Committee (3rd Day)
59: After Clause 4, insert the following new Clause—
“Changes to national business rate policy
The Secretary of State may not make any changes to national business rate policy which impact on local business rate yields without first consulting all interested parties.”
My Lords, I am delighted that what we have come to call the enlarged coalition is supporting the amendment.
It addresses a simple point. Under the existing system whereby business rates are pooled and go to central government, a change in the system of relief from business rates is entirely a matter for central government and has no implications for local authorities. However, once the retained business rate scheme is working, then local authorities will of course have a direct interest in such changes. Indeed, there could be circumstances where a change in the way in which business rates and relief from them are assessed could give rise to some considerable difficulties for local authorities in their budgeting and managing their expenditure.
Of course, this is inherent in the change. The Government are indeed transferring some of the risk to local authorities because that seems to be an inevitable consequence. What we are asking for here—it is a simple point—is that the Government should consult local authorities and the local authority organisations before any such changes are made, so that they can at least have a say and perhaps do their best to persuade the Government when a particular change is not appropriate. Those local authorities and organisations will have an argument because the change may well affect their funding. The least we can therefore ask, and it is a modest request, is that the Government accept this new clause and accept that local authorities should be consulted before there are changes in the business rate. I beg to move.
My Lords, I am happy to confirm that the broad alliance remains intact. We are very happy to support the amendment. The key points have been made. We are in a changed environment where what happens to business rates can have a direct impact on local government and this request is straightforward and honest, as the noble Lord described.
My Lords, I am not sure now whether I am part of an enlarged coalition or a broad alliance, but whatever it is I am pleased to be part of it. I feel comfortable in such a coalition and alliance. My name and that of my noble friend Lord Palmer of Childs Hill have been added to the amendment and we are pleased to support it. The points have been made.
Perhaps I may add one thing. I suspect that it is unlikely that the Minister will stand up in a moment and say, “No, of course the Government will not consult anyone about this; we will just do it”. I do not think that that is going to happen. I am sure that we will receive reassurance that consultations would take place. I expect that we would have reassurance that the results of the consultation would be taken carefully into account. However, it is the next stage that also concerns many local authorities, and it certainly concerns me. If, as is very likely, there are financial implications from any such policy changes, the reassurance that I should like from the Minister is that the cost and effect of such policy changes will be fully funded by the Government, either anyway or under the new burdens initiative. Frankly, that is one of the key points that we are concerned about—not whether the Government will give us warm words and reassurances about consultation, but whether the effects of any such change will also be fully funded. I look forward to the Minister’s reply.
My Lords, I envisage that “all interested parties” will include business. However, for the avoidance of doubt it would be helpful if—assuming that the Minister gives her blessing to the amendment in one form or another—she would confirm that that is the case. Clearly, since the rationale of the proposal in the first place is to incentivise local government and its business development policy, however valid that may be, it would make sense to involve business in any consultation about changes to the policy.
My Lords, I thank the alliance for its comments on the amendment. In particular I thank my noble friend Lord Jenkin for his explanation of the proposed new clause. I do not suppose that any noble Lord will be surprised to hear me say that I do not consider that such a provision is appropriate or necessary.
I fully understand that in the current system, where business rates are not retained locally, changes to national business rates policy do not affect the level of funding that authorities receive. However, in future such changes could impact on the level of funding available to a local authority. I am sure that Members of the Committee will understand that the Government may need at some stage to make changes to the national business rates policy for a variety of reasons. In the majority of cases it is likely that any changes will have been consulted on, but this may not always be the case. Changes to reliefs are a matter for the Chancellor, and a deferral system that gave businesses the opportunity to defer payment of 60% of the increase in their 2012 business rate bills as a result of the RPI uprating was announced in the autumn Statement. If the Government had consulted on that, businesses would have had to wait at least two or three months longer to receive the benefit, which in some cases could have meant the difference between shutting or remaining open. I use that as an example.
I assure my noble friend that where the Government implement a change to national business rates policy that will involve a net additional cost to local government—a point that was raised by my noble friend Lord Tope—this will be picked up through the new burdens policy. It will be treated as a new burden in line with our commitment to keeping the downward pressure on council tax as far as possible. Given this clear commitment that provides an assurance to local government, I hope that my noble friend will feel able to withdraw his amendment.
My Lords, I am grateful to my noble friend for that explanation. Of course I understand that the change may work both ways. If local authorities are going to benefit from the change, the argument not to have consultation but to get on and make the payments is much stronger. However, if there is a change that will increase the burdens on a local authority, my noble friend gave an undertaking that there would be consultation—so I cannot understand why this should not go in the Bill. It would be very reassuring to local authorities and would not place an undue burden on central government. If the Government were going to change the policy to the disadvantage of local government, there is no reason why a three-month delay should not be a perfectly satisfactory way of dealing with the statutory obligation to consult. Of course we do not vote in Grand Committee, but there is a stronger argument for this amendment than perhaps my noble friend acknowledged. Perhaps she might like to look at it again.
My Lords, I made the point, which the noble Lord accepted, that there may need to be flexibility on this. I gave the example of changes in the autumn Statement that would have been delayed if there had been consultation. It was a perfectly reasonable point. Without exception, the Government will want to consult where appropriate and where time allows, but there will be occasions when it is not in anybody’s interests to do so for reasons of speed. The proposed new clause would just constrain their ability to do that. Putting it in the Bill would be less than helpful.
My Lords, I hear what my noble friend says and we would wish to consult those advising us on that. I take the point that this is a wide-ranging amendment but, with different drafting to which we could return on Report, we might be able to write something in on this. Having said that, I beg leave to withdraw the amendment.
Amendment 59 withdrawn.
Clause 5 : Local retention of non-domestic rates: further amendments
Amendment 60 not moved.
Clause 5 agreed.
Schedule 3 agreed.
Clauses 6 to 8 agreed.
61: After Clause 8, insert the following new Clause—
“Non-domestic rating, valuation, appeals, etc.
After the coming into force of this Act, any question as to the person or body liable to a charge to council tax or business rates shall be referred to the Valuation Tribunal and may be determined prior to any hearing by agreement with either the Valuation Office Agency or Billing Authority (or both) or (as the case may be) determined as part of any appeal into the level of banding or assessment as if it were an appeal against a non-domestic assessment.”
My Lords, we come here to a harlequin selection of amendments, which all primarily concern making the rating system—the tax base and the appeal system—better managed and organised. I can certainly relate to the point that was introduced to our deliberations by the amendment of the noble Lord, Lord Jenkin. Billing authorities should have a stake in and an involvement with the rating appeal system. This is the counterpoint to the fact that they are, by any standards, taking on additional duties and obligations in the collection of business rates.
As I have said, valuation is poorly managed and underresourced, which has implications for the durability of local government finance in terms of budgets and predictability. As I have mentioned, the computer systems need updating and unifying, although that point is not covered by an amendment at this juncture. As certain work migrates from the social services appeal tribunal to the valuation tribunal, there will be additional loads to prevent what is coming in from them and the existing backlog overloading the system.
In prefacing the individual amendments, I say that the Valuation Tribunal Service business plan does not adequately address the backlog, which is not entirely the Valuation Tribunal Service’s fault. The parties—there are always two—are frequently not ready to engage in the appeal. Part of the problem is the Valuation Office Agency’s lack of capacity to deal with the matter at that stage. If both parties could be persuaded to get their ducks in a row—for want of a better term—it would improve the whole situation a great deal. The current situation already throws up the problem of a large number of appeals. It is unfair on billing authorities, interferes with predictability and is unfair on ratepayers generally in this context. It will cause a rise in tensions and growing problems if it is not addressed.
There are abuses by the private sector. A number of firms make blanket appeals, which also clog up the system. I impress on the Committee that I do not see these amendments as either pro-business rate payer or pro-government agency or tribunal matters. It is just a question of getting, I hope, a dispassionate view on making the system better.
Some bad practices have crept in in response to those abuses by the private sector. I still think that the level of struck-out cases is of concern. I hope that it is not a caseload management tool as opposed to a realistic attempt to ensure a reasonable level of procedural compliance. This is about confidence and the objectivity with which rating lists and appeal systems are administered by both the Valuation Office Agency and the Valuation Tribunal Service. I regard this very much as a two-way street.
I confess to an error. In the last line of Amendment 62 and in Amendments 95 and 96, there are references to a “valuation list”. This is incorrect; they should refer to a “rating list”. I alerted the Clerks to this, but I am afraid that it was too late to have it included on a corrected Marshalled List. I take total responsibility for that error creeping in.
Amendment 61 is to tidy up some anomalous situations. At present, the question of liability, as opposed to assessment, on both council tax and business rates goes to the magistrates’ court. The magistrates’ courts, of course, will merely turn around and say that if demand for payment has been legitimately formulated in terms of its procedure, the question of fact as to whether liability correctly attaches to the ratepayer does not really go beyond them. They do not have to deal with such issues, especially if it is a technical issue such as rateable occupation; that lies outside their jurisdiction. The appeal system would be better organised if the Valuation Tribunal Service were empowered and funded to deal with this. The effect of this amendment would be to place all relevant appeals other than debt recovery cases within the valuation tribunal jurisdiction. Clearly, debt recovery cases would remain with the magistrates.
On council tax, the fear is that the reduction in council tax benefits and reliefs which will undoubtedly occur through the Bill’s provisions will shift things to a question of liability. A particular concern of the Institute of Revenues Rating and Valuation is that this would enlarge the burdens on the Valuation Tribunal Service. The proposal is that the questions of liability should go instead to the Valuation Tribunal Service and be dealt with as if they were business rate appeals. The point here is that there is no provision for early settlement of council tax appeals; there is no agreement prior that can deal with this. This is a lacuna in that situation.
I realise that although this risks further loading the Valuation Tribunal Service—I have admitted that there may be an issue of funding—it makes more sense than those cases going to the magistrates. Later on, I have a sweeping-up proposal for the Secretary of State to make regulation to try to provide a unified form of appeals system. That deals with the third item on how council tax banding appeals can be dealt with, in order to try to bring in a provision for dealing with them prior to an appeal if that can be agreed between the parties. Amendment 70ZA is linked to Amendment 61. That is simply an alternative to tidy up the present untidy system of referrals to magistrates on the liability and to the Valuation Tribunal Service on assessments, so that we actually have a unified system.
On Amendment 62, the position is that if, unbeknown to a business rate payer, there is an error in assessment or, for instance, a legal precedent is set so as to create a windfall liability that could be backdated up to six years, that can come as a single retroactive demand—sometimes a very large sum. In a number of instances, this is completely unheralded for the ratepayer. The amendment would allow the backdated liability to be paid off in instalments. This is really an extension of the principle of transitional relief, and is consonant with the Minister’s point in connection with the deferral of the 60% RPI increase. It builds on that principle, and I hope that it is reasonably uncontroversial in preventing a crippling point load on a ratepayer, particularly in difficult times.
As I explained to the Committee previously, Amendment 63 concerns the relief for rural petrol filling stations. I said in my note to the Minister that the relief currently stands at £12,000 rateable value; I think it is actually £12,500, based on the information that I have received more recently. This figure was fixed in 1991 and has not kept pace with inflation in successive revaluations. For practical purposes, that relief for rural petrol filling stations has pretty much disappeared. In the mean time, there has been a sixfold increase in the level of non-domestic rating assessment of the value in the list. The rationale for retaining the relief but updating it in real terms is absolutely unassailable if we want to keep rural petrol filling stations in place. This is a matter of sustainability for many communities, in the same way as the post office, the pub and the shop—it is all part of critical mass for some of these communities.
Amendment 64 assumes that there is going to be no reallocation of funding to parish and neighbourhood councils. One thing that would help enormously would be for community premises—those wholly or mainly used for community purposes—to at least be afforded the same sort of relief as charities and alms-houses, which receive an 80% mandatory relief and may be entitled to a 20% discretionary relief. This is an issue at the heart of first-tier local government finance and it seems crazy that the blood, sweat and tears of local communities in creating these assets then attracts a business rate payment that goes back into the system and somehow comes back out again. It really does not seem very sensible. It would make an enormous difference to neighbourhoods and parish and town councils to have that sort of relief, which, as I say, already pertains to premises occupied by charities for charitable purposes.
I will lump together Amendments 66, 68 and 96. Amendment 66 concerns the central rating list, which refers to those hereditaments that are of a national application rather than falling into a defined local list class. This amendment seeks to tidy up what is presently a potentially untidy situation, or would be given other amendments proposed in this group. Under the Bill, a greater responsibility is passed to the billing authority in respect of recovery of sums due in business rates. However, the billing authority is not able to be a party to an appeal or to any agreement between the Valuation Office Agency and the ratepayer. Amendment 68 is intended to address this and make the billing authority a party to an agreement and potentially enable it to act as an appellant.
Having dealt with Amendment 68, I am reverting to Amendment 66. I apologise to the Committee for not having reorganised these amendments before they were tabled. Central rating lists involve hereditaments such as railways, telecoms infrastructure and toll motorways that cover more than one billing authority area. If, as I will suggest later on, the billing authority should have a stake in the agreement in terms of the management of the tax base—with its local knowledge and knowledge of the individuals who it is presenting with a bill—it seems sensible that for these central rating list hereditaments the billing authorities should get together, so they do not produce a quite intolerable load on the Valuation Office Agency and the valuation tribunal dealing with them. The idea is that groups of rating authorities would take on, as it were, the same status as a single party to the appeal.
Amendment 68 is intended to restore the billing authority’s state or function within the appeals system, as I have said.
Noble Lords have pointed out to me that I have not actually spoken to Amendment 65, so I had better deal with that while I am on my feet. As I said earlier, this is a two-way street. If business rate payers wish to have a more efficient system, they have a part to play in this as well. Amendment 65 would provide that every non-domestic rate payer should have to complete a simple annual return with regard to the extent of the premises that they occupy. This would help to address the issue of missed-out properties. It would also help with situations where properties had been missed out and then brought into assessment with huge backdating issues and, as I see it, would assist in maintaining the accuracy of the rating list. This is a quid pro quo for some of the other things that I am asking for.
Amendment 96 is really a longstop measure in what I believe is the highly likely event that the Minister does not agree with any of my other amendments—I see her smiling sweetly, which probably tells me all I should know. However, it provides the Secretary of State with the power to make necessary regulations as regards appeals. Given the complexity of what I have already explained, perhaps the Minister might feel that this had merit in terms of tidying up. As I said, this is about making the system more efficient.
I turn to Amendment 67, with apologies for dealing with the amendments in this order. The situation is that the Valuation Office Agency is, unfortunately, in the habit of declining on occasions to disclose the basis of its information on the valuation of non-domestic hereditaments. This may be seen as partly protecting the basis of valuations but it is a denial of the normal processes established everywhere else in contentious situations with regard to the need to know and the exchange of evidence. I am not clear why the Valuation Office Agency is doing it, but it is felt, certainly by the Institute of Revenues Rating and Valuation, that this may be to do with protecting the revenue base. I can understand that. However, for reasons that I have given earlier in connection with this Bill, I do not believe that the Valuation Office Agency, as the independent and supposedly impartial valuer of property for taxation purposes, should be leaned on in this way to protect the revenue base. If that is happening, I think that it is misplaced and produces results that are contrary to the rules of justice, whether natural justice or otherwise. I think it exacerbates the difficulties of disposing with appeals, of which I believe there are too many in any event.
I turn to Amendments 69, 70ZB and 70ZC. On Amendment 69, when a property is in the rating list, a material change of circumstances coming after the antecedent valuation date—for the present rating list it is 2008, which happens to be the peak of the market—can trigger an entitlement to appeal the assessment. The Valuation Office Agency, possibly for reasons to do with the maintenance of a tax base, has tended to interpret this increasingly narrowly, and I am bound to say that the circumstances are not crystal clear.
My amendment seeks to safeguard against falls in rent being excluded, rather arbitrarily in some cases, especially where a material change is due not to definable physical factors—one thinks of a supermarket opening in an out-of-town retail centre—but to more general national phenomena. At the moment, it seems that under those general national phenomena it would not matter how many empty shops were nearby or how unlettable a property was; it would be dismissed as being a general economic malaise rather than a single, material event. I want to try and address that because business rate payers up and down the country—not in all areas but certainly in many—are paying rates based on 2008 levels of value when it is quite evident that there have been material falls since then.
