Nick Raynsford
Main Page: Nick Raynsford (Labour - Greenwich and Woolwich)
Andrew Stunell
HMRC is obviously under the same obligations when transferring data in such a case as it is in every other case; it must ensure that the data are relevant to the question being asked, accurate and appropriate, and there are of course safeguards via the Information Commissioner should that be broken. HMRC takes data protection extremely seriously, and the provisions in the Bill, which lie on top of the provisions in the Welfare Reform Act, are needed precisely because it is necessary to ensure that we have safeguarded HMRC and given it specific, explicit and closely confined powers on the transfer of data.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
I must say that that is not an adequate response to the question asked by the right hon. Member for Wokingham (Mr Redwood). We have seen a lot of evidence on data sharing recently. The Electoral Commission has been undertaking data-matching exercises that have revealed huge problems of inaccuracy in data shared between Government Departments. This is a serious matter and the Minister is not justified in brushing it aside like that. There needs to be more certainty and more checks and safeguards need to be in place.
Andrew Stunell
I remind the right hon. Gentleman that at the moment HMRC shares these data with DWP, which then takes a view on an individual’s income and shares it with the local authority that administers the benefit. Under the provision, that information will go directly from HMRC to the billing authority. We absolutely share the view, expressed by both the right hon. Member for Greenwich and Woolwich (Mr Raynsford) and my right hon. Friend the Member for Wokingham (Mr Redwood), that it is extremely important that that creates neither opportunities for error nor opportunities for the misuse of data in any other way.
Mr Raynsford
As I am responsible for the amendments, may I remind the Minister that the first of the two he described simply requires that there should be no reduction in benefit entitlement for pensioners. As he has already given that commitment to the House, how can he possibly object to that amendment?
Andrew Stunell
It is completely unnecessary. The right hon. Gentleman could have tabled an amendment that said today is Monday, and I would have resisted it on the grounds that we already know that. We do not need it.
New clause 7 was tabled by my hon. Friends on the Liberal Democrat Benches. It would introduce a premium on second homes that is an exact mirror of the Government’s proposal for the council tax premium on empty homes. The empty homes premium came from the Liberal Democrat stable and I am pleased that it is in the Bill. I am sure that my hon. Friends will be eloquent in supporting their proposition, but I have to tell them that the Government believe that it is right to invest heavily in bringing empty homes back into use, and that is why we are using the policy levers available to us. Certainly, there are difficulties in the second home sector; we fully acknowledge that and we fully understand the concerns that my hon. Friends have expressed.
Andrew Stunell
I understand the hon. Lady’s point, but in Rotherham the funding gap is £1.8 million and the total value of discounts and exemptions granted by the Bill £1.9 million. To be clear, a 10% reduction for Rotherham is easily covered by the discounts and exemptions in the Bill. That is not true of every local authority, but it perhaps illustrates that there is a good deal of unnecessary trouble stirring by the Opposition. They are paid to do it, I understand that; but sometimes it is important to refer to the facts. In particular, I noticed that one of the leading financial officials on whom the Local Government Association draws for advice is the chief finance officer of Rotherham, so I am sure that those figures, which he submitted to the Department, are correct.
I am extremely sorry to have detained the House for so long, but I hope that I have provided a good foundation for the debate. The Government believe these to be important and significant reforms that will return power and responsibility to local government and take them out of Whitehall. We believe that is the right direction in which to head. I commend the Government’s proposals to the House and urge right hon. and hon. Friends and Members not to support the other amendments and new clauses.
Mr Raynsford
I draw attention to my interests as declared in the register.
This is a shocking example of how not to legislate. It is three months and 21 days since we completed a rushed Committee stage on the Floor of the House, and during that time, the Government have sat on their hands. Why, during that period, did we not have proper time to discuss the Bill’s very serious implications? Why did the Government not use it to publish the draft regulations that the Minister promised in the debate on 31 January? I remind him of what he said:
“I recognise, of course, that local authorities and suppliers need as much information as possible as soon as possible. For that reason, we intend to publish draft regulations while the Bill is still before the House.”
My right hon. Friend the Member for Wentworth and Dearne (John Healey) sharply picked up on that and asked the Minister whether he meant
“this House or the other House”.
The Minister replied:
“I am looking for a nod somewhere”—
he was clearly in need of guidance—
“but let us stick with this House.”—[Official Report, 31 January 2012; Vol. 539, c. 777.]
That was his commitment on 31 January 2012. As I said, three months and 21 days later we still do not have the draft regulations. The Government, belatedly and to cover their embarrassment, pushed out a series of positioning papers on 17 May—four days before this debate—rightly provoking anger and criticism in local government that it had not been given time to consider the detail far enough in advance of today’s Report stage to issue briefings. We had the worst possible example of the Government rushing the Committee stage, preventing proper scrutiny. I remember well the lack of detailed scrutiny, with a number of amendments simply not being called because of the lack of time. The Government then did nothing for three months and 21 days, and now they have come to this House without draft regulations. They should be deeply ashamed of themselves and should apologise to the House for the shambles they have made of introducing this legislation.
John Healey
Does my right hon. Friend agree that one other consequence of taking the Committee stage on the Floor of the House, rather than in a Public Bill Committee, was that those organisations responsible for implementing the system with concerns about its consequences did not have the opportunity formally to give evidence to the House, and thereby inform the debate and scrutiny, and ensure that the legislation was better than it is now?
