Local Government Finance Bill
Debate between Nick Raynsford and Helen Jones
Helen Jones
Labour Front Benchers believe in a fair deal for vulnerable people wherever in the country they happen to live, and we do not believe that a disabled person in Wokingham should be treated differently from a disabled person in Wigan. Our principle is that the help that someone gets should be dependent on their situation, not on where they happen to live. That is a key part of our policy. Let me say this to the hon. Lady: this is a policy designed to hit the poorest people hardest, especially the poorest people who happen to live in the poorest local authorities, which have already taken the biggest cuts in spending power, as we have seen during the passage of the Bill. Let us remember the figures. Liverpool will have lost £235 per person in spending power. In Hartlepool, the figure is £183. In Wokingham—I could not resist mentioning it just once more in the context of this Bill—it is a grand total of £1.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
I put it to my hon. Friend that we may well have disagreement between individual Members, and possibly even parties, about whether it is a localist measure to devolve council tax benefit to local authorities or whether it is sensible to have a national benefit, but no one who is sensible, looking at this, can possibly agree that it is proper and right to make a 10% arbitrary cut in the amount of money available for such people at the time that the system is being decentralised. That is what is utterly objectionable and what the hon. Member for Mid Dorset and North Poole (Annette Brooke) should be apologising for.
Helen Jones
My right hon. Friend is right. The reduction in the money available for council tax benefit is not the only thing that we are dealing with. The very same councils will be hit by the Government scheme for business rate localisation before being hit again by the reduction in the amount available for council tax. The Government call it a 10% cut, but in fact it is much more than that, because their calculations are based on what they think the cost of council tax benefit payments will be next year. It is no surprise to hon. Members who have followed the Bill’s passage through Parliament to learn that the Government believe that the cost will go down. In fact, the number of claims is rising as more people face reduced hours of work or unemployment. The Government have produced a wonderful document, which could have been written by Pollyanna, stating that claims will go down because the number of people on jobseeker’s allowance will go down and pensioner take-up will decline and so on. That is nonsense.
Helen Jones
Of course the politicians should make the decisions, but in cases such as this they make them based on proper professional advice. If they did not, the Minister would be the first to criticise them.
Mr Raynsford
My hon. Friend will know that under the Government’s proposals, the entire downside risk—the risk of further expenditure as the result of an increase in the number of claimants or further demand for council tax benefit—all has to be borne by the local authority, so it is hardly surprising if treasurers are advising their councils that they need to build up reserves against eventualities imposed on them by Government decisions.
Helen Jones
My right hon. Friend is entirely right. I suspect that if a council found itself in financial difficulty and did not have reserves, Ministers would be the first to stand up and accuse it of failing to plan prudently for that eventuality.
The scheme will last only one year. Will schemes have to be redesigned again after that? If so, people will have had to cope with three different council tax benefit systems in three years. Currently, they might pay nothing, but next year they might pay 8.5%. After that, who knows—15%, 20%, 30%? There is huge uncertainty for the poorest people in the community.
As my right hon. Friend says, local councils will also be left with huge financial uncertainty. The Government believe that the number of pensioners claiming council tax benefit will drop, but everyone who deals with benefits believes that it will rise, because in future the sum in question will be shown as a reduction in someone’s council tax bill rather than a separate benefit. If unemployment goes up in an area, if a major employer closes down or if there are increases in part-time working, as there have been recently, local authorities will bear all the financial risk.
Local Government Finance Bill
Debate between Nick Raynsford and Helen Jones
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.
Local Government Finance Bill
Debate between Nick Raynsford and Helen Jones(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Helen Jones
I remember that exchange between my right hon. Friend and the Secretary of State; he did not get a proper answer. Later, we will debate the clause about resets as they relate to TIF schemes.
The issue also applies to setting the levy. Let us say that there was significant house building in a local authority. That would lead to more employment and business rates, but would also mean that there was more demand on the council’s services. Unfortunately, in the Bill, the Government refuse to take account of service needs and service provision. Where would that leave the council? Would it have made a disproportionate gain and therefore be subject to a levy? A levy set as a percentage charge on growth simply does not deal with such issues, but the Government do not seem to wish to look at the matter. They want simplicity, but in a complex world—and that is not achievable. We have moved the amendment to get some clarity.
Amendments 28 and 29 simply seek to bring the procedure for requiring a levy payment from an authority more into line with that used for the local government finance report. As we have said, the Bill is remarkable for giving no indication of how the Secretary of State intends to exercise many of his powers. As has been said, we have seen no drafts of the regulations. The Secretary of State used fine words about the radical devolution of power in introducing these measures, but it is noticeable that that is totally inconsistent with what is happening under the Bill.
As I said, we have a concern about how the levy payments will be calculated, but the amendment seeks to ensure that local authorities, if required to pay a levy, have the opportunity to make representations about that. That happens with the local government finance report, because a copy must be sent to relevant authorities, and the Bill contains provision for what will happen if there is an amending report. However, the levy is calculated at the end of the year to which it relates and it is not clear whether levy payments will be included in the local government finance report.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
My hon. Friend is making a telling point. Is it not extraordinary that not even the basic principles on which the levy calculations will be made have been spelt out in the legislation? One can well understand the need for some discretion for Ministers, when operating rules, to be able to adjust on a year-for-year basis; I have no difficulty with that. But Ministers should be open with the House, the public and local government about the principles on which they are acting. The complete silence in this legislation about anything to do with the principles that determine whether an authority gets a disproportionate gain seems extraordinary.