The situation in the amendment is not open ended. It would seek to clarify what is presently unclear and to prevent unsustainably high levels of rateable value being maintained on nothing better than some point of tax principle. There are some safeguards. For instance, the actual rent would have to have fallen. It would have to be clear that this was not some artifice but due to the market levels of rent having fallen materially since the antecedent valuation date.
Amendment 70ZB comes in because of the question of whether the provisions of the present valuation code are being used to protect the tax base rather than objective valuation criteria. This is quite important in that it would restore the independence and neutrality of the Valuation Office Agency by attempting to decouple it from the twin arms of policy-making and financing the department. If you like, it would create a more objective, independent and professional body. I know that it is difficult to conceive but years ago I started my professional career in the Valuation Office. I remember well the standards that pertained at that time. They were based on two things. As I was told on my first day, I was there to value and would do nothing else, and I was to value as objectively and correctly as I could.
My Lords, I aggregated these amendments together to try to deal with them as quickly as I could. They cover a number of different areas but I felt that it was right not to seek to group them individually or in smaller groups for the very purpose of discharging that obligation. While understanding what the noble Earl said and standing here chastised as appropriate, I am nearly at the end of what I wanted to say.
This particular amendment seeks to restore objectivity and professionalism—not that these individuals are lacking in professionalism but to make sure that the valuation body commands respect and continues to do so in future. That is quite an important point of principle. I have dealt with the question of falls in value following the antecedent valuation date, which just leaves me to deal with Amendments 70 and 95.
Amendment 70 relates to the way in which the Valuation Office Agency appears to be managing the appeals system. There seems to be an inclination to declare incoming proposals for alteration invalid, but not necessarily straight away. It is important that the validity of an appeal is decided at an early stage, in the same way as if a planning application were submitted that had to be decided upon at that juncture. It should not thereafter be possible for the validity to be impugned. Amendment 95 is linked to Amendment 70 and could be an alternative to it. I am going to sit down. I beg to move.
My Lords, the noble Earl has raised a number of issues and I know that my noble friend will respond. That will be important because as business rates take the burden over the coming years these issues will become matters of considerable controversy and potentially democratic controversy. Knowing the noble Earl’s expertise and the courtesy of my noble friend, I am sure that these matters will be discussed further over this summer. I hope that in her response she will not necessarily rule out the idea of at least exploring these proposals. It may be that the Government have the necessary powers that the noble Earl is referring to in Amendment 96 to make adjustments in the system. But if that is not the case, it is a matter that we ought to consider further because this area will bear further examination. Indeed, I referred to an incident in my borough, which demonstrated the problems that can arise.
I am not going to tempt the noble Earl to his feet immediately, but perhaps when he replies to the Minister’s response he will say how he envisages in Amendment 70ZC this concept of a decline in market value being a reason, rather than a proximate event, to occasion appeals and change. I am not absolutely certain as to how he envisages that would be triggered. Would it be triggered by each individual land holder? You could have whole series of appeals in the light of a general trend in market decline. The noble Earl nods, so I think that that is the case. If that doctrine is to be imported into law, for some of the reasons that the noble Earl set out, some mechanism might be needed for collective action in those circumstances, otherwise it could be another reason for a proliferation of appeals that might come out of the works.
I listened with great interest to what the noble Earl said and I hope that we can be assured we will have the flexibility to address some of these issues as they arise over the next few years.
My Lords, the noble Earl has treated us to a veritable manifesto of issues. Like the noble Lord, Lord True, I am grateful to have had the benefit of his expertise on these matters. Perhaps I may also say in the noble Earl’s defence, if he needs it, that I am advised that the 20-minute rule does not apply to legislation—quite apart from the fact that the noble Earl could have degrouped all his amendments.
It also seems that some of the issues raised would impact on local business rate deals. In line with the discussion we have just had and the amendment of the noble Lord, Lord Jenkin, we would expect there to be some consultation on that. I hope that noble Lords will understand if we formally reserve our Front-Bench position on some of these issues, at least until we have heard from the Minister. The list prompted a visit to the Valuation Office Agency website to try and get some briefing. It is worth reflecting that the group of amendments brings home the breadth of responsibilities of the Valuation Office Agency and underlines the importance of the points made in earlier debates by the noble Earl about the significance of maintaining this important service. Its work includes not only the compilation of rateable values for some 1.7 million non-domestic properties in England and 100,000 in Wales, and the list of council tax bands for some 23 million properties in England and 1.5 million in Wales, but determining local housing allowances across 153 broad market rental areas in England. That is a heck of a responsibility and a major task.
The theme of much of the noble Earl’s group of amendments is the fitness for purpose of the current system, with particular issues around appeals. If the noble Baroness is unable to give satisfaction on that this afternoon, it would lend itself to an amendment on Report, saying that there should be, within a period of time—maybe two or three years—a specific report on how the system is coping with the business rate retention scheme. Given where we are, that is probably the best that we can do with the generality of those issues. Have the Government recently assessed the fitness for purpose of the Valuation Office Agency and the system that it supports in driving forward the business rate retention scheme?
Having said that, perhaps I might comment on one or two specific amendments. Amendment 62 requests the paying off in instalments of backdated liabilities. I seem to recollect that we had some heated debates about the backdated liabilities suffered by some ports. They were paid off in instalments. There was a facility to allow that, so I wonder why there is not sufficient in the system to protect that at the moment.
As the noble Earl identified, there are issues not only for rural petrol filling stations but for shops and rural pubs. I am particularly interested in who bears the cost of these reliefs under the current system. How will that break down under the business rate retention scheme? Will there be a switch in the bearing of costs for that? Will 50% now be borne by local government and 50% by central government? What is the change on that?
On Amendment 64, the noble Earl talked about no reallocation of funding coming the way of parish and neighbourhood councils. My understanding is that there is certainly an expectation that the grant for council tax support will be paid to billing authorities and major precepting authorities. The bit attributable to local precepting authorities goes to billing authorities and there is an expectation that they should engage with parish and town councils with the prospect of payment being made. Therefore, to that extent at least, there will be some relief.
In Amendment 65, the noble Earl refers to completion of a single annual return. We are not opposed to this principle, although if the system is creaking at the moment, I am not sure of the benefit of imposing another annual return—even a simple one—if there is no resource to deal with it. There is nothing worse than having a system of returns that simply cannot be coped with; the system is brought into disrepute.
Perhaps the Minister will tell us how central rating lists will work under the business rate retention scheme. The central bit of these rating liabilities deals with hereditaments such as railways, telecoms infrastructure, toll motorways and so on, which straddle multiple billing authorities. These liabilities are collected by the Secretary of State. How is the local share fed back to appropriate billing authorities, if at all?
Amendment 68 seeks to reflect the role of billing authorities in the appeal system, given the changed circumstances that arise where billing authorities have a more direct interest in the outcome of rates collection. That does not seem unreasonable. I shall be particularly interested in the response of the noble Baroness on that. I will not comment further on the specific amendments, but there is a case emerging for having a specific look at the whole system—not to hold things up, but so that we can make a judgment in a relatively short space of time as to whether it is fit for purpose for the new demands that are being imposed upon it.
To make a quick comment about my intervention on the noble Earl, I was merely observing that he had been speaking for 20 minutes. I allowed for the fact that he was probably coming to the end of his remarks. Also, this is a self-regulating Committee. If the Committee wants to take a longer speech, the Committee can do so.
My Lords, I am not sure that I can wind this up in 20 minutes, but I will do my best, gracefully, as I go along. I first thank the noble Earl for raising this subject in the way that he has. I am also extremely grateful to him for the discussions that we have had following the previous day, when I pointed out to him that if I had to answer every amendment one by one I would have 30 pages of speaking notes, which might take us longer than 20 minutes.
With the noble Earl’s agreement—and, I now hope, the Committee’s—I propose to tell the Committee what the noble Earl’s four main themes are, and will then write on each of the specific amendments so that the Government’s answer to each is there. That will help the Committee at the next stage. I am manifestly not going to be able to answer all the points today.
The answers are grouped under the noble Earl’s points about the valuation system not being well managed; that it should be independent of the Treasury; that the Valuation Office Agency and the Valuation Tribunal Service have been adopting, as the noble Earl put it, several bad practices; and that there are abuses by a small number of rating advisers. Those are the four themes that I will go through and, following the Committee sitting, we will make sure that every Member of the Committee and the Library has a response to each of the amendments. I thank the noble Earl for grouping them together, as it could have been even longer had he chosen to speak only to two or three at the same time.
First, on the resourcing and management of the rating and appeals system, ratepayers expect their rating assessment to be correct, and for appeals to be resolved quickly. This will always be the case, but under the rates retention system it would become increasingly important that the rating system delivered a good service for both ratepayers and local government. I appreciate the noble Earl’s concerns regarding the backlog of appeals in the rating system. We share those concerns. The Valuation Office Agency is working flat out to clear over 250,000 appeals by the end of March 2013, including the majority of the outstanding appeals against the 2005 rating list. It has recruited additional front-line staff and has transferred staff from other work areas to speed up the clearance times for these outstanding appeals. Around 75% of all appeals on the 2010 list to date have resulted in no change to the rateable value, but we are well aware of how significant business rates are to all businesses and that this makes the fast and efficient processing of appeals vitally important. Likewise, the Valuation Tribunal Service is proactively working to ensure that appeals that cannot be resolved through initial discussions with the Valuation Office Agency are listed and dealt with by the tribunal. In fact, only some 2% of listed cases result in disputes being brought before a tribunal panel, with the rest being settled between the parties.
I hope that I have been able to offer some comfort to the noble Earl that the valuation and appeal system will be able to cope with the rates retention. Let me also assure him that the resourcing and performance of the Valuation Office Agency and valuation tribunal are a matter for regular discussion in the Government, especially now as we move into the rates retention system. As with all public bodies, the Valuation Office Agency and valuation tribunal have to deliver their services in challenging financial circumstances, but we are fully aware of the important role that they will play in the rates retention system and we will ensure that they have the necessary capabilities to meet these objectives.
The second theme of the noble Earl, Lord Lytton, is the Valuation Office Agency’s response to rates retention. An example of those capabilities is the way in which the Valuation Office Agency has responded to the planned introduction of rates retention. Since as early as late last year, the Valuation Office Agency has been working with local government to understand what local authorities will need to budget effectively under rates retention. It recognises that there will be step change in its relationship with local government and it has established a dedicated project team for rates retention. This has already led to several discussions with local government and with the Local Government Association. While I understand the concerns of the noble Earl, I hope that he will agree that to date the Valuation Office Agency has responded well to the rates retention scheme and is working with local government to ensure its smooth implementation.
The Valuation Office Agency is independent. An essential part of any system of tax is that the public have confidence in their tax assessments—not only in the accurate level of those assessments but in the manner in which they have been reached. I agree with the noble Earl that the independence of the Valuation Office Agency is important. That is why valuation officers who perform their statutory functions, such as the assessment of individual rateable values, act independently of Ministers. In this respect they have to answer to the courts rather than to the Government.
We also have to recognise that the Valuation Office Agency is a public sector body, spending public funds, and is part of the delivery system for business rates and council tax. That is why it is right that the Valuation Office Agency should answer to the Government for its overall performance. As such, the Valuation Office Agency forms part of Her Majesty’s Revenue and Customs and reports to Ministers in the Treasury for its work. It also accounts to Parliament—this is the point about the report—in the form of an annual report, and senior officials in the Valuation Office Agency can be called to give evidence to Select Committees.
While I appreciate the noble Earl’s point, in practice we have to strike a balance to preserve both the independence of the Valuation Office Agency’s statutory functions and the need to maintain the accountability of public servants. The noble Earl’s amendment would prevent the Valuation Office Agency from reporting to either the Treasury or the Department for Communities and Local Government, and under those circumstances I do not believe that we could deliver that accountability.
The noble Earl also raised concerns about some of the practices and procedures of the Valuation Office Agency and the valuation tribunal. Having just stressed the importance of the independence of the Valuation Office Agency when exercising its statutory functions, I think that the Committee would be disappointed if I signalled a willingness to interfere in its day-to-day work. I appreciate the concerns that the noble Earl’s amendments have raised in such areas as invalid appeals and the use of a strike-out by the valuation tribunal. We have powers to make regulations on any matter relating to the valuation tribunal and we have made regulations under those powers that describe when a strike-out can be used. However, in line with other tribunals, we do not describe all the necessary procedures in those regulations, but instead allow the valuation tribunal to make directions. Those directions describe the procedures that must be followed in taking an appeal through to a valuation tribunal hearing. The Secretary of State has given the valuation tribunal, in line with other tribunals, the power to strike out appeals where the appellant has failed to follow the directions.
This is not a matter that we take lightly. It is important for the effective operation of a fair judicial system that a valuation tribunal is able to set directions and enforce them through the use of a strike-out. The tribunal will consult its users before it introduces any standard directions, and any parties will be made fully aware of the requirements, by means of practice statements and information leaflets, when they make an appeal. Therefore, while noting the noble Earl’s concerns, I do not believe that we should change the current system. Allowing these matters to be set out in directions rather than regulations will ensure that the tribunal can lay down procedures that reflect the nature of the court and are responsive to changing circumstances. The system would not be improved through our direct intervention or by bringing all the procedures into regulations.
The noble Earl referred also to abuses by some agents. He raised valid points about abuses of the system by ratepayers’ representatives. I know that he works closely with the Royal Institution of Chartered Surveyors and the Institute of Revenues Rating and Valuation. Both organisations have clear professional standards. The Valuation Office Agency includes guidance on its website about employing a rating agent and how to contact these organisations for advice, so it would not be appropriate to regulate in this area. I hope that the noble Earl will agree that by stringently and consistently applying professional standards, the professional bodies and the Valuation Office Agency can address some of the abuses that he mentioned.
I have not addressed every amendment—as I said I would not. However, I thank the noble Earl for the knowledge he brought. I hope that he will feel able not to press his amendments on the basis of the explanations provided and of the assurance that, before Report, he will have a reply to each one.
I was asked by the noble Lord, Lord McKenzie, whether under the current system local government pays all costs of mandatory reliefs. It pays between 0% and 75% of the costs of reliefs for eligible businesses and some not-for-profit agencies. If a local authority chooses to go beyond the existing rate reliefs to grant extra relief using the business rate discount powers in the Localism Act, it can meet the cost locally. If not, the cost will be reimbursed. However, from next April the system of funding business rate reliefs will change as part of wider reforms. We will shortly publish a consultation paper setting out the details of this. The basic principle is that changes in rates income, including changes in relief, will be shared 50:50 with central government. I hope that that answers the noble Lord’s question.
There may be other points that noble Lords wish to pursue with me. I think that I answered the point of my noble friend Lord True about the fact that a number of important issues have been raised, and individual replies will be given on all the amendments so that we can consider them further at a later stage.
My Lords, I thank all noble Lords who have spoken to this group of rather technical and impenetrable amendments. I am heartened by the interest that all noble Lords have taken in them. I am afraid that I do not have an answer to the point just raised by the noble Lord, Lord McKenzie, on the central rating list. I just do not know how that applies but I am sure I know a man who does and will endeavour to find an answer.
The noble Lord, Lord True, raised a point about collective action by non-domestic rate payers, so as not to have a plethora of individual cases. There is a tendency to do that anyway because they can, for example, share a surveyor’s or adviser’s fee. There is a valid point—just as with central rating lists, when local authorities might be asked to be grouped together, perhaps ratepayers could be made to group together when they have a common cause. At the moment there is no provision for that to be insisted upon, although it is certainly a point.
The noble Lord, Lord McKenzie, talked about a report on how the system is coping. Indeed that would probably be a helpful outcome of all this and, as the noble Baroness said, there is a lot of dialogue going on and I would not want to underplay that in any way, but perhaps it could be more overt. Part of the message, in so far as there is a message, is not getting through in the way that it might.
