Committee (5th Day)
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Schedule 4: Amendments relating to council tax reduction schemes
79B: Schedule 4, page 58, line 8, after “income” insert “including universal credit”
My Lords, in the absence of my noble friend Lady Hollis, I move Amendment 79B and speak to Amendment 83 in my name. My noble friend asked that I convey her apologies to the Committee. When she tabled her amendments, she believed that they would come up last Thursday. When that sitting was cancelled, they were moved to today when, unfortunately, she is chairing a meeting of her housing association, so she asked that I make that clear and apologise to the Committee.
Amendment 79B is designed to make clear that when a local authority makes a council tax support scheme which takes income into account in determining entitlement to support, that income should include universal credit, not just earnings or other kinds of unearned income. I presume that the Minister will need little persuasion of the merits of such an approach, as her default scheme takes precisely that approach. My understanding is that the default scheme will take account of universal credit income with some deductions relating to income that is to meet housing and childcare costs.
Having read the Explanatory Notes, I wrestled for some time yesterday trying to work out why the default scheme would want to take account of income net of the child cost element of universal credit. Why would you deduct the element designed to meet the costs of children? My noble friend Lady Hollis and I had a debate for some time trying to work out what the Government might be thinking of by this. Having read the draft regulations themselves, I concluded that this was meant to be a reference to the childcare cost element of universal credit, which of course is completely distinct from the child cost element. Having talked to an official—I am very grateful to the Minister that her department gave me access to a member of the Bill team—that is still my understanding. It would be helpful if she could confirm that on the record for the benefit of those reading the report of our debate.
I ploughed through the 155 pages of regulations as best I could with my limited understanding, and on page 105 there is a list of the rates that should apply for the various elements of council tax support under the scheme. When I read them, I panicked slightly because they are not the current rates that apply to council tax benefit. They are constructed in the same way but they are different numbers. Again, my noble friend Lady Hollis and I spent some time trying to work out why that might be and, in the usual way of politicians, ranged through cock-up and conspiracy theories trying to work out what the Government might mean by that by the wonderful old-fashioned Kremlinological means. Was this a way of saving 10% in the scheme itself? Actually, my best answer is that it is probably a mistake and that they are last year’s rates rather than the current year’s rates. Again, it would be helpful if the Minister could confirm that the intention is to use the current year’s rates, which were published this January, rather than those for last year.
We know very little about universal credit and the new system, because in those 155 pages of draft regulations the only substantive reference to universal credit comes in chapter 3 of part 10, which addresses the question of income and capital when there is an award of universal credit. That chapter is only 389 words long, and that includes the title. Of course, it would be hard for it to contain much more because there is a great deal that we do not yet know about universal credit, so I do not blame the department for the fact that it does not have that detail yet, but that is a point to which I shall come back. At least universal credit income will be taken into account. The case for doing that for everybody is compelling. Has the Minister had the opportunity to read the IFS report, Reforming Council Tax Benefit? It is a 148-page report that has an entire chapter on integration with universal credit. The report notes that the universal credit system was intended to,
“simplify the benefit system by reducing the number of different benefits that claimants and administrators must contend with”.
As council tax benefit is,
“the means-tested benefit with the largest number of recipients”,
keeping it outside universal credit,
“and allowing it to vary … undermines this simplification”,
but we are where we are. The report goes on:
“Universal Credit is also intended to rationalise work incentives by replacing a jumble of overlapping means tests with a single one, ensuring that overall effective tax rates cannot rise too high. Again, separate means tests for council tax support could undermine this, with the potential to reintroduce some of the extremely weak work incentives that Universal Credit was supposed to eliminate”.
I shall translate that for simpletons like me. If council tax rebates carry on having a 20% withdrawal rate and if universal credit is not counted as income, the effective marginal tax rate for a basic rate taxpayer could go up to 89.8%. Furthermore, it would mean that,
“income from private pensions, contributory benefits and spousal maintenance would actually make some recipients worse off”—
more money coming in, less money left behind, which is really serious—
“unless these income sources were ignored when calculating council tax rebates, which would be expensive for local authorities”,
as well as complicated. The report continues:
“This arises because income from these sources will reduce Universal Credit entitlement on a pound-for pound basis”.
I apologise for getting to this level of detail, but I am trying to illustrate the consequences of not taking universal credit into account as income.
There is no simple way out of the challenge faced by local authorities. Some authorities will decide that they have to devise their own schemes to avoid having to find the money to pay for the 10% saving by next year. The noble Earl, Lord Attlee, gave them some advice during our last sitting, on Monday, saying that local authorities,
“could opt to use the default scheme, but perhaps with some amendment to secure some easy savings. Local authorities could choose to develop a more sophisticated scheme later, but that is a choice that they will have to make … However, if a local authority wants to have a complex scheme, it can have one in later years, and it can go for a simple scheme perhaps based on the default scheme in year one”.—[Official Report, 16/7/12; cols. GC 15-17.]
A simple scheme based on the default scheme of 155 pages of draft regulations would be quite difficult. More complicated still is that any means-tested system is basically a complicated ecosystem.
Although I am teasing the Minister, I do not blame the department at all for having 155 pages of regulations. It is impossible to devise simple means tests that work well; that is why there are 155 pages, and they are based on the regulations for comparable benefits at the moment. If a council were to try to find an easy way forward, the reality is that its most likely step would be, for example, simply cutting 20% off the top of the applicable amount that goes to everyone or the maximum amount, but it may not fully understand the consequences of doing that distributionally across incomes or different types of activity. It is very complicated.
As the IFS notes, it would be simpler for local authorities to have an independent taper from that used for universal credit, but to do so would be worse for effective marginal tax rates. The key question is, “Why should we not leave it up to local authorities to decide how they will individually treat universal credit income?”. The answer is that one of the Government’s main arguments for the upheaval involved in creating universal credit is that it would reduce the very high marginal tax rates faced by some working claimants, so there is a clear risk that council tax rebates will undermine one of the main advantages of universal credit, namely the elimination of those high effective marginal tax rates.
In other words, it is a policy question. Think for a moment about the impact that this could have on the noble Lord, Lord Freud, the DWP Minister. If the Government cannot determine how universal credit income interacts with the taper on the various council tax support systems, it is impossible for central government to determine the effects of changes it makes to its own universal credit systems. The noble Lord, Lord Freud, could make a decision to do something that is more generous and has a particular effect, but when he pulls that lever he will not know what will move in the various parts of the country that have devised their own schemes. That is simply a bad policy outcome given the billions of pounds of public money being spent on universal credit. It is clear that the Committee should agree to this amendment and direct councils to take universal credit income into account.
