Lord True
Main Page: Lord True (Conservative - Life peer)Local Government Finance Bill
Lord True Excerpts
Lord True
My Lords, I associate myself with my noble friend’s remarks, although perhaps not his final point. Those who have heard me take part in these debates will know that I, too, regret very much that the benefit was not included in the universal credit. I think there is very wide agreement in the House on that but, as my noble friend has pointed out, that is not what Parliament has determined, and we must address the situation that we find ourselves in.
As my noble friend Lord Tope also said, there is an expectation for local authorities to deliver reductions in public spending. As I have often said in your Lordships’ House, the state is overspending by roughly £14 million an hour and it is legitimate to ask local authorities to consider playing a part in addressing that problem. We are doing so and, as I have said before in these debates, I would have preferred the Bill to not be too prescriptive in this area.
I agree with the first part of this amendment, that:
“Nothing … shall prevent billing authorities retaining the provisions of the … council tax benefit scheme”.
My problem with the amendment is that it asks your Lordships’ House to make a frontal assault on the principle of deficit reduction. The second part of the amendment effectively gives a put option to any local authority in this country, including the prosperous, leafy authorities that the noble Baroness, Lady Hollis, referred to, such as West Oxfordshire, Westminster and the Royal Borough of Kensington and Chelsea.
If the House passed this amendment, the Government would suddenly have to pick up the costs of Westminster, West Oxfordshire and the royal borough, which are prepared to sustain the existing scheme out of their own resources. This amendment says that your Lordships’ House should ask Her Majesty’s Treasury to pick up those costs, which those boroughs are prepared to meet. Similarly, any local authority in this country, rich or poor, would be able to ask for resources from the Treasury, and the whole effect of seeking to make a reduction in the welfare budget in this area could be negated. That is the fatal flaw in this amendment.
Baroness Hollis of Heigham
I am puzzled by the noble Lord’s remark. He says that if this amendment were carried, it would mean that prosperous authorities such as Gloucestershire, Oxfordshire and some of the inner London boroughs we have mentioned—Wandsworth, Westminster and so on—would be getting moneys from the national scheme that they do not need because they are ready to fund it themselves. Of course, given the council tax rebate scheme, they could still fund it themselves from the 90% grant, but is it not the case that under the transitional arrangements they will be entitled to apply for money they do not need, which they will no doubt keep and which will go to their reserves? In fact, the very thing that he is deploring about this amendment is going to be embodied in the transitional grant arrangements.
Lord True
The noble Baroness presents another possible wrong to defend the particular wrong that I am addressing.
I am sorry that I was slow coming into the Chamber when the noble Lord, Lord McKenzie, started his speech; I heard it on the monitor and I agreed with many of the things he said about the timing of this announcement, which is also implicit in what the noble Baroness has said. But I return to the fundamental point that if your Lordships pass this amendment, the Royal Borough of Kensington and Chelsea can ask the Treasury to go on funding the scheme as it now is. The noble Baroness thought it was absurd that those leafy boroughs should be funded, and I rather agree.
The other thing one has to accept is that surely there is somewhere between no saving from council tax benefit, which is the potential position if this amendment were passed and every local authority put that upon the Treasury, and the extent of saving, the problems of which we have heard described; there must be some amount that can be saved under this heading, because I believe—I do not have the figures before me—that spending on council tax benefit doubled during the Administration of the party opposite. I do not accept that there cannot be reductions. Therefore, because of the technical flaw in the second part of the amendment and because I think that there is scope for making reductions, I cannot support the amendment if it is put to a Division.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, I thank everybody for their contributions and the noble Lord, Lord McKenzie, for the way in which he moved the amendment, which was rather through gritted teeth.
We listened carefully in Committee to what was said about the implementation of this council tax scheme. During the Recess—noble Lords will recall that we have been back in this House for only one week—we looked at whether there was any amelioration that we could offer to local authorities to help them through the first year of the new scheme. That arose from discussions in this House, so, rather than being traduced for that, perhaps people would recognise that we have taken some notice and are setting about trying to help. I grant that the transitional scheme is for one year, but, during that one year, we would expect local authorities to have a much better idea of how they might “smooth in” the scheme.
