount. That will be different across the country. That is the nature of localism. I said earlier that I might have preferred still to have a national scheme with universal credit, but that is not what we will have. We have a localisation of council tax. What could be more in keeping with localism than giving local authorities the discretion and the power to produce a scheme that best suits their local circumstances? That is what this would do. As the noble Lord, Lord Best, said, some may wish to put limits on that discretion. The Liberal Democrats would certainly support a limit on the 20%—no lower than 20% on the single-person discount—so there would be a variation of between 20% and 25%. That alone would solve the problem that most local authorities are facing. Some may feel that pensioners should be exempted. All that is possible but it is only possible if there is some movement and some negotiation on the issue.

One of the surprises is that the Government have thus far been unwilling to negotiate at all on the single-person discount. The Secretary of State has firmly set his mind against any change. That contrasts starkly with the Localism Bill that we spent so many happy hours on in your Lordships’ House last year when we managed to achieve 440 amendments by agreement, albeit on rather a bigger Bill than we are discussing today. Not one of those amendments needed to be carried on a vote. Therefore, I am very disappointed that this year we cannot even negotiate on finding a solution to this issue.

If this amendment is carried today, as I very much hope it will be, obviously it will go to the other place and those negotiations will have to take place before it comes back to this House. I regret that we will have to come right at the end of this to force negotiations in this way, but if that is how it has to be done then so be it. The noble Lord, Lord Best, made this point and I want to stress that this amendment and the relaxation on single-person discount is strongly supported by every political group in the Local Government Association. I stress that that includes the independent group—I am never quite sure whether it is a political group or not, but the party leaders of all four groups have signed a letter to the Secretary of State urging him to accept it. It has all-party support. Nowhere is that support stronger than in the Labour group and on the Labour councils which are facing the real pain of this. It is inexplicable to me, after a lifetime in local government, that the Labour Benches have been unwilling to sign up to this amendment or even to discuss the wording to make it more acceptable to them. That is genuinely quite inexplicable. I hope even at this late hour, having made their stand on the previous amendment, and the House having decided on it, they will reflect on that and recognise that if we can pass this amendment today we can negotiate on it when it eventually comes back to our House.

To summarise, the amendment is fair. It is a far more equitable solution to the problem that local authorities are facing. That is why every local authority of every political complexion that I know of strongly supports it. It is localist, and this is supposed to be about the localisation of council tax benefit. It trusts local authorities and gives them some discretion—perhaps limited—on how to devise the scheme to face what we are legislating for. Above all, it is practical. It can be implemented quite easily even at this late hour. Local authorities have to publish their draft scheme by the end of January although it does not come in until April. They can do that now. Councils choose to vary the single-person’s discount which will be collecting very small sums of money. The figure being quoted by the Local Government Association is 30p a week from people who are already paying council tax and who are already on record, rather than larger sums of money from people who can much less afford it and who in many cases are not paying council tax at all because their income does not justify it.

In our debate on the previous amendment, the noble Baroness, Lady Hollis, referred to a red-line moment. That was perhaps a red-line moment in an unreal world; this is the real red line. It is perhaps an appropriate colour. It is the real red line in the real world and I urge noble Lords on all sides of the House—perhaps particularly those on the Labour side of the House—to support the amendment, as I do.

[Lord Bichard]

My Lords, I support the amendment and declare an interest as a vice-president of the Local Government Association, as many of us are. I support it for two very simple reasons. First, in the light of the previous vote, this is perhaps the last opportunity to offer some help to protect the most vulnerable in our communities, who stand to suffer most from the proposed legislation if it is passed as drafted. Like the noble Lord, Lord Tope, I implore all noble Lords who I know have a passion to protect the interests of the most vulnerable in our society to support the amendment. I suggest that this is not the time for political tactics. Nor could a vote for the amendment be taken as supporting in any way the policy in the Bill. It should and would be taken as a practical way of helping those most in need when they need it most.

The second reason is that I support the cause of localism and devolution, which is after all a key priority of the coalition Government. For me, devolution always involves the devolution of power. It is not just about the devolution of responsibility or, on occasion, of the right to be blamed. The devolution of power is what the amendment moved by the noble Lord, Lord Best, offers.

Devolution is also about devolving choice, and giving local authorities the chance to make a choice about where money is spent and what their priorities are. Once again, that is what the amendment is about. It gives local authorities the chance to make a judgment, taking into account their local knowledge, about what their priorities are and where their money should be spent. For those two simple reasons I implore the House to support the amendment.