I turn now briefly to Amendment 83, which would require a local authority to consult not just on the scheme it proposes under the current social security system but, at the appropriate time, on the scheme in the world of universal credit. The reason is very simple. There is a whole series of decisions that a local authority will have to take, even if it sought to devise a scheme that mirrored as closely as possible in the universal credit era that obtains in the current tax credits and benefit system. Simply maintaining the status quo is not possible, as the department has already discovered, because universal credit replaces a range of tax credits and benefits for working-age adults that are currently treated differently for council tax benefit purposes. For example, tax credits count as income, but income support does not, and nor does jobseeker’s allowance or income-based employment and support allowance. In universal credit, if one half of a couple is under state pension age, the whole household is treated as that, as my noble friend Lady Hollis reminded the Committee last week, but that is different from the current situation. Somebody on income support, JSA or income-related ESA is automatically passported on to maximum council tax benefit. That will not be possible in future. If universal credit income is taken into account without making corresponding adjustments to the means test, as the IFS noted:
“It could be impossible even for those with no private income at all to be entitled to maximum rebate”.
In other words, once a local authority has its own scheme in place, when universal credit comes in, it will be impossible, even for those in the current system, to know for sure what will happen to their entitlements unless there is an additional consultation and more information is made available. Indeed, although I had a very helpful conversation with an official earlier, which has moved me along in understanding this, I am not completely clear about what will happen to somebody in the default scheme. Will the Minister take this opportunity to tell us on the record? The Explanatory Notes to the draft regulations for the default scheme state:
“Applicants with an award of Universal Credit may still receive 100 per cent support under this system”.
“May” is good; “will” would be better. The Explanatory Notes also state that use will be made of income and other assessments. My understanding from the notes and the conversation is that in the default scheme the means test made by the Secretary of State for universal credit purposes will be taken across, certain deductions will be made for housing and childcare allowance and it will then be applied. For simplicity, will the Minister tell the Committee whether, if somebody is on income support, JSA or ESA and is passported on to maximum council tax benefit, when the new system comes in under the default scheme, that person will still get the maximum 100% council tax support, assuming no complicated changes of circumstances or other unknown factors? Simply person for person, will the very poorest still get the most?
This is an issue for all kinds of councils, especially those that do not use the default scheme or that want to make the 10% saving because they may want to use thresholds but they—and certainly the population—will not know what the consequences will be. Local authorities should simply be told that they must consult again under the universal credit regime. It is particularly an issue given, as I understand it—and I think we come back to this on a later amendment—that authorities may not amend their scheme in-year but must determine it some way ahead, when they may not know how universal credit is going to work in practice. Finally, when the Government are consulting they could take the opportunity of combining it with a take-up campaign, if they can afford it, of course. I beg to move.
My Lords, I shall start on a somewhat disagreeable note, which is to register our protest about the tardiness of the regulations that we now have before us, to which my noble friend Lady Sherlock referred. They were published on Monday, and there was some challenge to get hard copies so that we could work on them on journeys and when away from screens. It is unacceptable, particularly bearing in mind the point my noble friend made that it was quite possible that this amendment would have been taken earlier before we had seen the regulations or known what was published on that day. At least we have the chance now to get into them before Report. The scope of the regulations is profound indeed, and we should at least have had last weekend to review them in some depth. I am grateful to my noble friend Lady Sherlock; it is clear that she has done so from the presentation that she just made.
The noble Lord raises a point perhaps in jest, but there is a heck of a lot of detail in these regulations that is highly germane to some of the debates that we are going to have. To not have had the chance to review those regulations and plough through them in some depth before we were due to debate them is unfair. Just before I move on, I encourage the Minister to have a discussion with the noble Lord, Lord Freud, who, in relation to the Welfare Reform Bill, was very good at holding seminars and giving us good notice about the seminar meetings before the regulations saw the light of day. That is the more effective way in which to do it—and this is not just nitpicking. We are engaged in this process to challenge and press amendments, but we want to see what comes out of this system work as well as the Government do. On a number of occasions when we were looking at the Welfare Reform Bill, the input of my noble friends in particular made a difference and was recognised as having done so.
As my noble friend explained, the amendment refers to universal credit being included as income in devising council tax support schemes. It is really to highlight the potential interactions between universal credit and council tax support schemes and why they need to be addressed. The Minister will doubtless tell us that local authorities have to decide themselves, but my noble friend Lady Sherlock stated clearly why that should not be the case and why in this regard at least there should be a mandation on local authorities.
Since the amendment was crafted, we have had the benefit of some draft regulations, to which I refer, including the default scheme. My noble friend referred to the comments of the noble Earl, Lord Attlee, about simple systems. We now know that the default scheme has 155 pages of simplicity. As we on this side maintained in earlier debates, the creation of a fair benefit system is complex; the multiplicity of circumstances that have to be catered for are amply reflected in the draft default scheme. It is a measure of the challenge that local authorities will face. Whether local authorities that cannot carry the full cost of a local scheme start with the default scheme, as the noble Earl suggested that they might, or start from the bottom up, is obviously a matter for them. But the default scheme demonstrates the range of issues that local authorities will have to weigh and the potential scope of the evidence base on which they will need to consult to justify their schemes. Clearly, local authorities could import chunks of default schemes, particularly round the national boundaries of the scheme, into their local scheme. But this hardly makes it a local scheme. The default scheme sets out some information and how it will deal with recipients of universal credit; administratively, as my noble friend said, it will tap into the assessment of applicable amounts, income and capital, compiled for universal credit, and will modify them. The principle is that universal credit is taken into account as income but netted for any childcare and housing cost elements.
Some issues have already come from the draft regulations in the time that my noble friend has been able to spend on them. She has identified the confusion between child costs and childcare costs.
I can confirm that; it might save the noble Lord another six lines of his speech. Childcare costs is correct.
Yes, indeed—but the documentation that we had was confused on that matter, which is why the diligence that my noble friend brought to bear was important. Also there was the issue around the actual rates. Again, I agree with my noble friend that this is not to be overly critical of the team. These are complex matters usually dealt with by DWP officials whose whole life is around benefits. That is what drives them.
So far as housing costs are concerned, this potentially deals with the point that, absent such a change, anyone claiming the housing component of universal credit would see their council tax support significantly reduced or even eliminated.
