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Local Government Finance Bill

Volume 545: debated on Monday 21 May 2012

Consideration of Bill, as amended in the Public Bill Committee

New Clause 9

Regulations about powers to require information, offences and penalties

‘(1) The LGFA 1992 is amended as follows.

(2) After section 14 insert—

“14A Regulations about powers to require information

(1) The appropriate authority may by regulations provide for the exercise, for prescribed council tax purposes, of—

(a) powers to require the provision of information;

(b) powers to require a person to enter into arrangements under which access is permitted to the person’s electronic records.

(2) The appropriate authority may by regulations make provision about arrangements for access to electronic records for prescribed council tax purposes where the arrangements are entered into otherwise than under a requirement of the kind mentioned in subsection (1)(b).

(3) The appropriate authority may by regulations—

(a) make provision about the persons by whom powers conferred by regulations under this section may be exercised;

(b) make provision about the persons by whom arrangements under regulations under this section may be made;

(c) in particular, make provision for the authorisation by billing authorities of persons to exercise those powers or make those arrangements.

(4) The provision that may be made by regulations under this section includes, in particular, provision equivalent to—

(a) provision made by a relevant enactment, or

(b) provision that is capable of being made under a relevant enactment,

with such modifications as the appropriate authority thinks fit

(5) For the purposes of subsection (4), each of the following enactments as it had effect on the day on which the Local Government Finance Act 2012 was passed is a “relevant enactment”—

(a) section 109A(8) of the Social Security Administration Act 1992 (application of section 109B of that Act to the Crown);

(b) section 109B of that Act (powers to require information);

(c) section 110A of that Act (authorisations by local authorities to exercise powers of investigation);

(d) section 110AA of that Act (power of local authority to require electronic access to information);

(e) section 121DA of that Act (interpretation of Part 6 of that Act);

(f) section 191 of that Act (interpretation of that Act).

(6) This section does not affect the operation of Schedule 2 (administration of council tax).

(7) In this section “council tax purposes” means purposes relating to a person’s liability to pay council tax.

14B Regulations about offences

‘(1) The appropriate authority may by regulations provide for the creation of offences that may be committed by a person in prescribed circumstances—

(a) by intentionally delaying or obstructing a person in the exercise of a power conferred by regulations under section 14A(1);

(b) by refusing or failing to comply with any requirement under regulations under section 14A(1)(b) or with the requirements of any arrangements entered into in accordance with such regulations;

(c) by refusing or failing, when required to do so by or under this Act or by or under regulations made under this Act, to provide any information or document in connection with a person’s liability to pay council tax;

(d) by making a false statement or representation in connection with such liability;

(e) by providing, or causing or allowing to be provided, in connection with such liability, a document or information which is false;

(f) by failing to notify, or causing or allowing a person to fail to notify, a matter that is relevant to such liability (including in particular any matter that is required to be notified by or under this Act or by or under regulations made under this Act).

(2) Regulations under subsection (1)(a), (b) or (c)—

(a) must provide for an offence under the regulations to be triable only summarily;

(b) may not provide for such an offence to be punishable with a fine exceeding level 3 on the standard scale.

(3) Regulations under subsection (1)(a), (b) or (c)—

(a) may provide, in a case where a person is convicted of an offence under the regulations and the act or omission constituting the offence continues after the conviction, for the person to be guilty of a further offence and liable on summary conviction to a daily fine;

(b) may not provide for the daily fine to exceed £40.

(4) Regulations under subsection (1)(d), (e) or (f) that create an offence that may only be committed by a person acting dishonestly—

(a) must provide for the offence to be triable summarily or on indictment;

(b) may not provide for the offence to be punishable on summary conviction with imprisonment for a term exceeding 12 months or with a fine exceeding the statutory maximum;

(c) may not provide for the offence to be punishable on conviction on indictment with imprisonment for a term exceeding 7 years (and may provide for the offence to be punishable on conviction on indictment with a fine).

(5) Regulations under this section which create an offence within subsection (4) that may be committed before the date that section 154(1) of the Criminal Justice Act 2003 comes into force may not provide for such an offence committed before that date to be punishable on summary conviction with imprisonment for a term exceeding 6 months.

(6) Regulations under subsection (1)(d), (e) or (f) that create an offence that may be committed by a person acting otherwise than dishonestly—

(a) must provide for the offence to be triable only summarily;

(b) may not provide for the offence to be punishable with imprisonment for a term exceeding 51 weeks or with a fine exceeding level 5 on the standard scale.

(7) Regulations under this section which create an offence within subsection (6) that may be committed before the date that section 281(5) of the Criminal Justice Act 2003 comes into force may not provide for such an offence committed before that date to be punishable with imprisonment for a term exceeding 3 months.

(8) The appropriate authority may by regulations make provision—

(a) about defences to an offence under regulations under this section;

(b) about the commission by a body corporate of such an offence;

(c) about the conduct of proceedings for such an offence;

(d) about the time limits for bringing such proceedings;

(e) about the determination of issues arising in such proceedings;

(f) about other matters of procedure and evidence in relation to such offences.

(9) The provision that may be made by regulations under this section includes, in particular, provision equivalent to—

(a) provision made by a relevant enactment, or

(b) provision that is capable of being made under a relevant enactment,

with such modifications as the appropriate authority thinks fit

(10) For the purposes of subsection (9), each of the following enactments as it had effect on the day on which the Local Government Finance Act 2012 was passed is a “relevant enactment”—

(a) section 111 of the Social Security Administration Act 1992 (offences relating to powers under that Act);

(b) section 111A of that Act (dishonest representations for obtaining benefit etc);

(c) section 112 of that Act (false representations for obtaining benefit etc.);

(d) section 115 of that Act (offences by bodies corporate);

(e) section 116 of that Act (legal proceedings);

(f) section 121DA of that Act (interpretation of Part 6 of that Act);

(g) section 191 of that Act (interpretation of that Act).

14C Regulations about penalties

‘(1) The appropriate authority may by regulations make provision for the imposition of a penalty by a billing authority on a person where in prescribed circumstances—

(a) that person’s act or omission results or could result in the amount of council tax that a person (“P”) is liable to pay being reduced or subject to a discount, and

(b) P is not or will not be entitled to that reduction or discount.

(2) The appropriate authority may by regulations make provision for the imposition of a penalty by a billing authority on a person where in prescribed circumstances—

(a) that person’s act or omission results or could result in a dwelling in respect of which a person (“P”) would otherwise be liable to pay council tax being treated as an exempt dwelling for a period, and

(b) the dwelling is not or will not be an exempt dwelling for all or part of that period.

(3) Regulations under this section must—

(a) make provision with the effect that a penalty may only be imposed on a person where the person agrees to the imposition of the penalty as an alternative to criminal proceedings being taken against the person in respect of the act or omission to which the penalty relates,

(b) make provision with the effect that a penalty may only be imposed on a person where the person has not been charged with an offence in respect of the act or omission to which the penalty relates, or

(c) make provision within paragraph (a) and (b).

(4) This section does not affect the operation of Schedule 3 (penalties).

(5) The provision that may be made by regulations under this section includes, in particular, provision equivalent to—

(a) provision made by a relevant enactment, or

(b) provision that is capable of being made under a relevant enactment,

with such modifications as the appropriate authority thinks fit.

(6) For the purposes of subsection (5), each of the following is a “relevant enactment”—

(a) section 115A of the Social Security Administration Act 1992 (penalty as alternative to prosecution);

(b) section 115B of that Act (penalty as alternative to prosecution: colluding employers etc);

(c) section 115C of that Act (penalties in respect of incorrect statements etc);

(d) section 115D of that Act (penalties in respect of failures to disclose information);

(e) section 121DA of that Act (interpretation of Part 6 of that Act);

(f) section 191 of that Act (interpretation of that Act).

(7) The reference in subsection (6)—

(a) to section 115C or 115D of the Social Security Administration Act 1992 is to that section without the repeals in it contained in Part 1 of Schedule 14 to the Welfare Reform Act 2012;

(b) to any other provision of that Act is to the provision as it had effect on the day on which the Local Government Finance Act 2012 was passed.

14D Sections 14A to 14C: supplementary

‘(1) In sections 14A to 14C—

“the appropriate authority” means—

(a) the Secretary of State, in relation to England, and

(b) the Welsh Ministers, in relation to Wales;

“prescribed”, in relation to regulations made by the Welsh Ministers, means prescribed by such regulations.

(2) A statutory instrument containing regulations made by the Secretary of State under any of sections 14A to 14C may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.

(3) A statutory instrument containing regulations made by the Welsh Ministers under any of sections 14A to 14C may not be made unless a draft of the instrument has been laid before and approved by a resolution of the National Assembly for Wales.”

(3) In section 113(3) (application of negative procedure to orders and regulations under the Act), after “except in the case of regulations under section” insert “14A, 14B, 14C or”.’.—(Andrew Stunell.)

Brought up, and read the First time.

With this it will be convenient to discuss the following:

Government new clause 10—Power for HMRC to supply information for purposes of council tax

New clause 2—Discounts

‘(1) Section 11 of the LGFA 1992 is amended as follows.

(2) In subsection (1), for the word “shall”, substitute “may”.

(3) In subsection (2)—

(a) for the word “shall”, substitute the word “may”;

(b) for the word “twice”, substitute the words “a multiple of”.

(4) Omit subsections (3) and (4) and insert—

(a) In this section “the appropriate percentage” and “multiple” are to be determined by the relevant local authority and approved as part of their Council Tax Reduction Scheme as set out in Schedule 1A.

“(b) The eligibility for any reduction shall be determined as part of the Council Tax Reduction Scheme.

(4) Schedule 1 to this Act shall have effect for determining who shall be disregarded for the purposes of discount.”.’.

New clause 5—Report on effects of provisions

‘At a date no later than three years from the implementation of this Act the Secretary of State shall prepare a report detailing the effects of these provisions on—

(a) the number of people receiving council tax support in each local authority including the number in employment, the number actively seeking work, and the number of pensionable age, and

(b) the costs incurred by each authority in running the scheme, including the cost of appeals.’.

New clause 7—Power to set higher amount for second homes

‘(1) The LGFA 1992 is amended as follows.

(2) After section 11A insert—

“11C Higher amount for second homes: England

(1) For any financial year, a billing authority in England may by determination provide in relation to its area, or such part of its area as it may specify in the determination, that if on any day a dwelling is a second home—

(a) the discount under section 11(2)(a) shall not apply, and

(b) the amount of council tax payable in respect of that dwelling and that day shall be increased by such percentage of not more than 50 as it may so specify.

(2) The Secretary of State may by regulations prescribe one or more classes of dwelling in relation to which a billing authority may not make a determination under this section.

(3) A class of dwellings may be prescribed under subsection (2) by reference to such factors as the Secretary of State thinks fit and may, in particular, be prescribed by reference to—

(a) the physical characteristics of, or other matters relating to, dwellings;

(b) the circumstances of, or other matters relating to, any person who is liable to the amount of council tax concerned.

(4) Where a determination under this section has effect in relation to a class of dwellings—

(a) the billing authority may not make a determination under section 11A(3), (4) or (4A) in relation to that class, and

(b) any determination that has been made under section 11A(3), (4) or (4A) ceases to have effect in relation to that class.

(5) A billing authority may make a determination varying or revoking a determination under this section for a financial year, but only before the beginning of the year.

(6) A billing authority which makes a determination under this section must publish a notice of it in at least one newspaper circulating in its area and do so before the end of the period of 21 days beginning with the date of the determination.

(7) Failure to comply with subsection (6) does not affect the validity of a determination.

(8) For the purposes of this section, the Secretary of State may by regulations prescribe the definition of a dwelling to be considered a “second home”.

(3) In section 11(2) (discounts: no chargeable residents) after “sections 11A”, insert “, 11C”.

(4) In section 11A (discounts: special provision for England) after subsection (4B) (inserted by section 9) insert—

“(4D) Subsections (3), (4) and (4A) are subject to section 11C (4).”.

(5) In section 66(2)(b) (matters to be questioned only by judicial review), after “section 8(2), 11A”, insert “, 11C”.

(6) In section 67(2)(a) (functions to be discharged only by authority), after “section 8(2), 11A”, insert “, 11C”.’.

Government amendments 42 to 48.

Amendment 6, in clause 8, page 5, line 28, leave out ‘2013’ and insert ‘2014’.

Amendment 7, page 5, line 29, leave out ‘2013’ and insert ‘2014’.

Amendment 4, in clause 10, page 7, line 41, at end insert—

‘(12A) After sub-paragraph (7) insert—

(7A) In this paragraph, “increase” means an increase under section 11C(1)(b) (higher amount for second homes: England).”.’.

Government amendments 49 and 50.

Amendment 1, in schedule 4, page 48, line 43, at end insert—

‘(8A) Before making regulations under sub-paragraph (8), the Secretary of State must consult with local authorities regarding any proposed requirements for schemes.’.

Government amendment 51.

Amendment 9, page 49, line 15, at end insert—

(d) notify all persons within their area receiving council tax benefit on or immediately following 1 April 2012, of the implications of the draft scheme, including the estimated impact of that scheme on their living standards.’.

Government amendment 52.

Amendment 2, page 49, line 22, leave out sub-paragraphs (4) and (5).

Amendment 10, page 49, line 44, leave out ‘2013’ and insert ‘2014’.

Government amendments 53 and 54.

Amendment 11, page 50, line 2, at end insert—

‘(3A) The default scheme must be designed in such a way as to ensure, insofar as can reasonably be assessed, that no person below pensionable age, in or seeking employment, shall receive a lesser entitlement to a council tax reduction than that to which they would have been entitled under council tax benefit.’.

Amendment 12, page 50, line 2, at end insert—

‘(3B) If the default scheme has the effect of reducing or removing a reduction to which any class of persons was entitled under council tax benefit, it must include such transitional provision relating to that reduction or removal as the Secretary of State, after consultation with representatives of local government, thinks fit.’.

Amendment 13, page 50, line 5, leave out ‘2013’ and insert ‘2014’.

Amendment 3, page 50, line 14, leave out sub-paragraphs (2) and (3).

Government amendments 55 to 61.

I am delighted to be taking part in the resumption of the debate from the previous Session, as it is good to be resuming our consideration of this important Bill and these important provisions. The Bill is a major step forward in localising fundraising and decision making to local councils and restoring to them local control. Discussing local government finance is very much an acquired taste, albeit one that I can see has not been acquired by too many hon. Members today.

May I draw the House’s attention to the publication of the statements of intent, which the Department has tabled for the benefit of hon. Members over the past few days? The statements bring to the House’s attention a great deal of the technical work behind the Bill and of how the Government intend that the scheme should be implemented over the coming months.

The Minister mentions the seven technical notes. Dozens and dozens of pages about how the Government are going to approach this were released on the working day before Report and Third Reading in this House, and three and a half months after this House finished its Committee stage. Does the Minister accept that to anyone outside this House it looks as though, at every stage, this Government are going out of their way to avoid people being able to take a proper look at this and to avoid this House being able to do its job of scrutinising this Bill properly? We will be leaving too much to the other House to do.

I am extremely disappointed by the right hon. Gentleman’s intervention. May I just remind him that when I assured the House that these papers would be published, there was universal astonishment that we proposed to do that before the Bill left this House? There was a universal assumption that I had somehow misspoken and that we actually meant to do this at a later stage. It is very much for the convenience of this House today that it should have these very important documents available for consideration, but the right hon. Gentleman is right to say that Members of the other place will have every opportunity to give further consideration to the information. Of course, the reason for publishing these papers in advance of the Bill completing its passages through the two Houses is to give local authorities and those who have to work on these schemes the maximum length of time to implement the necessary provisions, so that an appropriate and speedy commencement can be made next year.

In fact, the Minister promised us not statements of intent, but draft regulations. He said:

“we intend to publish draft regulations while the Bill is still before the House.”—[Official Report, 31 January 2012; Vol. 539, c. 777.]

Where are they?

When the hon. Lady has taken the opportunity to look at the statements of intent, she will see that they are in effect—indeed, my note refers to it—draft statutory instruments. I remind her that we cannot publish draft statutory instruments until we have a Bill to publish them against. We have brought the statements of intent before both Houses so that matters for consideration are fully in view.

New clause 9 allows the Secretary of State to make regulations to introduce the necessary powers for local authorities to tackle fraud in claims for a reduction in liability to pay council tax, which will be effective from next April. Powers to investigate potential fraudulent claims for reductions in liability to pay council tax and to issue the appropriate penalties are a vital weapon for local authorities if they are properly to administer schemes and protect the public purse. The change from the existing scheme to the new scheme means that the new clause is needed to provide the necessary safeguards. Rather than simply reintroducing all the powers that local authorities have to tackle council tax benefit fraud, the clause allows us to work with local authorities to identify those powers and offences that will be needed to make local schemes work. The overall aim is that the regulations will reinstate only the necessary powers, offences, penalties and safeguards that are appropriate for the new scheme.

It would be very helpful if the Minister explained to my constituents what extra power is being granted to the council and how it will prevent fraud.

The provision allows us to enter into discussions with local authorities about the point my right hon. Friend raises. It is our intention not to increase the powers of local authorities but simply to transpose them from the existing scheme to the new scheme while recognising that a range of provisions in the current scheme needs to be considered rather than simply transposed without any further thought. New section 14A, which the Bill inserts into the Local Government Finance Act 1992, will allow the Secretary of State to make regulations giving local authorities the power to authorise officers to carry out investigations. Regulations may provide that officers so authorised may require relevant information from specified bodies to check whether a claim that they believe to be fraudulent is in fact so. The regulations may also provide authorities with powers to require that certain bodies must enter into arrangements allowing access to a person’s electronic records.