We were also told that many local authorities were looking to charge people who have 100% benefit at the moment anything up to 30%. Noble Lords have spoken about the difficulty involved in collecting sums of money, but that is just an absurd way of looking at this scheme. We have therefore limited the amount that can be charged to people who are on 100% benefit to 8.5% and effectively enabled local authorities to do that by helping them with a grant along the way.
Local authorities do not have to collect 8.5%; they do not have to charge it. They can accept that it will cost more to collect it than to say, “We will let that go for this year while we look further into our schemes for the future”. That is quite correct. As has already been said, some local authorities will not implement that aspect that all.
However, it is pretty rich of noble Lords opposite to suggest that this is somehow an absolutely dreadful imposition. We are giving money to local authorities to help them through a first year which we have recognised may not be very easy to handle. Rather than noble Lords opposite gasping and continuing to tell us that this is just awful, perhaps they might have given us a little bit of credit for listening and trying to help.
The deficit is serious. The increase in council tax benefit during the past 10 years has been enormous, being, as my noble friend Lord True said, well over 100%. That is just ridiculous. We cannot go on like that and we have to make some room for bringing that down. There are a number of ways of doing it, as noble Lords have pointed out.
I have given the House a Written Statement. I have given the broad outlines of how the scheme will operate. It is not very difficult. It is being made very easy for local authorities to fulfil the criteria and to claim the money. I have already said that we will give fuller details on the amount of money that local authorities are likely to be able to retrieve. I hope to do that this week or, if not, at the beginning of next week.
I do not accept that all the grumbles here are justified. I do accept that local authorities are having quite a difficult time. I also accept that the country is having a more-than-difficult time with its finances and the economy. That is why, as my noble friend Lord True said, everybody, sadly, is having to play a part. I just add that to what has been said. I am sure that this will come in again in other amendments that are on the way. This is not an amendment to the Bill but a transitional relief to the council tax scheme.
Those councils which have already consulted on the scheme or are consulting at the moment will need to decide, when they see about this grant, whether they wish to reconsult. It is very unlikely that that will be necessary because they will have a scheme that is slightly better than the one they were looking at, but it is up to them. If they want to do that, they need to take legal advice on whether the changes to their scheme justify them consulting again in any way, even on part of the scheme. That is up to them. We are giving them a helping hand. We hope that that will at least ameliorate for some of them the concerns expressed here today. As I said, I gave the Written Ministerial Statement at a time when I could really do nothing much about the change because there was not the ability to lay it. This has not been going on for months; we have not been considering it for months. We have considered it ever since we were in Committee in this House.
Amendment 98A would make it explicit that billing authorities can run a local scheme along the same lines as the existing council tax benefit scheme. It is not necessary for this amendment to do that or to put it in the Bill. If a local authority wants to have the default scheme, it may base its local scheme on that, retaining the criteria and allowance of the council tax benefit regime. Of course, it will do that against the background of the 10% reduction, so nobody will make up that 10% if they do that. The amendment would also require central government to continue funding council tax support schemes to the same levels as the existing council tax benefit scheme. As I said, that would be minus the 10% and would not be funded to the full amount.
The reforms we are making provide a vital contribution to our deficit reduction. To requote the figures, council tax benefit expenditure in England increased from £2 billion in 1997-98 to £4.3 billion in 2010-11. It might be interesting for noble Lords to hear and take note of the fact that in 2010-11, we spent more on welfare than on education, defence and health combined. Our reforms give councils stronger incentives to support local firms, promote local enterprise, cut fraud—there is plenty of that within the system—and get people back into work. I heard what the noble Lord, Lord Smith, said, that when people start working they can progress if they wish and are able to. On the noble Lord’s question, I slightly challenge what he said about inflation. My understanding is that inflation fell to 2.29%. I think the noble Lord said that it was 11%. Our reforms give councils stronger incentives to promote local enterprise and help people into work. We are moving on that basis.
From now on, local authorities will have real control over how they design their council tax support scheme for people of working age, enabling them to offer council tax reductions that match local circumstances and funding. This amendment potentially removes any saving and as such would constitute a spending commitment. I am not sure whether noble Lords opposite have cleared that with their Front Bench in the other place. If so, it might be helpful to know that. Local authorities already have choices and levers to design and manage their schemes, making their essential contribution to this deficit reduction.
As I think noble Lords will understand from that, I cannot accept the amendment, though I have listened to the concerns raised—as I did in the past. One reason that we have a transitional scheme today is that we as a Government have listened.