So far as childcare costs are concerned, the IFS points out that in certain circumstances those previously on housing benefit will see their effective support for childcare costs reduced. I have not had a chance to look at that in depth in the regulations but perhaps the Minister can say whether that is the situation on the basis of the draft scheme that we have.
My noble friend rightly focused on the issue of work incentives and the marginal tax rates. Including universal credit in the default scheme as income would appear to avoid the very high overall withdrawal rates of 90%, higher for unearned income, which could be in excess of 100%. But a withdrawal rate of 81% rather than 90% for effective marginal tax rates is still high.
One way of avoiding that would be to avoid overlapping withdrawal of benefits, in particular for council tax support to be withdrawn by the time that universal credit is withdrawn. Can the Minister say what modelling around this issue, clearly on the basis of current understanding of allowances, income disregards and tapers, has been undertaken for the default scheme? What is the range of effective marginal tax rates that flow from the proposed scheme? Who is affected?
We also clearly support Amendment 83, which is to do with consultation. There is a timing issue around this. It is clear that more detail, possibly the final detail, of universal credit will not be known until October this year. Even then, that may not be the final detail. That is important for local authorities devising their schemes. We know that if local authorities are to hit the timeframe of having a council tax support scheme in place by January next year, they would have to be well under way with their consultation by then. Therefore, if further information comes through around universal credit, particularly given its significance over a number of areas, it must be right that local authorities have to consult again on that.
The Committee will see the difficulty with the timeframe. If local authorities are consulting now and in August, September and maybe October on their current understanding and if things change in October when more detail is known, the practical opportunities for them to consult again will be restricted, but it is important that they do. It brings us to an amendment in the name of the noble Lord, Lord Jenkin, that we will come to later and that seeks to remove the restriction on revised schemes having to be promulgated by January of the preceding year. Effectively, as I understand it, the current arrangement does not give any scope for in-year adjustment of a scheme when new information comes forward—whether that is in relation to universal credit or anything else.
However, we know for certain that more precise information about universal credit will come through later this year, but at a point in time when most councils will have already started—if not completed—their consultations on the scheme without that extra information. It is important that it is made clear to local authorities that they should consult around the consequences of universal credit when that detail is known. Somehow, in the timetable for these processes, we need to build in for them the scope to do that.
My Lords, I thank noble Lords for both those contributions. From the outset, I must say that I am surprised at the criticism that the noble Lord has levied across the Room on the timing of the draft regulations. The statement of intent has been out since May and it is quite indicative of what would happen. The draft regulations are in fact almost identical to those that currently support council tax benefit—there are probably 196 of those. I appreciate that the noble Lord finds the timing of this difficult but while I am sure it is necessary for us to discuss some aspects of those regulations here and to get the principles right, local authorities will already be well under way with what they are producing for their schemes.
Can the noble Baroness then specify the extent to which the default regulations before us actually differ from the current detailed arrangements? Reference was made to the statement of intent—yes, but that is a very broad document and does not in itself set out any detail. It falls far short of the information you would need to devise an effective and important scheme.
But even so, local authorities have been waiting for and expecting these regulations, and they have started off. Also, on consultation, they are now entitled to do less than the 12 weeks—that is in the Bill—so they can curtail or tailor their consultation to different timescales. Moreover, local authorities are far better equipped and far further on than noble Lords opposite are giving them credit for. I have spoken to quite a lot of local authorities, and if they do not already have their scheme in embryo they are all just about there and about to undertake the consultation. While I do not mean any discourtesy to this Committee about the regulations, the most important aspect of this now is that local authorities are getting on with what they are doing and while some may find some difficulties, most are making a good fist of it.
The noble Lord referred to my noble friend Lord Freud. He will appreciate that up until now it has not been entirely in our gift to have discussions since the regulations were published. I do not know the timing for this Bill when we come back but perhaps I can give the noble Lord an undertaking that if it is not considered in the first week, we will make arrangements to have the discussions he has asked for before we get to Report. We may find that helpful and even if there is a day, we will make sure that we do it on that day. I hope that is all right.
I have clarified to the noble Baroness that we were referring to childcare costs; she was quite right to say that. While I am picking up on her questions, before I read my reply, I should say that the universal credit rates are indeed last year’s and will be updated in November, which is in line with the normal uprating procedure in the Department for Work and Pensions for this year.
I want to be really sure that I understood that. Separate from the uprating, is it the intention that the rates will be the same as those that apply at the time? For example, if it were starting this year it would be the 2012-13 rates and if it were for next year it would be the 2013-14 rates, which is slightly separate from the uprating point.
My understanding is that the rate will be this year’s, uprated. I hope that covers that point. I think the other question that the noble Baroness asked me was whether the very poor will still get the most. The answer is yes, because their income will still be very low, so this should work.
I am terribly grateful to the Minister for indulging me in this. These are the kinds of questions that I am wrestling with and that I therefore suspect others who read the record will be. It is not just about whether the very poorest will get the most but whether somebody on the equivalent of income support, for example, will get maximum council tax support under the default scheme. Will they get 100%?
The answer to that is yes. Local authorities have been asked simply to take those who have council tax benefit already and those whose applications have been made already and to transfer them on to the new system.
The noble Lord, Lord McKenzie, asked about housing benefit costs. This relates to applicable amount and income so that it does not skew the award. We will be happy to write on this matter, which, judging by the noble Lord’s face, would be a very good thing. We are continuing to work with the Department for Work and Pensions to develop the treatment of universal credit as these regulations are finalised. There is still work to be done, but we will write to the noble Lord and give other Members of the Committee a copy of that letter, as we have done previously, so that, if we have to have discussions before the next stage, we will have the answers.
Let me read the replies that I have, as we need to put them on the record. Some of this will answer the questions that have been asked and some of it will not, but it will show what we thought the whole question was really about. Amendment 79B seeks to clarify that income from universal credit can be taken into account in determining eligibility for council tax reduction. We touched on this issue in the previous Committee session, when my noble friend Lord Attlee explained that, while local authorities would be free to take universal credit income into account as they saw fit in their local scheme, the Government would be prescribing how this income would be treated in the default scheme. I am pleased to confirm that the regulations are there—noble Lords have seen them.