That is the point I am trying to get at. It is already an offence to make a fraudulent declaration and to try to get out of paying this tax, and we all want to stop the fraud, but we also want to keep some civil liberties in this country. I must press the Minister again. What extra powers to investigate people and get access to their data are being taken?

I am sorry if I did not make myself clear. The powers that local authorities rely on to guard against fraud in the current council tax benefit scheme will, in effect, lapse with the introduction of the new scheme. They are not competent to be used under the new scheme, so we need a new scheme. The purpose of the new clause is to ensure that the scheme takes account not just of concerns such as those held by my right hon. Friend but of the need to protect the public purse and that they are kept in proper and proportionate balance. We will not be giving local authorities powers to enter premises or to conduct inquiries and remove and copy documents from such premises. I hope my right hon. Friend finds that assurance helpful. The powers we are giving will require people to enter into arrangements under which access is permitted to relevant records and will, in our view, be sufficient for council tax purposes.

New section 14C will enable the Secretary of State to make regulations providing that authorities may issue penalties as an alternative to prosecution or where a person has not been charged with an offence. That will ensure that local authorities are able to take proportionate action, rather than being faced with the choice of pursuing prosecution or doing nothing. Before the debate on the amendments in the other place, we intend to publish a detailed statement of intent that will spell out clearly our proposals for regulations in accordance with the new clause. We have also made it clear in the new clause that any regulations will be subject to the affirmative procedure and will therefore be debated by both Houses. I hope my right hon. Friend will be somewhat reassured by what I have said.

Will the Minister explain to the House, for my benefit and, presumably, for the benefit of others, how regulations in this section can

“create an offence that may be committed by a person acting otherwise than dishonestly”?

Presumably, if a person is not acting dishonestly, they are acting honestly. How can that create an offence?

The hon. Lady is well aware that there are such things as negligence and avoidance of reality. We are all aware of such cases. I see quite a few examples in the House from time to time.

New clause 10 inserts into the Bill powers allowing Her Majesty’s Revenue and Customs to supply information for prescribed purposes relating to council tax to billing authorities in England and Wales and to local authorities in Scotland, and provides for offences relating to the misuse of that information. It is the matching part of the preceding clause, the one that gives local authorities the power to ask bodies for information. This clause allows HMRC to supply that information.

Data sharing will be an important way of maximising convenience and reducing complexity for claimants, while also helping to reduce administrative costs. It will reduce the need for individuals to have to provide the same information repeatedly to different public bodies and produce evidence about their situation to those bodies. Section 131 of the Welfare Reform Act 2012 provides for the sharing of information relating to social security benefits and welfare services with a qualifying person for prescribed purposes relating to welfare services or council tax. The two new clauses, together with that provision, will enable data held by the Department for Work and Pensions in relation to current benefits and, in future, to universal credit, to be provided to English and Welsh billing authorities and Scottish local authorities for the administration of local council tax reduction schemes.

I understand the point that the Minister is making about requiring organisations such as DWP to offer information relating to individuals, but section 14A(1)(b) refers to

“powers to require a person to enter into arrangements under which access is permitted to the person’s electronic records.”

I find it hard to see that that is to do with the Department for Work and Pensions. Can the hon. Gentleman assure the House that this does not relate to individual council tax payers and any electronic records that they have—for example, held on personal computers?

I may wish to return to the right hon. Gentleman’s point later in the debate, if the opportunity arises. My understanding is that there is nothing in the provision that in any way takes the powers of public bodies beyond what they are currently able to do in pursuit of council tax benefit and alleged fraud and misuse of council tax benefit. As I understand it, these powers are absolutely parallel to the existing provisions. I am sure that I will have an opportunity to return to that point later in the debate if I have in any way misguided the House.

New clause 10 inserts paragraphs 15A and 15B into schedule 2 to the Local Government Finance Act 1992. Paragraph 15A(1) and (2) will allow Her Majesty’s Revenue and Customs to supply information held for the purposes of its functions to billing authorities in England, as well as to a person authorised to exercise any of an authority’s functions on its behalf.

On new clause 10, when the Revenue has shared information with a local authority, what right will the individual concerned have to make sure that the Treasury has shared the correct information and has not made a mistake?

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.

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.

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.

The real danger, as the right hon. Member for Wokingham (Mr Redwood) said, is that there will be mission creep. Experience under previous Governments, including the Labour Government, shows that there is mission creep on data exchange. Discs are produced and information is passed around. What we really need from the Government is a definitive statement on what data can be passed between Departments, because there is a danger that people’s information will be passed around and that the parameters and scope of the data that ought to be shared will be extended.

I am certainly keen to offer, on behalf of the Department and the Government, a clear undertaking that it is not the intention that that should happen, and that the provisions before the House do not create the opportunity for that to happen.

To return to the question asked by the right hon. Member for Leeds Central (Hilary Benn), proposed new section 14A, which relates to the investigation of fraud, will enable local authorities to investigate the eligibility of a person for a council tax reduction, which might require access to the individual’s records, in the same way as can currently be done for council tax benefit. That is separate from the provisions elsewhere relating to HMRC’s sharing of data with local authorities.

Proposed newparagraph 15B(7), of schedule 2 to the 1992 Act, sets out the procedure that Welsh Ministers must follow when making these regulations, which will be through a statutory instrument, subject to annulment procedures. Proposed new paragraph 15C(7) sets out the procedure that Scottish Ministers must follow when making regulations in respect of the data-sharing provisions, which will be through a Scottish statutory instrument, subject to the negative procedure. Without that legal gateway, HMRC would not be able to provide the information that billing authorities need for council tax purposes, such as calculating an entitlement to a reduction under a council tax reduction scheme, and if that were the case it would clearly increase the complexity for claimants and the administrative costs for billing authorities.

Government amendments 42 to 50 and 56 to 60 would provide Welsh Ministers with the powers to place a duty on specified bodies in Wales to introduce council tax reduction schemes in Wales. Welsh Ministers have developed plans for locally delivered council tax reductions and asked for these amendments, which will enable them to prescribe, by regulations, for establishing in Wales council tax reduction schemes that are broadly similar to those that billing authorities in England will be required to introduce in accordance with the Bill. Those powers would provide Welsh Ministers with the scope to establish the remit for council tax reduction schemes in Wales that were appropriate for Wales.

Welsh Ministers have said that they intend to use the powers to introduce a single national scheme set out in regulations and include the reforms necessary to meet the 10% reduction in funding. They intend local authorities to be given an amount of local flexibility in the new scheme’s delivery, and deviation from the national scheme will be funded locally. Welsh Ministers have recently consulted on the policy’s detail, and they intend to set out their proposals on vulnerable groups, including pensioners, in due course.

Amendment 44, to section 13A of the Local Government Finance Act 1992, would provide Welsh Ministers with the power to require specified bodies in Wales to introduce council tax reduction schemes, and the proposed change details the scope of the regulations that Welsh Ministers would be able to make. Amendment 45 sets out the procedure that Welsh Ministers would have to follow when making regulations on the introduction of council tax reduction schemes.

The amendments include a series of provisions that I am very happy to bring to the House’s attention if Members would like me to do so, but it might be sensible if I proceed by saying simply that the amendments set out a range of requirements and rules that are intended entirely to ensure that the scheme can be applied as Welsh Ministers determine in the Welsh environment.

Amendments 51 and 54 are technical amendments to ensure that we can deliver our policy to protect pensioners, enabling regulations to provide for a default scheme that largely replicates current council tax benefit, and providing reassurance to local authorities that their schemes can incorporate certain features of current council tax benefit when they choose them to do so.

Taken together the amendments to schedule 4 would achieve that aim by ensuring that regulations prescribing requirements for schemes and regulations prescribing the default scheme may incorporate provisions equivalent to those that are, or could be, provided for in the sections of existing legislation relating directly to council tax benefit.

Why does the default scheme replicate the existing scheme on a 10% cut? Is the intention to penalise financially those councils that do not come up with their own scheme in time?

There is certainly an incentive for local authorities to introduce a scheme of their own choosing. The whole point of this is that local authorities should have the capacity to have their own scheme, designed as they see fit. If they have not formed such a scheme by the relevant date in January, the default scheme comes into play, and that scheme will, in essence, continue with the existing council tax benefit scheme in its entirety. Taken together, the amendments to schedule 4 ensure that regulations prescribing requirements for schemes and prescribing the default scheme allow local authorities to take this approach and, if they so wish, to adopt the existing scheme lock, stock and barrel.

The Government have already confirmed their commitment to protecting pensioners on low incomes and have said that there should be no change in support to them as a result of the introduction of this reform. Support will continue to be rules-based, with provisions about the calculations to be made set out in regulations under paragraphs 2(8) and 2(9) of new schedule 1A to the Local Government Finance Act 1992, which is inserted by schedule 4 to the Bill. As the House is aware, it is intended that the support scheme for pensioners will be protected so that their support is as close as possible to what they receive at present. Paragraph 4 of new schedule 1A provides powers for the Secretary of State to prescribe a default scheme in regulations to take effect in any authority that has not made its own scheme by 31 January. The default scheme will cover those who have attained the qualifying age for state pension credit and those who have not yet attained it. The Government have been clear that they intend the default scheme to be as similar as possible to the existing scheme.

These technical amendments will enable regulations prescribing the requirements for pensioner protection and the default scheme to make use of the same powers, definitions and treatments as set out in the detail of the existing council tax benefit legislation. The Government believe that that will help to facilitate their provision of protection for those of pension credit age and provide the legal backstop of a default scheme that can take effect should a local authority not complete its own scheme. In particular, amendment 51, new schedule 1A, paragraph 2 and sub-paragraph (10) will allow the Government, when they set up the scheme, to make equivalent provision to that contained in the one of the enactments listed in sub-paragraph (12). New paragraph (3A) in amendment 54 allows the default scheme to make equivalent provision to that capable of being made under the same enactment.

There is a great deal of detail that I am happy to bring to the House should Members wish to have it, and more in the statements of intent. If the House is content at this point, I will move on to Government amendment 52. As set out in the statements of intent that we have published on our plans for localising support, the Government do not propose to make regulations as to how a billing authority will prepare a scheme because that would not enhance the existing requirements and duties of authorities in consulting and involving local people. It therefore does not make sense to prevent billing authorities, after consulting their major precepting authorities, from proceeding to publish their scheme and to consult others if they are in a position to do so prior to the Bill’s receiving Royal Assent. Amendment 52 allows councils to proceed in that direction if they wish. In other words, if, after consulting its major precepting authorities, a billing authority wants to publish its local scheme and to consult any other person with an interest in the scheme, it can do so straight away without running any additional risks arising from carrying out those steps in advance of Royal Assent.

Are not the Government too often taking steps to implement legislation before it has been passed? We saw that with the Health and Social Care Bill and we are seeing it again now. The essence of a democratic Parliament is that legislation has to go through two Houses and get Royal Assent before it becomes law. Are not the Government trying to compensate for the fact that they are rushing this change in far too quickly, instead of giving local authorities time to prepare properly?

In the last Session, the hon. Lady spent a lot of time telling us that we had not produced enough detail, nor given local authorities enough warning or flexibility. It seems a little perverse for her to say now that she does not want local authorities to have the flexibility to get a scheme under way pronto, if they are in a position to do so. I do not understand her confused logic.

Government amendment 53 is a minor technical amendment, which will ensure that the first financial year to which the default scheme relates is the same as that specified for the implementation of council tax reduction schemes in clause 8(4). Amendment 55 relates to claims that are in progress when the schemes come into force: in essence, any claims in the pipeline will be rolled over, rather than applicants being required to start again with a new scheme.

That completes my remarks about the Government proposals, but it is right and proper that I comment on the proposals from other parts of the House. New clause 2, tabled by the right hon. Member for Wentworth and Dearne (John Healey), would do away with the automatic entitlement to the single person discount, which has been a feature of council tax since its introduction. I remind the House that households with just one adult are eligible to claim the single person discount on their council tax bill, and that is not a benefit but a tax discount that has been a fundamental feature of council tax since its creation in 1993. Eight million households in England receive the single person discount, of which 90% are in bands A to D; it is therefore not a subsidy for the wealthy. Indeed, 29% of households in Great Britain are single-person households and another 7% are single-parent households, which are also eligible for the tax discount.

New clause 2 would pass to local authorities discretion on whether to grant a discount to such people and the size of the discount as part of setting their council tax reduction scheme. Clause 8(2) provides that

“Each billing authority in England must make a scheme specifying the reductions which are to apply to amounts of council tax”.

Is this not another example of not giving local councils freedom, but trying to push the blame on to local authorities? Would it not cause chaos in places such as London, where the 32 boroughs could have 32 different schemes? How does the Minister think that could be run efficiently?

That is a severe criticism of new clause 2, which would pass down to councils the capacity to change single person discounts. As the hon. Gentleman rightly points out, that would create difficulties in implementation. I am sure that the right hon. Member for Wentworth and Dearne, when he speaks in favour of the new clause, will explain to the hon. Gentleman exactly how it would work.

New clause 2 would not only interfere with the single person discount, but give billing authorities discretion on whether a 50% discount should be granted in other circumstances. Currently, that applies when a dwelling is not unoccupied but is no one’s sole or main residence. At one time, that would have meant second homes, but the provision on those was amended in the Local Government Act 2003. The 50% discount still applies in some cases, when the second home is job-related. That is a matter of particular importance to the clergy and to service personnel. I suspect that the new clause would have an effect that the right hon. Gentleman does not intend.

Whatever the superficial attractions of the new clause—particularly to billing authorities, whose revenue-raising powers would be increased—it would certainly not be attractive to the 29% of households in which people live alone or the 7% of households that are single-parent families. Those categories include many older people, including widows and widowers, and the Government have made it clear that we intend that they retain their protection. We have prefigured that with our two-year council tax freeze, and our clear intention is to ensure that there is no loss of single person discount.

New clause 5 is interesting. The Government will monitor and review changes as part of the equality impact assessment process, as they do after every Act is implemented to check that it works as planned and to screen for unexpected equality impacts. There are already powers in the Bill to allow for that. Schedule 4 will insert into the Local Government Finance Act 1992 a new schedule 1A, which will enable the Secretary of State to require authorities to supply specified information to him. In the Government’s equality impact assessment of that reform, we made it clear that those powers could be used to collect information to support future evaluation of the policy. In other words, new clause 5 is not necessary, as what it suggests is already covered entirely in the Bill.

If the hon. Lady looks at the impact assessment submitted alongside the Bill, she will see that the specific question of whether the policy will be reviewed is addressed. The answer to her question is yes, and, if I remember correctly, the time interval before the publication will be three years.

Taken together, amendments 10, 13, 6 and 7 would delay by a year the localisation of the council tax reduction scheme, pushing it back from 2013 to 2014. The Government are very clear that the reform needs to be implemented in 2013 to secure the agreed savings set out in the 2010 comprehensive spending review. I think the Labour party is still struggling to come to terms with the fact that in 2010, £1 was being borrowed for every £4 spent and we were adding £400 million to the national debt every day. Tackling the deficit and establishing fiscal responsibility is a central part of the coalition Government’s strategy, and the changes to the scheme are fundamental to achieving the savings set out in the CSR.

There are things that councils should already be doing to prepare for the change, and we are supporting them in doing so, not least through the provision that the hon. Lady queried a few minutes ago. They should understand the circumstances of those in their area who currently claim support, ensure that elected members are aware of the decisions that they will need to take and engage with precepting authorities, such as police and fire authorities. They have the opportunity to prepare for and carry out consultation as soon as they are ready to do so—Government amendment 52 supports local authorities in their preparations by making that clear. The Government therefore believe that the amendments to delay the scheme are inappropriate and would create an unnecessary burden for local authorities, which will continue to be subject to their existing equalities duty and so will have to take that fully into account in their decisions.

The public sector equality duty includes a requirement for local authorities to have regard to advancing equality of opportunity between people who share a protected characteristic and those who do not, and to the need to eliminate unlawful discrimination. That continuous process requires relevant decision makers in local authorities to consider equality issues. That has a bearing not only on the question of delaying the scheme, which would incur costs and difficulties, but on amendment 9, which would require local authorities to notify current claimants of the potential impact of the draft scheme. Local authorities are already required, by paragraph 3(1) or proposed new schedule 1A to the 1992 Act, to consult on the draft scheme with such persons as they consider

“are likely to have an interest in the operation of the scheme”.

Furthermore, public sector bodies, including local authorities, are obliged to comply fully with the public sector equality duty.

On a point of clarification, the Minister appears to be saying that local authorities have a duty to consider those with protected characteristics. The problem he is not grappling with is that if local authorities seek to do that in their council tax schemes—in respect of disabled people, for example—the cut imposed on the working poor will be even greater. Which mode of operation is he arguing they should undertake? Is he arguing that there should be equal cuts for everyone except pensioners, or that cuts should fall more on people who are in work?

The Government have made it absolutely clear that that is a matter on which local authorities should take a decision. I remind the hon. Lady—she made this point—that it is open to councils to continue with the default scheme if they wish to do so; to look at other provisions in the Bill relating to discounts for empty and second homes; to take resources from other parts of their budget, which they could choose to do; and to scale back the benefits they provide in a scheme on which they have consulted.

My hon. Friend the Member for Warrington North (Helen Jones) raises an interesting point. Clearly, many northern councils whose grants have been slashed have very little room for manoeuvre compared with Wokingham, whose grant has been increased. Does the Minister agree with the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), who said that those in greatest need will ultimately bear the cost of the cuts? How can that be equal and fair?