Briefly, on the question of petrol filling stations, I will send round a report that I have received from Barber Wadlow, which gives a considerable amount of background information. I have it in electronic form, and will circulate it for the benefit of noble Lords rather than discussing it at this juncture.
On the annual return, an issue raised by the noble Lord, Lord McKenzie, I did use the word “simple” and I hope that it will now allow the box to be ticked with regard to the extent of the premise, never mind issues of valuation. At least that was a common element between the ratepayer and the Valuation Office Agency.
I turn to the points made by the Minister. She condensed this area into four main themes, which was a far more coherent method of answering my rather incoherent raising of these matters than I was able to achieve in doing so. I thank her for that, and particularly for the commitment that she evidently showed towards the critical and pivotal role of the Valuation Office Agency, and for the fact that its resourcing, performance, integrity and impartiality must remain. I know that not many former colleagues of mine are still in post because I have been out for a long time, but many people in that august organisation will very much welcome what the Minister said. I accept that if my proposal stands in the way of reporting to government, it would not be an acceptable outcome. I noted her point about the powers to make regulations, and I am grateful for that. Perhaps that may be a subject for further discussion.
On the question of abuses by agents putting in blanket appeals—and it is a clear abuse—one of the problems is that some of those firms are not recognised members of RICS or the IRRV. That is one of the difficulties about catching up with them. Such firms may employ individuals who are members, but very often the firm itself may not be accredited. Therefore, the opportunities for the professional bodies to bring these people to book are limited. In reality, that is not the subject of one of my amendments, but it was mentioned to me and I am grateful to the noble Baroness for addressing that point. I think the way forward is a further big conversation on this with the noble Baroness and her officials. I hope that I can perhaps get some of the principal professionals along, perhaps to a meeting but at any rate involved in the dialogue which we clearly need. That might help to curtail the amount of paperwork that would otherwise be flying around here, there and everywhere.
These are probing amendments, there to elicit a response. I will certainly think very carefully on what the Minister said and the implications of that. I will not press the amendments at this stage. I just reserve my position: I may need to return to a number of the points later in our proceedings but we will see what the outcome is of our further dialogue outside the formal procedures of the House. With that, I beg leave to withdraw the amendment.
Amendment 61 withdrawn.
Amendments 62 to 70ZC not moved.
70A: Before Clause 9, insert the following new Clause—
“Council tax benefit
Nothing in this Act shall exclude council tax benefit from inclusion in universal credit.”
My Lords, we now move to the second part of the Bill, on council tax benefit. I hope that the noble Earl, Lord Attlee, and the rest of the Committee will forgive me if I am a little fuller on both this amendment and the next group to raise some of the wider issues.
Many of us will remember the poll tax. When it was adopted I was a local authority leader. We were sure that it would not survive because it was essentially unworkable as well as unfair. Within a few years, the selfsame Government that introduced it abolished it—after, however, considerable cost, distress and distraint, 5,000 people in prison and the loss of hundreds of thousands from the electoral register, from which we still suffer today. Many Conservative authorities thought the poll tax was great until they learned that it was not when trying to collect small sums of what was then called community charge from unwilling payers, with bailiffs trying to distrain parents’ goods because adult sons owed £3 or so a week. That was not acceptable. I do not know about other people but I needed Special Branch protection at the time as I sought to impose on my city what was an idiotic law.
The same thing is happening now because many Conservative authorities—though not Labour ones—think that council tax benefit localisation is a good idea, until they start to prepare schemes for consultation when they begin to find out that it is not. As they struggle to balance the claims of vulnerable people against, say, work incentives within a framework of local government cuts of 30%, they are changing their minds. I predict that within 10 years—i.e. two or three years of universal credit fully bedding in—council tax benefit will be absorbed back into universal credit where it firmly belongs. That is the purpose of this probing amendment. I just wish we were not wasting all this time and effort—here in Westminster but above all in local government—which could and should be spent instead on economic development and meeting housing and social care needs.
Why should CTB be within UC, as the original White Paper from the Department for Work and Pensions in 2010 proposed—apart from the fact that DWP lost out in the turf wars to DCLG? There are four main reasons. First, in my view, council tax benefit is a decent benefit because it is demand led within an even-handed, national framework. Now, it genuinely responds to local need because it pays more to councils that have more needy people in them. From April, it will not be a fair benefit. It will be cash-limited, cut and a lottery. What you get will depend on where you live. That may make it a local decision but it does not mean that it therefore better meets local need—quite the opposite.
Pensions are exempt so the more pensioners you have the larger the cut that falls on everyone else. As a result, in Norfolk some districts have a 16% cut on the working-age population and others 30%—nearly twice as much. Equalities legislation then requires that vulnerable groups be protected; to what degree will be explored in some of the amendments tabled by my noble friends Lady Sherlock and Lady Lister. That leaves only the working poor—about a fifth to a quarter of the council tax benefit population—to carry the cuts. Despite David Cameron’s scandalously ignorant assertions about welfare recipients, council tax benefit and housing benefit are in-work benefits as well, as my noble friend Lady Donaghy will show. In future, your council tax discount will depend not on your need but on the accident of everyone else’s need in a particular patch. That is not localism; that is rationing by queue.
Pensioners will be treated the same across the country. Why them and not disabled people, poor children, carers or troubled families—why should these face a postcode lottery? In fact, the Government have got it the wrong way round because in practical terms most pensioners’ circumstances are similar, stable and predictable, and an adequately financed local authority could therefore predict and carry that risk. Instead, a local authority carries the risk of a floating vulnerable population for which previously it could access national council tax benefit.
Give a hostel for ex-offenders planning permission, increasing the number of your vulnerable people, or give a retirement home planning permission, increasing the number of your pensioners, and in future you increase pressure on your discount system. Would you grant that permission? You would certainly have second thoughts. Nor can local authorities sensibly encourage a council tax benefit take-up campaign, as my noble friends Lady Lister and Lady Sherlock will explore, even though council tax benefit has one of the lowest percentages of eligible people claiming it: only around 60% of eligible pensioners and 55% of couples with children. If a local authority has that take-up campaign, it has to pay more or cut payments to existing claimants.
Council tax benefit should be a social security entitlement, not a local authority handout. We accept this for housing benefit, that the cost of renting your home should be supported by national rules for housing benefit, even if they reflect regional costs. Why then should the property tax that that home generates, which runs alongside HB as a housing cost, not be treated similarly? Like HB, council tax benefit should be a national benefit, full stop.
If the first reason is that it produces a demographic lottery, the second reason is simplicity. By bringing all benefits together, universal credit was designed to be simple to understand: one means test, one taper, one benefit form, one set of back-dating rules, one interface point with staff, and one payment. Not any more—a second taper for CTB will now run below the UC taper. It will completely undermine the clarity of UC, especially as UC will have universal rules so people in similar circumstances get the same benefit wherever they live, but the new council tax discount scheme will have 200 to 300 different sets of rules, according to the predilections of the local authority as to the deserving and the undeserving poor. So a simple universal credit is now to be tweaked by 200 to 300 different local CTB schemes. Not only will it not be simple, what you are entitled to get will vary from place to place and, at the boundaries, from street to street. How will any individual know what they are entitled to, especially as funding for welfare advice is being cut by 75%?
Please do not tell me that local authorities are in the best position to assess these local needs. That is a piece of empty rhetorical sophistry. As far as CTB is concerned, there really are no local needs about which the local authority has particular, exclusive local information—not shared by other local authorities, denied to government—that should inform its local decisions. If Ministers believe that, perhaps they could give examples of local needs that are exclusive to one local authority. The example of closing down a factory will not do, because other factories closing down in other places will get the same support. Three examples will be enough: three examples of local need that will justify the localising of council tax benefit, such that it should be built into one council tax discount scheme but not into the next-door neighbour’s scheme because it is so essentially local.
Local knowledge of local need may be cited. However, the reason cannot be that local authorities know about their pensioners. Under the Bill, pensioners are a national group, so government rules will apply. Vulnerable groups, too, are nationally identified by law: local discretion does not enter the issue, so this is empty vocabulary. The only discretion may be on poor working households. The fragility of their domestic economy is something that my noble friend Lady Donaghy will explore. If that is where discretion will operate, where the cuts will be felt and where the pain will be experienced, we will sabotage universal credit directly.
The third reason is that this will undermine work incentives. UC was driven by the need to make work pay. I support that concept wholeheartedly. This proposal undermines that in two ways. First, it introduces a second taper in the form of council tax benefit on income, which for single people, especially those on low incomes in high council tax precept areas, will have an overlap such that both CTB and UC will fall on the same band of income. That could mean someone losing 95p or even £1 of every £1 that they earn. It will also mean that work will be less likely to pay because in some authorities in the group left standing after the combination of protected groups and 10% cuts may be the working poor, who will find that they have to pay rising sums in council tax as their returns from work fall. We are spending billions on UC only to find it sabotaged by a £500 million cut—because that is the only reason for localisation—exported as localism but in reality introduced, as the unfortunate Chloe Smith said, to save the cost of delaying the fuel levy. It is also not much more than the cost of having weekly bin collections, which was a fetish a little while ago. Localising council tax benefit sends a risk down from central to local government. It creates a postcode lottery for claimants. It undermines UC simplicity. It sabotages work incentives.
Finally, as local funding is cash capped by DCLG, the Government have essentially introduced instability into local government finance. They have transferred the risk that they accept—because it is a demand-led benefit—from central government, which is large enough, to local authorities, which are small and less robust. We all know that risk pooled is risk reduced. It was for precisely that reason that when local authorities in the late 1930s took over from the Poor Law unions the running of the Poor Law, it was taken into central government to reduce the risk to which local authorities were otherwise exposed. Balkanising that risk, which is what these proposals do, sends the risk down to local government and multiplies it. Therefore, any factory closure, take-up campaign mounted by a local charity, or planning consent that increases the number of vulnerable groups is likely to increase claims on a fixed budget, so the following year local authorities and claimants alike will have a different budget and a lower entitlement—and we will go through the hoops yet again.
I am absolutely sure that we will all regret this—central and local government alike—just as we did the poll tax. For me, the only question is: how long will it take before the Government recant? I beg to move.
My Lords, the Institute for Fiscal Studies, in its excellent report, Reforming Council Tax Benefit, states rather drily:
“It is difficult to think of reasons why the government’s original plan to integrate CTB into Universal Credit was inferior to what is now being proposed”.
Later on, the report says:
“There is no simple way that making only minimal changes to CTB will allow the new council tax rebate systems to interact with Universal Credit in a coherent way”.
I and a number of other noble Lords here spent months sitting through the stages of the Welfare Reform Bill, now the Welfare Reform Act 2012. This country is spending billions of pounds to create it, and the Government are now creating a scheme that will not interact in any coherent way with that thing that the whole country has now been told to expect.
A number of questions need addressing, many of which were raised by my noble friend Lady Hollis in her very powerful speech; I will ask just a couple. First, how is universal credit as income to be treated in the new system? Do the Government propose to give any advice to local councils? There is nothing very straightforward about this, and it is one of the many questions that every council will have to address. If universal credit is not treated as income, that would be much simpler, but it means that people facing the withdrawal of universal credit in addition to the withdrawal of council tax support, as well as paying national insurance and tax, would stand to lose at least 90p of every extra £1 earned, as my noble friend Lady Hollis pointed out. The alternative is that councils face putting incredible pressure on those who least can afford to bear the burden.
My noble friend Lady Hollis pointed out very well, I think, why council tax benefit and its successors are not basically local benefits. The only thing different about them is the extent of the liability. The reason why council tax benefit is national is because all of the assessments made are related to the extent to which the individual needs help in paying that liability, and that, of course, is shown out. For example, in working out how much somebody should get in help or council tax benefit, the starting point is the applicable amount, as I am sure the Minister is only too well aware. I recommend to him the Welfare Benefits and Tax Credits Handbook, which shows that the applicable amount is the same for income support, income-based jobseeker’s allowance and income-related employment and support allowance; indeed, it is used as the basis for housing benefit and council tax benefit. The point is that council tax benefit is a national benefit because it is designed on exactly the same basis as all the other elements of a social security system related to the need to assess what help somebody needs to meet their outgoings.
It is also based on a national assessment by central government of the amount of money that somebody needs to live on. Separating that out from the rest of the system creates fractures in what has previously been a coherent system. Ironically, it is going in precisely the opposite direction of the creation of universal credit. The point of universal credit was meant to be to bring all the component parts together in one place in order to simplify it both for the individual and for those administering it. Yet now we have a fairly important part of the system that has been broken off entirely and done in a different way.
On 8 March, welcoming the Royal Assent granted to the then Welfare Reform Bill, the right honourable Iain Duncan Smith, Secretary of State for Work and Pensions, said the following:
“The Universal Credit will mean that work will pay for the first time, helping to lift people out of worklessness and the endless cycle of benefits. Whilst those people who need our help and support will know they will get it without question. Universal Credit will, from October 2013, replace the current complex myriad of means-tested benefits with a single benefit system. It will be simpler for people to navigate and harder for people to defraud, but most importantly it will make work pay. No longer will it be possible to be better off on benefits than in work”.
If I were a council leader, I would be asking the Minister this question: how can I structure my scheme of council tax support to do both of the things that Mr Iain Duncan Smith pledges on 90% of the funding? I can see that I could simply cut support to all but the poorest, but that would have the effect simply of reducing work incentives. I could try to protect work incentives, but that would have an effect on the poorest. That is the choice I have. So the question for the Minister is: how can a council structure it so that it can help the poorest to get the help and support they need “without question” and ensure that people are always,
“better off in benefits than in work”?
Can the Minister explain? I have every confidence that councils all around the country are waiting to hear the answer because those that I have spoken to have not been able to figure it out for themselves. If the Minister cannot answer the question, is she going to break it to Iain Duncan Smith, or shall I do so?
My Lords, I support my colleagues in their contributions, which covered some of the points that I was going to raise. We thought that in Greater Manchester, where we worked together closely, we would try to work out a scheme of council tax benefits covering the 10 authorities. It has proved to be absolutely impossible. The reason is that we all start from different financial positions and we therefore approach the onset of the council tax benefit scheme from very different situations.
The point that my noble friend Lady Hollis raised about the poll tax is something that we should not forget. In the days of the poll tax, the cost of collection took a huge amount of the revenue that was collected. That was the law, we had to encourage people to pay, and if they did not pay we had to go for them in ways that were not as satisfactory as one would have liked, but that was the only way we could go forward. It created the problems that my noble friend mentioned. The unintended consequence was that a whole load of young people disappeared from Wigan and neighbouring authorities. They never registered for the poll tax; they never registered to vote because that would have exposed them as being liable to the tax; and most of them were probably not too bothered about voting. Someone said they had all moved to Spain. Well, not that many Wiganers were moving to Spain at that time. Again we are introducing a system whereby local authorities will be collecting very small bills from people who find it difficult to pay. In her response, the Minister might provide us with a calculation of the estimated extra costs of collection.
On the point about risk, my noble friend Lady Hollis made it clear that for a local authority the situation is very unpredictable as regards council tax benefit. We can devise a scheme for it, as I am doing at the moment, but I can tell noble Lords that that is not an easy task. The outcome of that scheme is unpredictable because we do not know, even when we set it to start on 1 April, how many people will be eligible to claim the benefit during the year. Clearly, treasurers will be advising local authorities that they have to cover that risk with additional balances. They cannot make an assumption. My authority covers 300,000 people and is therefore relatively large compared with other authorities. The noble Lord, Lord Greaves, comes from a smaller authority, but if, as we mentioned last week, one of the factories in his area were to close, the impact upon the scheme in Pendle would be huge. The money would have to be found for that and, at the same time, as noble Lords will remember from last week, the authority would not be receiving the business rate to cover the increase in benefit—so there would be a double impact.