The noble Lord, Lord McKenzie, asked how we were going to manage the handling of the transitional scheme. The answer, as I understand it, is that given by my noble friend Lord Strathclyde. There are very precise ways to come back at Third Reading. I do not think that bringing this issue back at Third Reading would constitute one of them. Noble Lords must take that into consideration. I hope that the noble Lord will feel able to withdraw his amendment.
Lord McKenzie of Luton
Well, my Lords, it seems that clarifying remaining uncertainties could keep us going for a month of Sundays, given what is outstanding on the Bill and the tardiness with which some of its provisions have been made available.
The noble Baroness talked about the 8.5% maximum that would be required for people to access the scheme. She referred to it meeting the cost. What we do not know is the extent to which it will cover the costs for councils which move from the existing scheme on which they have consulted to the new arrangements. We do not yet even know how it is to be allocated and apportioned. We may know that later in the week; we may not.
The noble Baroness said that it is easy to fulfil the criteria of the new scheme. It may be easy to identify what those criteria are, but how you move from where you are on the scheme on which you have consulted to that position is a completely different matter. There will be a whole variety of arrangements on which people have consulted. I doubt whether the Government have done any analysis on how practical or easy it will be or how costly it will be for people to move from where they are to where the Government want them to be. In any event, even if that were accomplished, that does not deal with the issue of what will happen in year two. I do not see the connection between knowing that this is available in year one and having a better idea of how councils can smooth it in for subsequent years if the plug is to be pulled on the transitional funding.
The noble Lord, Lord True, went on about the deficit and of course the deficit has to be addressed. Our point is: why does this have to be a component of it? Does every line in the government accounts have to cough up some sort of proportion? Why this one? Surely it is right that the Government have to evaluate the consequences of each cut that they are trying to make—and not only each cut. What the Government have singularly failed to do is to look at the cumulative effect of cuts on people. My noble friend Lady Hollis made the point about housing benefit and council tax benefits. We know that those two things often go together and that some people will get dramatic reductions in housing benefit because of underoccupancy provisions: an average of £14 a week. My noble friend Lord Smith referred to the importance of £3 a week for people in some of the poorer areas for which he has responsibility. How are those judgments made? The reality is that they are not, which is why we are justified in bringing forward an amendment on this basis.
The noble Lord, Lord Tope, said that this really was not something for the Bill but if we want to constrain the Government and cause them not to create the upset that they are going to cause by this legislation, what other mechanism do we have? He referred to the amendment of the noble Lord, Lord Best, which we will come on to in due course. We believe that this amendment is a better way of dealing with the situation. The noble Lord, Lord Tope, may disagree but, at the end of the day, the root problem that we are trying to deal with here is the so-called localising of council tax benefit and the massive cut that goes with that process. So long as the colleagues of the noble Lord, Lord Tope, support that approach, they cannot challenge us on where we end up on these issues.
When we heard from my noble friend Lord Smith, your Lordships heard then the voice of somebody who has to deal with these issues on a day-to-day basis and in challenging circumstances. It is not only about the council tax costs that people are suffering and the increases that this will bring but about housing benefit, about what is happening on food prices and about inflation generally. As my noble friend put it, there is also the growth of payday loans and worse forms of lending. That is the authentic voice of someone who is dealing with the chaos that these measures are creating. As he put it, there are no more cuts that can be made in the system and the Government should recognise their responsibility for that. My noble friend Lady Hollis spoke with her usual passion and the great analytical approach that she has to things. Again, that is the authentic voice of someone who is dealing with housing on the ground and knows local government through and through.
We do not have a meeting of minds on this. We see this as a very important issue—
Lord True
Before the noble Lord sits down, will he answer the central point that I put to him? I accept all his strictures about wishing to reduce spending on welfare. However, the effect of his amendment on every council in this country, including my own, is to have responsibility for this decision transferred from where it has been decided—in the other place and in the Cabinet room in Downing Street—to cabinet rooms and town halls up and down the country. If this were passed, I might well say to the Chancellor of the Exchequer, “Right, you pay for it, mate”. I do not think that your Lordships’ House should give the power to local authorities to take those decisions away from the Chancellor of the Exchequer. Is that not the effect of this amendment? Will the noble Lord answer that point?
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.