Mr Raynsford
My right hon. Friend, who is extremely experienced in these matters, makes a telling point. That was just one further way in which the Government could have ensured proper scrutiny, giving a proper opportunity to those most profoundly affected by the changes to give evidence to us and to help shape a better Bill than the one we face today. But no, the Government simply did not want scrutiny because, as we shall see, they are pushing through a crude measure that will have a profound impact—of some £500 million—either on individuals or on local authority budgets, and they are doing so without proper care or consideration of those consequences. As I have said, they should be deeply ashamed of themselves.
This is a complex matter. The introduction of housing benefit in the 1980s, many years ago, was bungled. It was bungled because it was rushed and local authorities did not have enough time to prepare. There were horror stories from all over the country of people not receiving the benefits to which they were entitled, and huge backlogs of cases building up in local authorities. One would think that a Government who had experienced that in their history—or at least the Conservative part, which went through that experience in government—would want to avoid doing the same thing again. But here we are, with a Government once again rushing to introduce complex changes in benefits that will have profound impacts on many individuals’ potential entitlement, and doing so to a ridiculously tight timetable.
Mr Kevan Jones
I think the Minister answered the question earlier: this measure is not about reform of local government finance, but about deficit reduction. However, is it not also about devolving the responsibility—and the blame—for implementing these proposals to local authorities?
Mr Raynsford
My hon. Friend is absolutely right: this measure is not about reforming the benefits system or creating a benefit; it is about imposing crude cuts in expenditure either on individual recipients or on local authorities. It is about the Government passing the buck, putting the responsibility and blame elsewhere.
Let us look at the timetable. We know how many tasks are involved if a local authority is properly to introduce its own local scheme of council tax benefit next April. What will a local authority have to do? It will first have to consider in detail the implications of the regulations—it has to know what law it has to comply with. Over the last year or so we have heard about various aspirations from the Government. We heard the Minister say that no pensioner should lose; we have also heard the aspiration that there should not be any work disincentives. How those two are compatible we have never had explained to us. If we have a benefit that goes to a substantial number of pensioners and a substantial number of people in low-paid work, and if we exempt one of those groups from any losses and then announce a 10% cut overall, the other group has to face that loss by definition. It is, I am afraid, a simple piece of logic. The Government have not come forward with any explanation of how the aspiration that there should be no work disincentives can possibly be achieved. It is the most flabbergasting case of what George Orwell would have described as “doublethink”.
The first task of local authorities, when they have seen the regulations, will therefore be to consider the implications. Then they will have to devise a draft scheme, taking account of the needs of the area and local aspirations. Many people in this House support the concept of localisation, but want it done properly. That would require local authorities to have the opportunity to consider what the best shape of a local council tax benefit scheme would be for it to respond to the needs of the area. Having done that, they should consult, which we all know is part of good administration. Consulting the considerable numbers of people affected is not trivial—we are talking about 6 million households nationally, which means tens of thousands in every local authority area. After a proper consultation, so that individuals will know the likely implications, local authorities should finalise their schemes and then brief their IT suppliers to produce the software necessary to administer them.
Mr Jones
Huge regional inequalities are involved. In addition, the pressures on councils in South Yorkshire, and in Middlesbrough and South Tyneside, which I cited in a previous debate, compared with leafy Wokingham, mean that if services such as providing for looked-after children and a growing elderly population are to be protected, the scope for cuts is very limited. The Minister laid it bare in his response: this is not about reforming or giving local councils the ability to be flexible; it is about implementing the deficit reduction strategy of this coalition Government. As my hon. Friend said, that will take demand out of areas such as mine. It is impossible to implement this system without further cutting the support for some of the most vulnerable in our society.
Mr Raynsford
My hon. Friend is making a powerful case, and I wholly agree with him about the adverse impact on some of the most deprived areas. Does he also recognise that one of the bizarre features of the Government’s proposals is that they will inflict losses on people throughout the country? There are 6 million recipients of council tax benefit, many of whom are in low-paid work in parts of the country that are relatively more affluent than the area he represents, and those people will suffer, too. Although he is absolutely right in what he is saying, the impact of the Government’s proposal will be even more savage and unfair.
Mr Jones
Well it will be. The mistake that the Government are making in the spin they are clearly putting out is in saying that this will affect only the “undeserving poor”—the workshy and feckless. As my right hon. Friend rightly points out, many people in receipt of council tax benefit are in low-paid work. In sectors where jobs are growing, the increases are mainly in part-time, low-paid and low-skilled jobs, so more people might come into this bracket.
This measure will affect people, and not only in terms of their council tax benefit; we need to add on the ludicrous nonsense in the housing benefit changes, which will result in individuals in my constituency who have an extra bedroom suddenly finding themselves up to £10 to £15 a week worse off. The Government’s measures will have a cumulative effect on the poorest communities and, I have to say, some of the hardest-working individuals in this country. We might add to that this Government’s VAT increases, which the Liberal Democrats and the Deputy Prime Minister were clear in opposing before the election only then to implement and turn a blind eye to, saying, “It does not really matter because we have a commitment to reducing income tax.” The cumulative effect of these measures will be to take a vast amount of money out of the poorest communities in the country. The opportunity to gain full-time employment is very limited in some areas, because of short-time working, which means lower wages, and the growth in the number of part-time workers.