The hon. Gentleman has made his point. I should make it absolutely clear that, from the Government’s point of view, it is right for local councils to take account of the local circumstances in their communities and to draw up a scheme that they believe is appropriate for them. I again make the point that other measures in the Bill give greater discretion to local authorities on raising council tax on second and empty homes. The vast majority of local authorities potentially have a substantial stream of additional income, if they believe they will face difficulties because of the reductions in income resulting from this part of the Bill. The Bill has to be taken as a whole.

The Minister has just said that the Government want councils to be able to draw up schemes to take account of local circumstances. Why then is he putting this funding noose around their necks by cutting the available money by 10% from the start?

I dealt with that point a minute or two ago, when I pointed out that the UK-wide reduction announced in the 2010 comprehensive spending review of some £500 million—with an impact of approximately £440 million in England—was part of the Government’s deficit reduction programme. Of course that has implications, as Opposition Members have pointed out. We think that pensioners are the important group to safeguard, which is why we are putting the statutory safeguard in the scheme and saying that local authorities should have regard to the most vulnerable in their area when drawing up their schemes.

Will the Minister acknowledge that yet more demand and stimulus will be taken out of local economies as a result of the measure? Will not the Government then have to revise their borrowing figure yet again, and borrow even more than £150 billion?

I think the hon. Gentleman has got that slightly topsy-turvy. We are ensuring that it will always be better to work and that it will always pay to work. One of the statements of intent sets out the Government’s view on how that can sensibly be integrated with universal credit, which will start in a year or two.

How can the Minister say that? He talks about protecting pensioners. In Rotherham, there are 2,600 people who are in work but on incomes so low that they need the support of council tax benefit to get by, week to week and month to month. They will lose out as a result of this measure, and they will do so by significantly more than 10% of the overall cut, so how can the Minister piously say that work incentives matter to this Government?

It would be interesting to hear the right hon. Gentleman tell the House how many of those 2,000 people received an income tax rebate as a result of the decisions taken by this Government. Indeed, I suspect that many of them will have been taken out of income tax altogether.

At least the right hon. Gentleman acknowledges that we are giving with one hand. It is right for local authorities and local communities to take account of the circumstances they face, and I hope that the council in Rotherham will do precisely that.

Is not the Minister making it quite clear that this is not about the reform of local government finance, but about deficit reduction? The point that my right hon. Friend the Member for Leeds Central (Hilary Benn) has just made is that those people might well have been taken out of tax, but they will now be hit by this measure as well as by housing benefit cuts. Furthermore, the poorest are the hardest hit by the VAT increase—a policy that he once believed in.

The hon. Gentleman needs to take stock of just how much council tax benefit someone in band A in his local authority might be getting and compare it with the discount that they might receive through the raising of tax thresholds. He might then grudgingly have to agree that the situation is not as bad as he maintains.

Amendment 1 would require the Government to consult on regulations prescribing requirements for schemes. Of course external scrutiny of plans for the framework is important, which is why the Government have published the detailed statements of intent for the key regulations that will deliver the policy. We will publish further statements of intent at each stage, as necessary. That will provide an opportunity for us to engage with local government on the detail of our plans before draft regulations are produced, and give local authorities the key information they need to develop their schemes. There is no need for additional requirements to consult with local authorities, such as amendment 1 would impose. In addition, we are working closely with local government representatives to design the framework within which local authorities will be required to operate, including considering what—if any—provision needs to be made for how local authorities should prepare schemes.

Amendment 3 is a bit of a stray. It would remove the deadline of 31 January for making revisions to or wholly revising schemes. The Government are clear that schemes cannot be amended in-year, but changes can be made between years. It is necessary to set a deadline of 31 January for revisions to schemes to provide certainty for council tax payers about when a final scheme will be issued. To remove the deadline could create significant uncertainty for low-income groups concerned about what support they will be able to claim.

Amendments 11 and 12 relate to the default scheme. I hope that I have already said enough to make it clear that the Government propose that the default scheme should retain the criteria and allowances currently in place for council tax benefit. We published a detailed statement of intent setting out how we expect to provide for the default scheme of regulations. As it is not intended that the default scheme will provide for any reductions in support, there will—as the hon. Member for Warrington North (Helen Jones) said—be a strong financial incentive for local authorities to avoid that, but the amendments are designed to guarantee that under the default scheme there will be no reduction in the level of support. Well, the scheme itself will have no reduction in the level of support.

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?

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.

I thank the Minister for addressing our new clause. Does he accept that there is a real problem with second homes in some parts of the country? If that problem does not decrease as a result of the changes, will the Government look again at measures to ensure that such areas are protected from a massive increase in the number of second homes?

My hon. Friend makes a very good point. For some rural areas, especially tourist-focused ones, a significant fraction of the housing stock may be occupied—or perhaps unoccupied—as second homes, which makes it very difficult for those who live and work there to secure accommodation. I am sure he has taken note of our changes to the second home discount provisions, which give local authorities in those areas the opportunity to bring their council tax bills up to 100%. His new clause proposes a premium on top of that. I am sure that, in the years ahead, he and I will work jointly on proposals for a Liberal Democrat Government beyond 2015, and I look forward to working with him on that proposition.

The Minister keeps referring to the right the Bill gives councils to increase the charge on second homes, as though all councils could gain a lot of money from that. Will he accept that in the poorest authorities, which will be hit hardest by the Bill—places such as Gateshead, Rotherham and so on—there is not an awful lot of second homes?

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.

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.

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?

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.

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?

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.

Ministers are seriously suggesting that local authorities should conduct that particular process in a matter of little more than eight months, because January next year is the cut-off date by which the benefits scheme has to be finalised. What world are they living in? What experience do they have of implementing complex changes in benefits? If they had any real-world experience, they would immediately realise that they have set local authorities an impossible task.

What makes this sinister is the fact that we know what the Government expect to happen. They know that local authorities will probably respond by saying, “This is too difficult, so we had better take the hit ourselves. We will take the cost of the reduction in subsidy and absorb it into our own budget to avoid upsetting too many of our local residents by imposing harsh cuts on them.” That, we know, is the reality. As I said earlier, that is why the Government are guilty of trying to offload this £500 million package of cuts either on recipients or on local authorities. That is why amendments 6, 7, 10 and 13 seek to get the Government off the hook by delaying implementation for 12 months to allow proper consideration and a proper orderly transition so that implementation will not lead to the problems I have described.

There is no logical case against that course. The Select Committee was adamant when it looked at the problem, and it recommended that the Government should delay. Local authorities are all backing these amendments, so why will the Government not accept them? We have heard the feeble excuse offered once again by the Minister, “Oh, it’s due to cuts. We can’t do anything else because of cuts.” I am sorry to say that this is not a Government looking intelligently or carefully at how to make savings without causing difficulties and hardship; rather, they are simply trying to offload these problems.

There is one other consideration to which the Government should give some thought, and I suspect some local authority lawyers are already giving thought to it. If it is impossible for local authorities to administer the scheme in a way that makes the savings by reducing benefits, and they conclude that they have to absorb the costs themselves, this amounts to a new burden imposed by the Government. Under the new burdens doctrine, Governments have said repeatedly—and this Government have repeated it—that they should cover any additional costs imposed on local government that result from Government decision.

I therefore advise Ministers to think a bit more about the implications of their new burdens doctrine. The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), who, when in opposition, was only too keen to talk about new burdens and to attack the Labour Government of the time for not honouring the new burdens doctrine, would do better if he now ensured that his own Government followed the words he used then. It is an interesting case of someone changing their tack once they find themselves on the Treasury Benches—briefly, I suspect, in his case. [Interruption.] This is not a unique or personal slight aimed at the Under-Secretary, as I would apply it to the entire Government Bench.

Amendment 9 seeks to impose an obligation whereby councils, in devising their local scheme, should inform recipients in advance of what the impact will be “on their living standards”. This is a fairly straightforward and sensible proposal to make people aware of what the local authority is proposing. It was suggested for that reason, and I would have thought that any reasonable Government would support it.

Amendments 11 and 12 deal with the default scheme that the Government are going to produce. Amendment 11 simply confirms what the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) has said he intends—that there should be no pensioner losers. It is extraordinary, therefore, that he is so reluctant to accept it. He says that it is not necessary. However, because we know that so many Government pledges unfortunately prove worthless, we would rather have this on the statute book than in the form of a ministerial assurance, and we will draw our own conclusions from his refusal to accept the amendment.

Amendment 12 concerns transitional protection. If the Minister argues that there will be no losses under the Government’s default scheme, his argument will suggest that there is no need for such protection. The amendment would ensure that if losses are implicit in the default scheme, the scheme must include the transitional protection that is proposed. That is an entirely reasonable and logical formulation, and I am surprised that the Government are reluctant to accept it.

This series of badly thought out proposals will cause widespread hardship and serious financial difficulty to local authorities, and it is being rushed through in a way that will make it difficult to implement properly. It is a sad and sorry saga, and I find it regrettable that the Government have not the realism and the sense of respectability to admit that they have made a serious mistake. They have got themselves into a difficult mess, and the only honest thing that they can, and should, do now is agree to the amendments that would defer implementation until 2014. That would provide time for the issues to be considered seriously and properly by all involved, and would enable the Government to escape from this mess.

As my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) pointed out, the Bill has not changed greatly since we last debated it. The underlying theme remains. As the Minister made clear, it has nothing to do with reform or enabling councils to implement a local scheme; it is actually about the Government’s deficit reduction targets. That is why they are so keen to aim for implementation in 2014.

The Minister seems to think—and I recall that the hon. Member for Mid Dorset and North Poole (Annette Brooke) said this during our last debate—that all local authorities are on a level playing field, but they are clearly not. The Minister suggested that, following the 10% cut in council tax benefit, councils could make up the difference if they wished to, which may be all well and good for councils in areas where the benefit is being increased. I hate to return to my favourite example of Wokingham, but a few weeks ago a very good article in the Financial Times stated that its budget was rising by 3%—unlike the budgets of authorities such as Durham, which are declining by as much as 15%.

We are not dealing with level playing fields; we are dealing with a strategy that the Government have worked out quite well. As we can see from the playbook according to which the Conservative part of the coalition is working, it is nothing new. The same strategy was adopted by the Conservatives in Canada in the 1990s. They made savage cuts in public services and devolved decision making to local level: in their case, federal level. What they were saying was “We are giving you freedoms, but we are ensuring that you take all the blame for the cuts.” The flexibility that councils will be given will, in fact, cause them great difficulty, unless they are in Wokingham.

That very good article in the Financial Times, published on 7 May, was headed “The well-to-do towns that austerity forgot”. I think that it is worth looking at, and not just because it makes it plain that the Government are rewarding their own councils while penalising poor areas. Let us look at the calculations for Wokingham. It is among the 8% of local authority areas—out of a total of 152—that are expecting a real increase in local government spending over the period set out by the Government. Meanwhile, 20% of councils, including Durham, are taking cuts in excess of 15%.

We are being told that we are all in this together and that what is being done is fair, but let us look at the difference between Wokingham and Wigan. In the index of multiple-deprivation, Wokingham scores 5.5 whereas Wigan scores 26. On average, there is an additional 1% increase in local government spending cuts between 2009-10 and 2011-12. Not only are local authorities in the north-east and other deprived areas suffering because their grants are being cut, but they are now going to be hit again by the council tax benefit cut. Local authorities will be told they are being given the flexibility to administer the scheme, but the result will be a 10% cut.

My hon. Friend mentions Wigan in the north-west and authorities in the north-east, but the case he makes is equally true for many authorities in Yorkshire and the Humber, such as Barnsley and Rotherham. As he has access to the figures, he might care to look at them in this regard. Wokingham may be facing an increase in its grant, which is astonishing given that local government is taking such a hit across the board, but Barnsley and Rotherham are facing double-digit reductions in their grant, despite increasing need and increasing pressure on services in their communities.

I agree. My right hon. Friend’s authority and mine are among those that are having to take £152 million out of the budget over the next four years. In Wokingham, however, the council is planning to overhaul its town centre at a cost of £30 million, and it is not closing its libraries and its voluntary sector groups have not lost their funding. In communities such as mine and that of my right hon. Friend, councils are having to find savings—and they are having to find them in areas such as libraries and non-statutory services.

In Durham, the bulk of expenditure goes on adult social care. The Labour-run local authority is rightly making sure the most vulnerable are protected, but that restricts where savings in the budget can be made. I send a clear message to the Liberal Democrats sitting on Durham county council that, as a result of their Ministers’ actions and their Members’ votes on this Bill, Durham and other local authorities are having to make savage cuts. The idea that they can be found simply through efficiencies is complete nonsense. No organisation could reduce expenditure so much without affecting front-line services.

Does my hon. Friend agree that not only is the current settlement unfair, but it is the baseline for the future system, and the Bill will lock in that unfairness for at least a decade?

That is a very important point. That will limit the ability of my council in County Durham and my right hon. Friend’s authority to effect any change. That will lock in the unfair and disproportionate effects, which have been caused by no account having been taken of deprivation. We have just heard a Minister saying this Bill takes account of equality, but it must be the first Bill in history that supports a system by which the poorest in our society and those councils with the largest need—growing aged populations and increasing numbers of looked-after children, for example—will suffer the most.

My hon. Friend is making a powerful case, identifying the regional inequalities at the heart of these proposals.

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.

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.

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.

The hon. Gentleman will be aware that for nearly the entirety of the period for which his party was in office the higher rate of tax was lower than it is today. As for the hypocrisy we are hearing from the hon. Gentleman and his colleagues who put this country in a position where public expenditure must necessarily be brought under control, his party always leaves office with unemployment higher that when it entered it and it is under his party that the money has all gone. This Government are having to deal with that, and he should show some shame for his part in the situation.

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.

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.

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.

My other concern is the differentials between schemes. That will create particular problems in parts of London, where there is a transient population and people frequently move around. They understand the present scheme and know what is expected of them. Different schemes in operation in different boroughs will lead to chaos and confusion not only for individuals but for borough treasurers trying to keep track of what people earn.

The Minister made it clear today that the measure is about deficit reduction. It is no great radical idea about devolving responsibility to local authorities, and no great victory for the Liberal Democrats who believe in the devolution of local decision making. If the scheme has been properly worked out, why can we not have a transitional scheme, as my right hon. Friend the Member for Greenwich and Woolwich suggested, so that the people and the councils affected have time to adjust? That would give some local authorities the stability that they will not get from the proposed scheme.

I hate to say it, but, as my right hon. Friend said, in 12 months or less, we will say we told you so. The misery and heartache that will be created for some of the most vulnerable people in our society is shameful. That is to be expected of Conservatives, but not of Liberal Democrats. The Minister may say that according to his impact study, equality is taken into account, but it is not. The measure will affect some of the poorest in society, including many women, who will not be protected in any way. The only group to have been taken out of the system for electoral reasons is the elderly. Having borne the wrath resulting from the granny tax, the Government clearly did not want to upset the elderly by allowing the council tax benefit reduction to affect them.

But the Government cannot have it both ways. They cannot say that they are devolving responsibility to local councils, and then tell local councils that they must take one section of society out of that scheme from day 1, along with a 10% cut. If it were genuine devolution, it would not have been so rushed, and if the Minister genuinely believed in devolving power, although I have never believed that Whitehall would want to give truly devolved powers to local authorities, there would be no ring-fencing. The Government are doing that because they know that the measure will be unpopular with a large section of the population who actually vote. That is the only reason why older people are excluded from the provision.

A delay is needed, but the Minister let the cat out of the bag and said that the measure is nothing to do with local government finance, but is aimed at deficit reduction. The Opposition would enter into dialogue with the Government about genuine devolution and proper reform of local government finance, but they have shied away from the elephant in the room—the re-banding of council tax. Ministers will not go near that for fear of upsetting a lot of people. If there is going to be radical change in local government finance, it must include a review of council tax bandings. I am sorry if that scares members of my own Front-Bench team. Without that, the Bill is no more than a short-term measure to achieve savings, as the Minister admitted, as a means of deficit reduction.

The strategy has clearly failed. We are now in a continuing double-dip recession, which this time will be blamed on the euro crisis. Why pay for that on the back of some of the poorest parts of the country? That is inexcusable in the Government’s approach to the Bill. Let us do away with the pretence that it is about reform. It is about deficit reduction and about hitting the poorest hardest. We need to remind people at local level that the decisions taken in this place by Conservatives and Liberal Democrats will take financial support from the poorest in our communities and some of the most hard-working families in this country.

It is a pleasure to follow my hon. Friend the Member for North Durham (Mr Jones), who has more than a decade’s experience in local government and knows what it is like for local authorities trying to deal with central Government cuts and central Government diktats. He knows that local government across the board, irrespective of party, is willing to change but wants that change to be implemented properly and fairly. Much in the Bill will make that more difficult for local government in the months ahead.

The Bill signals that council tax benefit is no longer a benefit or an entitlement for those whose incomes are such that they need help with council tax costs. In future, there will be a means-tested, cash-limited discount on council tax bills. That limit next year will be 10% less than the spend on and cost of council tax benefit this year. I have the figures released recently by the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), showing the total subsidy properly paid by councils to those entitled and then properly reclaimed from Government in 2010-11. In Rotherham, the figure was £22.5 million; in the other local authority that my constituency partly covers, Barnsley, it was nearly £20 million; and the total for South Yorkshire was £112 million. That money went to many of the poorest, who need help with their council tax costs and who currently have an entitlement to that help. In future there will be a smaller cash-limited pot and a severe means test, with that £112 million cut from the outset by 10%.