Helen Jones
My right hon. Friend, who is a very distinguished former local government Minister, is exactly right. In effect, we are being asked to write a blank cheque to the Secretary of State, who can then do what he wants with it.
Helen Jones
My hon. Friend reminds me of a good point that I was going to make earlier. I had Northumberland in mind because it is a place that I am very fond of and know well. If Northumberland has lost Alcan by the time the baseline is set, it will be set on the basis of lower business rates. If the authority replaces Alcan with another employer, will it be deemed to have made a disproportionate gain? The Minister must explain why an authority that is trying to do the right thing by bringing in new employment to replace what has been lost should be penalised for that.
An authority will need to be able to make representations when the amount of levy that it is going to be asked to pay is first published. As I said, we do not know whether the levy payments will be included in the local government finance report. That is because the Bill is so vague.
We think that it is only fair to specify that, if a local authority is required to make a levy payment, it should be notified and be allowed to make representations about the calculation before the final decision is made. It might be that an authority challenges the basis of the decision that it has made a disproportionate gain. That is unlikely, but it could happen. It might be simply that the calculation has not been done correctly. We have seen that many times. That is why we have amending local government finance reports. It has been known occasionally for Departments to get their calculations wrong. In such circumstances, councils should have a mechanism for making representations before the final decision. Local authorities are, after all, partners in this process. Neither the Secretary of State nor any other Minister would want to be a provincial governor figure handing down unchallengeable decisions.
Helen Jones
My right hon. Friend says that they would. I do not think that that applies to the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), although I can easily imagine the Secretary of State in a toga, handing down diktats.
Local Government Finance Bill
Debate between Nick Raynsford and Helen Jones(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Helen Jones
I am inundated. I will give way to my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford).
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
Is it not very clear to my hon. Friend and to Government Members that there is something slightly odd about a Bill that is supposed to give benefits to local government arousing considerable anxiety and concern in local government, as we have seen in the briefings that we have received? Is that not clear evidence of the need for further thought and attention to the detail to ensure that we do not end up with a disaster that is problematic for local government, rather than a measure that gives greater discretion and benefits to local government?
Helen Jones
My right hon. Friend makes a very good point. In delivering local services, we are meant to be partners with local government. It is right and proper that the House has an opportunity to take on board the views of local government on the legislation.
As my right hon. Friend is a London Member, perhaps I may read out what London Councils says:
“The retention scheme as written is extremely complex and does not, in our view, incorporate adequate reward and incentive for local authorities. London Councils believes that the Government needs to urgently rethink the business rate retention scheme that it has set out in the Bill.”
If we had had a proper Committee stage upstairs, we could have taken evidence on that matter, considered technical amendments and debated them properly. It is a shame that we are not doing so.
Mr Raynsford
My hon. Friend is making a powerful case. She is considering the changes to the benefits scheme and she highlights the fact that an increase in pensioners’ claims as a result of the changes would be a further problem for local authorities. Indeed, it will be a major problem for them, because they will not receive the funding to pay for it that they get under the current benefits scheme. They are being asked to budget in advance, with all the uncertainties, knowing that the downside risk remains with them if the financial position is not as good as they thought when they budgeted. There is no safety net in the benefits part of the system for authorities that find themselves in difficulty. That is a fundamental problem, which is arousing real concern in local government circles. It is extraordinary that the Government are not giving an opportunity for those serious problems to be understood.
Helen Jones
My right hon. Friend is, of course, right. Throughout the Bill, financial risks are transferred to local authorities. The Government set the system but transfer the financial risk elsewhere.
Let me return to the problems with IT systems. Earlier, my hon. Friend the Member for Plymouth, Moor View (Alison Seabeck) mentioned that only a few firms provide those systems. Interestingly, Capita has sent an e-mail to benefit and council tax managers to set out its concerns about the timing of the system. The manager who sent the e-mail writes:
“I think the most important point to make is that I remain concerned and disappointed that the timetable remains unchanged meaning that primary and secondary legislation will not be passed until the summer / autumn / winter 2012. Without the framework and detailed regulations underpinning both the local schemes and means for ensuring that pensioners now and in the future remain protected or treated equally, it is impossible to commence planning for software changes.”
That is the system with which the Government are expecting local authorities to cope.
There are other changes in the Bill—provisions on tax increment financing, on the rating of empty properties, and on exemptions from the scheme for renewable energy projects—for which local councils need time to plan, adjust their budgets and rethink the way they do things. Those measures require changes to how councils organise themselves and changes to IT systems. Many local authorities are making it clear that they believe the Bill does not give them sufficient time to prepare for those changes.
May I make a suggestion to the Minister—it is meant to be a helpful one? I try to be helpful occasionally even if the Whip is giggling away. Why not run the proposed system as a shadow system for one year to see how it works and iron out the glitches? Why not continue with the old system for a year but give local authorities an indication of what they would have received under the new system? That would allow any problems to be ironed out and the system to work properly.
Above all, the Opposition are saying that Ministers ought to take note of the people who must implement the changes on the ground—the people who collect the rates, who design the systems, who administer council tax benefit and deliver the services. If the Government rush the implementation of the Bill and it all goes wrong, chaos could result. They need to take the opportunity to test the system properly and to think things through. If they insist on introducing this hugely complex system, they need at least to give themselves time to run it properly and ensure that local councils can adapt their systems properly. That is why I have moved amendment 20 today. It might be helpful if I tell the Committee at this point that the Opposition intend to press the amendment to a Division.