Council Tax Benefit Localisation

Debate between Yvonne Fovargue and Stephen Timms

Wednesday 27th June 2012 Westminster Hall

[Yvonne Fovargue]

No, it is not cost-effective, and another factor is that council tax benefit offences are imprisonable. Does it do anyone any good to put people into prison for a short time for a very small debt?

[Stephen Timms (East Ham) (Lab)]

I welcome this debate. Has my hon. Friend seen the announcement by the Institute for Fiscal Studies on this very point? It said:

“The poll tax experience showed how difficult it can be to collect small amounts of tax from low-income households that are not used to paying it.”

Is that not the scenario that we are getting back into?

[Yvonne Fovargue]

My right hon. Friend must have read my notes, because I am coming to the Institute for Fiscal Studies. It warned that limiting spending will give councils an incentive to discourage low-income families from living in the area. As in the past, they will be left to chase desperately poor people through the courts for small amounts of unpaid tax. During the 1990s, I worked in an advice agency; I can honestly say that I do not want a repeat of the poll tax debacle. That policy, like the current one, involved the poorest people paying the most in the most deprived boroughs.

When I look at the options being considered by Wigan council, I despair. Wigan has an excellent council with an enviable track record of working with employers, and a very active local chamber of commerce that provides new employment opportunities and supports existing businesses. However, given the difficult economic climate, and despite active promotion of employment and growth, Morrisons recently announced the closure of Rathbones bakery, with 160 job losses. Any closure or relocation of a major employer places an increased burden on already hard-pressed councils, and insisting that they collect a small amount of council tax from people adds to that burden and puts them in an impossible position.

The issue is compounded by the fact that the grant is predicated on the amount of benefit in the previous year, so any large influx of people into the council tax benefit system will have a destabilising effect on the council’s budget. Indeed, there may be a perverse incentive to encourage such people to leave the borough—a return to the poll tax scenario.

Wigan and similar local authorities have stark choices. They could abolish backdating for working-age customers, but savings would be minimal. They could abolish the second adult rebate, but the savings would also be minimal. They could establish a weekly minimum payment of £1 upwards, but again the savings would be minimal. They could change the capital disregards on a sliding scale, penalising people who save, but, once more, the savings would be minimal. They could disregard income from child benefit, maintenance payments and disability benefits, but that would hit the most vulnerable the hardest and could be open to challenge on grounds of discrimination.

Such a move would certainly save money, albeit with the greatest cost falling on the most vulnerable. Awards could be capped at a percentage of liability, which could deliver savings, but, as my right hon. Friend the Member for East Ham (Stephen Timms) said, given the huge increase in the number of council tax bills, collection would be very difficult because some people would be paying council tax for the first time. That would lead to an increase in collection costs. Again, there are echoes of the poll tax.

The new scheme would have to be in place by January 2013 with the IT changes completed and ready to go online. Is the Minister confident that the IT systems will be in place in time for an introduction in 2013? My local authority certainly has worries about that. It wants to know how progress of the IT systems will be monitored, and how they will be supported in their introduction.

Another issue that localisation of council tax benefit raises is its relationship, or not, with the universal credit. The credit is supposed to simplify the benefits system, reducing the number of different benefits and means tests. Keeping council tax support separate and allowing it to vary throughout the country surely undermines that simplification. Universal credit was supposed to rationalise work incentives by replacing the jumble of overlapping benefits with one single means test. That may vary throughout the country, so how will people judge how well work will pay, if it does, in different areas? Will the Minister explain how work will always pay, given that a localised scheme will be introduced prior to the universal credit? How will the two line up and interrelate?

That is not the only change that will affect working families in April 2013. For those who also claim housing benefit—let us not forget that seven out of eight housing benefit claimants are in low-paid employment—the outlook is even more bleak. The under-occupation penalty or bedroom tax will also come into effect. Wigan has a shortage of one-bedroom properties, and more than 8,000 residents are under-occupying. They will be unable to move, because we simply do not have one-bedroom properties, so they will face a minimum 15% reduction in housing benefit—approximately £12 a week.

The increase in deductions for non-dependants is already increasing by approximately 30% a year. In 2013, the deductions will be almost double what they were in 2010.

Welfare Reform Bill

Debate between Yvonne Fovargue and Stephen Timms

Wednesday 1st February 2012 Commons Chamber

[Stephen Timms]

I also noted that the Minister did not give my hon. Friend the Member for Aberdeen South the assurance that she was seeking. My understanding is that any other income in the household, from any source, contributes to the household income, and the benefit for the disabled young person is therefore removed, pound for pound. My hon. Friend was seeking an assurance that some other provision would be put in place to safeguard the young person, but the Minister was unable to give her such an assurance, because I do not think that that is the Government’s intention. No such provision appears in the Bill at the moment.

[Yvonne Fovargue (Makerfield) (Lab)]

Does my right hon. Friend agree that the measure will have an impact on young people’s ability to form relationships? Having to depend on the income of a potential partner will have a great impact on their lives.

[Stephen Timms]

That is a particularly important point. If a person decides to marry someone who has an income, they will lose all their own income. The independence that the system has provided for 40 years is now being taken away.