I think that it would be helpful to explain paragraph 2(2) of new Schedule 1A of the Local Government Finance Act 1992. This is an illustrative provision, intended to show that local authorities can define the classes of person entitled to reductions by reference to such matters as a person’s income and capital and the income and capital of any other person who is resident in the dwelling. The many precise types of income that may be taken into account in relation to council tax benefit are, as the noble Baroness will know, currently listed in regulations. The draft default scheme regulations confirm that this will still be the case in future and, in relation to the default scheme, make it clear that universal credit will be among the types of income to be taken into account. Of course it is right that references to specific benefit incomes should be in regulations given the extent of the detail involved.
The noble Baroness may be seeking assurance on the way in which universal credit income will be able to be taken into account in calculating future awards under the default scheme—that is exactly what she was doing. Perhaps I could try to reassure her further than I have been able to do so far. Universal credit is a working-age benefit and it will normally fall to local authorities to design how income from this award will be taken into account in local schemes for working-age claimants. However, paragraph 4 of new Schedule 1A of the Local Government Finance Act 1992 requires the Secretary of State to make regulations providing for a default scheme. This will come into effect for any authority that has not made a scheme by 31 January 2013 and is to be in place for the financial year 2013-14.
As the noble Baroness will know, there are pathfinders for universal credit, which will commence in April 2013, and the migration to universal credit will commence in October 2013, so it is right that the default scheme should make provision for the treatment of universal credit income, although it will not be relevant to start with. The regulations for the default scheme set out how we intend to treat universal credit income under that scheme. As I said, we will continue to work with the Department for Work and Pensions on the detailed approach. However, we believe that this provides a clear general indication of how we intend to take universal credit income into account in the default scheme. The draft regulations explain that a person in receipt of universal credit will have a means test applied.
Previously, applicants of three benefits being replaced by universal credit—income-based jobseeker’s allowance, income-related employment and support allowance, and income support—would automatically have received 100% council tax benefit. However, universal credit will not distinguish, in the way that those benefits did, between those who are in work, and those who are out of work. This is an important part of the Government’s welfare reform agenda, ensuring that the return to work does not result in benefits dramatically dropping away, so that work pays and is seen to pay.
Claimants will be means-tested, using and appropriately modifying the assessment of income made for the purposes of universal credit. Broadly speaking, after the application of this means test, those who currently get 100% support will continue to do so. Those with a higher income will have their support tapered, as at present. So effectively, there will not be much difference. I can confirm that, in this case, universal credit income itself will also be taken into account, as I have said.
An individual in receipt of universal credit will already have undergone a complex Department for Work and Pensions assessment of income. It is proposed that, to reduce bureaucracy and red tape, this universal credit income assessment should be reused in the means test for council tax reduction, with certain appropriate adjustments for the calculation of council tax reductions; for example, the council tax reduction income disregards will be applied.
It is also envisaged that the DWP universal credit assessment of what the person needs to live on will be used in the means test in the form of the universal credit maximum award, again with some proposed adjustments to take off the housing element, which is disregarded under the existing council tax benefit system. That matter was raised by the noble Lord opposite. Final figures will not be required to finalise the default scheme regulations, as these refer to elements of universal credit award and calculation, rather than specific amounts.
I have answers to some questions that the noble Baroness asked me, but I should never have too many pieces of paper; they are a disaster. Our stated aim is that the default scheme should be as close as possible to the existing council tax benefit scheme. I can confirm that we are also pursuing this policy by looking to achieve, through our regulations, equivalence between the applicable amount in council tax benefit and maximum award in universal credit. It is already well known that the elements that make up the universal credit maximum amount and the elements that make up the council tax benefit applicable amount will have some broad equivalence. We continue to work closely with the DWP on this as well.
Clearly, the exact rates for each element of the universal credit maximum amount have not yet been finalised. The Department for Work and Pensions explanatory memorandum for the Social Security Advisory Committee, published in June, states that at paragraph 42. Should it, ultimately, be the case that the rates awarded to an element were different in universal credit, it would be a simple matter for us to adjust that by topping up the relevant element of the maximum amount so that it was equivalent to the council tax reduction applicable amount. That would still relieve local authorities of a considerable additional administrative burden in which they would otherwise be involved.
The draft default scheme regulations make clear the Government’s intention that local authorities in their schemes should be able to count universal credit income as a type of income to determine who is in a class. It is not necessary to amend paragraph 2(2) of new Schedule 1A to refer to universal credit, as authorities may already take this into account when determining the class of person entitled to a reduction under a scheme. Furthermore, it is not practical. If we were to refer specifically to universal credit in this provision, we might also need to refer to other individual benefits and types of income that may be taken into account. That would entail introducing references to myriad other types of income on the face of the Bill.
Amendment 83 would extend the requirement for local authorities to consult on their schemes so that they were required to do so under the current benefit structure or under universal credit. At present, council tax benefit is centrally prescribed. It is not clear to me what purpose a requirement for authorities to consult on a centrally prescribed set of requirements would serve. We have been clear that council tax support will not form part of universal credit in future, so a requirement to consult on schemes under that structure similarly does not seem needed.
The noble Baroness may be seeking to make clear that the consultation should explicitly seek views on the interaction between their proposed scheme and other current benefits, or the interaction between the scheme and universal credit. This is very sensible, but it does not require regulation. Local authorities are already required to consult on their schemes; we have been clear that we do not intend to prescribe how this consultation should operate, as local authorities routinely consult on matters and have settled policies and procedures, which we expect they will continue to follow.
I recognise that there is a great degree of interest from Members in this Room about how local schemes will take universal credit into account. I hope that some of the responses that I have given will provide greater clarity on that. We can perhaps discuss that before Report and have a proper session on it.
Local authorities’ schemes will be subject to consultation and authorities will need to be prepared to defend their schemes. Members in 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 will make a crucial difference to people’s lives in relation to benefits.
I hope that with that plethora of explanation, the noble Baroness will feel able to withdraw her amendment.
I may be the only person in this Committee who has not completely understood everything that has been said. If that is the case, I apologise. My noble friend the Minister seemed to say twice that under the default scheme people of working age who currently get 100% council tax benefit would continue to get the 100% reduction under the new scheme. Is that what she said? Under the default scheme, where is it proposed that that should be paid for, given that there is a 10% cut across board that does not apply to pensioners—and therefore it might be up to 20%? Then there are vulnerable people. If in addition to that people who currently get 100% council tax benefit continue to get that 100% reduction, will the cost of that fall on the remaining people of working age who are means-tested and get part council tax benefit, or does the council tax benefit assume that the council finds the money in some other way?