Earlier, from the Dispatch Box, the Minister gave some figures—£1.8 million and £1.9 million—which he said were the figures for the value of the reliefs and discounts compared with what he argues is the shortfall in Rotherham. Of course, reliefs and discounts are part of the council tax scheme. They bear no relation to the level of council tax subsidy, which under the current system is paid by councils and reclaimed from central Government. If the Minister was telling the House and telling me, as one of the MPs representing Rotherham, that there will be no cut in the pot available for council tax benefit payments next year compared with this year, I will willingly give way to him, but I think he was using those figures to make a completely different case, entirely separate from the challenge that Rotherham and every other council will face next year because of the decision taken, as he admitted tonight, for the purposes of crude deficit reduction, not as a bold local and localising reform. The Minister has not accepted my offer to give way, so I take it that he accepts the case I made and is not able to sustain the impression that he gave the House earlier.

The problem faced by many of the poorest non-pensioners is that they will lose the most, as the Government tell councils to protect pensioners and make everybody else worse off—in other words, penalise everybody else and protect pensioners. That cannot be done without causing significant pain for many non-pensioners because the overall sum available, irrespective of need or entitlement under the current system, will be cut by £500 million next April.

Does the right hon. Gentleman endorse the proposal made by the hon. Member for North Durham, who seems to think that there should be an impact on pensioners as well?

The hon. Gentleman must not have been listening carefully, because that is not the case my hon. Friend was making. His point was that providing special protection for pensioners when £500 million is being cut overnight from the available fund means that those people who are not pensioners but who are currently entitled to council tax benefit or council tax support will inevitably be hit harder. Local authorities and charities are making the same case, as did Barnsley Advice Network to me last week when we discussed the potential challenges and problems that people will be forced to face.

I apologise for coming late to the debate. I had a meeting elsewhere in the Palace.

My right hon. Friend is making a pertinent point. Is he aware of the work done by the House of Commons Scrutiny Unit, which has estimated the impact of a 10% cut to council tax benefit, with protection for the over-65s, using DWP figures? It calculates that non-pensioners will face an average cut of 16% in their council tax support.

I am glad to see my hon. Friend in his place. He has been an active participant in all debates on the Bill, including on Second Reading and in Committee. I have seen that work by the House of Commons Scrutiny Unit, which I think is useful and supports the point I am making to the hon. Member for Manchester, Withington (Mr Leech). If anything, the 16% figure is probably on the conservative side. My local authority in Rotherham calculates that non-protected, non-pensioner claimants of council tax benefit are likely to lose, on average, 19% of their support.

To clarify my earlier point for the hon. Member for Manchester, Withington, who is obviously having problems with earwax tonight, I was not suggesting that pensioners should be taken out of that protection; I was making exactly the same point as my right hon. Friend is making. The fact of the matter is that the hon. Gentleman will go into the Lobby tonight to vote for some swingeing cuts to the lowest paid, including some of his constituents in Manchester, who no doubt will have their revenge at the next general election.

My hon. Friend makes clearly and succinctly the points he made earlier.

I am concerned about the percentages, whether 16% or 19%, and the averages, such as the LGA’s calculation that non-pensioners are likely to lose, on average, £6 a week from the support they currently receive to help pay council tax. Percentages and averages are one thing, but the family, household or individual—the one in eight people currently entitled to council tax benefit who are in work but do not earn enough to cover their council tax bills without help—will face a reduction of perhaps £10, £12 or £15 a week, at a time when other costs are being loaded on them and they are struggling to make ends meet. They will find such a difference really hard to deal with. I hope that we do not lose sight of the sort of pressure that the Bill and the changes the Government are making will put on many households, including many that are working hard and have an entitlement that they simply will not have under the new system.

My right hon. Friend, as ever, speaks with great clarity and integrity. The core of the issue, as he is showing, is that it appears that there will be unintended consequences that create a disincentive to work for those very people.

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.

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?

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.

The Minister wants to intervene. Perhaps he will give the House the straight account of the figures for Rotherham, on which I challenged him five minutes ago.

I was going to intervene on the right hon. Gentleman’s last point, but I am happy to respond to the other one as well. On the last point, it is absolutely not the case that the Government have made explicit anything relating to disadvantaging working recipients. On the contrary, the statement of intent—I appreciate that he might not have got to this section—makes it clear that it is important for schemes devised by local authorities to link with universal credit and preserve exactly that protection.

On the other point, Rotherham council, according to the figures it submitted to the Department, will lose approximately £1.8 million of funding, but the discounts and exemptions that it will be able to recover in future will amount to £1.9 million. That is all in the Bill before the House today. Whether the council chooses to join those two things together is a matter for it, but it is absolutely the case that, taking the Bill as a whole, the council will in fact have a greater capacity to meet the needs of the people it serves.

The Minister has just told the House and me that, to run the new scheme from April next year, Rotherham will have available no less funding than it has during this financial year. I will look very carefully at the facts, and, if they match the Minister’s words, I will welcome them; if they do not, I shall demand that he puts the House straight and offers an apology.

On work incentives, will not the Secretary of State therefore use his powers under schedule 4 to specify that people in work must, and work incentives will, be protected as he proposes, and has pledged, to use them for pensioners? If that is the case, the Minister’s actions will match his words. If that is not the case, exhortations on the importance of local government schemes reflecting needs and not damaging work incentives will not be worth the paper of the circular on which they are sent out, because there will be no protections guaranteeing the preservation of work incentives until and unless the Secretary of State chooses to use his powers as he has pledged to use them for pensioners.

Until that point, it is reasonable for Opposition Members, who are concerned about the future of this support for council tax payments, to continue to press the Minister and to be concerned that non-pensioners are likely to bear a heavy cut in their current support. Those on low incomes who are not pensioners, but who would get the full council tax benefit under the current system, will, as the Barnsley advice network has told me, have to find 20% of their council tax bill from their basic income, whatever they earn, as councils try to make less go further.

The Minister is old enough, experienced enough and has been involved in local government long enough for this measure to sound a warning to him and his colleagues. This is the return of the poll tax—[Interruption.] There are a few groans from Tory Members, but let us remember that a 20% minimum payment expected of all people, whatever their means, was part of the flaw in, and at the heart of the unfairness of, the community charge a couple of decades ago. In practice, that is what we are building in for non-pensioners: a requirement to cover for themselves, whatever their income, about 20% of the council tax costs in their local area.

Given the way in which the measure will work for many, it is a return of the poll tax: rushed into law and rushed into practice, with a deaf ear to local government, to charities, to experts and to Members, who warn the Government, “You’re pushing too far, too fast with these changes.” I will return in a moment to the amendments on the legislation’s commencement tabled by my right hon. Friend the Member for Greenwich and Woolwich, but first let me do my job and introduce new clause 2 and the amendments that stand in my name.

With new clause 2 and amendment 2, I seek to challenge the Secretary of State’s powers over, and prescription of, the new council tax support schemes. My purpose is this: I believe that the House and local government require a justification for the inclusion in this Bill of such powers of prescription from the centre over the local, otherwise their removal from the Bill is justified. None of the arguments that I have heard from Ministers, on Second Reading, in Committee or today, justifies the extent of the centralised powers vested in the Secretary of State to design and to enforce a particular manner of council tax support scheme.

The Government claim that the reform is a localising one. If it is, they should localise the decisions on the design of, and procedure for preparing, the scheme. They should localise the decisions and let the local authorities that will run the scheme devise them, in the Minister’s words, to suit local circumstances.

My right hon. Friend is absolutely right that any system has to be flexible enough to ensure that, if there are changes in demand locally, the system can catch up with the increase, but is not the concern that the Government’s proposals are completely inflexible, and that any increase in demand will impact on local services?

My hon. Friend is absolutely right. Any increase in need, demand and, as a consequence, cost will all have to be borne by the local authority—borne by switching funding from other budgets that perhaps support important local services, or borne by cutting back within the council tax support scheme the support that is paid to those who remain eligible.

However, I want to exemplify the challenge that the Minister faces to justify the powers that the Secretary of State is taking in the Bill in order to prescribe from the centre. In paragraph 3(4) of schedule 4, the Secretary of State may make regulations on the procedure for preparing the scheme, including in paragraph 3(5) regulations to

“require the authority to produce documents of a particular description”;

regulations to

“include requirements as to the form and content of documents produced in connection with the preparation of the scheme”;

regulations on the

“requirements…about the manner in which such documents must be published”;

regulations to

“require the authority to make copies of such documents available”

in certain ways, and “to supply” copies of such documents to certain people; and even regulations to prescribe the charges that local councils should make for those documents.

In all honesty, that is the sort of prescription we expect to find in a memorandum from a publications manager to a graphic designer and a press officer, not from central Government to elected local government officials throughout England. If the Minister and the Secretary of State are to have any credibility on the claim that this is a localising move and a localising measure, they should back off and guarantee what they say. If the schemes should be under local control, as the Minister and Secretary of State claim, the Government should give local authorities the powers to control them, not take those powers and exercise them from the centre.

Amendment 1, which is also in my name, is in the same vein although more moderate, because it seeks simply to require the Secretary of State to consult before making any changes to the requirements that he chooses to impose nationally on local schemes. As the Bill stands, there is not even any obligation to consult local government on the requirements that central Government impose.

Paragraphs (8) and (9) of schedule 4 make it clear that the Secretary of State may make regulations to require any matter to be included in the design of a local scheme; may prescribe any class of person to be included in the scheme; may prescribe the reductions that cover any class in any area; and, to reinforce my earlier point, may prescribe the way in which the provisions are made. That completely undermines not only the constant mantra of Ministers across the range of their departmental responsibilities but the specific pledge that they made in their response to the consultation, where, on page 2, they said that this is

“a policy of decentralisation that will give local authorities increased financial freedoms”.

Is not this yet another example of the Secretary of State’s schizophrenic approach to local authorities? His previous edicts have given advice on everything from pot plants to levels of chief executives’ pay to publications. He wants to give the impression that he is giving up powers, but in fact he is retaining them.

To be honest, no Minister of any Government is immune to that temptation. I am sure that it would be possible for the Minister to find one or two examples where I myself might have made such moves as a Local Government Minister. However, we in this House have a right to challenge the Government on what they claim is the underpinning principle of the Bill and to point out how the principles they claim are not matched in their legislation. There is a strong, principled case for the Secretary of State to back off, loosen the reins, and let those in local government devise the schemes that they will be obliged and required to run.

There is a principled case and a practical case for the amendments. If the Government are able to set the key constraints and parameters of any scheme, and to do so at any time, it is entirely possible not only that local flexibility—the ability to tailor to local circumstances—will be undermined, but that local authorities will devise their schemes, set about implementing them, and then find that they have to revise them because the Secretary of State has decided to step in and make regulations under the many regulation-making powers that he has available to him in this primary legislation. If it is pensioners today, could it be carers tomorrow and ex-service personnel the day after?

Perhaps that is not as serious a case to put to the Government as ex-service personnel and carers, but my hon. Friend makes the point. If the Secretary of State had a particular concern about cat lovers, he could indeed use these regulations to make special provision for council tax support for them.

I am sure that my right hon. Friend agrees that given their desperate state after the drubbing they got in the local elections, Ministers would do anything if it got them votes.

Perhaps, Mr Deputy Speaker, I had better not pursue that. However, it is certainly true that given their drubbing a couple of weeks ago, the Liberal Democrats will have to chase votes wherever they can find them.

Amendment 1 is designed to challenge the Government to concede, and to give a commitment to this House, that should they use their powers under the Bill and make stipulations about the schemes that local authorities will run, they will at least consult local government before doing so.

Amendment 3, which also stands in my name, exemplifies my belief that, as my right hon. Friend the Member for Greenwich and Woolwich argued, this is a rushed reform that has been introduced without an ear to proper consultation or a thought to the consequences. The amendment attempts to flush out whether the Government have properly considered the impact of the Bill in relation to the provisions of the Localism Act 2011, which allows a local authority, in setting its budget and its council tax, to put to the vote in a referendum a level of council tax that it might want to propose for its area, and allows local residents to veto what they may regard as excessive council tax rises. Under those powers, a local authority must hold a referendum no later than the first Thursday in May of the financial year to which the council tax would relate. In practice, that means that a local authority will have to run contingency spending plans, budgets and council tax levels until the result of the referendum is known, and if it is unsuccessful, those contingency budgets will need to be put in place and new council tax bills issued. That process must take place around the turn of the financial year, and by early May at the latest, yet the Bill requires that the council tax support scheme must be designed and in place by January—before most local authorities finalise and agree their budgets and council tax levels, and certainly before the level in any referendum might be established.

That mismatch indicates that this reform is ill thought out, rushed and likely to be wrong, and it reinforces the arguments that my right hon. Friend made about his amendments 6, 7, 10 and 13, to which my name has been added. There are good reasons for making this part of the benefits system local, but there is no justification for doing it by making harsh cuts to the national and local totals of spend available, by capping the totals against any future rise in needs or costs, by requiring local councils to carry all the risk of any increases in claims, or by forcing very big cuts in council tax support for many of those who need it most.

When we last debated this in Committee in January, my right hon. Friend and I noted that councils were faced with an extraordinarily tight timetable of 12 months until the point at which they would have to have these new schemes in place. That period is now eight months. There is no time to consult local residents, to design the computer software systems necessary to run these schemes or to test them and put them into practice, to work out how the tapers to the new universal credit system will have to work with the council tax support system, or to plan for the new local scheme in the context of next year’s budget planning by local authorities.

This is a disaster waiting to happen. The Government have not done the work needed for local government to do the work that it needs to do. I say this to Ministers: take a leaf out of the Health Secretary’s book, pause, listen, and be prepared to put back the start of this scheme from April next year to April 2014.

It is a pleasure to follow my right hon. Friend the Member for Wentworth and Dearne (John Healey), whose speech was not only very passionate but extremely well informed.

Nothing could illustrate better what a shambles of a Bill this is than the seriousness of the new clauses and amendments that the Government have tabled at this late stage. It is, frankly, a gross discourtesy to the House to bring these issues before us with little notification and little opportunity to discuss them. Because we have not been allowed to take evidence on the Bill, we have had no evidence on the new clauses. We would have benefited from evidence on them, particularly from legal experts. Although the Minister assures us that the new clauses replicate powers that are already in existence, that is debatable. He could not answer a number of the questions that were put to him about how inaccuracy in data records could be challenged, which electronic records could be accessed under the powers, and how the powers would relate to a person’s personal electronic data that are held on their own PC.

Every council will, of course, need the right system in place to tackle fraud—nobody would argue otherwise. However, it is interesting that we have heard nothing from the Government in this debate about the reductions in council staff, which are making it much more difficult to tackle fraud, or their desire to abolish the Audit Commission, which is the very body that searches out fraud and assists local councils in tackling it.

I am concerned about some of the measures in the new clauses. Some of them do indeed replicate those in the Social Security Administration Act 1992. However, the Minister cannot explain how one can commit an offence other than dishonestly and he cannot explain the offence of

“allowing a person to fail to notify”

something. What on earth does that mean? Does one have to be under duress, or not? What is the definition of the word “allowing”? What kind of proof is required? Above all, what will the defence against those offences be? That is not clear from what is before us. I want to see dishonest people banged up in prison or fined, but I want people who have made an honest mistake to have a proper defence for any charges that are brought against them. It is a great shame that we were not allowed to discuss the new clauses in Committee.

I want to concentrate on new clause 5, which I tabled with my right hon. and hon. Friends. The Government’s plans for council tax and what we have heard from them today clearly demonstrate how remote they are from the realities of life for many people in this country. They propose to take money away from some of the poorest people, including, as my right hon. and hon. Friends have said, people who go to work every day to earn their poverty. People with disabilities and families with children will pay the price for the incompetence of the Government. Many of them will already have lost tax credits or disability living allowance, which is being cut by £2.7 billion. It is estimated that about 400,000 disabled people will lose employment and support allowance when it is time-limited to one year for people who have paid national insurance contributions. Those very people will be hit again by the Government’s plans.

The Government consultation document said that they would

“seek to ensure that the most vulnerable in society, in particular low income pensioners, are protected”.

Pensioners are indeed protected from the cuts, and we do not disagree with that. However, coupled with the 10% cut in the amount that is available, that means that other people, many of whom are equally vulnerable, will face council tax increases. That is something that the Liberal Democrats do not seem to understand, but it is simple mathematics.

The Government’s default scheme in their so-called statement of intent replicates the current scheme and gives protection to many more vulnerable groups. The intent, I suppose, is to penalise councils financially. However, it is difficult to argue that we should protect vulnerable groups in the default scheme, but not legislate for that protection elsewhere.

There is no protection for people with disabilities—not even for those who are placed in the support group for ESA. Those people are, by definition, unable to seek work, even if it was available, which is not likely given the current flatlining economy. There is no protection for people placed in the work-related activity group, who are not expected to

“seek paid employment to increase their income”.

They are asked to take steps to increase their employability, but they are not yet expected to seek work. That shows how spurious is the Government’s claim that they are doing this to spur on local councils to get people into work. That is nonsense.

There is no protection for carers, as defined in the regulations on national insurance credits. That means people who provide care for at least 20 hours a week to one or more disabled person who is in receipt of certain benefits. Those people carry burdens that most of us cannot manage, and yet they do it every day. They save this country millions of pounds that would otherwise be spent on residential care.

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.

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.

My hon. Friend is coming to the crunch. A substantial number of people in receipt of council tax benefit are in work. It is an in-work benefit, not just an out-of-work benefit as some Government Members would like to portray it. Given that the Government’s statement of intent states:

“Local schemes should support work incentives, and in particular avoid disincentives to move into work”,

can my hon. Friend fathom the thought processes of those who are bringing in this scheme, which will clobber the working poor?

My hon. Friend is correct and I will come on to some examples of what he says in a moment.