At Second Reading, the Minister suggested that we can pay for this scheme by the new proposal to end discounts on empty properties and second homes. It may come as a surprise to your Lordships but there are not many second homes in Wigan. It is not a preferred choice for people who want to buy second homes. Unfortunately, that is not a source of revenue that I look forward to collecting money from. What about empty properties? We have empty properties and some have been empty for some time. I therefore asked for some information, and the number is less than the Government seem to think it is. Empty homes in Wigan are a reflection of a number of things. One is the state of the housing market, which is in great difficulties and people who need to sell their houses cannot do so. Maybe they want to move away for work, or have done so and left the house empty, and still cannot sell the property because there is no demand; I notice that the noble Earl’s organisation, the Royal Institution of Chartered Surveyors, has today announced that house prices are going down, revealing the state of the housing market. It is not there. They cannot sell the properties that they wish to sell. Many are people who have inherited properties from their parents and, again, cannot sell the property. Many of these properties are on terraces, so not desirable for modern couples. I cannot believe that there will be a huge amount of money there.
Again, to be collecting money on empty properties, my officers tell me, will be a really tricky task. They predict that, whatever the sums that we think we might eventually get from empty properties, we should assume a non-collection rate of at least 20%. That is not because we will not be diligent, but simply because of things being difficult. It is not always as easy as people may think to change.
I am by nature a localist. I welcome things that pass down to local authorities. In this case, it would be so difficult to run a scheme like this that we ought to now think again and make sure that we get a nationally based scheme that people can easily understand. Therefore, I support the amendment.
My Lords, I had not planned to speak to the amendment, but my noble friend Lady Sherlock raised a question about whether universal credit would be treated as income or not for the means test for local schemes. I am one of those sad people who has spent some of my weekend reading House of Commons Hansard Written Answers, and I have the answer for her. Stephen Timms asked the same question, and the answer was:
“Local authorities will be free to design their own scheme for localised support for working age people in their area. This includes being able to design any means test they wish to include, and deciding on what that test should and should not take account of”.—[Official Report, Commons, 2/7/12; col. 414W].
Going back to what my noble friend Lady Hollis of Heigham said, what local factor could possibly make it fair for one area to include universal credit as income and fair for another not to do so? It makes absolutely no sense at all. Every local authority, unless it goes for the default scheme, will be reinventing the wheel over and over again, working out their own means test. People will see absolutely no fairness in it whatsoever. It makes no sense not to have a national scheme.
My Lords, there are a rather large number of people here who must have been council leaders during the period of the poll tax—as, indeed, I was. I do not want to rehearse much of what has been said about that period except to say that, in my local authority a few years before the poll tax was introduced, we had 47 Conservative councillors and three Liberal Democrat councillors. By the time we had moved to the council tax, we had 47 Liberal Democrat councillors and four Conservatives. The five remaining Labour councillors were astonished to find themselves the principal opposition. So some good did come from the poll tax.
Only in a localist sense. It is fair to say that this issue has divided opinion throughout the country and, certainly, opinion within local government. When the Government’s proposals were first announced as the localisation of council tax benefit—council tax support, as it now is—many of my colleagues in local government were surprisingly enthusiastically supportive of it, perhaps because of the word “localisation”. That is a seductive word for many of us who would quite rightly describe ourselves as localists; I am very much one of those. I said in the Second Reading debate, and say again, that others including myself have thought throughout this that it properly belongs with universal credit. That is my personal view; it is not shared by all colleagues in my party. To be fair, it is not shared by all colleagues in any party. It divided local government. The Local Government Association still supports the localisation of council tax support in principle, with increasing reservations. On the other hand, London Councils, to which my authority belongs, has always opposed the move. Let us not pretend that there is one universal belief about all of this.
I cannot help feeling that today we are having a Second Reading debate that actually happened last year rather than in relation to this Bill. I know that this was much debated—and others here know much better than me; they experienced it—during the passage of the Welfare Reform Bill. The noble Baroness, Lady Hollis, is almost certainly right to say that it was an argument between the DWP and DCLG, the outcome of which we are here today to discuss. I feel now that we have to move on.
The reality is, whatever our dire predictions may be—and I have to say dire predictions that it will be “just like the poll tax” are exaggerated; I cannot know that, nor can anyone else here, but I do not think it will be that bad—it will pose some real difficulties for local authorities. We have heard mention already of the difficulties experienced under poll tax, and in other situations, by local authorities having to attempt to collect relatively small debts, particularly from people who have not previously been paying council tax, and for whom paying it is not the norm or part of the culture. Whether or not these predictions are exaggerated, only time will tell. I think they possibly are but then I joined the Liberal Party in the 1960s—I am an optimist. We wait to see.
As we say so often, we are where we are. This is what is going to happen, and what we need to do today and in future proceedings on this Bill is to see how we can mitigate the very worst effects of what is proposed in it and the accompanying regulations. It was inevitable that we were going to have this Second Reading-style debate now, but we need to move on and accept that, whether we like it or not, we have to implement what is to come in the best way possible. I hope and believe that we will have a constructive debate on how we are going to achieve that.
One of the worst aspects of all of this is actually calling it the localisation of council tax support. Frankly, I do not believe it is localisation; it is passing a scheme to local administration. It is the worst of all worlds. I am sorry to say this to my noble friends: it is not localisation, it is not moving to local authorities the right to determine the schemes for themselves; it is passing them a very prescribed scheme, together with a £500 million reduction. We will not debate the need for that reduction today; I think there are better ways of achieving that, but again that is what is going to happen and this is the way it is to be done.
There is extremely qualified support from me for what my Government are trying to do. I have to speak honestly about that but I hope that from now on we can discuss how we can make it better—or, if Members opposite prefer, less bad.
My noble friend was looking for some guidance? He might get some. My noble friend said that the role of this Committee is to look for ways of mitigating what I believe is going to be a potentially disastrous situation. He is right, of course, but before we can understand how to mitigate it, we have to understand what some of the problems are going to be and the effect this policy is going to have.
My noble friend is right in saying that it is not going to be as bad as the poll tax. It only causes one of the problems the poll tax caused, not the two main problems—certainly in my part of the world—and it is not going to affect as many people. But for the people it does affect, some of the problems are going to be the same.
The poll tax had two basic problems. As has been discussed, one was that it resulted in local authorities having to collect relatively small amounts of money from a lot of people. This was extremely expensive and not cost-effective. The second problem was that for people in the kind of houses that exist in large parts of the north of England and other areas—that is, relatively cheap terraced houses, which had very low rates in the past—the poll tax resulted in a huge increase in what they had to pay. In our area, it increased overnight by three or four times for people who were moving into a new house or an old house like that. That was one reason why people refused to pay it. Another was that it was a poll tax, not a property tax.
I was leader of the council at the time. I had the pleasure of introducing the first poll tax budget in Pendle. The consequence of that was that my party got booted out at that year’s elections, was kept out for another couple of years and I was no longer leader of the council. However, these things go round in circles. There is a new leader of the council now. That is what happened. We should learn from history but people simply do not. The noble Baroness, Lady Hollis, mentioned the Poor Law of the 1830s and the poll tax. It seems that people simply are not learning the lessons of history here.
The noble Lord, Lord Smith of Leigh, talked about the kind of housing in Wigan, of which we have large amounts in east Lancashire. He is absolutely right. Although we have a relatively high vacancy rate in such properties—perhaps 5% or 6% in some areas—it will be extremely difficult to collect the money from those properties. Again, there is a question of cost-effectiveness. You cannot really send the bailiffs round to an empty house. You have to pursue the owners, who may be in other parts of the country and often are.
I will just put forward one or two facts from my own small district authority that illustrate the problem. All authorities will differ in the proportion of people who fit into different categories and so on, but the basic problems will be similar, certainly in the north of England. At the moment, 10,457 people in total receive council tax benefit. Of those, 42% are pensioners. In some areas the figure is higher—much higher in some—and in some it is lower. In addition, there is the question of identifying vulnerable people, who will also be protected. That in itself will cause a problem to local authorities. There will be different definitions in different authorities, which may be seen as unfair, as the noble Baroness pointed out.
In total, those protected will account for between 40% and 50%. Of the rest who are not pensioners—50% to 58%—the number who are passported claimants of working age is around 64%. That is, of the people of working age who claim council tax benefits, around 64% are passported benefit claimants who get, in most cases, 100%. In other words, around 36% of people—around 2,200 of them—are being means-tested by their local authority. They are the people who are, by and large, being given part-payment. Some get 100% but most get part-payment. That is the sort of scale. They are the people who, between them, will cause problems.
Of those 10,457 people, 8,816 are in properties that are classified as band A for the purposes of council tax. They are mainly terraced houses but some are flats and bungalows and so on. This means that those 58% of people of working age will be lumbered with the whole cost of the 10% reduction if the local authority chooses to pass it on to them by charging them a council tax. If it is all done that way, the council tax benefit reduction under the new scheme will be around 18% for persons of working age. Some of those persons are on benefits. Some are working but, by definition, they are not in a position to pay more tax or to pay tax when they do not at the moment. In any case, if they get housing benefit and so on, they are often already suffering from cuts in what they will receive. So it will not be easy and the collection will be a problem.
How is a local authority supposed to fund this? As far as I can see, it has three options. It could increase council tax generally but that option would not be open to most local authorities because it would not be possible to keep within the limit of increases in council tax that the Government will allow next year without having to go for one of these referendums—and nobody is going to do that. Just keeping within the Government’s limits will already involve severe service cuts. It could change the council tax discounts but again that is taking it from some people and giving it to others. It could, for example, reduce the single person discount. That may or may not be possible but it is not something people are likely to do, at least at the beginning. It could make more general fund savings—in other words, more cuts in services and spending—but that would be very difficult at a time when authorities are under huge pressure, or it could reduce the support to claimants by whatever amount turns out to be in their particular authority.
It will differ, mainly according to the proportion of claimants who are pensioners, because it will all be lumbered on everybody else. Nobody has explained how this can possibly be fair between local authorities and between pensioners and other people. I read in the paper this morning that Mr Nick Boles proposes that the Conservative Party should in future cut all sorts of benefits for better-off pensioners. Yet here, although they will not get any more than they do now, better-off—and all—pensioners will be discriminated in favour of, as opposed to, working-age people. There does not seem to be a lot of logic there.
The situation is more complicated in two-tier areas. There, the decision will be made by the district council and yet the main consequence of that decision will fall upon the county council and other precepting authorities such as the police authority and the fire service authority. In my own district in Lancashire, the county council takes 71% of the council tax that is paid at the moment. The borough council takes 15%, the police authority 4% and the fire service authority—I have not got its name right—some 9.5%. The county council could be lumbered with a significant extra bill if the district council decided that, by some miraculous means, it could find the extra money—I think in my area it is about £150,000—to subsidise the cut in the council tax reduction scheme or, in other words, to keep it at the present level and continue to provide 100% council tax subsidy for those people who get it at the moment.
I do not know a great deal about Burnley, but I read in the local newspaper earlier this year that the leader of Burnley Borough Council suggested that Burnley might be able to find this money. I do not know where Burnley would find it from, but he said it might be able to and would therefore not make cuts and extra impositions on council tax benefit and the council tax reduction scheme.
The response of Lancashire County Council was one of horror, because it would have to pay something like four or five times what Burnley would pay in order to do this. It would be the district council’s responsibility to make the decision. The leader of the county council was quoted in the local paper as saying that if Burnley did that, it would simply reduce the services provided in Burnley Borough by the number of extra pounds that it had to pay out. It is questionable whether that would be legal, but districts and counties in these circumstances would not want to end up in the High Court, enriching lawyers. Therefore, there are clear problems and difficulties in two-tier areas. Even if the district wants to put money into alleviating and mitigating the problems for council tax payers, the brunt of its decision will be borne by the county. That is difficult.
On the cost of collection, the average amount that 6,038 households in Pendle would have to pay under the new system, if the 18% were levied, would be £142.60 a year—£3 a week. It is extraordinary that the council will have to collect £3 a week from 6,000 households. It is exactly the poll tax problem, which is why the noble Baroness, Lady Hollis, was absolutely right that in a practical sense the thing is not going to work. From 500 households the levy would be less than £1 a week. We can see that a lot of that money simply is not going to be collected. It will cost the local authority more than £50 a year to take someone to court even if it is awarded court costs. The result of this will be that the collection rate will go down. The many authorities that have been working very hard to get their collection rate up to high levels—97%, 98% and more—will have all the problems of the poll tax and will be thrown back 22 years to all the difficulties that we had then. This is not a good idea. Whatever the rights and wrongs of the policy, it will cause huge practical difficulties. I look forward with great interest to the proposals that my noble friend Lord Tope will put forward to mitigate some of the effects.
However, in the early 1990s I worked for Sir John Major at No. 10, where one of our main responsibilities was finding an alternative to the community charge. Therefore, I was in a different place but working on the same issue. In many ways I am also in the same place as other noble Lords who have spoken today. I made a number of points at Second Reading that were taken up by noble Lords. I support to a large degree the intellectual case that was put. My noble friend Lord Tope spoke wise words. The Committee must address practically the issues that have arisen. We have all made our position clear. I said at Second Reading and will say again that I would rather we were not here and that the benefit was part of universal credit. However, given the position that the Government are in, we must try to make this work in the best way possible.
This debate has taken on the tone of that on Amendment 1. I agree with some of the analysis, but if the logic is that the burden will go on a narrower and narrower base, and that base will tend to be lower-income working families, we will have to wrestle with these issues very carefully in Committee. A number of amendments suggest all sorts of other exemptions, some defined, some less defined. Some call for the Government to define who the vulnerable are; that is an interesting concept. The risk is that the Committee could make the work incentive situation worse with a well meaning intent to try to protect broad categories of people who obviously deserve our consideration.
I throw that into the discussion because it will be an interesting tension given that we are also told to take it as read—like my noble friend Lord Tope, I accept the position of my Government—that pensioners are to be excluded. However, as my noble friend Lord Greaves and others have said, that of course narrows the ground. In my authority, too, pensioners make up around 44% of claimants and 43% of council tax benefit spending.
I am not going to claim any credit of prior speaking on this. The point is well made; I made it at Second Reading. However, I hope that as we go forward to look at the amendments in detail we will remember that some well meaning amendments might have the perverse effect of making the work incentive situation even worse. I hope that we can now go on to look at the matters in detail.
I suppose that we must be grateful to the noble Lord, Lord True, for the part he played in mitigating, to use the phrase of the day, some of the worst consequences of the poll tax. However, he should be gently reminded that an element of the poll tax remains within the present system. That was a most astute piece of reconstruction of the poll tax, somewhat akin to the three-card trick. I do not blame the noble Lord, Lord True, for that; I think that the Secretary of State of the day, the noble Lord, Lord Heseltine, trod the path rather carefully. It certainly was an improvement but, as we all know, it leaves us even now with a system of local taxation more regressive than it should be.
However, we are not really debating the poll tax; we are debating these proposals. It seems to me that my noble friend Lady Hollis’s amendments are designed to have precisely that mitigating effect that the noble Lord, Lord Tope, cannot discern but which the noble Lord, Lord True, rightly encourages us to find. That is because of the link to universal credit. However, frankly, we should stop talking about a 10% cut. It is much more likely to be a higher figure anyway. The £500 million is widely regarded as a substantial underestimate. Then, as implied or explicitly mentioned by other noble Lords this afternoon and at Second Reading, the impact of the exemption of pensioners from this—which I support, contrary, once again, to the ministrations of the Local Government Association—will obviously increase the burden on everybody else. We have heard the noble Lord, Lord Greaves, refer to an 18% figure. The impact assessment talks of a 16% figure. It is interesting to look at what the impact assessment says about the whole issue. Paragraph 34 of the recently updated impact assessment reads:
“Although the net impact of the policy is simply a transfer from council tax payers to Government”—
a phrase worth thinking about—
“(and therefore a reduction in demands on general taxation, by bringing decisions about local tax reliefs closer to those responsible for raising local taxation), there will be some groups who see a reduction in their income. These groups may be: working age council tax benefit claimants”,
as already referred to,
“council tax payers or any recipients of local services that may be reduced in order to meet any funding shortfall”.
Again, this is implicit but is worth making explicit. Then it says:
“However, an accurate analysis of the reduction in income of these groups is not possible since the design of any council tax support scheme for working age people will be at the discretion of local authorities. In addition, the means by which a local authority recovers any shortfall in funding will be for themselves to decide”.