The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill) has at least admitted that this is exactly what the Government are doing. I have a cutting here from the Daily Mail of 11 June 2010 headlined, “Tory minister under fire for gaffe as he tells MPs: ‘Those in most need will bear the burden of cuts’”. The article states:
“Unveiling a 1.2 billion package of cuts to councils, Local Government minister Bob Neill suggested the poorest areas would suffer the most.
Asked why northern cities were losing…more than southern areas, Mr Neill said: ‘Those in greatest need ultimately bear the burden of paying off the debt.’”
That comes from exactly the same Government who were happy to slash the income tax rate from 50p to 45p, giving huge tax breaks to some of the wealthiest in the country. The Minister should come to North Durham to speak to some of my constituents in low-paid work who are earning less than what some of these individuals are going to get in tax breaks in a year. That clearly shows that the Government do not have a clue about the effect on the poorest in our society. The idea that we are all in this together is complete nonsense.
Mr Jones
I do not know whether the hon. Gentleman is old enough to remember records—I think he is—but if he does he will remember that trying to play a broken record is very difficult. The rhetoric from the election, when the Government blamed everything, including the world recession, on the Labour party, has now become a broken record. We are now into another recession in this country that was of this Government’s making. It is interesting that the Chancellor of the Exchequer now argues that the British economy is not doing well because of the eurozone. In 2008, 2009 and 2010, when the banking crisis hit, it was all Labour’s fault; now it is all Europe’s fault. The only people who are not accepting any responsibility are this coalition Government.
Was our borrowing in 2008 and 2009 the right thing to do? Yes, it was. It was the right thing to do to ensure a growing and stable economy. We do not have that now; we have a recession that has been made in Downing street by this coalition Government. The idea that the fair way of dealing with that is to reduce the top rate of income tax so that it will, through Reaganomics, trickle down to boost the economy is complete nonsense. We have also heard complete nonsense this afternoon that the way to get growth is to slash employment rights. The Government are living in cloud cuckoo land if they think that that will not have an effect on local people.
I was in local government for about 11 years, and I know that if a Government tinker with the system only to get it wrong they pay for it dearly. I remember the Conservative Government getting the poll tax wrong. Even when it was quite evident that it was going to be complete chaos, they would not change their mind. We are trying to rush through a system that will affect some of the poorest people and the poorest councils, adding to the injustice of the skewed way in which the Government have rewarded their friends on councils in the south. We are setting local government an absolutely horrendous task. The idea that the system can somehow be changed tomorrow at the flick of a switch is complete nonsense and I hate to think of the sleepless nights these provisions will give local treasurers. The practicalities will have an effect on councils’ individual income while they try to work out the system.
Mr Raynsford
One of the nightmares that local authority treasurers might well be thinking about is the downside risk in future years. Up to now, we have been talking only about the 10% cut, which totals £500 million, but under the scheme local authorities will be liable if there is an increase in demand for council tax benefit, possibly because of the closure of a local business or because the double-dip recession, which the Government have created, has caused further hardship and unemployment, meaning that more people are claiming council tax benefit. That risk is clearly now with the local authority and many treasurers will be nervous about the implications for them.
Mr Jones
My right hon. Friend makes a good point. Let me take my constituency as an example. Compared with April last year, 384 more people are unemployed. The figure represents nearly 7.2% of the population and shows no sign of decreasing. The demand will not be on the central pot but on the councils. If councils have the large pressures that we see in Durham and elsewhere, because of the number of children in care and adults with social needs, where will that money come from? We can add the 10% cut to those pressures, too.
As for the chaos that the process will lead to, although some councils—certainly Wokingham—will be able to afford to absorb such a reduction to their budget, not many will be. The mechanics of putting the system in place will be very difficult. What will happen if, with the best of intentions and advice, the computer systems cannot be put in place? Where will a local council find its money? What will happen if a scheme is put in place that has teething problems that lead to mistakes? What will happen with appeals and with the process of dealing with the situation? There is no remedy at all.
Chaos and uncertainty will be faced by many low-paid families in this country and they will not know how the change will affect them. That is why amendment 9, tabled by my right hon. Friend the Member for Greenwich and Woolwich, is right. It must be made crystal clear what the effect will be on individuals. I support my right hon. Friend’s amendment, but I think that it might be playing into the Government’s hands, as they will want to blame the local council—in my case, Durham—for what is happening. Councils need to make it very clear that responsibility for the cuts lies with this Conservative and Liberal Democrat coalition Government. If they do not do that, the tactics that the Conservatives are using and that the Liberal Democrats have sleepwalked into mean that local people will blame local councils.
Local Liberal Democrat councillors in Durham, for example, are arguing against changes to library hours and to local leisure centres. They will sign petitions to their hearts’ content. Small equatorial rainforests are decimated for local Liberal Democrat copies of “Focus” that state that they are supporting decisions against such moves by Labour Durham county council. They are not explaining to the people, however, that their coalition with the Conservatives in government nationally is cutting the county council’s budget savagely while helping the leafy Wokinghams of this world. That is the message we must get across to people: these cuts and their effect on local services and on people’s income are down to the coalition Government.
I reiterate what I have said before: not one single piece of the legislation that has such an effect could go through without the complicity and support of the Liberal Democrats. They must take as much of the blame for the pain and heartache coming the way of many people in County Durham over the next 12 months as the Conservatives and it is no good hiding behind the idea that County Durham has somehow been given the freedom to come up with this scheme.