I received a parliamentary answer from the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), which said that in 2010-11, the last year for which we have the figures, 743,660 non-passported council tax benefit recipients were in work. There were 2,860 such people in Stockport, which is the area that the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) represents. That is more than 743,000 people who the Minister for Housing and Local Government does not think exist. They do not go to Tory fundraisers, I suppose, or attend the black and white ball. All the time, his implication has been that council tax benefit goes only to those not in work. The further implication, of course, is that they are deliberately not in work, which is what underlies most of what he says. Coming from a Government who preside over unemployment of 2.6 million, that is breathtaking arrogance.

Does my hon. Friend agree that the people who will be affected are the same group who will be affected by the crazy bedroom tax? If they have an unoccupied bedroom in their house they will lose housing benefit, which is another in-work benefit.

My hon. Friend is right. The same group of people is being hit again and again. Whatever the Government tell us, we are not all in it together.

My hon. Friend mentioned in passing the borough of Stockport. I will leave the Minister to speak for the people of Hazel Grove, but I assure her that I am acutely aware that a substantial number of my constituents in the Reddish part of Stockport are in work and qualify for council tax benefit.

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.

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?

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.

The figures I gave were calculated on payments made in 2010-11, as given in a parliamentary answer by the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate. The total paid to councils in Great Britain in that year in council tax benefit was £4.8 billion. In their consultation on funding, the Government promised to give 90% of the forecast council tax expenditure for 2013-14, but they expect council tax benefit to have miraculously decreased by then to a total of £4.2 billion.

How did the Government arrive at that assumption? Considering unemployment levels and what is happening to the economy, we might expect council tax claims to go up rather than down. Perhaps that figure was calculated on the earlier optimistic forecasts that the Government gave us, but they have had to be adjusted. Councils should be warned, however, that they might face more than the cut they are expecting. Even with the so-called minor adjustments the Government want to introduce to the distribution of funding, and the creation of ceilings and floors, we do not expect too much difference. We have heard those promises before in local government finance settlements, and the measures still ended up hitting the poorest most.

Moreover if, as the Under-Secretary appeared to suggest, vulnerable people ought to have more protection—I assume he was referring to those on passported benefits—why could the working poor be facing cuts of up to 40% in their benefits, which would wipe out any gains from the increase in personal allowances that he trumpets? In face, those gains have been wiped out already by rising VAT, the loss of tax credit, changes to housing benefits and so on.

I know the Minister is anxious for good news—if the Labour party had lost to Professor Pingu the penguin, I would be looking for some good news—but his proposal will not run, because like most Lib Dem policies it is little more than a headline for the latest hocus-pocus. Indeed, far from councils being given more freedom, they will bear all the financial risks and most of the public anger for the policy. The Government have carefully ensured that the increased bills dropping through doors will bear the imprint of the local council, not that of the Secretary of State. Councils will pay the price if it goes wrong. The Select Committee on Communities and Local Government called it

“an illusion of delegation with a minimum of real discretion”.

We know, for instance, that only between 57% and 66% of pensioners claim their benefit. The likelihood is that the number claiming the benefit will increase when it is shown as a discount on a bill rather than as a benefit. That is a good thing, but councils must bear the burden of the extra cost. Increased unemployment in a council area, especially from the closure of a large company, will mean that council tax benefit claims increase. What will happen then?

The Government want to include council tax support in their business rate retention scheme, but what is the consequence of that? According to the Government’s consultation, a local authority will come into the safety net category only if its revenues fall by between 7.5% and 10% below the baseline, which is a massive fall before getting any support.

This is the crux of the matter. The Government have said that the measure will inspire councils to create employment and get more people into jobs, but how do councils do that in a double-dip recession? The Government have an in-built belief that local authorities do not want to encourage economic growth, but I challenge the Minister to name one, as I have throughout debates on the Bill. I am willing to give way to him if he wants to name one, but he cannot do so. Local councils have not caused the double-dip recession; the Government have. It is not local authorities that are causing firms to go into administration, but the economic failure of the Chancellor, who seems to have been too busy entertaining Rebekah Brooks at Dorneywood to notice what is happening to the economy.

The poorest areas are likely to face the greatest rise in claims and have already had their budgets cut. There is no slack in the system and no money to be transferred from elsewhere. The Opposition’s greatest fear is that some local authorities will try to manage the system by driving down claims and deterring people from claiming. I have confidence that Labour authorities will not do that—thankfully, there are many more Labour authorities than there were when debates on the Bill began—but I have little confidence in Tory and Lib Dem authorities. Equally, setting up an appeals system and dealing with what is likely to be a higher level of default will incur costs for local authorities.

New clause 5 is designed to ensure that the Government cannot ignore those impacts. It is no good the Minister telling us that there will be reviews, because those reviews do not include people in work and in poverty or those looking for work and in poverty.

My hon. Friend makes excellent points, but on the confusion in the appeals process it is not yet clear whether council tax benefit staff will be employed in future by the Department for Work and Pensions under the universal credit or within local authorities. That changeover adds to the complexity and confusion.

My hon. Friend is entirely right. Even if we supported the Government’s changes in the Bill, their failure to align the changes with universal credit will cause chaos throughout the system, including for staff.

Many Government amendments relate to Wales, which the Government forgot about when they drafted the Bill—to lose a county is unfortunate; to lose a whole country is rather careless—but the Welsh Government have said they are profoundly concerned by the plan. Some 327,000 people in Wales will be affected, whom the Government also seem to have forgotten about—they have developed a habit of absent-mindedly mislaying citizens, such as those in work or those who happen to live in Wales.

The Government have tabled a series of amendments on council tax reduction schemes and default schemes, which could have been discussed properly had draft regulations been brought before the House, as the Minister promised us on 31 January. Instead, we are once again being asked to grant wide powers to the Secretary of State without any idea how they will be exercised, which is extremely worrying and a poor way to make legislation.

My right hon. Friend the Member for Greenwich and Woolwich raised the rushed implementation of the proposals, an important problem we raised in Committee. Last week, we received statements of intent, but not the draft regulations we were promised. I get the feeling the Government are simply not ready to implement the proposals. It is as if someone, somewhere in the Department for Communities and Local Government—I suspect the Minister for Housing and Local Government—had a wizard wheeze and said, “I know. Let’s cut council tax benefit,” but did not work out the details. The Government, following the example set by the Prime Minister, do not seem to do detail. They just wave a languid hand and say, “Detail will follow.” But, in government, details matter. They affect the lives of the people whom we represent. The Bill will result in enormous changes for local authorities, which are being asked to cope with changes to non-domestic rates and with the localisation of council tax benefit, all at the same time.

By next year, local authorities will have to be ready to run their own local schemes, yet the Bill was rushed with indecent haste through the Committee—because the Government did not appear to understand the rules for carrying over a Bill—then kept hanging about like some kind of slow-cooking stew until after the Queen’s Speech. It will not have a Second Reading in the other place until, I believe, 12 June, and its first Committee sitting there is scheduled for 3 July. If, as I am told, the other place will not be sitting in September, who knows when the Bill will complete its passage?

Amendments will have to come back here, and if they are not agreed to—[Interruption.] The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill) talks about the recess, but he has perhaps forgotten that this House is sitting in September, although the other place does not appear to be doing so. That is the kind of detail that matters when we are trying to get legislation through. There could well be ping-pong between the two Houses. Regulations will also have to be set and passed by both Houses. In the meantime, councils are being expected to draw up a scheme without knowing the precise rules that they will need to follow, and with no certainty about their funding. That is not sensible government—it is pass-the-buck government.

We have also heard about the difficulty of producing the software required to implement the changes. Councils will need to be very clear about what they want from the firms that are designing that software, but they do not have the necessary information at the moment. Why are the Government so determined to meet the 2013 date that they will not listen either to local authorities or to the experts who design the system? I would call them pig-headed, but that would probably be unfair to pigs. Why are they so keen to impose cuts on the poorest people and chaos on local authorities? We know the answer: it is simply that they are out of touch.

The people who will suffer are the poorest people. Councils are in a no-win situation. If they protect vulnerable groups other than pensioners, those in work or seeking work will face even larger reductions in their income. This Government believe that the poor must pay for the poor, while tax cuts are given to the rich. They believe that the living standards of those who have very little have to be cut, while bankers in partly state-owned banks swan off for courses on executive nutrition at a spa. I am sure that many of the poorest people in this country would love to have to worry about the type of nutrition that they got; most of them have to settle for what they can afford.

The Government do not call the money given to bankers a handout, but that is what they call the money given to local councils. They do not call their tax cuts for millionaires a handout, but that is the term they use for the money they give to local councils to run essential services. This is a Government without a proper sense of direction and without a proper sense of right and wrong. We will continue to monitor the effects of the Bill. We will press our amendments to the vote, and we will ensure that the plight of the poorest people who are being hit by these provisions is not forgotten. It is for that reason that I urge my hon. Friends to vote in support of new clause 5.

I should like to remind the House that, contrary to some of the wild assertions from the Opposition, the Bill represents a major step towards bringing power back to local government and local communities. The business rates retention scheme, the localisation of the council tax benefit system and the return of the power to set discounts and reductions in council tax for empty homes and second homes are all measures that the previous Government failed to introduce, notwithstanding a lot of hot air about what they might have done or would not do, as the case may be—

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.

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.

Thank you, Mr Deputy Speaker. I am sure that the opportunity to give way will arise, and I shall certainly do so in due course to those who think that there is anything to be said against our view that the Bill represents a significant localisation for local government and local communities. The return of business rates to local authorities, the capacity to set council tax without having capping limits set by the Secretary of State, and the transfer of the benefits system to local authorities are all significant measures.

I want to restate my point about the return to local authorities of the ability to set council tax discounts. If every local authority chose to exercise the changes that are being passed into their hands, that would generate for English local authorities a total of more than £400 million. There is no direct connection in the Bill, but I want to make it clear that, whatever might be said about the proposals in the Bill, that discount change will be of significant benefit to local authorities.

I shall deal with some of the points raised in the debate. The right hon. Member for Greenwich and Woolwich (Mr Raynsford) suggested that we ought to accept at least some of his amendments, simply because they were already in the Government’s plans. Well, it is because they are already in the Government’s plans that we do not need to accept them. Some of his other amendments were intended to dismantle the Bill and its provisions, but I made it clear that this is not just a localism measure but a component part of putting our finances right. At no point have we disguised the fact that localisation and deficit reduction are both involved in the proposals.

I am happy to give way to the hon. Gentleman, even though he could not find the time to be present earlier.

I am very grateful to the Minister for giving way. He keeps using the word “localisation”, but it is obvious that what he is doing is localising cuts. He has spoken about raising £400 million and about the empty homes premium and the council tax discounts. Why are central Government being prescriptive about such measures? Why are they stating that homes must have been empty for two years? Why will they not give local authorities the power to decide how long a home needs to have been empty in order to qualify for the empty homes premium?

The flexibility on discounts will apply to all empty homes from day one, not just to those that have been empty for two years. The two-year condition relates to the empty homes premium, which is a separate provision that is being put in the hands of councils by the Bill.

The hon. Member for North Durham (Mr Jones) made some interesting points, but he did not seem to be aware that, whereas Wokingham has the capacity to generate £700,000 extra income, Wigan, which he mentioned specifically, has the capacity to generate £2.2 million from the discounts. If Wigan chose to implement those measures, that would completely offset the funding gap he talked about.

To be clear, much of the shroud-waving from the Opposition is completely misplaced. It was strange that the hon. Member for North Durham argued—although he tried to back out of it—for additional cuts in council tax benefit for pensioners, because he wants councils to have the flexibility to switch their spending on pensioners to others whom he thinks are more worthy of protection. That is a point of view, but it is not one that the Government share.

I have a lot of time for the right hon. Member for Wentworth and Dearne (John Healey). He served time in the Treasury, during which I believe he was party to the introduction of the 10p tax rate—[Interruption.] We all have skeletons we wish we could keep in the cupboard. When it comes to protecting the low-paid, it is this Government who have raised tax thresholds for low-paid people, many of whom are women, of course, and will take 2 million people out of tax over the next three years.

The right hon. Gentleman did get round to welcoming the localism measure, but—not for the first time—he wants localism, but not yet. The Opposition do not have a strong track record on localism, but they have realised just how important it is to the people we represent. They now pay lip service to it at every opportunity, but I see no sign that it goes beyond lip service to their agreeing to implement localism in practice. At every turn, they try to delay, dismantle and divert the successful attempts of the Government to localise decision making and give local communities the power to take decisions about their services.

I answered the right hon. Gentleman regarding Rotherham’s figures. He mentioned Barnsley, and its figures are an almost exactly equal balance, just slightly in favour of Barnsley, with £1.6 million in each direction. He also waxed lyrical about the new clause 2 single person discount. Some 29% of households are single person, and another 7% are single-parent households. I do not believe that he would want to put those people under additional pressure. The Government do not accept that new clause 2 is the way forward.

The right hon. Gentleman also made an interesting point, of the kind that only a former Secretary of State might make, about what would happen if a council tax referendum failed and the impact that would have on the scheme. The scheme that a local authority sets up by 31 January each year will have statutory force and cannot be changed for the following 12 months, so it would be required to be considered in any reduced budget. Of course, when a local council sets up its scheme, it will be with the full knowledge of its intended settlement. As I say, the right hon. Gentleman welcomes localism, but he does not want it yet.

I draw to the attention of the hon. Member for Warrington North (Helen Jones) one of the documents we published last week, “Localising Support for Council Tax: Vulnerable people—key local authority duties”, which sets out clearly the factors that a local authority needs to have in mind when it exercises its discretion and introduces a scheme. When she studies that, she will find that many of the questions that she raised are answered and her concerns are dealt with.

The hon. Lady commented on the introduction of the Welsh Assembly clauses. She will know from what the Government said previously that we took the time to consult with our colleagues in the Welsh Administration, and it is at their behest that the clauses take their present form. That is an example of the Government taking a measured approach, consulting with the relevant bodies and introducing proposals entirely in accordance with the Welsh Administration’s views.

The hon. Lady also drew attention to an amendment on consulting with those affected. There is a requirement on local authorities, when they have drawn up their scheme, to consult with those whom they believe will be affected. That clearly will involve a consultation with all the groups the hon. Lady mentioned.

I apologise for not being here earlier, but I was at a Select Committee meeting.

My right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) apparently raised the point about the time local authorities will have to propose a scheme, consult on it—as the Minister has just described—and then get their providers of services, such as Capita, to design the schemes and implement them. In January, Capita raised concerns about the time constraints that it would face and its real worry that it would have inadequate time to do that. Is the Minister convinced that local authorities will have adequate time and that there will be no problems with the delivery of services to constituents?

That is exactly why we produced the statements of intent—to give local authorities and their providers the longest possible time to understand how they might best design and develop a scheme. That is also why we have provided a significant sum of money to assist them in doing that.

The hon. Member for Warrington North also asked about criminal offences being created by the Bill. The Social Security Administration Act 1992 creates several criminal offences in relation to council tax benefit, including an offence of dishonestly making a false statement and one of knowingly making a false statement for the purpose of obtaining council tax benefit. There is a different standard of proof for each offence, as I suspect that the hon. Lady knows better than I do. Greater penalties apply if it can be shown that a person has acted dishonestly.

Can the Minister explain what the position is when a person has not acted dishonestly? We have asked him several times. He has referred to acting knowingly and to acting dishonestly, but the proposed provisions refer to offences that can be committed other than dishonestly.

I am surrounded by lawyers, and the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), is giving me helpful advice, but let me say that there are two separate categories, which I think the hon. Lady has just restated: dishonestly making a false statement and knowingly making a false statement for the purpose of obtaining council tax benefit. To underline a point I made when introducing the debate, those provisions mirror and replicate the existing situation as far as the council tax benefit fraud prevention scheme is concerned. Another relevant point I made earlier is that we are conducting a full review to ensure that what is put into the new scheme is wholly proportionate to the new situation.

These proposals are designed to localise council tax benefit and the council tax reduction scheme, are part of a much broader package of localisation to local government and are consistent with the Government’s deficit reduction plan. I commend new clause 9 and the other Government amendments and new clauses to the House.

Question put and agreed to.

New clause 9 accordingly read a Second time, and added to the Bill.

New Clause 10

Power for HMRC to supply information for purposes of council tax

‘(1) Schedule 2 to the LGFA 1992 (administration) is amended as follows.

(2) After paragraph 15 insert—

15A (1) A Revenue and Customs official may supply information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs to a qualifying person for prescribed purposes relating to council tax.

(2) The following are qualifying persons for the purpose of this paragraph—

(a) a billing authority in England;

(b) a person authorised to exercise any function of such an authority relating to council tax;

(c) a person providing services to such an authority relating to council tax.

(3) Information supplied under this paragraph may be used for another prescribed purpose relating to council tax.

(4) Information supplied under this paragraph may be supplied to another qualifying person for a prescribed purpose relating to council tax (whether or not that is a purpose for which it was supplied).

(5) In this paragraph—

(a)

“Revenue and Customs official”,

“the Revenue and Customs”, and

“function of the Revenue and Customs”,

have the same meaning as in section 18 of the Commissioners for Revenue and Customs Act 2005.

15B (1) A Revenue and Customs official may supply information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs to a qualifying person for prescribed purposes relating to council tax.

(2) The following are qualifying persons for the purpose of this paragraph—

(a) a billing authority in Wales;

(b) a person authorised to exercise any function of such an authority relating to council tax;

(c) a person providing services to such an authority relating to council tax.

(3) Information supplied under this paragraph may be used for another prescribed purpose relating to council tax.

(4) Information supplied under this paragraph may be supplied to another qualifying person for a prescribed purpose relating to council tax (whether or not that is a purpose for which it was supplied).

(5) In this paragraph—

“Revenue and Customs official”, “the Revenue and Customs” and “function of the Revenue and Customs” have the same meaning as in section 18 of the Commissioners for Revenue and Customs Act 2005;

“prescribed” means prescribed by regulations made by the Welsh Ministers.