Once again, the buck is passed but accompanying support is not there.
Paragraph 37 of the analysis generously says:
“In order to make the required savings, authorities may choose to change the parameters of the scheme. They could reduce the personal allowances”—
a point made by the noble Lord, Lord Tope—
“or increase the taper rate, or some combination of the two”.
It is that particular reference to the taper rate that is relevant to my noble friend’s amendment, because a different taper rate will compound the difficulties for those people who suffer from its application. At the very least, harmonisation with universal credit would seem to be a prerequisite, even if it is not formally part of the scheme. As my noble friend has pointed out, since we could have 340 different schemes, there can be no guarantee—unless the Government require it—that there should be any degree of harmonisation with the rate of universal credit when that begins to apply.
There is a real issue here and my noble friend’s amendment seeks to address it in what might be the most effective way, if indeed we are left in this position where a substantial increase is going to be visited upon people—not just pensioners because there will be an expectation by, and possibly a requirement from, the Government to extend relief to other vulnerable groups, however they are to be defined. Of course, one has every sympathy with the intention of trying to protect those groups, but the question is: who pays the bill? It will not be the Government or the general taxpayer, or even other local council tax payers; it will be the working poor, effectively, who will meet that bill. That is a redistribution of the tax burden in the wrong direction and it is not acceptable.
This amendment is to be supported because of the relationship with the universal credit, which apparently has not crossed the horizon of those responsible in the Department for Communities and Local Government. I do not blame Ministers for this—yet. Whether they will ultimately take responsibility for it is another matter. I do not think those who have brought these proposals forward have addressed their minds to this; or, if they have, they have come to a damaging conclusion that will affect far too many people, particularly people in precisely the sort of areas that I, the noble Lord, Lord Greaves, my noble friend Lord Smith and others around this table continue to represent: poorer areas with a high proportion of council tax payers in bands A and B—it is 70% between those two bands in my authority—where there is already a significant problem.
There is a final issue, which the noble Lord, Lord Greaves, touched on, about the difficulties of collection, because that will have another impact. A prudent treasurer—once again, as we said in relation to the business rates—is going to have to look at the council’s reserves policy, because it would be wrong to assume a similar level of collection to that now achieved, as the noble Lord pointed out. Therefore, reserves will have to be built up and, since they cannot be built up out of an increase in council tax for the reason given by the noble Lord, Lord Greaves, they are likely to come further at the expense of council services. This is the double whammy to which the impact assessment refers. There will be a cost to individuals in cash terms and a further reduction in services. The people most dependent on those services are the very people who will suffer the most damage in cash terms.
These proposals will drive us down a vicious spiral. I hope that the Government will look again, particularly with reference to what is after all one of their prime, flagship policies: universal credit. We know that the DWP is not happy with this situation. It is time for the Government to think again about the relationship between these two departments and what they come up with, because at the moment they simply do not fit.
My Lords, briefly, I stand guilty as charged in the sense that I made my maiden speech in this House during the passage of the Local Government Finance Act 1988, which introduced the poll tax. I said at the time that it was unfair and unlikely to work, but I was a greenhorn and my comments were probably not well informed.
I will follow on from what the noble Lord, Lord Beecham, said. The constraints that will fall on council tax payers, and in particular on those in receipt of relief, will of necessity enable those who are so advised to mount an appeal against their banding. In circumstances where the bandings are 21 years old, there will be every opportunity for a challenge to be successful on account of the age of the tax base. It was for that reason that I tabled my earlier amendment on the transfer of the loan to the valuation tribunal.
Dealing with the personal circumstances of individual claimants who are partly supported by benefits will not be quick. It will not be easy to dispose of such cases in a short time. The risk is that the system will become clogged by appeals that will take an inherently long time to resolve because they will have to delve into the details of individuals’ financial circumstances. We will debate an amendment tabled by the noble Baroness, Lady Hanham, which will probably assist us. None the less, the policy will produce a significant load on the system unless it is better resourced.
I make no comment on whether the process is destined to work. This goes into areas of local government finance that are beyond my ken. However, I warn against the inevitable transfer and the unforeseen consequence of what may happen in the wider domain of appeals.
My Lords, the amendments in this group seek to include support for council tax as part of the universal credit. We support them all. My noble friend Lady Hollis made a typically powerful presentation, and the amendments were spoken to in a supportive way by almost every noble Lord, including my noble friends Lady Sherlock, Lady Lister and Lord Smith, and the noble Lord, Lord Greaves. The noble Lord, Lord Tope, expressed a degree of equivocation. The noble Lord, Lord True, issued the caveat that we should be careful about amendments that we had yet to debate.
Including council tax as part of universal credit is not a new position. We argued strenuously during the passage of the Welfare Reform Act that this was where it belonged, and we know that Ministers in the DWP agree. The Government’s arguments in favour of localising council tax support are that it can be varied across the country in accordance with local need; and, because the costs will fall on local councils, there is an incentive to promote employment so that people are floated off benefits. My noble friend Lady Hollis destroyed that argument pretty powerfully. Of course, the Government are pursuing two policies—one of supposed localisation and one of cuts. That is what makes these things particularly challenging. The incentive effect depends on how these cuts are to be applied since means-testing support for council tax more aggressively leads to weaker work incentives than reducing support for all claimants. As the IFS put it:
“Reforms that save the full 10% typically involve reducing support for those currently entitled to maximum CTB—those on the lowest incomes. And those options that do protect the poorest claimants either fail to generate large savings, or significantly weaken work incentives”.
That is why my noble friend Lady Sherlock pointedly asked: how, at one time, do you both help the poor and make people better off in work? That was the commitment made by the Government. How will they do it on this basis? Issues around work incentives for localised schemes are not straightforward and must be considered in the context of universal credit as well.
As my noble friend Lady Hollis made clear, we have supported the concept of universal credit—not every aspect of its proposed implementation, including payment frequency, second earners and wallet-and-purse issues, but the fundamental architecture. It is a structure that, as my noble friend explained, clearly simplifies the benefit system and provides a common taper which, together with income disregards, will make work pay and give clear incentives to work. It encompasses tax credits as well as benefits and is an “in and out of work” benefit. It is the natural home for council tax benefit and it is understood that this was the original intention. However, it would be good to have on the record the point in time at which the Government’s position on this changed and why.
Keeping council tax benefit outside universal credit, with the prospect of dozens if not hundreds of local schemes, undermines that simplification. It potentially undermines the rationalisation of work incentives, with the prospect of overlapping taper rates. These are not just theoretical matters. The Government have promulgated a default scheme that will be imposed on local councils that do not introduce a local scheme by next January. How does this default scheme sit alongside universal credit? In particular, how is universal credit to be treated for the purposes of the default scheme? My noble friend Lady Lister referred to an answer given to my honourable friend Stephen Timms in another place: it is up to local councils to decide how they do this. However, we are dealing here with a scheme that the Government have promulgated and that they will impose on local councils. Therefore, the Government must know how they will treat universal credit in that default scheme—that is the scheme that they are promoting.
At present, tax credits are taken into account as income for council tax benefit. Income-related benefits, such as JSA, IB and ESA, are not and passport individuals on to maximum council tax benefit. Universal credit substitutes for benefits and tax credits, so how will it be treated in the default scheme? Will the Minister also tell us how overlaps in tapers between universal credit and the default scheme are to be avoided, if they are? These are not just points of interest; they are fundamental to the operation of the scheme that the Government will impose in just a few months’ time. The logical route in all this is to follow my noble friend’s prescription and include council tax benefit as part of universal credit from the start. We do not doubt that this is where it will end up eventually.
My noble friend Lady Hollis made the point that the proposition advanced by the Government means that take-up campaigns will be deterred. With a number of noble Lords, she talked about the collection of small amounts and the difficulty that that will create. My noble friend Lord Smith and a number of noble Lords referred back to the poll tax and all that that entailed, particularly the point that young people disappeared from the system. We cannot allow that to happen again. My noble friend and the noble Lord, Lord Greaves, referred to the difficulty in budgeting that the proposed system will bring forward. I understand that there are not many second homes in Wigan and we do not have too many in Luton either.
The noble Lord, Lord Tope, talked about opinion being divided. It does not seem particularly divided around this Committee Room. He said that we have to move on. I hope that we would move on, at least shortly, by deferring the introduction of this so that all the issues that we have debated this afternoon and all the other issues that will come up in the detail of our work can be more properly considered. We will have a chance to deal with that. He is right that this is not localism. It is the worst of all worlds.
Issues around collection were powerfully illustrated by the noble Lord, Lord Greaves: you can image the horrors that £3 per week from 6,000 households would create. The noble Lord particularly focused on the issues around two tiers. Yes, it is the billing authority that has to make the judgment at the end of the day. There is a requirement to consult but, as I understand it, if there is a disagreement there is no appeal process. The billing authority will impose its judgment in a circumstance where the bulk of the hit, pain and cost of that will fall on the upper tier.
The noble Lord, Lord True, cautioned us against other exemptions and about what that could lead to. I say to him that this is an issue for the Government. They are creating this difficulty and they cannot hide behind the vagueness around it to try and force people into making these awful judgments about whether they will protect a certain group of poor people and therefore make it somewhat worse for another group. That is not an acceptable way to develop a policy.
The noble Earl, Lord Lytton, referred to the prospect of a greater number of appeals being forthcoming as a result of this. My noble friend Lord Beecham made the point that we are again going to come on to. We talk about a 10% cut but the basis of the figures is projections as to what the council tax will be at some point in the future. We will unpick that in Committee to understand what the real hit on that deduction is. I know that the Minister will not be able to accept these amendments but this is a very important issue and it will continue to be part of our attack on what is proposed over the weeks ahead, when we get to Report and beyond.
My Lords, I am grateful to the noble Baroness, Lady Hollis, for introducing her amendment. She started by talking about the poll tax years. I well recall them but it was long before I came to your Lordships’ House. I do not believe that this legislation has those weaknesses but I am well aware that I face a formidable adversary. In parliamentary terms, I have admired the noble Baroness for many years. I am delighted at last to start working with her on legislation.
The noble Lord, Lord McKenzie, asked me when the Government decided that council tax benefits would be localised and included in universal credit. That decision was made in the spending review of 2010.
The effect of Amendments 89, 90 and 91 in the name of the noble Baroness, Lady Hollis, and with the support of the noble Baroness, Lady Sherlock, would be to make support for council tax part of universal credit. I know that this is a matter dear to the heart of the noble Baronesses. Amendment 70A seeks to establish that nothing in the Local Government Finance Bill would prevent council tax support from being included in universal credit. The Government have been clear that council tax will be localised and will not form part of universal credit. Council tax is a local tax and it is right that local authorities, which are responsible for setting and administering council tax, are free to decide the level of support to be offered to working-age taxpayers. Nevertheless, I have listened carefully to the concerns expressed in Committee about the working poor. Localisation means that local authorities will be able to align the system of council tax support much more closely with the existing system of council tax discounts and exemptions, and with local decisions on the level of tax.
The noble Baroness, Lady Hollis, and other noble Lords mentioned the effect of protecting pensioners. Of course, all noble Lords will be aware that not all pensioners receive council tax benefits; only those who need the benefit get it. The noble Lord, Lord Smith of Leigh, talked about the problem of the housing market, of which all noble Lords will be aware. However, local authorities will be able to take account of this when devising their scheme. Many noble Lords, including the noble Lord, Lord Greaves, talked about the effect of the 10% cut in CTB from the centre. It is worth remembering that council tax benefit doubled under the previous Administration. The noble Lord, Lord Beecham, asked who will pay the bill. The answer is that the taxpayer will pay the bill because the taxpayer is still paying 90% of the cost of council tax benefit.
This policy is consistent with the drive for greater local financial accountability and decision-making. The noble Baroness, Lady Hollis, suggested that we are just passing the risk on to local government and asked what happens if a local authority runs out of money. The Government intend local schemes to be fully integrated with the council tax system, with support offered in the form of a council tax reduction. Where demand for support increases above or falls below local forecasts, billing authorities will collect less or more council tax than had been estimated at the beginning of the financial year. Provision is made in the Bill to enable billing authorities to pass on any reduction in council tax receipts in a year, allowing cash-flow pressures that would otherwise fall on the billing authority alone to be shared with other local authorities.
Localisation will give local authorities a financial interest in the provision of support for council tax and a bigger stake in the economic future of their local area; I am sure that the Committee accepts that point.
My Lords, making councils financially responsible for providing support creates stronger incentives for them to get people back into work. This reinforces the positive benefits of driving economic growth in their areas, provided through the retained business rates system. Furthermore, if the claimant count can be reduced, it may be that the local authority can devise more generous council tax benefit schemes.
Localising support for council tax is intended to deliver a 10% saving on the council tax benefit bill and is an important contribution to the Government’s vital programme of deficit reduction. This saving will need to be delivered. However, localisation gives local authorities a significant degree of control over how the 10% reduction in expenditure is to be achieved, enabling them to balance local priorities and their own financial circumstances as they see fit. After all, not all local authorities have the same mix of claimants, and I am sure that noble Lords are not suggesting that central government should dictate to each local authority how its scheme should work.
My Lords, I am quite confident that my department has done its homework, but inspiration may arrive.
Local government has previously expressed concerns about ensuring the ongoing direct payment of council tax support funding to councils if it is integrated with universal credit. Localisation ensures that funding is allocated directly to local authorities. We recognise the importance of helping local authorities to develop and administer schemes that support universal credit. In answer to the noble Baroness, Lady Sherlock, it will not be in the interest of local authorities to establish schemes that fail to provide positive work incentives and which risk locking residents into low aspiration and poverty. Universal credit will not be sabotaged, as was suggested by the noble Baroness, Lady Hollis.
The noble Baroness, Lady Sherlock—and many other noble Lords—asked me how universal credit income will be taken into account in local council tax support. I will respond to this point in more detail in relation to Amendment 79B. It might be helpful, however, if I made a few points now. In relation to its own local share, it will be up to a local authority to decide how, if at all, universal credit income is to be taken into account for working-age claimants. In relation to the default scheme that will come into effect if a local authority fails to adopt a scheme by the deadline of 31 January, universal credit will be taken into account in the following ways: either the income assessed under universal credit, with some adjustments, is less than a defined minimum income amount, in which case the claimant will receive a 100% rebate; or their income exceeds this amount and a means test is applied. In both cases, the assessment will use, with some adjustments, data from the universal credit assessment of the income needed to live on. I will explain these points in more detail when we get to the relevant amendment.
The Government have published guidance on how local schemes can support improved work incentives, and we are working with the Department for Work and Pensions to enable data from universal credit to be shared with local authorities for the administration of local schemes. The noble Baroness, Lady Lister, and the noble Lord, Lord McKenzie, talked about calculations on universal credit. The noble Baroness helpfully read out a Written Answer on whether the calculations can take into account universal credit income. As the noble Baroness will be aware, the second half of that Written Answer explained that the default scheme will take account of universal credit income. We will be publishing draft regulations setting out that approach shortly.
Amendment 83, in the names of the noble Baronesses, Lady Hollis and Lady Sherlock, would extend the requirement for local authorities to consult on schemes under the current benefit structure or universal credit. At present, council tax benefit is centrally prescribed, with very limited local authority discretion, and it is not clear what purpose a requirement to consult would serve. We are clear that council tax will not form part of universal credit in future.
Members of both Houses, and from both sides of the House, have expressed their support for the principle of localisation. We trust local government to administer the key services that make a crucial difference to the lives of the most vulnerable in society. It is right that we trust it to take greater responsibility for the administration of local taxation in relation to those groups. Obviously I have not been able to answer every point asked of me, but I will write and place a copy in the Library.
My Lords, I thank the Minister for that answer and for his attempt to address some of the questions raised in the debate. I asked how we would advise a council to construct a scheme that would manage to protect both the poorest and work incentives. He answered half that question in the sense that he assured me that a council would not wish to do anything that would damage work incentives. He did not answer the other half, and crucially he did not explain how one might construct a scheme that did both. Perhaps he could elaborate on that.