John Healey
I wonder—are they unintended consequences? If they are, the degree of negligence in the legislation is unforgivable. If they were foreseen and have been calculated as part of the legislation, that speaks volumes about the “doublethink” and “doublespeak” that my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), quoting Orwell, talked about earlier.
The Government are making a pious claim to be on the side of those who are struggling but who are trying to do the right thing by staying in work in order to support themselves and their families, but those people will find it much harder from next year as a result of the changes that are going ahead. In Rotherham, just over 2,600 people are in that position, in Barnsley, just over 2,200, and across South Yorkshire there are more than 13,500 people in work who earn so little that they are entitled to support from us and others to help cover their council tax bills.
Mr Raynsford
I wholly concur with my right hon. Friend’s argument. Does not he, like me, think it extraordinary that the Government, when they first announced the proposals, said specifically that they intended the reduction not to create any work disincentives? That has now disappeared from the rhetoric—they appear to have forgotten that objective entirely. Given their overall approach and the rhetoric they are adopting in relation to other benefit changes, such as saying that they are on the side of people in work, is it not extraordinary that they are now explicitly accepting the fact that this measure will create serious work disincentives?
John Healey
I hesitate to disagree with my right hon. Friend, but I am not sure that they have forgotten it, because earlier the Minister said from the Dispatch Box that the scheme will somehow preserve work incentives. The whole design of the proposal, the framing of the legislation and everything the Government have published do not match the claims he has made from the Dispatch Box. They are hollow words that will hurt many people who are working at the moment and others who are not pensioners but who rely on the council tax benefit to help make ends meet, week to week and month to month.
Mr Raynsford
My hon. Friend is making an extremely important point. The Government are introducing this Bill at the same time as they are making a number of other changes. That will have a large cumulative impact on certain households. What is deeply shocking is that the Government are not aware of what that cumulative impact will be, nor of the extent to which what they propose this evening will aggravate an already disastrous situation for people who are suffering other losses of the sort that she has identified.
Helen Jones
I could not agree with my right hon. Friend more. The Government simply have no idea of the pressures on people on very low incomes.
The Prime Minister said that carers were the
“unsung heroes of our society”.
He went on to say:
“We should all support, recognize and celebrate the incredible work that carers do”.
That was in 2010, and times have changed. Now he wants not to support them, but to increase their council tax—another broken promise.
The Government also do not want us to talk about those who are receiving council tax benefit and are in work. The Minister for Housing and Local Government, who is not here this evening, likes to pretend that those people do not exist. He told the Communities and Local Government Committee that
“if somebody is in work they will not be receiving the benefit because they will not need to.”
That is another example of why he is tipped for promotion: it shows his incisive grasp of complex issues. Only someone as wilfully blind as him could come out with that, and only someone with no experience of what it is like to live on a low wage.
Helen Jones
My hon. Friend is quite right. We can go through every local authority in England and find a number of such people.
It is not just people in work and on low wages who will be affected but disabled people deemed unable to seek work, carers, and part-time workers who do not even show up in the figures. An increasing number of people are being forced to seek part-time employment, and they will pay the price of the Government’s cuts.
As my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) said, there is a form of “doublethink”. The Minister for Housing and Local Government told the Select Committee that people could be protected by
“getting economic activity going so there are jobs.”
The Government are prone to lecturing everybody on getting economic activity going. They lecture councils and the European Union, but the one set of people they do not seem to lecture is themselves. They have no plan for growth at all.
Many people in receipt of council tax benefit are in work or not expected to seek work because of their circumstances. For them, the cut will depend not on their individual circumstances but on where they live and, crucially, how many pensioners there are in their local authority area. That varies hugely from one area to another. Claimants of non-working age make up 34% of the total in East Dorset. In Tower Hamlets, the figure is 68%.
The benefit cut that people receive could vary between 13% and 25%. The worst thing about it is that it is entirely arbitrary, with no pretence of fairness whatever. In fact, in their recently published statements the Government have explicitly rejected the idea of taking into account the number of pensioners in a local authority area when setting the funding level. Many Government Members will have cause to regret that in future years.
As some of the Opposition amendments point out, the new system will hit not only those in work or unable to work but those seeking work. The Government have been in such a rush to bring it in that they have failed to align it with universal credit, to which the Minister referred earlier. If they are so keen to have universal credit, they should have waited to align council tax benefit with it. Their own consultation document acknowledged the problem, stating:
“There is a risk, however, that some of the advantages from the single Universal Credit taper…could be lost if there is a separate and overlapping withdrawal of council tax support through localised schemes. This would produce a marginal deduction rate higher than 76%”.
If millionaires were having to put up with that, the Government would be rushing in to rescue them. What sort of Government include those warnings in the consultation and then ignore them? They are either incompetent or vicious—one or the other. [Interruption.] Both, somebody says, and I am beginning to think so.
As we have seen with business rates, the areas in greatest need will be hit hardest. Let us take the impact on people in work as an example. In Liverpool, there are 6,570 people in work and receiving council tax benefit. In Durham, there are 5,810, in Birmingham a whopping 16,780 and in Hackney 7,910. Just down the road in the City of London, there are precisely 40. In Purbeck there are 580, in Runnymede there are 610 and in Wokingham—I could not pass up another chance to mention Wokingham —there are 780.