(6) Regulations under this paragraph must not be made except with the consent of the Commissioners for Her Majesty’s Revenue and Customs.

(7) A statutory instrument containing regulations under this paragraph is subject to annulment in pursuance of a resolution of the National Assembly for Wales.

15C (1) A Revenue and Customs official may supply information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs to a qualifying person for prescribed purposes relating to council tax.

(2) The following are qualifying persons for the purpose of this paragraph—

(a) a local authority;

(b) a person authorised to exercise any function of such an authority relating to council tax;

(c) a person providing services to such an authority relating to council tax.

(3) Information supplied under this paragraph may be used for another prescribed purpose relating to council tax.

(4) Information supplied under this paragraph may be supplied to another qualifying person for a prescribed purpose relating to council tax (whether or not that is a purpose for which it was supplied).

(5) In this paragraph—

“Revenue and Customs official”, “the Revenue and Customs” and “function of the Revenue and Customs” have the same meaning as in section 18 of the Commissioners for Revenue and Customs Act 2005;

“prescribed” means prescribed by regulations made by the Scottish Ministers.

(6) Regulations under this paragraph must not be made except with the consent of the Commissioners for Her Majesty’s Revenue and Customs.

(7) Regulations under this paragraph—

(a) are subject to the negative procedure; and

(b) may make—

(i) different provision for different purposes, including different provision for different areas or for different authorities, and

(ii) such incidental, consequential, transitional or supplementary provision as the Scottish Ministers think necessary or expedient.

15D (1) A person to whom sub-paragraph (2) applies is guilty of an offence if the person discloses without lawful authority any information—

(a) which comes to the person by virtue of paragraph 15A, 15B or 15C, and

(b) which relates to a particular person.

(2) This sub-paragraph applies to—

(a) a qualifying person for the purpose of paragraph 15A, 15B or 15C;

(b) a person who is or has been a director, member of the committee of management, manager, secretary or other similar officer of a person within paragraph (a);

(c) a person who is or has been an employee of such a person.

(3) A person guilty of an offence under this paragraph is liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding 2 years or a fine, or both;

(b) on summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum, or both.

(4) It is not an offence under this paragraph—

(a) to disclose information in the form of a summary or collection of information so framed as not to enable information relating to any particular person to be identified from it;

(b) to disclose information which has previously been disclosed to the public with lawful authority.

(5) It is a defence for a person (“D”) charged with an offence under this paragraph to prove that at the time of the alleged offence—

(a) D believed that D was making the disclosure in question with lawful authority and had no reasonable cause to believe otherwise, or

(b) D believed that the information in question had previously been disclosed to the public with lawful authority and had no reasonable cause to believe otherwise.

(6) For the purposes of this paragraph, “lawful authority” has the meaning given by section 123 of the Social Security Administration Act 1992.

(7) In relation to an offence under this paragraph committed in England and Wales before the commencement of section 154(1) of the Criminal Justice Act 2003 (increase in maximum term that may be imposed on summary conviction of offence triable either way) the reference in sub-paragraph (3)(b) to 12 months is to be taken as a reference to 6 months.”

(3) In paragraph 11 (supply of information to authorities: England and Wales), after sub-paragraph (1) insert—

“(1A) Information may be prescribed under sub-paragraph (1)(d) by reference to—

(a) how the person concerned came to be in possession or control of the information;

(b) the purpose for which it is requested by the authority.”

(4) In paragraph 12 (supply of information to authorities: Scotland), after sub-paragraph (1) insert—

“(1A) Information may be prescribed under sub-paragraph (1)(d) by reference to—

(a) how the person concerned came to be in possession or control of the information;

(b) the purpose for which it is requested by the authority.”

(5) In paragraph 16 (supply of information by authorities), after sub-paragraph (2) insert—

“(3) Information may be prescribed under sub-paragraph (2)(c) by reference to—

(a) how the first-mentioned authority obtained the information;

(b) the purpose for which the first-mentioned authority believes that the information would be useful to the other authority.”

(6) This section comes into force at the end of the period of 2 months beginning with the day on which this Act is passed.’. —(Andrew Stunell.)

Brought up, read the First and Second time, and added to the Bill.

New Clause 5

Report on effects of provisions

‘At a date no later than three years from the implementation of this Act the Secretary of State shall prepare a report detailing the effects of these provisions on—

(a) the number of people receiving council tax support in each local authority including the number in employment, the number actively seeking work, and the number of pensionable age, and

(b) the costs incurred by each authority in running the scheme, including the cost of appeals.’.—(Helen Jones.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Clause 8

Council Tax

Amendments made: 42, page 5, line 2, at end insert—

‘(aa) in the case of a dwelling situated in the area of a billing authority in Wales, is to be reduced to the extent, if any, required by any council tax reduction scheme made under regulations under subsection (2B) which applies to that dwelling;’.

Amendment 43, page 5, line 4, after ‘paragraph (a)’ insert ‘or (aa)’.

Amendment 44, page 5, line 12, at end insert—

“(2A) Schedule 1A (which contains provisions about schemes under subsection (2)) has effect.

(2B) The Welsh Ministers may by regulations—

(a) require a person or body specified in the regulations to make a scheme specifying the reductions which are to apply to amounts of council tax payable, in respect of dwellings to which the scheme applies, by persons to whom the scheme applies,

(b) impose requirements on that person or body regarding the matters which must be included in that scheme, and

(c) make other provision for and in connection with such schemes.

(2C) Schedule 1B (which contains further provisions about regulations under subsection (2B) and about schemes under those regulations) has effect.’.

Amendment 45, page 5, leave out lines 18 and 19 and insert—

“( ) No regulations under subsection (2B) are to be made unless a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the National Assembly for Wales.’.

Amendment 46, page 5, line 21, at end insert

‘or regulations under subsection (2B)’.

Amendment 47, page 5, line 24, leave out ‘Schedule to be inserted as Schedule 1A’ and insert

‘Schedules to be inserted as Schedules 1A and 1B’.

Amendment 48, page 5, line 27, at end insert

‘under section 13A(2) of the LGFA 1992’.—(Robert Neill.)

Schedule 4

Amendments relating to council tax reduction schemes

Amendments made: 49, page 47, line 32, after ‘schemes’ insert ‘: England’.

Amendment 50, page 47, line 35, after second ‘scheme’ insert ‘under section 13A(2)’.

Amendment 51, page 49, line 7, at end insert—

‘(10) Regulations under sub-paragraph (8) may in particular set out provision to be included in a scheme that is equivalent to—

(a) provision made by a relevant enactment, or

(b) provision that is capable of being made under a relevant enactment,

with such modifications as the Secretary of State thinks fit.

(11) Subject to compliance with regulations under sub-paragraph (8), a scheme may make provision that is equivalent to—

(a) provision made by a relevant enactment, or

(b) provision that is capable of being made under a relevant enactment,

with such modifications as the authority thinks fit.

(12) For the purposes of sub-paragraphs (10) and (11), each of the following enactments as it had effect on the day on which the Local Government Finance Act 2012 was passed is a “relevant enactment”—

(a) sections 131 to 133 of the Social Security Contributions and Benefits Act 1992 (council tax benefit);

(b) sections 134 to 137 of that Act (general provisions about income-related benefits) so far as applying in relation to council tax benefit;

(c) section 1 of the Social Security Administration Act 1992 (entitlement to benefit dependent on claim) so far as applying in relation to council tax benefit;

(d) section 6 of that Act (regulations about council tax benefit administration).’.

Amendment 52, page 49, line 16, leave out ‘consultation under sub-paragraph (1)(a) took place’ and insert

‘any step described in sub-paragraph (1) was taken’.

Amendment 53, page 49, line 44, at end insert

‘(or such other year as is specified in section8(4) of the Local Government Finance Act 2012)’.

Amendment 54, page 50, line 2, at end insert—

‘(3A) The default scheme may in particular make provision that is equivalent to—

(a) provision made by a relevant enactment, or

(b) provision that is capable of being made under a relevant enactment,

with such modifications as the Secretary of State thinks fit.

(3B) For the purposes of sub-paragraph (3A), each of the following enactments as it had effect on the day on which the Local Government Finance Act 2012 was passed is a “relevant enactment”—

(a) sections 131 to 133 of the Social Security Contributions and Benefits Act 1992 (council tax benefit);

(b) sections 134 to 137 of that Act (general provisions about income-related benefits) so far as applying in relation to council tax benefit;

(c) section 1 of the Social Security Administration Act 1992 (entitlement to benefit dependent on claim) so far as applying in relation to council tax benefit;

(d) section 6 of that Act (regulations about council tax benefit administration).’.

Amendment 55, page 51, line 30, after ‘benefit’ insert

‘, or who makes or has made a claim for that benefit,’.

Amendment 56, page 51, line 31, at end insert—

‘Schedule 1B

Section 13A

Council tax reductions schemes: Wales

Interpretation

1 In this Schedule—

(a) “the regulations” means regulations under section 13A(2B);

(b) “scheme” means council tax reduction scheme under the regulations;

(c) “specified” means specified in the regulations;

(d) “specified authority” means a person or body required by the regulations to make a scheme (and, in relation to a particular scheme, means the authority which made the scheme or is under a duty to make it).

Application of schemes

2 (1) The regulations may—

(a) prescribe, for each scheme that is to be made, the dwellings to which that scheme is to apply;

(b) require each scheme to state the dwellings to which it is to apply.

(2) The regulations may prescribe—

(a) the date by which each scheme is to be made, and

(b) the first financial year to which it must relate.

Persons entitled to reductions

3 (1) The regulations may prescribe—

(a) classes of person who are to be entitled to a reduction under schemes;

(b) classes of person who must not be entitled to a reduction under schemes.

(2) The regulations may—

(a) allow specified authorities to determine (subject to regulations under sub-paragraph (1)) classes of person who are to be entitled to a reduction under schemes, or

(b) provide that specified authorities may not determine such classes.

(3) The regulations may require each scheme to state the classes of person (prescribed under sub-paragraph (1)(a) or determined under sub-paragraph (2)(a)) who are to be entitled to a reduction under the scheme.

(4) Any class of person prescribed under sub-paragraph (1)(a) may be determined by reference to, in particular, the matters listed in sub-paragraph (7).

(5) The regulations may require any class of person determined under sub-paragraph (2)(a) to be determined by reference to specified matters (which may include those listed in sub-paragraph (7)).

(6) If the regulations do not require a class a person to be determined as mentioned in sub-paragraph (5), the specified authority may determine that class by reference to, in particular, the matters listed in sub-paragraph (7).

(7) Those matters are—

(a) whether the Welsh Ministers consider, or the specified authority considers, any person to be in financial need;

(b) the income of any person liable to pay council tax in respect of any dwelling to which a scheme is to apply;

(c) the capital of any such person;

(d) whether any such person is in receipt of any specified benefit;

(e) the income and capital of any other person who is a resident of the dwelling, or whether any such person is in receipt of any specified benefit;

(f) the number of dependants of any person within paragraph (b) or (e);

(g) whether the person has made an application for the reduction.

Reductions

4 (1) The regulations may prescribe reductions, including minimum and maximum reductions, to which persons in each class (whether prescribed under paragraph 3(1)(a) or determined under paragraph 3(2)(a)) are to be entitled under schemes.

(2) The regulations may—

(a) allow specified authorities to determine (subject to regulations under sub-paragraph (1)) reductions to which persons in each class set out in the scheme are to be entitled, or

(b) provide that specified authorities may not determine such reductions.

(3) The regulations may require each scheme to set out the reductions (whether prescribed under sub-paragraph (1) or determined under sub-paragraph (2)(a)) to which persons in each class set out in the scheme are to be entitled.

(4) Different reductions may be set out for different classes.

(5) A reduction under a scheme may be—

(a) a discount calculated as a percentage of the amount which would be payable apart from the scheme,

(b) a discount of an amount set out in the scheme or to be calculated in accordance with the scheme,

(c) expressed as an amount of council tax to be paid (lower than the amount which would be payable apart from the scheme) which is set out in the scheme or is to be calculated in accordance with it, or

(d) the whole amount of council tax (so that the amount payable is nil).

Other matters

5 (1) The regulations may require each scheme to state—

(a) the procedure by which a person may apply for a reduction under the scheme;

(b) the procedure by which a person can make an appeal under section 16 against any decision which affects the person’s entitlement to a reduction under the scheme or the amount of any reduction to which the person is entitled;

(c) the procedure by which a person can apply to the relevant billing authority for a reduction under section 13A(1)(b).

(2) In sub-paragraph (1)(c), the relevant billing authority for any dwelling to which the scheme applies is the billing authority in whose area the dwelling is situated.

(3) The regulations may prescribe requirements which must be met by the procedure mentioned in sub-paragraph (1)(a) or (b).

6 (1) The regulations may—

(a) require other matters to be included in schemes;

(b) allow schemes to make provision that is equivalent to provision made by a relevant enactment, or provision that is capable of being made under a relevant enactment, with such modifications as specified authorities think fit;

(c) prescribe the procedure which a specified authority must follow when making a scheme (including requirements regarding consultation and other steps to be taken before and after making the scheme);

(d) require or allow functions conferred by the regulations to be exercised by specified authorities jointly with other authorities;

(e) prescribe a default scheme which is to take effect, if a specified authority fails to make a scheme in accordance with the regulations, in respect of dwellings to which that scheme would have applied;

(f) impose requirements on specified authorities relating to the review, revision or replacement of schemes;

(g) enable specified authorities to make reasonable charges for the supply of copies of documents relating to schemes;

(h) require specified authorities to provide to the Welsh Ministers information about schemes.

(2) In particular, the regulations may under sub-paragraph (1)(a) set out provision to be included in schemes, and a default scheme prescribed under sub-paragraph (1)(d) may make provision, that is equivalent to—

(a) provision made by a relevant enactment, or

(b) provision that is capable of being made under a relevant enactment,

with such modifications as the Welsh Ministers think fit.

(3) For the purposes of sub-paragraphs (1)(b) and (2), each of the following enactments as it had effect on the day on which the Local Government Finance Act 2012 was passed is a “relevant enactment”—

(a) sections 131 to 133 of the Social Security Contributions and Benefits Act 1992 (council tax benefit);

(b) sections 134 to 137 of that Act (general provisions about income-related benefits) so far as applying in relation to council tax benefit;

(c) section 1 of the Social Security Administration Act 1992 (entitlement to benefit dependent on claim) so far as applying in relation to council tax benefit;

(d) section 6 of that Act (regulations about council tax benefit administration).

Transitional provision

7 (1) The regulations may make such transitional provision regarding the commencement of schemes as the Welsh Ministers think fit.

(2) Such provision may include, in particular, provision for and in connection with treating a person who is or was in receipt of council tax benefit, or who makes or has made a claim for that benefit, as having made an application for a reduction under a scheme.

Guidance

8 In exercising any function relating to schemes, a specified authority must have regard to any guidance issued by the Welsh Ministers.”’.

Amendment 57, page 52, line 7, after ‘scheme’ insert ‘under section 13A(2)’.

Amendment 58, page 52, line 11, leave out ‘a billing authority’.

Amendment 59, page 52, line 12, at beginning insert

‘a billing authority in England or a specified authority (within the meaning of Schedule 1B) in Wales’.

Amendment 60, page 52, line 13, at beginning insert ‘a billing authority’.—(Robert Neill.)

New Clause 1

Tax increment financing schemes

‘(1) The Secretary of State may provide in regulations under paragraphs 20, 23 or 26 of Schedule 1 (levy payments, safety net payments and safety net payments on account) for the calculated amount for an area in which a tax increment financing scheme is in place to disregard the levy and any re-set.

(2) Regulations under subsection (1) shall be made by statutory instrument and may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.’.—(John Healey.)

Brought up, and read the First time.

With this it will be convenient to discuss the following:

New clause 6—Determination of central and local shares

‘(1) In determining the central share and the local share for any relevant authority, the Secretary of State must have regard to—

(a) the level of need in that authority, and

(b) the likely capacity of the authority to benefit from business rate growth.

(2) Any assessment of the level of need shall include—

(a) the ranking of the local authority in the Index of Multiple Deprivation,

(b) the level of unemployment within the authority’s area,

(c) the proportion of adults within the authority’s area who have a limiting long-term illness,

(d) the number of adults within the area who are in receipt of social care,

(e) the number of looked-after children within the authority, and

(f) the level of child poverty within the authority’s area.

(3) The Secretary of State must lay his assessment before the House at the same time as the Local Government Finance Report.’.

New clause 11—National business rate policy changes: consultation

‘The Secretary of State may not make any changes to national business rate policy which impact on local business rate yields without first consulting with all interested parties.’.

Government amendments 15 to 17.

Amendment 62, page 12, line 13, schedule 1, leave out ‘each year’ and insert—

‘each financial year until the end of the financial year beginning 1 April 2014’.

Government amendments 18 and 19.

Amendment 63, page 23, line 40, at end insert—

‘(ca) by reference to the volatility caused by rating appeals following a revaluation;’.

Government amendments 20 to 41.

Government new clause 8—Payments to and from authorities.

I rise to speak to new clauses 1 and 11, and amendments 62 and 63.

My purpose with new clause 1 is to encourage the Minister to confirm, on behalf of the Government, that the necessary powers exist in legislation to make tax increment financing work in future, and also to confirm Ministers’ intent and commitment to using those powers. The case for TIFs—tax increment financing schemes—is unarguable. I myself have been arguing it for a number of years, first in the Treasury and then in the Department for Communities and Local Government. There are local government regulations in Scotland to allow six TIF pilots to go ahead. The use of TIFs is widespread in Canada and the US, particularly in areas where regeneration is required; indeed, only one state in the US—Arizona—does not have TIF legislation. TIFs build on the commitment that Labour made in government, in the Budget 2010, a commitment that was backed by a capital down payment of £120 million.