My Lords, I am grateful that the Minister specifically responded to some of the points I made. He asked, “Who will pay the bill?”, and answered, “The taxpayer”—by which of course he meant the Government, although clearly most government funds come from taxation of every kind. He pointed out that in future the Government will pay only 90% of the costs, which is, in other words, a 10% cut in the requirement to pay from government funds—taxation in general. What he did not explain was why it was fair to cause what most councils will find themselves doing by imposing that 10% on a small group of people—those of working age who claim council tax benefit. It is a clear transfer of that burden from everyone in the country who pays all different sorts of taxes to a very small number of people. The Minister did not explain why that was fair.
Secondly, he said that it would be an opportunity for councils to align council tax benefit—the new council tax reduction scheme—with existing council tax discounts. I do not understand what “align” means, and perhaps he would like to explain it.
My Lords, unfortunately, I did not catch the noble Lord’s final question. In response to his first point, he said that the difficulty with the scheme was that it would hit a small proportion of the population. The local authority will devise a scheme but, more importantly, it could at the same time also reduce its budget a little, if it wanted to. It is at the local authority’s discretion.
I wonder if the Minister could write to me on my question about the word “align”? He specifically said, if he checks, it would be possible to align—that was the interesting word—council tax reductions with existing council tax discounts. They seem to be very different things at different levels and I do not know what “align” means at all.
My Lords, one of the things that struck me about this debate was that we had 10 speakers, apart from the Minister, of whom seven are either current or former local government leaders. Do you know what? Not one of us said that we were a vice-president of the Local Government Association and, given that the LGA has very unfortunately been expressing support for localisation, it may wish to rethink its views. It is clear that those views have no support whatever in the Grand Committee from people who actually know what they are talking about and have been there and done that through all sorts of structures, discounts, rebates, cuts and the like. There is indeed a broad alliance when local authority leaders of all political complexions—from London boroughs, southern districts, northern districts and northern unitaries—all express and share a set of common concerns. I am completely baffled as to why the DCLG, which used to be the DoE—a department that I much loved and respected, particularly when I was sort of fighting it in the 1990s—is not listening to this. It was noticeable that although the noble Earl responded with his usual courtesy and clarity, which we have come to expect from him on the Floor of the House, to the questions being asked, answers came there none.
My noble friends Lady Sherlock and Lady Lister emphasised the problems regarding where the cuts should fall. The Minister was pressed on that. I cannot believe that he came into this debate without a note on his file saying how this issue should be responded to by local government, but apparently he did not have one. He said, “We will have to think about that”, as though it was a brand new question, and that he will write to us. I am slightly dismayed by the quality of support that that may suggest the Minister is experiencing.
Secondly, we also asked him what issues might count as local needs that were distinctive to a particular local authority and not shared. Given that this is a debate about localisation, I should have thought he could have offered us an answer. That question was asked more than an hour and a quarter ago. There has therefore been plenty of time for a note to come over his shoulder from officials responsible for the Bill giving three examples of local need that were so distinctive to each local authority that, as a result, it was appropriate that they should devise a council tax discount scheme. Not one example has come through and been offered in an hour and a quarter. Again, that suggests that there is no evidence for this, and that no thought was given to it by the department. I am taken aback by that. Until recently I rated the department very highly. This is no criticism of the Ministers who do their formidable best on the Floor of the House.
My noble friends commented on the impact on claimants. Former and current council leaders commented on the impact on local authorities, and in particular on the issues of collection and trying to make judgments between pensioners, who are protected, vulnerable people who should be protected, and work incentives that should be protected—and then finding that the totality probably exceeds the money that is available. Again, the Minister gave us no guidance.
The Minister’s main argument—he ran only one—was that because local authorities set council tax, it is appropriate for them to be responsible for the council tax discount scheme as a way of increasing financial accountability. There was of course the odd gesture towards to getting people into work. I will deal with the first argument, which is a complete myth. The noble Earl will be aware—and the noble Baroness, Lady Hanham, will certainly know—that until business rates are more appropriately returned to local authorities, something like 85% of local authorities’ spend will come from central government rather than council tax. Council tax raises just 15% of revenue. After that, two-tier authorities—the local authorities that the noble Lord, Lord Greaves, and I talked about—raise about 15% of that 15%. They are the billing authorities and they raise about 1.5% of the spend. Will the noble Earl explain how being responsible for 1.5% of revenue justifies being responsible for the billing structure of the whole of the two-tier structure? There is no local accountability there. There is no biting down. The most that it will affect is that proportion of local spend that goes to the billing authority—unless they start gaming the system, which many of us will be tempted to do.
The myth that was paraded time and again with the poll tax and then the council tax was that somehow making local authorities responsible for this would press down intelligently on spending. This cannot apply where most local government spending is rightly supported by central government, and billing authorities, particularly in two-tier authorities that cover more than half the country, are responsible for only 15% of that 15%. It does not work. It is simply a myth. It is easily parroted but it does not have any validity.
Secondly, the noble Earl said that this would be an incentive for local authorities to get people into work. I estimate that to do this, the average authority would have to find some £2 million to get people into work. Given that every day the Government see unemployment figures rising, how do they expect a local authority to have the resources or the capacity to make such a difference that it would feed back into its council tax discount scheme and its council tax levy? Talk about Scientology; this belongs to the planet of the Thetans.
Finally, the Minister challenged the idea that UC would be sabotaged by this. He did not answer any of the detailed questions put by my noble friends Lady Lister and Lady Sherlock, and by others on our Front Bench. He merely asserted that UC would not be sabotaged. However, asserting a statement does not make it true. I am sure that the Minister will come back with more in-depth replies when we return to this and similar issues when we debate later amendments.
It would not have been appropriate, but if he had sat in on our debates on welfare reform, he would have seen the hours we spent trying to design a system that would encourage people into work in a supportive and constructive way. Now this has come in like an Exocet and we are left wondering why we spent so much time when the people responsible for this part of the Bill seem to know so little about what went on in the debates on what became the Welfare Reform Act. How can you seek to sabotage, frankly, what should be your flagship scheme for the sake of £500 million in cuts when, on the delay in the fuel levy, Chloe Smith said on “Newsnight” that there were plenty of other savings in the department that she could have used but could not cite any in particular? I am completely baffled.
I will withdraw the amendment. We need to get on to the next group, which is about the cuts. I hope that the Minister asks his staff what questions he can expect to be put to him by Members around this Room today, and gets thoroughly briefed so that he can answer them as we would all expect that he would wish to do. I beg leave to withdraw the amendment.
Amendment 70A withdrawn.
71: Before Clause 9, insert the following new Clause—
“Grants: minimum amounts
Any grant payable to a local authority in England in support of a council tax reduction scheme shall not be less than the amount required to meet the costs of a scheme prescribed for the purposes of paragraph 4 of Schedule 1A to the LGFA 1992, or the amount of council tax benefit subsidy for that local authority in respect of the year beginning 1 April 2012.”
My Lords, this follows on from the previous amendment and some of the arguments have already been anticipated. There is no point in having localisation unless local schemes seek to differ from the current national scheme. Most authorities, as far as I am aware, would not have touched the existing scheme if it remained demand-led and fully financed. Why would they? To cut CTB locally when it is financed from a demand-led national scheme would simply take money out of your local economy. The first question to the Minister is—again, he has some time to get an answer—what is wrong with the current CTB system? I understand the need to make cuts, but what is wrong with it? Do the Government want a localisation agenda?
I do not support what the Minister could have done, but the he could, for example, simply have frozen the benefit levels for a year and got some of this money back if that was his problem. The reason that schemes were changed was not because they will reflect different local priorities—as we said, the Minister could not find us three examples—but to deliver the 10% cuts.
Local authorities are waking up to the fact that they have been conned. They favour localisation in the sense of more local decision-making, as I do. They do not want the cuts, yet without the cuts there is no point in localising. The Government want all three groups protected: pensioners, vulnerable people on passported benefits and people on work incentives. That is effectively the entire population to be protected, yet we are supposed to make cuts.
The Government’s consultation guidance paper suggests four approaches for local authorities facing the cuts agenda. First, they might make good the shortfall by getting more people into work. As I say, I estimate that there would have to be economic growth of £2 million a year in the average city. “If only they tried hard enough,” the Government seem to think. Well, given the Government’s own experience with the national economy, all I can say to them is, “Get real”.
Secondly, the local authority can cut services in addition to the 30% cuts that they are already experiencing. As if. Thirdly, it can find compensating revenue for removing the discounts on second and empty homes. My noble friend Lord Smith raised this question. This was the answer given by Andrew Stunell to my right honourable friend John Healey in another place: that Rotherham and Barnsley could pay for their cuts by scrapping their discounts.
Let me spend a little time on this, even though it is the subject of Clauses 10 and 11, because it seems to be the Government’s favourite reply. I have spent many happy hours trying to correlate second-home discounts, short-term empty properties, long-term empty properties, CTB claimants, local authority 10% cuts, households below average earnings and the family household survey, and trying to work all those figures across. Leaving aside London, as far as I can see, four sets of local authorities emerge from those correlations as being able to find additional revenue locally. First, there are the wealthy or pretty places with abundant second homes—as my noble friend said, they are not necessarily in Wigan. Cornwall has lots of second homes because it is a pretty place. Chichester, Chester, Wokingham and so on will have abundant supplies of people with wealthy income and low numbers of claimants. The Financial Times ran a piece back in May on what is so special about Wokingham, which has only 4% of its expenditure going on council tax benefits, whereas in places like Wigan the figure is 15% and more of the population are claiming these benefits.
We should remind ourselves that, even where there is a pretty place, in two-tier authorities such as North Norfolk they will only get 15% of the discount. The rest will go to the county council for redistribution elsewhere, possibly 40 miles away, so there is no relationship to localism at all.
The second group of local authorities, other than the pretty and the wealthy, is those that are relatively flourishing as far as I can tell in the southern half of the country. They may or may not have some second homes but they have a buoyant housing market—as illustrated by the fact that they have a high number of properties that sell within six months and very few properties standing empty after 12 months. Two such authorities, as far as I can tell from reading across the stats, are Brighton and Hove, and also Reading. They could presumably remove discounts on all empty properties to perhaps cover their cuts if that was their choice.
Of the two groups in trouble, one includes those with so little additional income from any of the discounts that it does not a cover even a third of the cuts, such as in Norwich, or falls well short, such as in Luton and Newcastle. We are beginning to feel persecuted. Finally, there are those authorities with few second homes, a high number of properties empty for six months and an even higher number empty for 12 months or more. As my noble friend Lord Smith spelt out, that is because no one wants to buy them. They are mostly band-A terraces. Where do I find them? They are in Durham, Rochdale, Pendle, Burnley, Preston and Wigan—the north-east and north-west mostly—and correlated with above average numbers of people with below average incomes. As my noble friend Lord Smith said very powerfully, raising additional taxes on these properties to make council tax cuts is simply redistributing money from the nearly poor who cannot sell to the really poor who cannot buy.
Given those four patterns and that they cannot get more people into work for the most part, local authorities are unable to cut services further given that they have cut so many that they are only providing statutory ones, and most local authorities are outside the prosperous south—the pretty and the wealthy—and will not have sufficient revenue from discounts to make their cuts, where do they go? They go to the final option, which is to revise their discount scheme. I have studies from 20 schemes, from London boroughs, unitary authorities and shire districts. I have no more than that—I wish I did, but the software is so late in coming through that local authorities will have real difficulty in meeting their timetable. That is the subject of my next amendment.
The choices that councils have so far identified, which they face in the name of localism, are pretty horrifying. I will describe the problem and then ask the Minister what advice he would give. With 5.9 million claimants, CTB is the most widely claimed of all benefits, costing just under £5 billion a year. If all pensioners and people of working age on passported benefits were protected—some 91% of claimants—the required cuts of 10% would fall on the residual 9% of the population, mainly the working poor, who would face the mathematical impossibility of 120% cuts.
My first question is: will the Minister please tell us who currently receiving CTB under the DWP scheme should not get it? That is not “may” but “should”. Effectively, the Government want everybody protected but then expect local authorities to make the hard choices. What can local authorities do? First, some are, or are considering, offering a flat rate across all non-pensioners from 15% to 35%, with many vulnerable people in low-paid families paying £2 to £3 each a week, as the noble Lord, Lord Greaves, and my noble friend Lord Smith of Leigh said. Councils will have the poll tax nightmare of collecting thousands of small sums from people reluctant to pay. As was quoted in that case, those local authorities already fear a 20% drop in their collection rates. As a flat-rate cut, it is hardly a distinctive, local response to distinctive, local need.
Local authorities may tweak protection for vulnerable groups, but then why is a lone parent in one authority judged needy only if a child is under three, as I have seen in one scheme, and in another if a child is under five, as I have seen in a different one? In what sense, except rhetorically, is the question of whether your child is three or five a distinction based on local need? Why in one council would DLA be counted as income and, as in another scheme I have seen, in its neighbour it would not? Are there really local differences in the nationally assessed needs of disabled people to justify inclusion or exclusion of DLA? Of course not. Why are carers protected in some schemes but not in others? Do the wait and worry of heavy-end caring really vary in significance and need from one local council to another, to be justified in the name of localisation?
The first option for local authorities is to choose on whom the cuts fall. They may decide on a flat-rate cut—there is nothing local about that—or they may target particular groups, who are simply individual people scattered unevenly across the country; and that is going to be called localisation.
The second option for local authorities in the schemes that I have studied is to link the cuts to property bands. Some local authorities may restrict CTB to property bands A and B, but that excludes poor and larger families and somewhat larger houses in band C. Others would go up to band D but cap the discounts at band B level. Yet others would gain by proposing a cash cap at £1,200 or £1,500 a time. However, as my noble friend Lord Smith and the noble Lord, Lord Greaves, said, poorer authorities have two-thirds or three-quarters of their properties in bands A and B, so the savings from that are simply not available. In any case, how precisely is this a localism judgment between three adjacent councils about local need? It is just playing around with a calculator until the right size of savings comes out the other end.
Thirdly, councils can adjust the detail of the council tax scheme itself. There are lots of splendidly confusing possibilities here. The cap on capital in the current scheme is £16,000. Some councils propose that it drops to £10,000, some to £6,000. How do local authorities know in these circumstances who are the needy; and do they really want to wipe out people’s savings? Other councils may increase the taper by which council tax benefit is withdrawn from 20% to 25% or even 35%, which is very severe, but that will reduce work incentives if we are not careful, because 95p in the pound will get lost. To add to this wonderful mix, some local authorities are thinking about disregarding the disregards—of child benefit, of child maintenance for lone parents, of earnings and WTC. That, too, undermines the very work incentive so carefully constructed under universal credit. That issue has not been appreciated in any of the reports from local authorities of the proposed schemes that I have read. Almost none of them is in a position to do a read-across, although not through a lack of competence, care, compassion or understanding.
Every billing authority will be adopting some permutation of the above. Side-by-side neighbours will adopt different schemes even though their demographic profiles are similar and even though in shire counties three-quarters of their expenditure is common across the entire county; and yet they will still have a different scheme. Why? I assure you, it is not because this reflects great insight into the particular and distinctive needs of their communities—the rationale for localisation. I fear that it is because—I hope I am wrong—they will exercise discretion, judgment or even prejudice on the appropriate saving levels that claimants should have, how many children should count, and so on. Carers are good, but unemployed single men with unattractive mental health problems are bad.
Local authorities can change their minds and adjust their schemes every year if they meet someone in their ward’s surgeries who is, to their surprise, badly hit, hurt and deserving—and who votes—or if they get lobbied hard enough by a particular charity or pressure group. Will we see the CPAG slogging it out with Mencap for exemption from the cuts, bearing in mind the very wise warning of the noble Lord, Lord True? It will depend on the perceptions that councillors bring, not on the needs of claimants that are national but experienced by individuals in a locality. I do not doubt that local councils will do their best. I was a councillor for 25 years and I have and had huge respect for my fellow councillors, but this I know: this is not localism; it is parochialism of the Poor Law writ large.