This change is a triple whammy for the poorest areas. First, it will mean that local authorities with more people in work and receiving council tax benefit face a much bigger risk of default in their council tax collection. Secondly, it will make it much harder for them to mitigate the effect of the cut on people of working age. Thirdly, there will be a bigger impact on their local economy, because money will be taken from people who would otherwise go out and spend it. It will come as no surprise to my right hon. and hon. Friends to hear that the New Policy Institute estimates that five of the 10 hardest-hit local authorities will be among the top 10 most deprived in the country—Hackney, Newham, Liverpool, Islington and Knowsley.
In the Liverpool city region, it is estimated that the Government’s proposals will result in cuts of 17.23% for those who are not pensioners. In Halton, a single person will have to find at least £179 more each year. In Sefton, which has a higher than average number of pensioners, a couple in a band A property will have to find an extra £226 a year. That is probably small change to Government Members, but to people who struggle to keep their heads above water—those who have to count every penny to get to the end of the week without getting into debt, and without being driven into the arms of the loan sharks who are on many of our estates and ready to batten on vulnerable people—it is the difference between surviving and not surviving.
I sometimes wonder what Ministers know of that world. Have they ever stood in a supermarket watching people put things back because they cannot afford to pay for everything in the basket? Do they understand the struggle that some families have if a child needs a new pair of shoes? They know nothing of it, and they have no wish to understand it.
Mr Raynsford
Is it not telling that not a single Government Back Bencher has contributed to this debate in support of the Government’s measures? Does that not indicate that they know deep down that these measures are deeply flawed, deeply unfair and deeply wrong?
Helen Jones
My right hon. Friend is entirely right. [Interruption.] The Under-Secretary says that it is because they think the measures are right. Well, if I cannot appeal to their moral sense, let me try appealing to their economic sense. The poorest areas will have the biggest hit to their local economies. The 2010-11 figures show that a 10% cut will mean £10 million being taken out of Birmingham, £6.1 million out of Liverpool, £3 million out of Newham, £2.7 million out of Newcastle and £2.9 million out of Gateshead. By contrast, the prosperous local economies lose less. Runnymede will lose £454,000; Wokingham £518,000; Melton more than £246,000; and Hart £293,000; but—as we might expect with this Government, this is a big “but”—that is not the whole story.
Mr Raynsford
On a point of order, Mr Deputy Speaker. The Minister has made a factually incorrect statement that I would not want to remain on the record without giving him the opportunity to reconsider it. I hope that he will therefore take an intervention.
Mr Deputy Speaker (Mr Lindsay Hoyle)
The right hon. Gentleman has pointed out that he believes the Minister’s statement to be incorrect. It is up to the Minister to decide whether he wishes to give way. I do not think that he is willing to do so at this stage, but I am sure that the right hon. Gentleman will try again.
Robert Neill
Compared with formula grant that the Labour Government left behind, yes I do. That view was shared by the Lyons inquiry, which the previous Government very conveniently buried because it did not suit their purposes.
Might I now turn, Mr Deputy Speaker, specifically to the two sets of amendments and new clauses before us? I am sorry that the right hon. Member for Wentworth and Dearne (John Healey) is not in his place, because he made a thoughtful and well considered speech. I had the pleasure of shadowing him for a time and I respect his concern about the matter, so in fairness to his arguments, I will deal with the points he made.
New clause 1 relates to the operation of set-aside and the position of tax increment financing schemes—TIFs. The Government are committed to making TIFs option 2, which is what we are talking about, successful. I am glad to learn that when he was in government the right hon. Gentleman was an advocate of TIFs. He was not, unfortunately, able to persuade those further up the governmental pay scale to introduce them, but I do not doubt that he tried hard. This Government are doing what everybody asked and succeeding in introducing them. He is quite right that for TIFs to operate properly there has to be a degree of certainty, but the change he proposes is not necessary because the provisions in the Bill already enable that to happen.
The Government’s intention, as indicated in the White Paper, is that a ring fence exempts TIFs from the calculations of the levy, the set-aside and any reset, and the Bill already permits that. We also intend that, under the system, the additional uplift in rates retained be disregarded when setting tariffs and top-ups, not only in relation to the option 2 TIF scheme, but in respect of enterprise zones. That is why “proportion” is used in the regulations about which the right hon. Gentleman is concerned. The intention for TIFs is 100% ring-fencing, but in relation to enterprise zones, as hon. Members will know, the uplift in rates is retained from a starting point, so there is a proportion. The wording is used simply to cover both types of scheme and to enable both to be ring-fenced.
Mr Raynsford
Given the Minister’s response to the Chair of the Communities and Local Government Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), insisting that the new system is simpler, will he now explain how that mechanism, involving not only the set-aside and the levy but the reset and the differential arrangements in enterprise zones, will work in practice to achieve the objective, which my right hon. Friend the Member for Wentworth and Dearne (John Healey) rightly stressed, of giving investors the certainty that there will be a ring fence?
Robert Neill
I think that the right hon. Gentleman will have to make do with a potted version, given that I have only 10 minutes left and want to deal with other points as well. Suffice it to say that if he casts his eye over paragraph 37(1)(d)(iv) and (vi) of part 10 of new schedule 7B to the Local Government Finance Act 1988 —I know that he will want to do detail as we wish to do detail—he will see that the regulations permit those uplifts to be disregarded.