I think that the last point that the noble Lord made is the right one. We have been at pains to point out that council tax support will come into the general business rates retention scheme support. The local authority will have to make its decision based on its entire income as to how it funds and creates support for council tax benefit. It is not restricted only to the amount of council tax benefit support related solely to that, which will come from the benefit system.
My Lords, I thank the Minister very much for answering the questions that I asked about the default scheme and the universal credit, and I look forward to the opportunity to talk more with her and her team. However, I do not feel that in the end she answered my point of substance about the amendment, and I realise that we have a disagreement on this. She is right that at the moment councils may choose to include universal credit; the point of the amendment was meant to be that they should—not that they may, but that they ought to do so. That is the point that I might want to come back to at a later stage, because I do not think that the Minister answered the policy question as to the impact on central government of being rendered unable effectively to determine the consequences of decisions about its own universal credit policy, due to an inability to control the interaction with separate tapers and schemes around the country.
On the point made by the noble Lord, Lord Greaves, since the default scheme is as the Minister explained in her reply, the real danger about consultation is that those authorities that do not feel able to find the other 10% cannot use the default scheme. They will have to amend it in some other way or change it. Because I cannot, despite the advice of the noble Earl, Lord Attlee, see a simple but fair way of amending the default scheme for a saving on that scale, they will have to engage in some other quite detailed process. Therefore, it is really important that the consultation is right from the outset. However, since they will have to change that scheme when universal credit comes in because they cannot simply move over from one to another for the reasons that I explained—obviously badly—they ought to consult again. That is the point I wanted to press on the Minister. However, since we are in Grand Committee, I thank everybody who has contributed.
Perhaps I could follow up on two points. I do not think that the Minister dealt with the question of consultation and timing. On a couple of occasions, the expression was used, “We continue to work on the detail of universal credit with the DWP”, and that is fine and we understand. But if when that detail emerges it has consequences for the schemes that local authorities are proposing, how will that fit into the timeframe? They are consulting now, they have to have a scheme in place by January, they have to engage with upper-tier authorities first and have two rounds of consultations. If they have done that on the current understanding of the default scheme as adjusted and of universal credit but the detail changes in a way that might be significant, how can they feed that into their final schemes?
Is it not right that, as proposed, you get a chance every year to change your scheme but you have to have that done by January in the preceding year? As a practical matter, the timing does not seem to fit, does it? If in October you get a raft of new information and presumably there is support for a further round of consultation on that, it will make it impossible to meet those deadlines—or extremely difficult. If authorities are consulting now to try to get the thing done in time, the timeframe becomes pretty impossible, does it not? That was one question—the need to go again on consultation because of new information.
The broader issue about being able to change the scheme in-year is one that we will come on to in a later amendment, but what work has been done by the Government either by the DWP or CLG about the interrelation of tapers on the basis of the information that we have at the moment—the applicable amounts and income amounts in the default scheme and what we know about the components of universal credit? How do those tapers currently correlate? Do we have much of an overlap, if any, between the withdrawal of the council tax support taper before you get to that position on universal credit? What is the crossover? What evidence do the Government have and what work have they done to try to evaluate that? That is also key to effective tax rates and therefore work incentives.
My Lords, I am not sure whether the noble Lord would expect me to answer his last point, which was about modelling, today. That has largely been done by the DWP, and it would be more effective if I wrote to the noble Lord giving details of that and did not try to muddle my way through today. We ought to do it properly.
On the question of consultation and the scheme that local authorities are working on, I said very clearly that the current council tax benefit scheme is almost transferable into the one that they will have to operate from January. People who are already receiving council tax benefits and those in the pipeline will automatically be put in, so they will not require any more work done on that. As far as consultation is concerned, I have also dealt with this. The consultation does not have to be 12 weeks. Equally, say if you just have one consultation going out for your scheme, that will be back before the 12 weeks are up. Where there is a precepting authority involved, this is going to have to be a joint scheme and one would expect discussions to take place, or to have taken place, before the scheme was put out for consultation. It should be something that goes smoothly and seamlessly between the two.
We are satisfied that the work that has been done, the way this has been translated and transferred, and the amount of information that is available is absolutely sufficient for local authorities to be working up their schemes now.
At the risk of prolonging this, I wish to respond briefly. Although it is true that if a local authority were to implement the default scheme as it is now and to find the saving elsewhere then, on the basis of the assurances the noble Baroness has given the Committee today, individuals at the bottom would find themselves unaffected, but that will only be the case if the authority is able to find the money. A number of authorities clearly may decide not to do that, and they will have to make changes. Therefore, nobody can be assured from today that they will be protected from changes. I do not think the Minister is in a position to give that assurance. If she is, I invite her to intervene on me now and give it. I am delighted to pause.
I am so sorry; this really is not false modesty on my part. If the authority I live in—and this is just for the sake of argument—decided it could not afford the default scheme and it took on another scheme then obviously the Minister is not in a position to give that assurance, is she? Or is she, even in those circumstances?
I am sorry to prolong this, but I am getting a bit confused—well, not really, because I was confused to begin with. If there were a modified version of the default scheme, would that still count as the default? I think my noble friend is saying that some authorities will not be able to afford the default scheme as it stands because the 10% cut has got to come from somewhere, so if they take it out of the default scheme, would that still be called the default scheme modified or would it be considered a different scheme, which they would have to consult on?
The default scheme is the default scheme, and the default scheme comes into operation in two ways. One is that the local authority does not have a scheme by the time we get around to 31 January next year, in which case the default scheme would be imposed. The second is that it can choose to use the default scheme as its scheme, and that will then still be the same. If it then does not have enough resources, it has to make the judgment as to where it gets those resources from. As I already explained to the noble Lord, Lord Greaves, that would not necessarily come just from the council tax support; it would come from its wider budget and whole programme.
My Lords, I think I understand this now and I am certainly beginning to look at this whole scheme in an entirely different light. My understanding in the discussions we had in previous meetings of this Grand Committee was that lots of authorities would be operating on the basis that everybody of working age would be means-tested and would end up paying something. We discussed at great length two or three Committees ago that this would result in a lot of people only paying very small amounts of money—£1 a week, and so on—and the difficulty of collecting this. I know one thing definitely and have been told another. I definitely know that my own authority is looking at a scheme that involves all council tax payers paying something, and I am told that that is typical of the schemes being looked at, certainly by councils in our part of the world.