I remember, as a Minister, visiting my local benefit office and asking, given what was then a limited social fund, to whom they would give financial help? The staff, who were lovely, kindly and competent, were mainly middle-aged women. One would use the social fund for the struggling lone parent, another for a woman caring for her elderly mother, and a third for someone who was disabled. Those are all perfectly legitimate uses of discretion for the social fund. However, the one who would help the lone parent was herself a lone parent. The one helping the carer was herself a carer. The one helping the disabled person had a disabled husband. This was not local discretion, although we called it that; it was the projection of one’s own life experiences, for better or worse. A lone parent interviewed by another lone parent would get a different outcome than if interviewed by someone who was herself a carer. Councillors, far less trained than DWP staff, will be and do the same.
This is morally wrong. Someone’s need for financial help with their council tax should not depend on the demography of their authority—on how many pensioners there are—nor on the perceptions and prejudices of local councillors, Poor Law-style, to weed out the people they do not care for and support those with whom they sympathise. Poverty is poverty. As part of income support, council tax benefit is as important to the farm worker in Devon as to the disabled former steel worker in Merthyr and the lone parent in Hackney. Their entitlement should be national, wherever they live, and their eligibility met in full.
In this context, I and others reject localism for what it really is: dumping the cuts on local authorities to pass on to needy citizens without power. I think it is shameful. I really hope that no noble Lord will ever say that they welcome localism but do not like the cuts, because that is why we are having the localising of what should be a national benefit, with a shameful set of outcomes. I beg to move.
My Lords, for some reason that I am not sure I understand, my Amendment 73A has found itself grouped with the amendment that has just been moved by the noble Baroness, Lady Hollis. I can assure the Committee that I will be a good deal briefer in speaking to this amendment because it has a rather narrow specific intent. It is more of an exploratory amendment, which attempts to link the question of the Government’s support for local authorities in the changing circumstances introduced by this Bill to the now well established new burdens doctrine published some years ago by the previous Government, which, in summary, states that the,
“additional cost of all new burdens placed on local authorities … by central Government must be assessed and fully and properly funded”.
My question to my noble friend is: what assurances can the Government give about the future shape of the arrangements under this Bill, and what are the Government’s intentions about the future funding levels? There is some anxiety on the part of the Local Government Association about the future—I declare my interest as a vice-president of the LGA, like everyone else; it is always good for a laugh, and I think that helps. Amendment 73A simply says that it should be assessed every year, which is intended to link the regular annual support for local authorities with the new burdens that have been imposed upon them as a result of the Bill. I do not know what my noble friend will be able to say about that but certainly the local authorities are seeking reassurance on it.
On the subject of the Local Government Association, it was suggested during the debate on the previous amendment that somehow it is not reflecting the views of its member councils and it should therefore rethink its stance. It has made it clear—and made it clear again to me this morning—that it remains in favour in principle of the localisation of support for council tax. That is the LGA’s view and it is sticking to it. Of course it is looking for assurances of the kind that I have given. There may be others that we will come to later. However, it does not come well from the party opposite to suggest that a thoroughly representative body, which represents virtually every council in the country, is somehow misdirecting itself and does not know what it is saying. I think it was the noble Lord, Lord Beecham, who made that suggestion. He knows a great deal about this—probably much more than I do. However, if I may defend the association, it has worked out its views and has made perfectly clear—to noble Lords on all sides of the Committee, I am sure—what it wants. It is in favour of the localisation of council tax support.
My Lords, I must reply to the noble Lord, Lord Jenkin. It is certainly true that that is the association’s position; I did not say that it was not. However, the association’s position is dictated by the two largest parties in it—the Conservative group and the Liberal Democrat group. It is not the consensual view of the association. When I was its chair, that was something that we tried, and usually managed, to achieve. It is the view of the two parties that just happen to support the coalition Government—at least until 10 pm tonight. I do not say that the LGA is misrepresenting the situation; I suppose a majority within the association represents the majority of councils. However, that is not the view of the entire association. Even if it were, it would still be wrong and I would not be backward in criticising my political colleagues in the association if they supported the position that it has taken.
Perhaps I misheard the noble Lord. I understood that he was asking the LGA to reconsider its view. He is perfectly entitled to do so, but it is against the background that the association has considered its opinions on this extremely carefully and has made its decision. Of course it is not unanimous; no one is suggesting that it is. If there were unanimity, the millennium would have arrived. In matters of local authority finance, there are many different points of view. Perhaps we may leave it at that.
In speaking to this amendment, I am looking for some assurance from the Government on how they see the future of this structure. Local authorities are anxious that, after the next comprehensive spending review, they will find themselves bearing a significantly larger proportion of the total cost than is envisaged at the moment. If my noble friend could give any assurances on that, I know they will be very well received.
My Lords, I am not a vice-president of the Local Government Association and I certainly do not claim to speak for it. I said in a debate on an earlier amendment that the views of local authorities within the Local Government Association, as most are, have differed on this issue, regardless of political control. There are certainly Labour-majority councils that have supported what they thought was the localisation of council tax. There are some in my own authority. However, as people have come to realise the implications of what we are debating today, that support has become more questioning. I shall put it no more strongly than that. The briefing that I imagine we have all had from the LGA today states:
“The LGA supports the principle of localising responsibility for decisions about the incidence of council tax”.
The question is whether that is what we are getting now but maybe that is for another debate.
I support my noble friend Lord Jenkin. My noble friend Lord Shipley and I have added our names to Amendment 73A, which the noble Lord, Lord Jenkin, explained very well. The concern that we address with this amendment is the expectation that, for a range of reasons, the cost of council tax support will increase. More people are likely to claim it because, sadly, they will fall into that category, perhaps because the change in wording from “benefit” to “support” will—wrongly, maybe—encourage more people to feel able to claim it. Therefore it is highly probable that the costs will increase in years to come. We seek from the Government an indication of how they intend to deal with that and, more particularly, an assurance that it will fit under the new burdens doctrine and that the increased costs, assessed annually by the Government, will be met in full in accordance with the doctrine. That is the purport of the amendment in my name and that of the noble Lord, Lord Jenkin. We seek reassurance from the Government.
But I hope that the letter will arrive any day now, despite the fact that I have never served as a councillor.
I do not support the principle of the localisation of council tax benefit—as my earlier speech may have made clear. Even if I did, under these terms I would not be happy about it. I would think that I had been sold a pup. One reason for differing views within local authorities—I hope that the Minister will help me understand this better—is that potentially there will be significant regional differences in the impact of this policy.
I will refer again to the report on council tax benefit of the Institute for Fiscal Studies. The IFS note that the pain of this cut will fall disproportionately on poorer areas. It states that in cash terms, the cut in funding will be larger in areas where council tax benefit spending is highest—the more deprived areas of Britain. The report goes on to point out that almost 90% of local authorities face a funding cut of between £10 and £25 per dwelling. It would seem that the risks described by other noble Lords are all downside. That must be of serious concern to local authorities. What does the Minister envisage happening? Will the Government be able to take account of the different positions?
I will give an example. The OBR forecasts a reduction in the number of people claiming passported benefits as a result of the combined effect of presumed economic growth and welfare reform—an increase, therefore, in the number of low earners. The effect on CTB would be to see fewer people claiming maximum council tax benefit or its successor, and more people claiming partial council tax benefit as a result of moving into work. Has any work been done by the OBR to see how even those cost assumptions would be? The most recent quarterly Northern Economic Summary from IPPR North showed two things that spring to mind. First, the number of young people not in education, employment or training is highest in the north of England, at 19%, compared to an average of 16% in England. Given the trends in youth unemployment, that could see more people moving into the unemployed category rather than out of it.
Secondly, the report found that the amount of time people are spending on jobseeker’s allowance is increasing. Almost half—47%—of those claiming JSA in the north have been doing so for more than six months. The average time people have been claiming benefits is more than double what it was during the previous 2008-09 recession. Here I am trying to tease out an understanding of whether the assumptions underlying the costings of the impact on local authorities, and the extent to which they have been future-proofed, have taken account of north-south divides and differences, and what assumptions have been made about changing patterns.
Finally—I will come back to this when we debate later amendments—the Minister will be aware that 85% of council tax benefit at the moment goes to the lower-income half of households, and that almost half goes to the lowest-income quintile. Inevitably, any cuts are bound to be borne by the poorest households. Given the combination of poor households and poor areas being hit, is the Minister not concerned about what will happen to the economies of those areas? I know from talking to at least one northern authority that such a significant proportion of its households are in receipt of a variety of means-tested benefits that cuts in the Welfare Reform Bill alone will, it is anticipated, produce a reduction of demand in the economy as a whole. Have the Government modelled any of those impacts on a regional basis?
My Lords, first, I do not share the concern of the noble Baroness, Lady Hollis, about the capabilities of local government and councillors. Councillors are perfectly able to produce fair and equitable council tax support schemes. However, one problem we have is that timescales are driving the publication of draft schemes very quickly. Inevitably, draft schemes that go out to consultation will be different. After all, lots of things that local government does are different. Council tax rates are different. It would not be surprising, given differences between local authority areas that there may be differences in council tax support schemes. However, timescales are likely to prove too tight. I think that there will be a problem over equalities impact assessments and the timescales that they require. I would prefer a start date of April 2014, but we will come to that in a moment.
The real issues remain financial support, the level of financial support going into those schemes, and the new burdens doctrine. Amendment 73A matters quite profoundly because we are having a debate about the 10% cut and how it should be applied, and I absolutely subscribe to the view that it cannot simply be loaded on to the working poor. I would prefer it, if it is to be applied, to be spread across council tax payers generally.
Secondly, it has become clear to me that 10% is at the low end of what the reality will be. It will be significantly higher than that and, for the reasons that my noble friend Lord Tope outlined, demand is likely to rise and the change of title from “council tax benefit” to “council tax support” is likely to produce more people applying for it. Economic conditions remain difficult and will continue being difficult for the next two to three years; therefore, more people are likely to be applying.
Thirdly, the fixed-grant system that the Government are likely to introduce seems dubious in terms of who will actually decide on which data the government estimates are based. I fear that the estimates of demand over the first two years of the scheme will prove to be understatement. Therefore, the Government should manage the risk. In the context of 28% front-loaded cuts in the current and previous financial years, which have had a great impact on councils’ ability to meet all their obligations, there is a major principle at stake. If we have a new burdens doctrine, it ought to be applied; otherwise there is no point in the Government having a new burdens doctrine. Given the sum of money involved—£500 million, 10% of the £5 billion annual commitment to council tax benefit—this is an acid test of whether the new burdens doctrine has a future.
I sincerely hope that the Government will look again at this whole issue. I have subscribed, in my role as vice president of the Local Government Association, to the view that if you are going to localise—we are trying to devolve and localise—it is entirely appropriate for local government to take responsibility for this. They are the ones who set council tax. Therefore, they are the ones who are capable and should be responsible for setting the level of council tax support, but they have to be able to do it in the context of knowing that that cash will be available and the risk will be managed against rising demand by a Government that is supportive of them.
My Lords, in principle I support the localisation of council tax benefit, but I do not support this scheme at all. It will have impacts, and my noble friend Lady Hollis has raised them clearly. She talked about the regional in-fighting that we will have. Certainly, we believe that it will be worse in the area that I represent and many other parts of the country—worse, even than the poll tax. When the poll tax was in place, it was relatively easy for me; I was only chairman of finance. When somebody came to me and complained about the poll tax, I could always say, “The Tories have introduced the poll tax”. We swept all the Tories off the council; it was very easy. But now, when they say, “What are you doing with my council tax benefit support?”, at the end of the day I will have to devise a scheme. That will be down to me.
It has been done to me. What options would we have in designing such a scheme? I have shared with my colleagues some of the initial thoughts that we have had in Wigan; we have not got quite as far as announcing what they will be. We will unfortunately not raise the money from the empty homes thing, so we will have to make some anticipation of where the costs will come from. Will they come from council taxpayers? I do not think so. I agree entirely with the noble Lord, Lord Greaves, we are not going to ask for an increase in council tax above the minimum amount that the Government will allow us to have in order to put money into council tax benefit. A referendum on that is certainly doomed to defeat. We will never try that. Will we make cuts in services to put more money into the council tax support scheme? That is an option but as my noble friend Lady Hollis mentioned, the impact of such a policy will be on the same group of individuals who should benefit. They are the people who need and rely on many of the council’s services that are already facing £66 million of cuts over the next few years. Where am I going to find the extra £2 million or so to pay for this? Or we could have to have a scheme that pays lowers benefits than the current scheme. That is very difficult because the people upon whom this will impact are the working poor. They are the ones who will really suffer from this—if we discount some of the vulnerable groups we will talk about in future amendments. I fear for some of the political consequences. The noble Lord, Lord Greaves, and I know of the kind of campaigning done by certain political parties, including the BNP, about people who are downtrodden. They say, “No one thinks about you. Here you are, you are poor and you live in these difficult communities”. Such parties could campaign on those issues.
Not only do I support the amendment in the name of my noble friend Lady Hollis but I support Amendment 73A. It is really important because we know from the Bill that there will be a 10% cut in the current amount of benefit paid to local authorities, but the Bill is silent on the future. What will happen at the end of the first year? That amendment covers the issue because clearly there will be changes. The pessimists among us think there will be a bigger burden. There may be optimists among noble Lords who think that it will reduce. However, the situation can change and noble Lords have of course mentioned that only 60% of pensioners currently claim this benefit. If responsibility is moved to local authorities, who will do it better anyway, there will be more take-up and we will have to pay higher amounts.
Demographic factors will always keep coming along, and we will get more people in the old-age pensioner range who will therefore be able to claim benefits. That will happen. Economic performance could also vary and have an impact on the level of local wages and employment. I must ask, in response to the comment made by the Minister in his previous answer, which local authorities need incentives to find jobs for people? Where are the authorities that do not want to do that? We spend considerable amounts of money on economic development departments. One of the things that unites us and has cross-party support across the combined authorities of Greater Manchester is our desire to get better economic growth for our city region. We are doing all that we can now. The fact that we will have to pay more is not going to give me more or less incentive to do that. I want people to work. It gives them dignity, income and a better lifestyle. I have always encouraged that and these proposals will not achieve it.
The danger here is that the under the scheme, if we do not get an increase on an annual basis reflecting the change in needs, we will get more cuts by creep. Every year that we do not get the support that the amendment seeks, we will either have to make more cuts or change the scheme to make it harder for the most vulnerable people to make ends meet. I support both amendments because they are really important.
My Lords, we support the thrust of these amendments. I will start with Amendment 73A, spoken to by the noble Lord, Lord Jenkin, and supported by the noble Lords, Lord Shipley and Lord Tope, about the new burdens doctrine. I was broadly going to support this anyway. A new burden in this context would be if there were increased take-up of the benefits system in a subsequent year, so on that basis it is doubly worth supporting. It is not as though we are dealing with a new service or something of that nature, but if we are including in that definition the fact that there will be changes in the volume of take-up, it is certainly right to push back at the Government on that.
My noble friend Lady Hollis’s amendment gave a devastating critique of what the proposals will actually mean for individual local authorities and the people who will be hurt. My noble friend talked about adjoining authorities, one that included DLA in the computation of income and one that did not. What a nonsense when people are being forced into those sorts of judgments.
The noble Lord, Lord Shipley, said that one of the problems is that the timescale is too tight. I hope that we will be able to have common cause in an amendment that is coming up—I hope shortly; if not, next week—to address that specific issue.
My noble friend Lord Smith asked what local authority would not want to find jobs for young people. Part of the problem for some local authorities is that their economic regeneration departments are under pressure from the cuts that are already there, so it is not lack of desire to do that; the capacity to do it is becoming increasingly constrained.
Issues were raised about who is going to do the forecasting for the council tax benefit expenditure for the year in question, not only for 2013-14 but for subsequent years. The fear has been expressed here—and I share it—that 90% of forecast subsidised council tax benefit expenditure in reality will be an underestimate for what actually comes to fruition.