Those provisions have the same effect as the new clause tabled by the right hon. Member for Wentworth and Dearne would have. The Government have said that it is not our intention to reset the system until 2020, save in exceptional circumstances. I accept that for option 2 TIFs it may well be desirable to have a longer period than that, and the regulations will permit that. Enterprise zones and option 2 TIFs will be disregarded at the reset and could be disregarded for subsequent periods. It will therefore be convenient to align future resets with the revaluation period from 2015 onwards. The system will work perfectly well in practice.
In amendments 62 and 63, the right hon. Member for Wentworth and Dearne fairly recognises that central Government have, and always will have, an interest in public spending. It is unrealistic to think that central Government would not have a macro-economic view on the overall level of control over local government, and that is why we could not accept his amendment and constrain ourselves in the way that is intended. However, we have always made it clear that, over time and particularly once we have the public finances back on track, we hope to increase the proportion of business rates that are part of the rates retention scheme. We are starting at 50%, which is a considerable step forward in giving local authorities greater financial autonomy, and the provisions in the Bill allow the figure to be increased if circumstances permit. Equally, however, one has to be realistic and recognise that in an economically difficult world it would be imprudent to presuppose that the central share could be removed altogether. I do not think that any Government would envisage that. It is conceivable that in dire circumstances the share could be increased, but that is certainly not the Government’s intention; we intend to reduce it as soon as economic circumstances permit. It is therefore appropriate to maintain the existing provisions, which enable the alterations in shares between local and central Government to be considered alongside the need to maintain affordability and to protect the interests of the taxpayer and the wider economy. Whatever the proportion, be it 50% or higher, I repeat the assurance that, as is consistent with the 1988 Act, it remains the case that business rates paid to central Government through the central share will be returned to local government through other grants.
On amendment 63, we are alive to the point that the right hon. Member for Wentworth and Dearne makes, and we will take it on board when drafting final regulations. We are conscious of the potential interaction of the incentive with loss of revenue at appeals, and we have said that we will consult further on that during the summer. We have already scheduled meetings between officials and local authority officials. Against that background, I hope that the he will feel able, albeit in absentia, to withdraw his amendment.
Let me turn to new clause 6 and the related proposals from Opposition Front Benchers. I could not help but note a slightly different tone in the debate when we discussed them. I think that earlier the hon. Member for North Durham (Mr Jones) alluded to one-tune records. With respect to the hon. Member for Warrington North (Helen Jones), a one-tune record is still a one-tune record however long you play it, and I am afraid that that is what we heard from the Opposition Front Bench. It is also, I am sorry to say, a rather inaccurate one-tune record, because when one analyses the hon. Lady’s argument, one sees that it is not only a serious indictment of the system that we inherited from the Labour Government but it does not accurately portray what we are seeking to do. It is a serious indictment of the Labour Government’s record because the list of undoubted differences and inequalities between regions in the UK that she set out is in some measure, if she will forgive my saying so, the legacy of the failed, highly centralist policies of the Labour Government. It is pretty scandalous that after 13 years of regional policy and of a highly centralised local government finance system, the inequalities to which she referred exist. That is what Labour left behind.
The coalition has sought to address that legacy, even within the existing system. First, we have increased the weighting given to the needs element of the formula grant, which precisely reflects those issues, from 73% to 83%—something that no previous Government have done. Secondly, we have introduced transitional grant to deal with authorities in the greatest difficulty.
It is worth bearing in mind that need is built into the calculations in the business rate retention system. Need is part of the calculation of the baseline because the needs element is part of the formula grant, and we have indicated that we will take the 2012-13 formula grant as the baseline. The hon. Lady’s examples of the undoubted cost pressures in social services, child care and so on are, therefore, reflected in the social services element of the formula grant that we have maintained, as well as in the uplift of the needs element that we have maintained. We have placed such authorities in a better position for the starting line.
There are undoubtedly significant and sensitive services that are under pressure. Reference has been made to some of the child care cases that we know about. Those are really tough areas with real cost pressures, but under our system top-tier authorities in two-tier areas, which make up the majority of the authorities that are responsible for adult social care and children’s services, will be designated as top-up authorities. That means that they will be protected from volatility more than any other authorities in the system. They know that their top-up will be fixed for the reset period and index-linked thereafter to the retail prices index. There is particular protection in our system for authorities with the greatest need. The thrust of the Opposition proposals therefore falls at the first point.
We have said that we will share the proceeds and the risks through the 50:50 split between local and central Government. We have said that the baseline will take into account the issues that we have taken on board. We have said that baseline funding will remain fixed and that growth in budgets will be linked to local business rates growth thereafter, but with protections in place. Opposition Front Benchers have shown a schizophrenic attitude to the Bill from start to finish. They have paid lip service to a degree of localism, and they have given examples of over-centralisation that, on analysis, turn out to be the legacy of their own system. They have been in denial throughout about the need to link reform of the local government system with a realistic appraisal of the need to reduce the deficit. They have produced a set of arguments about as dysfunctional as one could find, making them the Simpson family of British politics. We have heard no credible alternatives. They have played the same record time and time again, and they do not have much credibility. I hope that the House will resist the Opposition proposals if they are pressed.
Robert Neill
I beg to move, That the Bill be now read the Third time.
This is a bit like coming out in the play-off final after the brief half-time break at Wembley on Saturday. We just need a little bit more to close the deal as far as this Bill is concerned—[Interruption.] It did not have to go to penalties.