We might find out in the next few weeks, but a large number of authorities will probably be surprised to learn that the default scheme involves 100% benefit or reduction for people who get it at the moment. The schemes that are being looked at in many cases at the moment do not involve that, which will mean that the authorities then have to look at where they will find the money from. On my previous intervention, the Minister said that the money would not just come out of the council tax reduction money that comes from the Government. We understand that; it is being cut by 10%. It is not being cut for pensioners or vulnerable people as defined in each area, and if it is not being cut for people who are already on 100% reductions that is another burden on somebody else. It either comes from the rest of the working-age population, whether in benefit or otherwise, who will be means-tested, or, as the Minister rightly said, it has to come from general council resources.
Some of us will have to make these decisions, such as the noble Lord, Lord Smith of Leigh, who is not here today, and we do not have those extra resources. We are desperately looking at ways of reducing our councils’ spending overall to comply with whatever grant settlement we get next year, and it is simply not going to be possible to say, “Here’s another burden that we’ll just take into general resources”. I do not believe that a lot of authorities will give 100% benefits to people who get them at the moment, and that is a major worry.
My Lords, we are still on the default scheme. If the council is required to adopt the default scheme, the benefits remain at 100%. If it takes on the default scheme as a local scheme, it will make its own adjustments to whatever it believes that it can do. If it sets up its own scheme, the 100% will only come about for a limited number of people on very low income, and it can then taper it up and down depending on people’s income because they will be means-tested at that stage. I am trying to make it clear that the default scheme is the legal backstop for local authorities that do not have one on 31 January. They do not have to adopt it, but they can as their own local scheme. I hope that I have contributed as much as possible on this matter.
I hope not, because I am afraid that I have another question. Assuming that, as the noble Baroness says, the scheme operates as a default scheme—assuming that people have not been able to consult and do not have their own schemes, so the default scheme is in position—the 100% people will remain at 100%. To what extent does the default scheme provide for other categories of people whose benefits would, presumably, therefore have to be adjusted? Is there flexibility within the default scheme—I confess that I have not ploughed through it—to see the impact on other people, or would there be a requirement to provide the current proportion of benefit to those people? If so, the financial problems to which the noble Lord, Lord Greaves, referred would be compounded.
I understand that the situation is as it would have been had the council not been changing. The default scheme is the current scheme—the current council tax benefit scheme. That will simply transfer and people will be treated the same way for a year unless it is reset the following year. If it is the local scheme, it does that itself; then it can make decisions about the amount that is reduced for council tax benefit.
My Lords, I am glad that we have cleared that up. My understanding, therefore, so that we are all clear, is that local authorities have two choices. They either adopt or have imposed on them the default scheme or they create a scheme of their own devising, which may or may not bear some relationship to the structure of the default scheme.
The amendment is actually targeted at the second group of authorities. I have probably confused things by asking some questions so that I could better understand the default scheme, but in fact the amendment is targeted at those authorities that either do not choose to adopt the default scheme or on which it is not imposed. This amendment is aimed at those authorities that devise their own schemes and it was intending to say that they should be required to take universal credit income into account in any means test that they go on to apply to determine entitlement on the basis of income.
The case for that is very strong. Nothing that has been said today in any way diminishes it. It is in fact strengthened, if anything, by the intervention of the noble Lord, Lord Greaves. There is a real danger that in attempting to square the kind of circles that have been described, an authority will devise a scheme without having a full understanding of the consequences on either individual incomes for universal credit or of the national position in terms of what the Government want to do. That is problematic.
The Minister’s argument, finally, that it would not be practical to name universal credit because one could name lots of other benefits simply does not hold water. In fact, the purpose of this is not about the individuals who are on it: it is about the national policy conference. The reason I am asking this specifically is to enable the Government to make judgments about universal credit—a single integrated benefit for people of working age—to be able to do the things that, at some considerable length during the passage of the Welfare Reform Bill, we were told universal credit would do. The amendment simply seeks to enable that policy aim to be realised. The case is very strong.
I have found a statistic that might help the Committee and might not because it refers to Pendle and nowhere else. There are 6,038 existing claimants of council tax benefit of working age, if I have read this correctly. I do not have a proportion on 100% but I have a proportion on 90% to 100%, most of whom are on 100%. The number is 4,479. Around two-thirds of the working-age claimants who are means-tested are on 100% benefit in Pendle, if I have read these charts correctly, which I think I have. That puts the thing in context.
Indeed it does. I am afraid that the choice faced in that authority is very stark. Either it finds money from very scarce resources, which it probably will not feel able to do, or it devises a scheme of its own making that must in the end have the effect of penalising some of its population. Does it penalise the very poor in order that everyone should pay something, or does it make it very hard to make work pay by putting that burden on to those in work? That is a Hobson’s choice and I am very glad personally that I do not have to make it. Those who are, in Pendle and elsewhere, have my sympathy. We have aired this as much as we can and, given that this is Grand Committee, I beg leave to withdraw the amendment.
Amendment 79B withdrawn.
80: Schedule 4, page 58, line 32, at end insert—
“( ) A scheme must set out the steps, including consulting local charities and organisations providing advice on benefits, which the local authority will take to ensure that—
(a) it estimates the numbers of people eligible to an application for reduction under the scheme;(b) persons entitled to a reduction will be made aware of their entitlement; and(c) assistance is available to such persons who wish to make an application.”
My Lords, in moving Amendment 80, I will speak also to Amendment 81 as they are linked in terms of their objectives.
The Government’s recent report on the 2010 child poverty targets noted that one reason why the child poverty target was not met was that,
“not enough families got the support that they were entitled to”.
It cited the 2009 Child Poverty Unit report that estimated that,
“there were 400,000 children living in relative income poverty as a result of their families not receiving all the benefits and tax credits to which they were entitled. Improving take-up and support for families with children was identified as an important element of the agenda to tackle child poverty”.
However, the report continues:
“DWP take-up statistics show a downward trend in the take-up of most major benefits among families with children since 1998”.
Amendment 80 is drafted to address this concern, although it is not confined to families with children. Whereas in the past increasing take-up has always been a win-win situation for local authorities, improving living standards for their residents and helping the local economy, under the new cash-limited council tax reduction schemes, it is a zero-sum game, in which improved take-up for one group, particularly pensioners, means less money available for others. We have already had a preliminary skirmish around this issue involving in particular my noble friend Lady Hollis, who cannot be in her place today, and the noble Lord, Lord Greaves.