However, if the TIFs system is to work—that is, if local authorities are to borrow money for up-front infrastructure investment against the anticipated increase in business rate income as a result of the new infrastructure —there must above all be certainty for those long-term investments to be made. There needs to be certainty for a clear business plan and then an investment plan to be put in place; otherwise TIFs will not get off the ground and will not work. That certainty is required over a 20 to 30-year time scale, which is why it is needed in legislation. As the Centre for Cities said in response to the Government’s consultation:

“When the Government introduces Tax Increment Financing…it should be based on ‘Option 2’—a ringfenced TIF which is best suited for local investment finance within the proposed business rate retention system.”

That point was echoed by the British Property Federation, which said:

“Failing to ring-fence the income stream for that length of time”—

its submission referred to a 25 to 30-year period—

“would generally render the upfront investment unbankable, because the risks associated with it become too difficult to model, understand and price. TIF will only work with the sort of total ring-fencing proposed under Option 2”.

The Government made the commitment to ring-fencing, stating in the White Paper of October 2010:

“We will introduce new borrowing powers to enable authorities to carry out Tax Increment Financing”.

In response to the consultation, the Government also made a commitment to

“allow a limited number of Tax Increment Financing Projects to be exempted from any levy and reset for 25 years.”

That is the crucial commitment that I want to test against the content of the Bill before us. I expressed my concern about the freedom of the ring-fencing from any effects of reset to the Secretary of State on Second Reading on 10 January. He had no answer: either he did not know, or he did not want to say.

Let me therefore point the Minister to the source of my concern, which relates to paragraph 37(1)(d) of schedule 1 on page 32. This deals with the regulation-making powers of the Secretary of State, referring to regulations that can

“provide for that amount or that proportion to be disregarded for the purposes of calculations under any of the following provisions”—

in other words, regulation-making powers that can lead to the disregard of a proportion of business rates in specified areas, namely TIF areas, for particular payments that would otherwise be due. The provision goes on to identify payments to the central share, payments by billing to precepting local authorities, levy payments, safety net payments, payments on account and payments that follow from changes either to the local government finance report or to an amending report of a local government financing report. There is no power, however, to make regulations to exempt payments as a result of changes through a reset.

If I am mistaken, I would like the Minister to indicate where that power lies. If no such provision exists in the legislation, will he confirm that the Government will honour the commitment they made in their response to the consultation and will amend the Bill so that any payments resulting from a reset can be disregarded—and disregarded in full—for the purpose of the TIF areas? The Minister would be welcome to accept my new clause if he needs to do so.

The right hon. Gentleman has made admirably clear his concerns about the potential lack of commercial certainty. One of the advantages of going down the route of tax increment financing is that there would be ring fence over the 25 to 30-year period. Does he not see, however, that in very uncertain economic times, that is a very long period, so it might be unwise, where a major change required a major reset in a particular area, perhaps where new towns were being built, not to allow the Government a certain amount of leeway? Is that not more important than the exclusion of a reset from the ring fence?

I would have thought the hon. Gentleman, who represents the Cities of London and Westminster, would recognise more than anyone else that for the sort of commercial investment required to get TIFs off the ground in circumscribed and specific areas, certainty is a premium. If the 25 or 30-year commitment required to make this work could be periodically completely set to one side in a reset process, I put it to him that the inherent risk created by that and the inherent lack of certainty entailed by it would undermine the ability to raise the finance necessary to get the TIFs off the ground.

As to the hon. Gentleman’s point about new towns, the regulations allow the disregard in the specified areas that are designated as TIF areas only. The disregard on business rate payments, a proportion of which would otherwise become payable by the local authority, would be allowed under various headings, but this would not apply to the reset. Fundamentally, that is the biggest upset factor of all, so the case for disregarding that is probably stronger than it is for the smaller-beer measures for which regulations can be designed to protect.

I accept what the right hon. Gentleman says and he is absolutely right about commercial certainty, which is of great importance to any would-be investor. Instead of the notion of absolute certainty embodied in new clause 1, would the right hon. Gentleman not be satisfied, particularly in view of the important effect of building a new town or a huge new industrial estate for which the notion of a reset would apply, by reassurances from the Minister that the Government do not intend to make the changes he has in mind? Would that not be better than going down the route of absolutely certainty, which provides little flexibility either to central or local government, for an incredibly long period of 25 or 30 years? We need go back only two and a half or three decades to recognise the great changes that have taken place in many of the industrial areas that we represent and to understand that absolute certainty of the sort that he—

Order. [Interruption.] Order—the hon. Gentleman must not test my patience even more. Interventions are welcome, and I am prepared to give a little leeway, but the hon. Gentleman is almost making a speech.

Thank you, Mr Deputy Speaker. I got the gist. I welcome this Bill and I want it to work. My fear is that without the certainty around potential resets—we do not know when or how often they might happen; we do not know whether they will happen every 10 years; we do not know how they will work in future—there will be huge risk and uncertainty in the system. It is not a question of whether I am satisfied by the provision; it is a question of whether the potential investors, who will determine whether the TIFs work or not, are satisfied. I am trying to convey the sentiment that I have picked up from my discussions with banks, commercial organisations, the British Property Federation and some of the City’s policy experts, who all say, “Look, we require a ring fence; it must be total”. Thus leaving out the reset, which the Government promised they would not do, does not make sense if we want the provisions to work. I hope the Minister will be able to provide the confirmation we need and be able to build it into the Bill. This issue will certainly need to be confirmed at later stages of the Bill.

Amendment 62 is designed to get to the heart of the relative share of the business rate take as between central and local government. The figures for projected resource spending on local government under the current spending review demonstrate a significant reduction for next year and the year after that—of nearly half a billion between this year and the next, and of more than £1.5 billion between next year and the year after that in nominal terms. Alongside that, the projected yield from business rates is set to go up by nearly £1 billion next year and by more than half a billion the year after that. That means that the gap between the projected business rates yield and central Government’s commitment to resource spending on local government is more than £2 billion for next year, and £4 billion for the year after that. There is a significant and growing gap between the business rates yield and spending on local government.

I accept, as do my colleagues on the Opposition Front Bench, the need for the business rates retention system not to undermine the Chancellor’s announced plans for deficit reduction during the current spending review period. However, I do not want central Government to keep helping themselves to a growing yield from business rates after 2014-15, given that the system is designed to return that yield to local government as an incentive for it to support economic development.

It is not yet clear how local authorities’ needs will be assessed for the purpose of determining the proportion of the business rate that they will retain. We need to see the bigger picture, not least because services and needs vary widely, as does the ability to generate income locally.

My hon. Friend, who has experience of local government, has put his finger on the button. What worries me is that the Bill gives the Secretary of State power to set the central and local shares—in other words, to determine the division of the business rates take—in each and every year, indefinitely. I am not talking just about what will happen next year and the year after that, or about what will happen until the end of the current spending review period. From year to year, local government simply will not know where it stands until the Secretary of State makes the decision. The central and local shares could vary, and central Government could decide to take a greater share.

The Government’s top-slicing of at least 50% of the business rates revenue and 50% of the business rates growth above the baseline will reduce the incentives for local authorities to support growth, which were meant to be part of the design of the system. It will also reduce the certainty that would enable authorities to plan their finances on more than a year-by-year basis, and reduce the Government’s own ability to claim that this is a localising reform. I am sure that we will hear from the Minister—and I have heard this before—that the Government have declared their intention of returning the revenues in the central share to local government; but, as has been pointed out by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne), we have been given no details, and we do not know what purposes or constraints that may entail.

My right hon. Friend has raised an important point about what the Government may choose to do with the extra money from the business rates that will accrue each year. The suspicion has been expressed that they will use it to ensure that local authorities must fund more and more council tax benefits. That would be a simple way of transferring responsibility for benefits to local authorities.

My hon. Friend may well be right, and his Select Committee will doubtless keep a close eye on the matter. I hope that the Minister will give us some answers tonight, but I am sure that, if he does not, Ministers in the other place will be pressed on the point.

The other gaping hole in the Bill is the absence of any specific measure that would tell us when and how the Government would deal with the reset in the future. The two options that they presented in their statement of intent last week could lead to fundamentally different outcomes. There could be a full reset, whereby all the business rate growth up to the point of the reset was redistributed—meaning, in effect, that the baseline of the whole system would be reset by means of the new, and total, business rates pot—or there could be a partial reset, meaning that business growth would be retained at local level, and just the initial baseline would be reset. That represents a very wide range of possibilities for local authorities. If the Minister wants authorities to be able to plan for the future on the basis of the new system, he must provide them with some of the answers to such questions, sooner rather than later.

Getting the reset procedure right is important not least because the initial baseline is so unfair. It locks in unfair local government settlements and in-year cuts. It is crucially important for local government to be certain that the reset procedure will work in the future, because otherwise the gaps will continue to widen.

Indeed. I have my misgivings about whether any approach to the reset procedure can make the system fair after more than a few years. Indeed, I am still to be convinced that the system can be reset in a fair and proper way. But, Mr Deputy Speaker, I digress beyond the scope of the amendments that I tabled.

Let me now turn to amendment 63. During earlier debates on the Bill in the Chamber, I argued that this was an unsuitable system for long-term Government funding. Ultimately, business rates yield is too volatile, and it is too volatile on a year-by-year basis. Let me give three examples, a couple of which will be close to home for those on both Front Benches.

In Warrington the business rates yield has dropped by £10 million over the last 10 years, from £53 million to just £43 million. In Sunderland there was a £17 million drop between 2010 and 2011, and in the year before that there had been a £12 million rise. I can tell the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), that in the middle of 2005-06, the business rates income in his borough of Bromley halved. In two of the last four years, the changes—up and down, and up and down again—have amounted to more than 10%. The funding stream is inherently volatile, and, in my view, is inherently unsuitable as a basis for the funding of essential local government services.

The main purpose of amendment 63, however, is to draw attention to concern about the volatility caused by appeals. I believe that areas in which there is a particular concentration of a single or consistent business type are particularly vulnerable to a big impact from them. The hon. Member for Cities of London and Westminster (Mark Field), who has just left the Chamber, may recall that in 2007-08 a full 20% of the business rates yield of the City of London was lost as a result of successful backdated appeals. So the appeals add another important, volatile element to the system of business rates.

Those appeals are made against decisions by the Valuation Office Agency, not local authorities. The system is managed by the VOA and tribunals, not the local authority, and it brings benefits to the companies that are successful, not the local authorities. We must ensure that the impacts of appeals do not affect the funding base of the local authorities; we must not expose authorities to vagaries in the system and to the impact of appeals, when they cannot predict them, control the risk of them or benefit from them. Actually, neither can they benefit from business rate increases through revaluation, at least while the Government put in place transition relief.

I tabled amendment 63 because the Government are creating a one-way bet, in which the Chancellor wins each way and the councils lose each time. If the appeals are won by the company, the local authority has to manage the volatility and has to bear the loss up to the level of the safety net threshold—which, according to the statement of intent in the Government’s publications of Thursday last week, is likely to be somewhere between 7.5% and 10%. Amendment 63 is an attempt to make sure that once the calculations and the thresholds are determined, safety net payments take full account of rating appeals. Linked to that, I hope the Government will accept the case for fully compensating local authorities from the levy pot for the impact of any successful business appeals—over which they have no control, and which they cannot predict.

New clause 11 is relatively modest, and I hope the Minister will accept it in principle, if not in practice at this stage. The power for setting and changing business rates policy—business rate reliefs, which are mandatory, as well as the payment schedules for business rates and the transition periods for business rate increases—will continue to rest with the Secretary of State and the national Government. Currently, any national business rate policy changes have no direct impact on local authority finances or local authority budgets. In future they will, however. They will not be local government decisions, but they will create consequences that local government will have to deal with. If the Government decide to change the rate or the type of mandatory rate reliefs, or to allow the deferral of part of the change in business rate bills, that will have a direct impact on that year’s yield in the area concerned, and therefore on the local authority’s funding. Local authorities will be hit by the consequences of decisions that they did not make and that they cannot control. That is unfair and unreasonable.

It may surprise some Members to learn that the Federation of Small Businesses has also made that argument. It said in response to the consultation of October 2011 that

“the FSB is concerned that the incentive system could actually deter local authorities from promoting and utilising the reliefs available to small businesses such as small business rate relief, rural rate relief and hardship relief…It would mean that a local authority would lose out on income if it increased the proportion of businesses that received rate relief or would make money if the number of businesses able to get reliefs fell.”

I am sure the Minister does not want to design into the new system perverse incentives that will hit small firms in that way.

As currently proposed, the new system will be bad for local authorities, and could be bad for local small and medium-sized firms. My new clause requires that, at the very least, the Secretary of State must consult the parties that would be affected by changes in national business rates policy before making such decisions. Under the new system, the stakes for councils will be higher, so the guarantee to consult them before any changes are made is the minimum that Ministers should promise.

Once again, I am very pleased to follow an interesting, passionate and well-informed speech from my right hon. Friend the Member for Wentworth and Dearne (John Healey). I can add little to the case he made for his amendments, so, given the time constraints, I shall focus on new clause 6, which stands in my name and that of other right hon. and hon. Friends.

We make no apologies for returning to the issue of need and the different levels of need within local authorities —the elephant in the room that the Government want to ignore. This issue has been raised time and again in our debates on the Bill by hon. Friends, many of whom represent some of the most deprived communities in this country and have seen at first hand the impact of the Government’s policies on those communities.

Why are the Government so wilfully blind to the effects of their policies? They have already hit local authorities with cuts that are larger than those inflicted on any Government Department, and we have heard from Opposition Members about the real and serious impact the cuts are having on front-line services—the cuts in school food provision, increases in home care charges, library closures in the poorest communities. However, none of this has any influence on Ministers, so out of touch are they with most people’s lives, and it now appears that they are going to make things worse.

First, they entrench unfairness in the system by basing it on the current local government finance settlement, so the inequalities and unfairness of the current scheme will form the basis of the settlement for years to come. We have heard many times during our debates on this Bill about cities that are losing spending power: Manchester is losing spending power of £186 per person, Birmingham £155 and Nottingham £147. Those are the cities that the Government think will drive the economic recovery; there is no linked-up policy here. Wokingham, of course, gains, however. Basingstoke and Deane gains £6.30 per person. East Dorset gains £3 per person.

According to the Government’s statement of intent—it is one of many, so I am unsure how much weight we can place on any of their statements of intent—each authority will keep 50% of its business rates and the Government will provide a revenue support grant to make up the difference between the local share of business rates at the outset of the scheme and the spending controls for local government. However, they will, it seems, have top-sliced that for the new homes bonus first, which already benefits most those authorities with a high tax base, and it appears that many other grants will also be included, as listed in the statement of intent.

We already know how the grant system has been used to penalise the poorest authorities with communities that are most in need, and there has been a significant reduction in resource equalisation. Under this scheme, the gap between richer and poorer authorities will widen. First, as the Yorkshire and Humberside councils have said,

“a baseline may not reflect the actual levels of funding councils need to deliver services from April 2013.”

They were right about that. Secondly, as we have discussed during the passage of this Bill, some authorities will find it easier to grow their business rates than others. It has been estimated that even if the top-ups and tariffs increased in line with the retail prices index, the gap between the richest and the poorest authorities, and between the north and the south, will widen. Cash growth in the City of London could be 139% over four years and the figure for Westminster could be 90%, whereas the estimate for Liverpool and Knowsley is 21.9% and that for South Tyneside is 22.7%.

When we add into that this Government’s abject failure to take into account the differing tax bases of local authorities, the situation becomes even worse. That failure means that local authorities do not start on the level playing field that the Deputy Prime Minister kept telling us about—although he was the man who said he was not going to raise tuition fees, so I am not sure that anyone takes much notice of him. In the long term, fortunate local councils might reduce or even get rid of council tax, whereas others whose tax base is low and where it is harder to attract investment will be unable to do so. When we also take into account the amount that some councils will lose through changes in council tax benefit, it is clear that they could be heading for the perfect storm.

May I use the example of my constituency to illustrate precisely the issue that my hon. Friend is raising? My constituency covers two metropolitan boroughs that lie side by side; Tameside predominantly contains band A and band B properties, so its ability to increase its income from council tax is less than that of neighbouring Stockport, which contains a much larger amount of properties in a wider range of bands. Is that not the fundamental unfairness of all this?

It is the fundamental thing that the Government fail to understand: councils are not starting from the same baseline. Those who pay the price for these inequalities, which will increase, are those most in need. Need is the thing that the Government do not want to talk about. That is why our new clause 6 seeks to require the Government to take into account both the likely capacity of an authority to benefit from business rate growth and the authority’s level of need.

When the Secretary of State issued all these statements of intent last week, he sought to dismiss the whole concept of need. He talked of grants as a

“system of Government handouts to local authorities”.

He said that this

“encourages a begging bowl mentality, with each council vying to be more deprived than its neighbour.”—[Official Report, 17 May 2012; Vol. 545, c. 39WS.]

I have never heard such an appalling slur on local councils or such an arrogant dismissal of the needs of many of the poorest people in this country, and he should apologise for that. Is he really suggesting that councils are pretending to represent areas that are poorer than they actually are, simply to get Government grants? That is nonsense. So why is it that under this Government the needs of people who are out of work, of people who have long-term illnesses and of people in poverty can be treated as if they do not exist? These people do not have loud voices, because most of them are just trying to get by from week to week. They do not share mulled wine and mince pies with the Prime Minister or get invited to dinner at Dorneywood. By contrast, those who pay 50% tax—millionaires, who are apparently squeezed beyond endurance—must be relieved of their burdens. [Interruption.] The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill) says that that is a cliché. It is not a cliché; it points out the moral laxity of this Government, who cannot see that treating poor people unfairly while giving handouts to rich people is exactly what most of the country finds wrong.