We have had a lengthy and sometimes constructive debate during the Bill’s progress through the House, and it is worth taking stock now. The House has the opportunity to make a considerable game shift in the relationship between central and local government. We are now in a position to move away from what has been, on any independent view—as consistently endorsed by independent experts, going back to Layfield, the Lyons inquiry and the resource review—the unhealthy level of dependence of local government on central Government for income that has accrued over the years. As part of the Government’s localism agenda, we intend to hand back power to local people and the authorities that represent them. I hope that that principle will be recognised by hon. Members on both sides of the House.
I shall set out what the Bill does and its wider context as part of the coalition’s localism agenda. It is recognised that giving greater local control over expenditure and revenue raising is desirable. The principle of business rates retention is therefore supported across the House. Once we drill under some of the rhetoric, there is also a general recognition that welfare spending needs to be brought under control, and that it is right that local authorities should have control over council tax support.
The Bill incentivises local authorities to go for growth, because that is the other part of the agenda that the coalition regards as critical. We need to encourage sustainable growth and the Bill incentivises local authorities to grow their tax base by directly linking financial benefit to the decisions that they take on, for example, planning permissions that lead to more commercial floor space and economic activity, and in the design of their council tax support schemes that incentivise them to get claimants back into work, which is where we all want to see them wherever possible. It enables councils to decide how best to manage their contribution to reducing the deficit. All thoughtful commentators accept that a contribution must be made and that it is more likely to be nuanced and effectively delivered if there is local input into the design of that contribution.
Local authorities will also be given the freedom to decide how to help provide for the most vulnerable in their communities. I hope that no one seriously thinks that any party has a monopoly on concern for vulnerable people in their communities. The Government regard the vulnerable as a top priority, and that is why we have increased the weighting given to the needs element of the formula grant in our financial settlements; why we have maintained that in the baseline; why we introduced transition grants; and why we will ensure that local authorities that deal with some of those areas of greatest cost pressure in relation to adult social care and children’s care will be designated as top-up authorities and will have a degree of certainty about their funding by index-linking and protection from volatility. That is a practical commitment to helping to protect the most vulnerable in society.
The reforms are also part of our wider approach to supporting growth, which is our best hope of having the money that we need to support services for the vulnerable in a sustainable way; to get more people back into work; and to enable us to pay down the deficit, which at the moment ties the hands of central Government in seeking to deliver the services that we all want for our communities. We have made real progress on this front over the past two years. The Bill sets important incentives for business rate retention and helping people back into work through council tax support, but that is linked to other parts of the agenda. We are encouraging local authorities to build new homes, through the new homes bonus, an incentive for both commercial activity and domestic building. Homes as well as jobs are central to the incentives we are putting in place.
The local enterprise partnerships are bringing together businesses and civic leaders to provide strong local leadership and to drive growth. My right hon. Friend the Secretary of State, I and all the Ministers involved in the legislation very much hope that the Bill will not only make technical changes but bring about an attitude change in the relationship between local government and their business communities. Many of our competitors have a much closer relationship between their local authorities and the big economic drivers, but that has not always been incentivised in the UK. The Bill will enable it to happen and—I hope—help that mindset to develop. The LEPs will play a part in that by setting up the structure to enable it to happen.
We have put in place 24 enterprise zones offering discounted business rates and simplified planning to attract new local business and investment. The regional growth fund, the Growing Places fund and the Get Britain Building fund are providing a £3.3 billion boost to local economies and supporting tens of thousands of jobs, and through our welfare reforms we are seeking to bring welfare spending back under control and to target support. The 2010 spending review focused on reducing welfare costs through savings of about £7 billion a year.
Localising council tax support will help to deliver savings of £500 million across Great Britain—this in an area of activity where expenditure more than doubled under the Labour Government. It is not a sign of a healthy economy that expenditure on council tax benefit should have doubled between 1997 and 2009-10. Instead, we are providing strong incentives for local authorities to support growth and improve employment opportunities, helping to reduce poverty and reliance on support, as well as hold down costs in the long term. Speaking as someone whose grandfather clawed his way out of poverty in the east end, I, like plenty of other Government Members, have as much personal experience of such things as anyone else who has spoken.
The Bill has received extensive scrutiny. Its core principles were set out in the coalition agenda; we then proceeded with the local government resource review in early 2011; there was a consultation, along with eight detailed, technical papers to explain the thinking behind the reforms; and we have discussed the detail of the scheme through our local government finance working group and several sub-working groups. We have by no means ignored the views of local authorities; on the contrary, we have sought to engage with them, and will continue to do so, at every stage in the process. Those groups have been meeting frequently since January.
Localising council tax is a pragmatic approach to balancing the need for reform with ensuring a sensible level of deficit reduction, and builds on the welfare reform White Paper, published in autumn 2010, setting out our broad intentions. We undertook pre-consultation engagement with local authorities and other groups to help them to understand the issues, and held delivery partner engagement events last August and September, as well as a full three-month consultation from August to October that generated about 400 responses.
Against that background of consultation, nobody can say that the Government have not sought to engage with people over our reforms. Against that background of consultation and information sharing, last Thursday we published a series of statements of intent to provide clarity and assurance to the House and councils about how the reforms, including our proposal to fund localised support for council tax, will work in practice.
I shall tell the House what we have published so far and how much we have sought to set out the agenda. We have announced that business rates will be split 50:50 between central and local government and confirmed that central Government will return their share of business rates, in its entirety, to local government, and we have confirmed that the system will not be reset until 2020 at the earliest to give sufficient reward and long-term certainty while ensuring that the scheme will be fiscally sustainable, thus protecting the interests of taxpayers and the wider economy.
