Council Tax (Benefit Claimants)

Steve McCabe Excerpts

Tuesday 29th January 2013 Westminster Hall

[John Hemming]

The argument is about whether it is best to compare people on the basis of the percentage cut in spending power or the total cut. If another council is spending only £40 and it has the whole amount cut, that is going to cause it a lot more problems. There is no doubt that it is the percentage that matters, and Birmingham’s percentage in this particular spending round is relatively good. It has to be accepted that all the figures are better than the average. Unquestionably, Birmingham has done relatively well. If the Labour party goes round whinging, no one will give them any credibility whatever. I am happy to take further interventions.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

The hon. Gentleman’s words may come back to haunt him. Most people in Birmingham expect their MPs to stand up for them. If I have understood the hon. Gentleman’s position, he is trying to suggest that Birmingham council is deliberately over-charging the poor. In doing that, he is managing completely to ignore the fact that it his Government who are cutting council tax support.

The hon. Gentleman seems to be advocating that Birmingham should accept the transitional grant. I have just read the Institute for Fiscal Studies report. Will he tell me whether he accepts that this is a one-off, one-year grant that is designed to persuade councils not to cut council tax support by as much as the Government are cutting council tax funding? Despite his maverick use of figures, does not it ultimately mean that further services will be cut to make up the shortfall? If that is his position, why does not he tell people?

[Sir Roger Gale (in the Chair)]

Order. There is a limit to what I am prepared to permit.

[John Hemming]

I thank the hon. Gentleman for his questions. On the first one, which is fighting for the city, the right hon. Member for Wentworth and Dearne (John Healey) and I campaigned considerably, including in this Chamber, for an increase in fire funding, because the proposals from the Government were unfair. The Government indeed changed those proposals, and it is now accepted that the new proposals on fire funding are completely fair. However, when the city does relatively well out of the funding settlement, I will have no credibility at all if I go around whinging about it, which is what Sir Albert Bore does whatever happens. On the first point, of course I will fight for the city, but when we get a reasonably good deal I will say just that, because it is foolish to complain about things when we are actually doing quite well.

I accept that I have gone through a lot of figures. I can give hon. Members the spreadsheets if they want to see them. If the Government grant is £2.1 million, it is true that £1.3 million is needed from the general fund. However, if houses are built and people move into the city, there is more council tax. The estimated figure for next year is £1.4 million more. The Government grant leaves a shortfall of £1.3 million. If we then use the £1.4 million of extra council tax to prevent ourselves from having to pay the poor, we are far better off.

[Steve McCabe]

Is the hon. Gentleman saying that any additional council tax revenue that is generated by new growth should all go towards the council tax support scheme, and that there should be nothing to deal with any of the other cuts being inflicted on Birmingham?

[John Hemming]

I have highlighted areas in which there are reserves within the council. I have particularly identified the over-budgeting for inflation. I quoted the figures from the council’s background papers, and I am happy to share the spreadsheets with all Birmingham Members if there interested. The issue is about choices. It is clear that the administration in Birmingham has decided that its choice is to try to charge poor people council tax. My view is that it has a lot of alternatives. To say, “We must do it,” is complete nonsense.

I accept, as the hon. Gentleman said, that the grant is a one-off scheme at the moment, but in my speech I said—I did not say it all that quickly—that we should extend it into further years. I hope that the Minister is listening. I repeat that I want to see the Government extend the grant to further years, because it is important that we try to protect the poorest people in society. The argument of the administration in Birmingham is that we need work incentives. We already have things such as the Welfare Benefits Up-rating Bill, but the administration is pushing it too far.

[Steve McCabe]

I am interested in the hon. Gentleman’s point about work incentives. Does he accept that the change in council tax support will fall on those who are of working age? They are the people who will be hit.

[John Hemming]

I accept that. That is why the Labour party administration in Birmingham argued that it wanted to do this—to encourage people to work. I want to encourage people to work, but let us recognise that the Welfare Benefits Up-rating Bill is coming in. If we ladle things on top of people, it gets very difficult. They are householders, so they are having to manage being in a household. The courts will not enforce the whole tax bill, and the council has ignored that, but the point is serious. It is a political choice made by the authority. The grant that I want to be continued costs only £100 million. I say “only”—£100 million is quite a bit of money, but it is not difficult to find from the national budget.

It was a real struggle to get the information that I have used in this speech from the Labour administration in Birmingham. In its report, its reason for not taking the Government grant was:

“The deferral of the scheme for 12 months may not truly promote positive work incentives or support people back into work.”

It seems to me, however, that it wishes to tax the poor in order to blame the Government and for party political gain.

--- Later in debate ---

[Brandon Lewis]

That is a fair point. Obviously, anybody can use figures in a way that suits them. The reality is that we have put in some money to help councils through the first year or so, and I will come back to that in a moment. However, if councils have not done anything by Thursday, the current scheme stays in place.

I see the most variation in the amount that local authorities propose to charge benefit claimants who have previously received 100% support. Suggested amounts range from 6% to 30% of council tax bills.

[Steve McCabe]

Will the Minister confirm what the Institute for Fiscal Studies has said, which is that the support that has been offered is worth 25% of the cuts? Is that not the difficulty?

[Brandon Lewis]

I will come back to that point in a moment, but as it happens I do not agree that that is the difficulty; it is just part of a wider package. As ever, Opposition Members tend to pick on one thing rather than look at an issue as a whole. The flexibilities that we have given to local government, along with councils’ ability to crack down on fraud and error—£200-odd million last year alone, which in most people’s books is a lot of money—give local government enough to deal with the measure. Across the country, that comes to more than its cost.

I am disappointed that some councils have failed to rise to the challenge to explore every option, and that they are taking what they perceive to be the easier route of looking at double-digit across-the-board cuts. That is a short-term approach that slashes entitlements for the poorest without looking at other ways in which to manage the funding reduction, and it is not sustainable. It is common sense that asking the poorest to pay contributions of 30% is simply unreasonable and, in the longer term, as the funding for council tax support is built into the baseline level of business rates funding, councils have everything to gain from helping people back into work. That is where their focus should be.

It is, of course, for local authorities to consider the appropriate funding to be applied to support local taxpayers as part of their wider budget decisions. Making councils financially responsible for providing support creates stronger incentives for them to get people back into work and to reduce costs.