Local Government Finance Bill

Lord Wigley Excerpts

Tuesday 12th June 2012 Lords Chamber

[Lord Wigley]

My Lords, as a committed devolutionist, I have every sympathy with the objective of giving local government maximum freedom. However, in doing so, we must surely ensure that we are not undermining their ability to deliver services to vulnerable people who depend upon them or adding financial burdens to such people.

The Bill applies to Wales, but not to Scotland or Northern Ireland, so it is the Wales dimension that I will mainly be addressing tonight. I hope that in Committee there will be an opportunity to go after more detailed aspects relating to vulnerable people, particularly disabled people.

In terms of its effect on Wales, this Bill has greatly changed since it was first presented to the House of Commons. This is because of the introduction of new clauses, apparently supported by the Welsh Government, at a very late stage in the House of Commons. Indeed, it was such a late stage that I do not believe a single Welsh Member spoke in the Chamber when they were discussed. This creates some concern about the timetabling of consultation and legislation between Westminster and Cardiff, especially as the measures involved, the change in council tax benefit arrangements from April 2013, were first announced as far back as the 2010 spending review, which was nearly 20 months ago. Was it the Welsh Government’s fault that they had not responded in good time to be included in the Bill when it was first published or had the Government not consulted the Welsh Government in good time to enable that to happen? The amendments that have been introduced follow the Welsh Government’s consultation earlier this year. A legislative consent Motion for this Bill is yet to be discussed in the National Assembly, which will be scrutinising these proposals for the very first time later this month. Frankly, this is a procedural mess, and it is not good enough.

Criticism of the Bill is generally not related to the measures proposed in it but to how the Bill provides the framework for significant cuts to council tax benefits which will fall on vulnerable members of our society. I suggest that this is part of a localism and cuts agenda and will involve the devolution of administrative costs as well as the 10% other costs. According to the Welsh Minister responsible for communities and local government, Mr Carl Sargeant, the recent figures for funding transfer represent in total a cut of some 13%. I do not know whether the Minister agrees with that or whether she has discussed this with Welsh Ministers. The Welsh Minister also said in a recent response in the National Assembly that he would shortly be meeting Mr Iain Duncan Smith and the noble Lord, Lord Freud, to raise profound concerns about the financial implications. Is the Minister in a position to confirm whether that meeting has taken place and what was its outcome?

People in Wales who have kept up with the Bill are concerned about the effect of these proposals. As noted by the Minister in the House of Commons, the Welsh Government will be setting out their proposals for council tax reduction schemes in due course, but they propose to introduce a single national scheme set out in regulations and to include the reforms necessary to meet the 10% reduction. The fear is that the Government of Wales will be helping the UK Government to implement a scheme that may be detrimental to poor communities and, particularly, to vulnerable people in those poor communities. The Minister in the House of Commons seemed to believe that the Welsh Government intend local authorities to be given an amount of local flexibility in the new scheme’s delivery and that deviation from the national scheme will be funded locally. Their proposals will be scrutinised by Members of the National Assembly for Wales when they are laid before them. In England, following consultation, support for vulnerable pensioners will be delivered through a national framework of criteria and allowances, so pensioner council tax support will not be reduced. We must suppose that this means that the burden will instead fall on all working-age claimants of council tax benefit. As was said earlier, the Institute for Fiscal Studies estimates that this will mean that on average working-age claimants, most of whom are already in poverty or close to poverty, hence their eligibility, will be losing almost a fifth of their current support and, in some areas, up to a third.

In Wales, around 330,000 households—nearly a quarter of all households—receive some form of council tax benefit. However, Welsh Ministers have already accepted that they will not be able to shelter Wales from these Westminster-inspired cuts. My party, Plaid Cymru, has called for the Welsh Government to follow the Scottish Government’s example and protect vulnerable citizens from these cuts by using some of the recent £80 million Barnett consequential payment to prevent the cuts for 2013-14. This would at least allow enough time to work through the proposals and plan the way ahead.

I turn briefly to the non-domestic rating. Business rates raise some £940 million a year in Wales. This is an essential component of local government finance, which enables many vital local services to be delivered for communities. Therefore, any relief of business rates comes at a price and must be paid for. However, if we can use business rate relief as an economic lever to safeguard and create jobs, and to revitalise town centres, it is a price that may be worth paying.

In Wales, the business rates system is, uniquely, not devolved. There is a Welsh business rates pool at Westminster, which I believe will remain as a result of the Bill, even though the English system is being changed and despite local government and economic development being devolved responsibilities. Welsh Ministers are currently not empowered to design a Welsh business rates system that is substantially different from the present system in England. With business rates devolved in Scotland and Northern Ireland, and being localised in England, Wales will have a unique system of having its rates pooled at Westminster. If the UK Government insist on devolving council tax benefit, they should also give Welsh Ministers full control over the Welsh business rates pool. Leaving the system as it is would be an enormous anomaly.

At present, the Welsh Government are allowed only to fund varying levels of rate relief. They cannot alter rates in any other way or configure rate levels to meet policy objectives. Full powers over the business rates regime should surely be put in the hands of Welsh Ministers. In a recent speech to the Institute of Welsh Affairs at an economic conference in Cardiff, Professor Brian Morgan, who leads the Welsh Government’s review of business rates, which was published today, said that an expert whom the review had consulted had described the business rates situation in Wales as “ridiculous”.

In Scotland, local authorities retain 50% of any business rates income that they generate on top of a nationally agreed base. In Northern Ireland, Ministers use their control over the non-domestic rates to place an extra levy on large out-of-town retailers and redistribute the proceeds to town centres. Professor Brian Morgan’s report on how the business rates system in Wales can be reformed to streamline and stimulate economic growth calls for full control over business rates in Wales to be transferred to the National Assembly. Therefore, in conclusion, I ask the UK Government to discuss the implications of this report with the Welsh Government to see whether they can amend the Bill further at a later stage to ensure that the proposals put forward by Professor Morgan and his colleagues can be put into effect.