For the first time ever, we have an incentive to depress take-up written into the template of a statutory income maintenance scheme. That cannot be right. Take-up of means-tested benefits is a perennial problem and take-up of council tax benefit is among the lowest. The latest government statistics show that between 31% and 38% of those entitled did not claim council tax benefit, although that may be a slight overestimate of non-take-up. In other words, it is possible that as many as nearly two-fifths of those eligible are not claiming. Take-up is particularly low among pensioners, of whom between 39% and 46% are not claiming, and among couples with children, of whom between 41% and 48%, nearly half, are not claiming. Overall, the trend in take-up of council tax benefit has been downward. Since 1993-94, take-up has fallen by at least 6 percentage points for pensioners, by around 7 percentage points for non-pensioners, and by a massive 15 percentage points for couples with children. However, all those figures are approximate.
In its 2009 report, Take Up the Challenge, the Child Poverty Unit set out what it called,
“a strong argument for local authorities and partners to focus on increasing take up of benefits and tax credits by poor families with large unclaimed amounts”.
It explained that take-up can contribute to tackling child poverty and related issues such as social exclusion and health inequalities. There are also benefits for the local economy with money claimed in benefits and tax credits being spent in local communities. It continued:
“Furthermore, improving take up will help local authorities and partners to ensure that hard to reach and vulnerable families are receiving support, and are in contact with services”.
It pointed out that:
“A significant amount of benefits go unclaimed by people who are working”,
so that the:
“Lack of awareness of in-work financial support available through benefits and tax credits can be a barrier to parents entering and sustaining employment”.
To the extent to which the new localised schemes will still cover working people, improving take-up will reinforce the Government’s aim of tackling poverty through paid work.
The report concludes that,
“spending on increasing take up can provide good value for money”.
Given that, it was disappointing and surprising that in a Written Answer to my noble friend Lord Beecham, to which he referred in an earlier session, the noble Lord, Lord Freud, stated that the Department for Work and Pensions,
“does not promote benefits … The department has not spent money in the 2011-12 financial year on promoting the take-up of welfare benefits, and we have no planned expenditure to promote take-up of welfare benefits for the next financial year”.—[Official Report, 23/4/12; col. WA 302.]
It was even more disappointing and surprising to learn the other day that the DWP proposes to cease publishing estimates of take-up of means-tested benefits. I found that out by accident. I did not find it out as a Member of this House; I found it out as a social policy academic. I also found that my colleagues here were unaware of that really rather serious step.
Can the Minister tell the Committee what the Government’s position is on improving benefit take-up? Do they still believe that take-up is an issue? It would appear that they are content for people on low incomes not to receive the money to which they are entitled, despite the arguments put by the Child Poverty Unit, and now it would appear that they want to bury the evidence of such non-receipt.
As the Government are, in effect, washing their hands of the issue of take-up, it is therefore left to local authorities and voluntary organisations to do what they can to improve take-up. Local authorities have an honourable history in this area. They played a key role in countering the impact of benefit cuts in the 1980s by instigating often very successful take-up campaigns. The Child Poverty Unit report and an earlier DWP best practice guide give examples of the kind of take-up work that local authorities still do, including improving take-up of council tax benefit. Indeed, under the Social Security Contributions and Benefits Act 1992, local authorities now have a statutory responsibility for council tax benefit take-up. Each billing and levying authority,
“shall take such steps as appear to it appropriate for the purpose of ensuring that any person who may be entitled to council tax benefit in respect of council tax payable to the authority becomes aware that he may be entitled to it”.
Amendment 80 builds on this and would write a similar, if differently worded, responsibility into this legislation.
It has been suggested that the change of name from a benefit to a reduction or discount could in itself improve take-up, especially among pensioners. The noble Lords, Lord Tope and Lord Shipley, suggested that in an earlier discussion. I have no objection to the change of name, which could be helpful, but at the same time I return to the fundamental point that the cash-limited nature of the scheme will, as many organisations have pointed out, create a disincentive to local authorities to encourage take-up. This is particularly with regard to take-up among pensioners, whose entitlement, as we have already discussed, is protected by law. As many noble Lords have warned, the more money is paid to pensioners the less there is for other so-called vulnerable groups and for low-income working people.
In the face of this dilemma, it will be very tempting for local authorities to keep quiet about council tax reduction schemes and it is therefore crucial that there continues to be some form of statutory responsibility placed upon them to encourage take-up, hence Amendment 80. Another element in the dilemma is that even lower take-up could exacerbate another problem identified by organisations such as Citizens Advice and the IFS, which is of more people not meeting their council tax demands and there being extra work for local authorities trying to collect the arrears. Already, according to a recent report in the Guardian, the Consumer Credit Counselling Service has seen a 27% increase in the number of people contacting it for help with council tax arrears between 2010 and 2011.
As long as local authority council tax reduction schemes are funded by central government on a cash-limited basis, the traditional presumption that it is in the interests of both authorities and those eligible for assistance that take-up is maximised will, as I have said, no longer hold. Personally, I believe it is unethical to establish an income maintenance scheme for people on low incomes on this basis and I hope that the Government will think again. If they are not willing to do so, however, there is one step that they can take to mitigate the double-edged sword that improving take-up would now become. The money transferred to local authorities, whether or not they are subjected to a 10% cut—it goes without saying that I am opposed to such a cut—should be based on estimates of the numbers currently entitled to council tax benefit, rather than on the numbers actually claiming. The difference is considerable. In 2009-10, between £1.7 billion and £2.42 billion was unclaimed in council tax benefit. This should be included in the money devolved to local authorities, whether or not they are subjected to a 10% cut.
Amendment 81 is designed to address this issue in a different way by requiring the Secretary of State to ensure that there is sufficient funding available to meet the council tax reduction for all eligible claimants, so that if take-up improves it does not pose the dilemma that I have outlined for local authorities. In the absence of such a provision, can the Minister tell the Committee what the Government’s advice to local authorities will be as to how they should deal with the take-up dilemma created by the cash-limiting of the grant they will receive to run council tax reduction schemes? I hope that in the interests of maximising take-up the Government will be minded to accept Amendment 80, or to introduce their own amendment to retain a local authority responsibility to promote take-up, but that in doing so they will also address the perverse incentive they have created to depress take-up through an amendment on the lines of Amendment 81. I beg to move.
My Lords, I support Amendment 80, so ably moved by the noble Baroness. I will also speak on Amendment 81, which is slightly more problematic. It perhaps does not cover all of the issues quite as it might. First, there is an issue with the non-claiming of council tax benefit. There is a whole set of numbers; the noble Baroness mentioned £2.4 billion. These things are notoriously difficult to be certain about, but we can all agree that it is a very big number. A large number of people who are eligible to do so are not claiming council tax benefit. That gives rise to a conflict of interest for local authorities. That is a serious and important issue. That must be addressed. It may be in the financial interest of a local council not to promote or advertise the council tax support scheme. That cannot be right.