Our economic analysis, which has been independently verified, suggests that a 50% local share over a seven-year reset could create an additional £10 billion of gross domestic product. That figure is based on the multiplication of additional commercial floor space created through our incentive effect and, then, the additional gross GDP that stems from the economic activity in that commercial floor space.
We have set out the statements of intent indicating what will be in the secondary legislation, including—as was noted in the previous debate—the safety net threshold, to be set at between 7.5% and 10%, to protect against volatility.
On the localisation of council tax support, we have been clear that we will seek to provide as much detail as possible as early as possible. We continue to work with local authorities and service providers on the design of the scheme. [Laughter.] I know that the right hon. Member for Greenwich and Woolwich (Mr Raynsford) does not believe that any proposal that he did not make could be taken seriously, but that perhaps says rather more about him than about the Government.
Mr Raynsford
Perhaps the Minister will now tell the House how he believes that publishing everything that is required to enable early implementation as soon as possible is compatible or consistent with the current situation, where, eight months before local authorities have to finalise the scheme, they do not yet know what the legal requirements are.
Robert Neill
If the right hon. Gentleman deigns to read the statements of intent, he will find what is effectively an executive summary of the regulations, which will deal with how the default scheme operates, including for pensioners, who we have indicated should be protected. We are having regular meetings with our local government working group, which includes representatives of local authority treasurers, and we are also in regular contact with the principal software provider and other service providers. We are therefore doing exactly what the right hon. Gentleman would want us to do, although I doubt whether it will satisfy him, because it is not him doing it.
We have announced £30 million of initial funding to help meet the costs of planning and analysing draft schemes for both billing and precepting authorities, so we are supporting local authorities. The statements of intent are, in fact, very detailed. We have also provided a free online calculator to help local authorities to analyse the potential impacts of their proposed schemes.
Mr Raynsford
The Government are having great difficulty in convincing anyone that the Bill does what they claim. They claim it is a localising measure, but, as we have heard, there is an extraordinary lack of support for it on their own Back Benches. Indeed, so far not a single one of their Back Benchers has spoken in support of it.
Local authorities are the supposed beneficiaries, but they, too, are profoundly unconvinced. Let us listen to what they say. London Councils says:
“London Councils supports the principle of business rate retention, but has grave concerns about the proposed changes set out in the Bill regarding the way in which the system will function.”
It adds:
“London Councils is strongly opposed to the introduction of local council tax reduction schemes, as set out in Clause 8 and Schedule 4 of the Bill.”
The Local Government Association says:
“In principle we support the localisation of National Non-Domestic Rates…The principle of full business rate localisation, which also ensures fair treatment of councils in areas with weak economies, would be a powerful move towards localism…However, the government proposes to keep a top slice amounting to 50 per cent of business rates for the Treasury, taking taxes paid by local businesses for local services and using them for local services based on national priorities instead. That is not a localising policy and goes against the Government’s stated commitment to localism.”
If the Government cannot convince the people who are supposedly the beneficiaries of their reforms that they are acting in their favour, I am afraid they are in serious difficulty. The Government are, indeed, clearly in deep difficulty in this regard.
Incidentally, in the earlier debate I sought to intervene on one of the Ministers, the hon. Member for Hazel Grove (Andrew Stunell), as he had inaccurately claimed that the previous Government had done nothing to allow greater local discretion over discounts on second homes. I hope he will use this opportunity to put the record straight, because, as he will know, that is simply not correct. I am sure it was an unintentional error, however. The previous Government legislated to give local councils discretion to reduce the discount on second homes from 50% to just 10%. The Minister may wish to argue about the 10% figure, but there was good reason for deciding on it, and that was a clear extension of discretion to local government. It is therefore simply wrong to suggest that we did nothing in that regard. I hope the record will be put straight.
Andrew Stunell
If it helps the proceedings, let me say I am happy to acknowledge the factual account the right hon. Gentleman has given, and I am sorry if I gave a misleading impression earlier.
Mr Raynsford
I am very grateful indeed to the Minister for that gracious apology.
The first part of this Bill is a wasted opportunity, as it fails to deliver what people want in terms of a truly localist objective. The second part, which deals with the council tax benefit changes, is deeply flawed. The changes are damaging and will either cause serious hardship to recipients of council tax benefit or will put pressure on local authority budgets. It is not just the initial £500 million that will be a problem; increased costs may come later on as a result of further claims for council tax benefit, which may result from closures of local businesses or a further period of recession. That will be an extra risk for local government, which will get no support for central Government.
Finally, on the issue of administration, the Government are acting recklessly by rushing ahead without giving adequate time for proper preparation. It has been said repeatedly by those in the know, be they people in local authorities or their IT advisers, that the timetable is too tight to allow proper implementation. I will not go through the details, as we did so in the earlier debate, but it is reckless of the Government to ignore that and to claim that local authorities and others are happy with the timetable that the Government have set—they are not.
I shall end by quoting what local government has said on this. The LGA says:
“The tight timeframe for implementing this places an even greater burden on councils and we urge the Government to give councils the necessary time to do this”.
London Councils says that
“even under best-case scenario planning, the proposed implementation timetable may well be unachievable if council tax bills are to be sent out on time”.
That is not the action of a prudent Government; it is reckless and, I am afraid, it is typical of this Bill.
Question put, That the Bill be now read the Third time.