My hon. Friend is making precisely the point that needs to be made in these debates, which is that the demands on local services vary widely and that it is often the poorest communities that have the greatest demands. I am very pleased that her proposal recognises children in care, because they are a big issue for local authorities in need. That argument needs to be made in this debate.

My hon. Friend is right about that, and I shall discuss the number of people in care later. It is important that we recognise that many of the things we are discussing are statutory services, which the local authority has to provide.

Let us examine some of the differences between areas. In Knowsley, whose case was put forcefully in Committee by my right hon. Friend the Member for Knowsley (Mr Howarth), 58,000 people—more than one third—live in areas that are among the top five most deprived in the country. In the north-east, 32.7% of people live in the most deprived 20% of areas. Those are the areas that will struggle as the gap between needs and resources widens. Such authorities are often the same ones that are having to cope with the biggest increases in unemployment. That both reduces the finance available to local councils, because more people are claiming benefit, and increases the demand for their services.

The Secretary of State seems to think that authorities are competing to be the most deprived, so let me ask him something—I would if he were here, but he seems to take these debates so lightly that he has not even bothered to turn up for most of this one. So let me ask this Minister: is unemployment in Birmingham, Ladywood higher or lower than in Henley? In Birmingham, Ladywood, it stands at 11.2%, whereas in Henley it is 1.1%.

Does Middlesbrough have a higher or lower unemployment rate than North East Hampshire? Middlesbrough’s rate is 9.7%, whereas that for North East Hampshire is 1.1%. Is the figure for Liverpool, Walton higher or lower than that for Wokingham? The figure for Liverpool, Walton is 8.5%, whereas that for Wokingham is 1.3%. Does he think that councils are making this up and deliberately causing unemployment to get Government grants? Not even he could get up to argue that. It is not local councils that have caused this recession, yet still we hear from Government Members that councils are “reluctant” to promote economic growth. Coming from this Government that is a bit like King Herod accusing someone of child cruelty. Local authorities are still having to cope with the long-term legacy of heavy industry, followed by de-industrialisation.

I am loth to interrupt my hon. Friend, who is making a powerful and passionate case that I have no doubt will sway even those stern Gradgrinds on the Government Benches. Does she accept that constituencies such as mine have islands of deprivation in a sea of affluence and that we have a post-industrial working class in parts of west London? Is it coincidence that the royal borough of Kensington and Chelsea has the longest life expectancy of anywhere in the United Kingdom, whereas places such as her constituency and mine are at the other end, not through any fault, but because of industrial history? What can be done to address this cruelty?

My hon. Friend is quite right. In the first place, we could ensure that we address those legacies of ill health and poverty, which create a greater demand for services and mean that fewer people are able to contribute to them. For example, why does Durham council need to spend more on older people than a similarly sized council such as Surrey? It is not because it is profligate, but because it has higher deprivation and ill health, which lead to greater demand for home care services but mean that fewer people are able to finance that care. Fifteen times as many people receive a community service in Durham as in Surrey and two and a half times more receive a home care service. That demonstrates the huge variation in need across the country.

Those levels do not bear any relation to an authority’s ability to generate income. In Surrey, for example, 75% of the properties are in band D or above. Surrey can generate more income from band D council tax than a similarly sized authority, which is a point that was made earlier. Unless those factors are taken into account in any financial settlement, there is a huge risk to services for those in need.

A similar combination of need and a more difficult local economic situation can be seen in Halton, my neighbouring authority. One in five people in Halton has a limiting long-term illness, yet its ability to benefit from increased economic growth is more limited than that of other authorities for one simple reason: 22.3% of its business property already has an empty rating assessment, and even if it were all brought back into use it would generate little by way of extra income. The same is true of Liverpool and other big cities, where so much spare capacity exists that even if an extra 15,000 jobs were created, they would get no additional business rate income. When the Government insist that councils concentrate on increasing commercial floor space, the problem is that those who have surplus capacity find things increasingly difficult.

The question of developing local economies also does not take into account the relationship between city regions. Often the drivers for economic growth might be outside a borough’s boundaries, or in a neighbouring local authority to which people will travel for work.

My hon. Friend is quite right and that is true in many conurbations, such as Manchester and London, for example.

Let us also consider the need for children’s services. Levels of child poverty, and thus the demand for services, vary hugely between authorities. In Hartlepool, 29% of children are in poverty. In Newcastle, the figure is 27%, as it is in Liverpool. That is 91,000 children. I could not resist looking at that often mentioned authority, Wokingham, where the level of child poverty is 7%. Which area has the most need for services, yet which is benefiting most and is likely to benefit more from this Government’s plans?

Such high levels of child poverty mean a higher demand for children’s services. In Liverpool, for example, 77% of the children in poverty are in single-parent families, meaning there is an even greater need for child care and support for families to help parents go to work, as well as for other support. Children in those areas need better service, not worse, and they need more help. There is no point in the Deputy Prime Minister’s banging on about the need to address inequalities in education unless the Government recognise that to make a real difference those inequalities must be tackled before children get to school.

So, we have places such as Middlesbrough—the hon. Member for St Austell and Newquay (Stephen Gilbert) is shaking his head, but anyone in education knows that to make a real difference to educational attainment we need to tackle the inequalities before the children reach the age of five. By the time they get to school, those inequalities are entrenched and, if he does not think that that is true, I suggest he asks some teachers.

Middlesbrough is the ninth most deprived local authority in England and has seven times as many children receiving free school meals as Wokingham does. It clearly needs greater investment in children’s services. Poverty also drives the number of children being taken into care. We spoke earlier in the passage of the Bill about the huge increase in the number of referrals and children taken into care following the case of baby Peter, but the differences between authorities are stark. There was a 10% increase nationally in safeguarding referrals in the period around 2009-10, but in Liverpool the increase was 60%. Those are the differences that we are dealing with. The same applies to the numbers of looked-after children—children for whom the authority has a legal obligation to be the corporate parent and to provide. It cannot cut those services, it cannot trim them and it cannot decide how great the demand is.

I ought to declare an interest, as my wife, Councillor Allison Gwynne, is the cabinet member for children’s services in Tameside council. My hon. Friend’s point about children’s services and the cost of those services is absolutely correct, not least because children’s services, particularly for looked-after children, is such a resource-intensive service and cannot easily be cut, nor should it be. It is those councils that often have the least ability to raise business rates that are likely to be penalised the most.

I could not have put it better than did my hon. Friend. These services are demand-led; they are not within the control of the local authority, and they are, as he said, very expensive to provide, as they must be. We are dealing with some extremely damaged and vulnerable children in local authority care. Surrey has 32 looked-after children per 10,000 of population, and Wokingham has 22, compared with 104 per 10,000 in Middlesbrough and 100 per 10,000 in Newcastle. That is a stark example of the differing levels of need in local authorities, and the idea that those services should be left to the vagaries of the market is breathtaking.

My right hon. Friend the Member for Wentworth and Dearne, who is no longer in his place, gave some good examples of how business rates can vary from year to year. It is entirely unpredictable, yet this Government still refuse to recognise those different levels of need within local authorities.

Am I being a little cynical when I say that the Government have devised a scheme that is now so complicated—top-ups, tariffs, set-asides, then revaluations, and on top of that the fact that only 50% of business rates will be returned to local authorities, and a rate support grant element as well—that when they achieve what they are trying to do, the transfer of money from deprived communities to more affluent communities, it will be virtually impossible to explain to anybody what they have done?

I do not think my hon. Friend is at all cynical. He is exactly right. The whole point of the Bill, as we have said throughout, is to centralise power and devolve the blame. We saw it earlier when we were debating council tax. We are seeing it now in the Government’s plans for business rates. I believe their aims are simple. They go about it in a complicated way, but the basic aim is very simple: to ensure that whoever gets the blame for cuts in local services, it is not them. It is also to ensure that the voices of those who are most in need are excluded from this debate.

We believe that the views of those people ought to be heard. Let us think about who they are. They are elderly men and women who have contributed all their lives and who are not getting the home care that they need in their old age, or are paying too much. It is a child in a family who may not be well-off but is dependent on local libraries for his or her education. It is the most vulnerable children in need of care and protection. These are the people to whom this Government pay no heed. We have moved the new clause because we do not intend their needs to be forgotten. I urge my hon. Friends to support it in the Lobby. It might help if I indicate that we will press it to a vote.

Perhaps it is a sign of the complexity of the subject and the fact that we have not exactly taken the nation with us that there are so few Members in the Chamber tonight to discuss local government funding. We ought to remember that local government funding underpins local authority services, which support our most vulnerable people—the elderly and the disabled—and that it is women who are the heaviest users of local authority services and who are hardest hit when services are cut or funding is changed. Any changes to local authority funding need to be considered carefully and time must be taken to ensure that all intended and unintended consequences are known before those changes are made, not after, but adequate time and proper consideration are precisely what the Government’s proposals are lacking.

We heard only this morning that nine of the 10 poorest areas in the country are in the north-west, and the 10th is in the north-east. We know that Government cuts to local authority funding have already led to every person in the average north-west local authority losing £133. Every person in my local authority has lost £70, yet every person in deepest deprived Surrey has gained £2.

Because of the complexities of local government funding, even slight changes in one area often have major impacts elsewhere. We are beginning to see clear evidence that the pupil premium, although well intended, is responsible for a shift in funding from the poorest areas to the most affluent, and from schools with high concentrations of children on free school meals to schools with lower concentrations of those children. The Government have already signalled their intention to shift health funding away from need and deprivation and towards the elderly population. That will have an impact on areas such as mine that have high concentrations of people who, because of our industrial heritage, are in need of health provision and live in deprivation, because the funding will be transferred to areas in the south where the more affluent and the elderly live.

Now the Government propose changing business rates, which will simply carry on their work of siphoning funding from the poorest areas to the most affluent. Those policies on business rates are not new or untried; they were used in the USA in the 1990s and resulted in cities such as Detroit and New Orleans becoming derelict, because everyone who could move out did so and left the cities to the poorest and most vulnerable. The Government’s proposals on business rates take absolutely no account of the ability of individual local authorities to raise rates without the support of the Government.

The Government’s proposals also take no account of geography. Any area that is not within the golden triangle of south-east England, northern France and Germany needs the support of Government infrastructure to attract businesses and business rates. We have heard tonight how, as a result of these proposals, the City of London will see cash growth of almost 140% over four years, yet places such as Liverpool, Knowsley, Bury, Wirral and south Tyneside will see cash growth over the same period of about 20%.

The Government’s proposals take no account of the number of children living in poverty in a local authority or the number in need of local authority care and protection. They take no account of the number of elderly poor, the quality of housing or the number of people living in substandard housing or with chronic ill health. They do not take account of what local authorities need to spend; only of what they can raise.

I am asking the Government to agree to carry out and publish an independent assessment of the needs of different local authorities before deciding how much of their business rate they can keep. Local authority funding formulae are complex and any review must be properly handled and carefully considered. I know that the Government do not do detail, but that is what local authority funding formulae are all about. If they get the detail wrong, they will cause chaos for our most vulnerable people.

I remember that some years ago the previous Government were levering additional funding for schools, but the schools were saying that they were not getting it. Treasury civil servants initially pointed the finger at local authorities and said that they were creaming off the money. There was naming and shaming of local authorities, which came out very firmly and screamed that they were not creaming off the money. The civil servants looked again and then pointed the finger at special educational needs, saying that the growth in the SEN sector and its increasing cost was draining money that had been meant for the schools. A proper review found that it was not special educational needs, but a Treasury anorak—[Interruption.] I am sorry, but Ministers should listen to this, because it is important. It was a Treasury anorak who tweaked the system in one area and caused a Mexican wave in another. Local authority funding is complex. If the Government do not take the time to consider it properly, the most vulnerable people in our society will be the most affected.

I agree with the point that the hon. Member for North West Durham (Pat Glass) makes: local authority funding is complex. I spent 16 years in a local authority and another eight on the Greater London authority dealing with funding issues, so I say to her gently, because I recognise the sincerity of her point, that the instance to which she refers occurred on the previous Government’s watch. Despite her indication that it was a risk in the system, it was a risk because of the opacity and complication of the funding system and the operation of the formula grant, which this Government inherited and are changing. I understand that there is a problem, but this Government are fixing it.

I am going to make some progress if the hon. Gentleman will forgive me—[Interruption.] Very well, I will give way on that point, but I may not again.

The Minister says that the system is being reformed because of the complications of the current system. The Secretary of State, in his initial statement to the House, said that the Government’s objective was to create a new and simpler system. Does the Minister think that the Government have achieved that objective?

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.

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?

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.

Members of another place will study the Minister’s remarks this evening very carefully and return to a number of points. I am grateful to him for his comments about TIF funding, and I was pleased by most, if not all of them. I, too, will study the Hansard record of his comments very carefully indeed. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Proceedings interrupted (Programme Orders, 10 January and this day).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

New Clause 6

Determination of central and local shares

‘(1) In determining the central share and the local share for any relevant authority, the Secretary of State must have regard to—

(a) the level of need in that authority, and

(b) the likely capacity of the authority to benefit from business rate growth.

(2) Any assessment of the level of need shall include—

(a) the ranking of the local authority in the Index of Multiple Deprivation,

(b) the level of unemployment within the authority’s area,

(c) the proportion of adults within the authority’s area who have a limiting long-term illness,

(d) the number of adults within the area who are in receipt of social care,

(e) the number of looked-after children within the authority, and

(f) the level of child poverty within the authority’s area.

(3) The Secretary of State must lay his assessment before the House at the same time as the Local Government Finance Report.’.—(Helen Jones.)

Brought up, and read the First time.

Question put, That the clause be added to the Bill.

Clause 1

Local retention of non-domestic rates

Amendment made: 15, page 2, line 4, at end insert—

‘;

(d) paragraph 28 (regulations about distribution of remaining balance).’.—(Robert Neill.)

Clause 3

Additional grant

Amendment made: 16, page 2, line 30, leave out from ‘(7),’ to end of line and insert ‘omit “and 86”.’.—(Robert Neill.)

Schedule 1

Local retention of non-domestic rates

Amendments made: 17, page 11, line 35, at end insert—

‘(5) The reference in sub-paragraph (3) to use for the purposes of local government in England includes the making of payments under an Act or an instrument made under an Act (whenever passed or made) to—

(a) billing authorities in England,

(b) precepting authorities in England,

(c) levying bodies in England (and for this purpose “levying body” has the meaning given by section 74(1)), or

(d) bodies to which section 75(1) applies.’.

Amendment 18, page 20, leave out lines 31 to 33.

Amendment 19, page 21, line 14, at end insert—

‘(1A) If a local government finance report for a year has been approved by resolution of the House of Commons, and that report provides for an amount to be credited to the levy account kept for the year, that amount may be credited (as an item of account) to that account.’.

Amendment 20, page 25, line 41, leave out ‘this paragraph has effect’ and insert—

‘the levy account is kept’.

Amendment 21, page 25, line 42, at end insert—

‘in accordance with subsections (2) to (4).’.

Amendment 22, page 26, line 3, at end insert—

‘, and

(c) all of the calculations required by regulations under paragraph 26 (calculations of safety net payments on account) have been made for the year.’.

Amendment 23, page 26, line 13, at end insert—

‘Step 2A

Add to the amount found under steps 1 and 2 any amount credited to the levy account for the year in accordance with paragraph 18(1A) (credit in accordance with local government finance report).’.

Amendment 24, page 26, line 15, leave out ‘and 2’ and insert ‘to 2A’.

Amendment 25, page 26, leave out lines 19 to 21 and insert—

‘Subtract from the amount found under steps 1 to 3 the aggregate of all the payments to be made by the Secretary of State under regulations under paragraph 26(4)(b) (adjustments following safety net payment on account).

Step 5

Add to the amount found under steps 1 to 4 the aggregate of all the payments to be made to the Secretary of State under regulations under paragraph 26(4)(b).

Step 6

Subtract from the amount found under steps 1 to 5 the aggregate of all the payments on account to be made in the year under regulations under paragraph 26.’.

Amendment 26, page 26, line 22, leave out ‘4’ and insert ‘6’.

Amendment 27, page 26, line 24, at end insert—

‘(5) Sub-paragraph (6) applies if, in the first year for which the levy account is kept—

(a) an amount is credited to the levy account for the year in accordance with paragraph 18(1A), and

(b) that amount exceeds the aggregate of all the payments on account to be made in the year under regulations under paragraph 26.

(6) The amount of the excess is to be treated as the remaining balance on the levy account for the year.’.

Amendment 28, page 26, leave out lines 30 to 41 and insert—

‘(2) The Secretary of State may by regulations make provision about the basis (“the basis of distribution”) on which an amount referred to in sub-paragraph (1) is to be distributed.’.

Amendment 29, page 26, line 42, leave out from ‘If’ to ‘, the’ in line 43 and insert—

‘the Secretary of State makes a determination under sub-paragraph (1)’.

Amendment 30, page 26, line 45, leave out ‘sub-paragraph (1)’ and insert ‘that sub-paragraph’.

Amendment 31, page 27, line 1, leave out ‘report is approved’ and insert ‘determination is made’.

Amendment 32, page 27, line 4, leave out ‘report’ and insert ‘regulations’.

Amendment 33, page 27, line 19, at end insert—

‘; but any such time must fall within the year to which the remaining balance relates.’.

Amendment 34, page 29, line 42, at end insert—