Perhaps I can press the Minister on a couple of techie points. I would guess that at the moment the reimbursement to local authorities for council tax benefit is on subsidised council tax benefit expenditure, and I think that is because there is not a full subsidy where a benefit is paid incorrectly or late. How is that going to work under a supposed localised system? Who is going to make the judgments, under various schemes that do not have the same parameters, whether a benefit is paid incorrectly or late? Is that what we mean by the reference to subsidised council tax expenditure?
Can the noble Earl also deal with the fact that this is going to be funded by way of the business rate retention scheme? What does that actually mean in practice? Are we saying that part of the central share is going to be used to fund this? Will it be deducted from the total business rates collected in the first instance and then split on a local and central basis? Precisely what does that mean?
On the specific issue of having to forecast subsidised council tax benefit expenditure, if that means making a judgment about that which is paid properly, correctly and in accordance with the scheme, it is clearly going to be much more difficult with a whole raft of different local schemes. The fundamental point that noble Lords have made is that is that the 10% cut—or whatever it turns out to be—is going to impose impossible conditions on local authorities having to make the judgment of Solomon. It is deeply uncomfortable and deeply unfair.
It has been said that the existing claimant count is about 60% of people entitled to it. Is the Minister saying that it is wrong for local authorities to encourage those people who are entitled under the present or new system to actually claim? Under the new system, there would be a real incentive for local authorities to discourage people from claiming. Effectively, because it is a discount, the more people that claim, the lower the council tax base will be in that authority.
No, my Lords, I am not saying that. People should claim the benefits to which they are entitled. I am saying that the system is designed to encourage local authorities to go for local growth in order to reduce the claimant count. I fully accept the noble Lord’s point that people should claim the benefits to which they are entitled. The local authority may—
I just want to check that I have not misunderstood the Minister. Since council tax benefit is payable to people in work as well as people not in work, economic growth could still lead to people in work claiming benefits. Is he saying that an objective of localisation is to reduce the number of people who claim the successor to council tax benefit?
My Lords, there is an incentive for local authorities to encourage businesses which tend to pay higher salaries into their area. One of the complaints about the localisation of business rates is that it encourages retail outlets which tend not to pay very high wages. If a local authority can encourage higher paying businesses into its area, it will be able to reduce the expenditure on council tax benefits.
I then have two questions, if the Minister will allow me. First, why does he think that local authorities are not doing that now? Has he any evidence that local authorities are not seeking to encourage high-paying employers with high-tech skills into their patch? Secondly, that will almost always mean poaching them from somewhere else. As the Government knows, there is very little opportunity nationally for fresh economic growth beyond that. What advice would he give to local authorities to poach businesses from other areas?
The Minister will of course be aware of the House of Commons’ Communities and Local Government Committee report on localisation issues and welfare reform. It said:
“We have seen little evidence to support the hope that new and better-paying jobs for individuals, immediately sufficient to off-set the 10% reduction in the benefit budget, will inevitably follow from”—
the incentives that have been discussed; and,
“the means of economic growth are never solely in the gift of individual local authorities”.
What evidence did the Government have that the Committee did not to support the Minister’s contention?
My Lords, on the activities of local authorities to encourage businesses to come to their areas, of course local authorities do that now—I fully accept that—but they will do even more because they have a greater incentive. The noble Baroness quite properly made the point about poaching. It was a good point. Actually, we need to encourage businesses to locate in the UK and not in either another European state or further afield. It is not a question of poaching from next door necessarily, but if the local authority adjacent to you is less business friendly, you might find that businesses will locate in your area.
I take it that we have finished that little discourse. I shall just revert to the question of the noble Lord, Lord Greaves, about what happens if more people claim benefits. What would happen if councils, or indeed the Government, went so far as to encourage people—particularly pensioners, 60% of whom do not claim—to do so? There is, I believe, £1.8 billion of unclaimed council tax benefit. What happens if those people start to claim? That would presumably take us beyond the £500 million. Who pays for the benefit for those people? Will the Government pay 90% of it or will it all fall on the local authority?
Let us assume that a local authority does not devise a scheme that encourages more claimants, but the number of claimants in that area goes up for whatever reason; and that the local authority runs a scheme to means-test people for housing benefit. My authority will probably do that in the first year, although it will be put out to consultation. What if the 60% of people who claim at the moment goes up to 80%? At the moment, it is a national benefit and the Government would automatically pay the cost of the extra 20 percentage points. Under the new scheme, the cost would fall on the local authority because it is a discount, not a national benefit. Increasing the number of people claiming by 20 percentage points would effectively reduce the council tax base of that authority. It is not money that is paid out to people; it is simply deducted from their bill.
We all, I hope, want people to claim benefits to which they are entitled. However, if the local authority, local campaigners for welfare and benefits, or local councillors with the interests of their residents at heart organised a campaign to increase the number of people claiming under the new system, it would reduce the amount of money coming into that authority. Will the Government adjust the grants to that specific authority over a period to take account of that, and how would that be done?
The Minister may wish to cast his mind back to the Pensions Bill, which we debated a couple of yours ago, and the representations that were made by the Royal British Legion, for example. It wanted a change to the name of council tax benefit because it believed that elderly people in particular were dissuaded from taking it up. They saw it as a benefit and that was something with which they were uncomfortable.
The nature of this arrangement could cause more people to claim without a campaign for take-up. Why on earth would we want to build any problem into the scheme that would dissuade councils or anyone else from encouraging people to take up their rights?
My Lords, I said in the previous debate that simply changing the name from council tax benefit to council tax support is likely to increase the number of people who feel able to claim support, having, for whatever reason, felt uncomfortable about claiming benefit. That change alone, which was not produced by local authorities, in intended to increase take-up.
My advice to the Minister is that when in a hole, one should stop digging. We are getting a bit stuck here. I have heard it said by Ministers—although never in this House—that it is necessary to give local authorities an incentive to get more people back to work. I find that both patronising and deeply offensive. Some local authorities are better able to do it and have better circumstances in which to do it. However, I cannot believe that there is a local authority anywhere in the country that would say it has no incentive and does not want to get its local people back into work. Performance may differ greatly but I am sure that the intention is the same. Therefore, we are a bit stuck on this. It is an unanswerable question—as the noble Baroness well knew when she asked it. Perhaps we should spare the Minister his suffering and move on with the rest of the debate.
My Lords, on this point, not all eligible pensioners take up their council tax benefit. A number of factors affect the take-up rate. One is the stigma attached to the word “benefit”. That is why the Royal British Legion campaigned for a change in 2009. However, it is just one factor affecting take-up. There are many others, including the complexity of making a claim, people’s confusion about whether they are entitled to it and their aversion to disclosing information in answer to questions that they feel are intrusive. The noble Baroness, Lady Hollis, is nodding in agreement. In estimating future demand, local authorities will want to consider all these factors together.
I agree that the Minister needs to make progress, but will he reflect on this with his officials and write a clear letter about what will happen and who will pay the extra cost if the take-up rises? That is the issue that worries us. It is clear that we will not resolve it today, but reflection by the Minister and some information in writing would be extremely helpful.
My Lords, I will cover that in my concluding remarks. The noble Baroness, Lady Hollis, suggested that schemes would be determined on the basis of councillors’ prejudices. I refute this, as does my noble friend Lord Shipley. Schemes will have to be constructed by the council, not on the basis of individual councillors’ prejudices. They will not be in a position to take decisions on individuals but will agree to the best system after considering any changes they think they need to make to the current scheme—or they can use the default scheme which, as noble Lords know, is more or less the current scheme.
The noble Lord, Lord Smith of Leigh, made an interesting observation. He said that he supported the localisation of council tax benefits, but not this scheme. If that is so, what scheme would the noble Lord support?
But unfortunately we have to make savings.
The noble Baroness, Lady Hollis, suggested that this reform does not support local financial accountability. I disagree. Currently, local authorities can put up council tax without any regard for the impact on the cost of council tax benefit. This reform changes that by ending the subsidising of council tax increases from the benefits bill. There have been previous attempts to address this acknowledged problem. The recent report by the Institute for Fiscal Studies, to which the noble Baroness Lady Sherlock referred, noted that this reform restored the link between council tax increases and the benefits bill.
I was asked who should not get CTB. It is not black and white. The point of localisation is that councils will have the option to continue with the current scheme and find savings elsewhere, or to reduce some awards a little and raise money on empty homes. Localisation will mean that councillors will have choices about how they manage the cuts. There may be different schemes across the country. We trust local government to choose how to deliver local services to vulnerable groups. We trust them to deliver this scheme to support local people with their council tax bills. This is local accountability in action.
Speaking to Amendment 73A, my noble friend Lord Jenkin asked what happens once the spending review period ends and whether there are any guarantees for local government. Funding for the first two years of localised schemes is derived from the Office for Budget Responsibility forecast for spending on council tax benefit, which reflects existing spending and therefore assumptions about underlying demographic changes and council tax increases. Thereafter, decisions about overall levels of funding will be taken as part of the spending review process, which will provide an opportunity to consider cost pressures. Funding will be allocated via the retained business rate system, and the recent consultation set out provisional allocations.
I am sorry to interrupt the Minister; I know he is trying to make progress. Assuming the first year is 2013-14, if the forecast by the OBR proves to be inadequate, will there be a basis for revision for the subsequent year within the spending review? Can the Minister say precisely what funding being provided by the business rate retention scheme means in practice?
My Lords, that is one of those matters of detail that the noble Lord will have to look forward to in my letter.
The noble Lord, Lord Jenkin, asked whether this policy reform was a new burden. This reform is not a new burden. Local authorities will have a significant degree of control over how a 10% reduction in expenditure on the current council tax benefit is achieved, enabling them to benefit local priorities and their own financial circumstances as they see fit. The Government are committed to carrying out a new burdens assessment regarding the administration of the schemes, and are gathering data on administrative costs to support this assessment.
I was asked whether the Government would be able to adjust allocations. As I said, the spending review provides an opportunity to review overall funding levels. Funding is allocated through the retained business rates. Baseline allocations will be set for 2013. Councils will have the flexibility and responsibility to design schemes that match local circumstances. Adjusting allocations would undermine the key principle at the heart of our reforms to local government finance, since funding will be within the retained business rate system. As we discussed in previous debates, it is essential that there is a sufficiently long period between resets to incentivise growth. Frequent adjustments to funding allocations would undermine this wider principle. Local authorities will have a range of flexibilities enabling them to manage costs in the mean time, including making adjustments to their own organisations and costs.
Increasing local financial accountability is a key objective of the localism agenda. Localising support for council tax gives local authorities an increased stake in the economic future of their local area, strengthening the incentive to support people back into employment. It also increases financial accountability by helping to make local authorities accountable for decisions over council tax levels, putting an end to the central subsidy of council tax increases.
There is widespread recognition of the need to reduce welfare spending. As I mentioned, spending on council tax benefit doubled under the previous Administration and it is essential that we take steps to bring it back under control. The saving from localisation announced in the spending review is a crucial contribution to the vital task of tackling the deficit.
Localisation gives local authorities significant control over how to manage the reduction in funding. Authorities will be able to offer council tax reductions that reflect local circumstances and priorities. They can decide whether to pass the reduction on to council tax payers, use flexibility over council tax or manage the reduction within their budgets. The noble Baroness, Lady Hollis, talked about the difficulty of collecting relatively small amounts of money and I will have to weary the Committee by repeating that it is up to local authorities to devise their schemes and take account of that difficulty.
Amendment 71 makes delivering the savings impossible and would in fact encourage local authorities to plan for that. The intention behind it is not realistic. The 10% saving has to be delivered, and we have given local authorities the freedom to decide how best to do this in their local area.
I do not deny that we are in hard times. The noble Baroness went into government in 1997 in a period of steady economic growth. The present Government are faced with truly dreadful financial circumstances.
My Lords, I will accept that, but we also know why we have gone into a double-dip recession, which is not our responsibility.
The default scheme is intended as a legal back-stop, a safety net to ensure that those in financial need can continue to receive support. To fund a default scheme fully, as Amendment 71 would require, would send a message that local authorities do not need to take responsibility for developing a local scheme. It would make delivering the saving—which was called for in the spending review—impossible. Local authorities do not need to wait for the default scheme. Pragmatic councils are pushing ahead with the job at hand. Local authorities are starting to think through how to manage the reduction to best reflect local priorities: Harrow, Brent and Chiltern councils are already consulting on the design of their schemes.
Amendment 75 seems to be intended to prevent local authorities from designing a scheme to help deliver a saving. This does not seem responsible. It is right that local authorities have the flexibility to decide how to manage a reduction in funding, reflecting the circumstances of their area. Constraining their ability to do this prevents them from taking sensible local decisions about their priorities and what is affordable.
At the end of our debate on the last group of amendments the noble Baroness, Lady Hollis, accused me of not answering some of her more technical questions—questions that, I suggest, even my noble friend Lady Hanham would find taxing, so it is not surprising that I cannot answer them. Of course I listen to the Committee’s concerns very carefully and I will discuss the technical points with my excellent team of officials. I do not accept that there is any weakness in the team behind me. Any weakness lies with me because I am not an expert in local government. However, I will try to serve the Committee as best I can.
My Lords, I thank the Minister for that reply. No criticism is made ad hominem of either the officials or the Ministers. However, when we are talking about localisation and cuts and we ask on whom the cuts should fall, it is not unreasonable to expect an answer other than merely, “That is for the local authority to decide”. When we ask who is getting too much council tax benefit, it is not unreasonable for us to expect the Minister to be able to tell us. When we ask which three needs might be genuinely local and not shared by other authorities, it is not unreasonable to expect an answer. They are pretty obvious questions on policy, and not technical at all.
A number of people have intervened on the Minister and we have engaged in the arguments. I simply cannot engage with his basic position that it is all right to increase the cuts that will fall on poor people in poorer areas, and to call this increasing local accountability. However, at this time of night, I beg leave to withdraw the amendment.
Amendment 71 withdrawn.
71A: Before Clause 9, insert the following new Clause—
The Secretary of State shall by regulation provide for the use of electronic means to communicate information regarding the level of a council tax demand.”
My Lords, I beg for a little light relief in moving this amendment. I assure the Minister that I will not tax his patience by bringing a bit of speed-dating to our deliberations.
My understanding is that regulations currently provide for all information relating to a demand for council tax to be in hard copy. In these electronic times it seems to me that at least some council tax payers would welcome an e-mail version and the provision of certain supporting data on a website, for which a link can be supplied. Speaking for myself, with all manner of legally important documents being served electronically these days, I would welcome the reduction in paperwork. I realise that there may be legal issues relating to electronic service of certain types of document, but where possible and convenient to the council tax payer, I should have thought that an electronic option would be desirable. That is all that my amendment seeks to provide. Coincidentally, it may reduce the weight of postmen’s bags in March. I simply ask that noble Lords indicate their agreement in the customary manner by saying, “Hear, hear!”. I beg to move.
My Lords, I thank the noble Earl for the explanation of his amendment. It would require the Secretary of State to create regulations providing for the use of electronic council tax billing. However, billing authorities already have powers under Regulation 2 of the Council Tax (Administration and Enforcement) Regulations 1992 to serve council tax bills electronically, as long as it is by agreement with individual council tax payers. The Government believe that this is a sensible arrangement.
Clause 14 makes provision for the costly supporting information that goes with council tax bills to be provided electronically. However, regulations will state that hard copy must be provided if a bill payer requests it. The Government consulted on this measure and it was strongly supported by respondents. Relieving authorities of the duty to provide the information in hard copy may encourage the take-up of electronic billing, because all parts of the process can be paperless, if the taxpayer so chooses.
However, given that billing authorities already have the powers to send bills electronically, I do not see any need for the amendment and invite the noble Earl to withdraw it.
My Lords, I thank the Minister for that. I did not know that there was already a power and I am surprised to hear it, given that there appears to be a rather small uptake. I am heartened by what he had to say. I entirely agree with his sentiments. If the powers are there, let them be used, and perhaps his department could encourage greater use of them among billing authorities in the interests of economy and speed. I happily beg leave to withdraw the amendment.
Amendment 71A withdrawn.
The Committee stands adjourned until 3.30 pm on 16 July.
Committee adjourned at 7.22 pm.