Amendment 80 addresses that issue, because it requires authorities to work to improve take-up, to estimate the number of people eligible, to make those people aware of their entitlement and to ensure that advice on benefits either from the council or from third parties is provided. I think that the council should have a requirement to do so itself, so that it cannot simply pass the buck to a third party. Assistance should be made available to such persons who wish to make an application because many people need advice and help with filling in forms and understanding the rules and how they can maximise the outcome of the application. It is entirely reasonable to give them that level of help, but the council itself has an obligation. Many of its staff are well trained across a range of benefit work. They should be required to help, so I fully support Amendment 80.
I fully understand Amendment 81, but it is not just a question of provision by the Secretary of State because I suspect that the Secretary of State would say that the additional powers given to local authorities over empty homes and second homes will, in some cases, provide the resource required. Here I move to a later amendment to be moved by my noble friend Lord Best, which is very important because it will give flexibility to councils to find resource in a number of ways. It is not just a question of the Secretary of State being responsible for funding. Actually, local councils will have some powers to address the funding issue themselves through decisions on what they will do about empty homes and second homes in their area. I agree entirely that not all councils can meet the bill. If there were a significant rise in the number of people applying for council tax support, many councils, even among those who currently think that they can cover the cost, might not be able to.
To conclude, I am happy to support Amendment 80, but Amendment 81 perhaps needs further work and examination of exactly how councils might raise the money themselves.
My Lords, following that helpful contribution, perhaps I may say a brief word. I was talking to a northern authority recently which could not raise significant sums from empty homes for obvious reasons but, as half of its council tax benefit claimants are pensioners, it was assuming that it would be a 20% cut across the board for the rest, because that is how the sums work. It did not have the money available. I had a look at its website. If I were living in a band B property on my own, even with a single-person discount, council tax would be £892.80. If I lost 20% of that discount, I would be £3.43 a week worse off. That does not sound like a lot, but actually, out of £71 a week JSA, that is about 6% of my income. If I were to lose 6% of my income under the current situation and, if the take-up were to increase significantly—given the gaps that both my noble friend Lady Lister and the noble Lord, Lord Shipley, described, that is quite possible, especially with the renaming—that figure would surely rise even further. How will the Minister protect those people and what assurances can she give that authorities would not be put in that position? If the take-up goes up and no additional funds were available, they would simply have to stretch the amount available even further.
My Lords, there are Ministers in the Government, I think including the Prime Minister and certainly including the Chancellor, although not, alas, the Minister, and there are certainly Members of your Lordships’ House, who were not even born when I first came into contact with what was then the rate rebate scheme. I put out a leaflet promoting that scheme in the ward to which I had recently been selected as a Labour candidate. That was in the winter of 1966, so we have been living with this system for a very long time, and my interest in it and in other aspects of welfare rights has been continuous throughout that period. Indeed, it is 40 years—I am sorry to go through this historical saga—since I, as opposition spokesman on social services, produced a report about social services for the Labour opposition in Newcastle. We included within that the establishment of a welfare rights department; we called for action to promote the take-up of all kinds of benefits; and we subsequently implemented that plan. Incidentally, I was advocating a passporting system which, at that point, was apparently impossible to achieve. We have something at least approaching that now and, in fairness, universal credit, subject to the qualifications that we have discussed today in Committee and on earlier occasions, should move us in the direction of streamlining the system and seeing that one door is open to the relevant requirement of support. I commend the Government for that, at least.
We are now in a situation in which very many people are clearly not claiming. I have been quoting a figure of £1.8 billion of unclaimed benefit. My noble friend thinks there is a band between £1.8 million and £2.4 million. Traditionally, the greater proportion of that is not claimed by owner-occupying pensioners. About the only good thing about this aspect of the Bill is the change of character from a benefit to a discount or reduction, which was advocated by the LGA—I make no more declarations. I think it was included in the two reports on local government finance which, I am sorry to say, the previous Government kicked rather rapidly into touch. I do not blame my noble friend Lord McKenzie of Luton for that. Others might, but I am sure that he has changed his mind as much as the noble Lord, Lord Shipley, appears to have changed his in a different direction. As we have said many times, the amount will undoubtedly and rightly increase. I would commend the Government for that if they provided the wherewithal to pay for it, so my commendation is qualified. However, the principle is right, and it will have that effect.
What the Government have apparently decided—it was only today that my noble friend Lady Lister of Burtersett discovered this—is that they will not take any steps to make any estimate of the number of people requiring this benefit, let alone promote take-up. I do not know whether the decision was made by the Minister’s department or the Department for Work and Pensions. Perhaps my noble friend can enlighten me.
It is even less forgivable that the department that has the overall responsibility for dealing with the problems of poverty and sustaining the income of pensioners and vulnerable people should apparently not wish to know how many people are eligible or how many are claiming. It is not doing what it ought to be doing and promoting take-up. When it comes to promoting take-up, there are a number of things that many councils—in fairness, I think of all political colours—have pursued. I was able to persuade my own council, Newcastle City Council, then under the leadership of the noble Lord, Lord Shipley, to stage a benefits summit two or three years ago in which we brought together a range of people, some major public sector employers, such as the health service, trade unions, community groups and others, to look at ways in which we could promote a range of benefits. The council committed some resource to doing that. It certainly led to an increase on top of what was already being claimed. I think the figure was £8 million or £10 million, so it can be done.
The previous Government mounted take-up campaigns, usually advertising campaigns, but they are not actually all that effective. The increase in take-up from that kind of media campaign, with adverts in cinemas and perhaps on television, tended to be of the order of only about 1%. It did not have sufficient impact. What is needed is face-to-face or some kind of human contact at least, perhaps even at the end of a telephone, with people in the workplace and elsewhere promoting take-up. That is why the first part of my noble friend’s amendment is very important. It is hugely important to engage local charities, such as Help the Aged, although I think that merged into—
Yes, Age UK. I should know because I am the honorary president of the Newcastle branch. Perhaps I am suffering some of the consequences of advancing old age myself. But organisations such as that one are very much involved, along with Citizens Advice and other organisations. We have projects in my own ward dealing with problems of the elderly, and there will be organisations of that kind and different groups, such as Child Poverty Action Group. They are the first port of call, but they are facing huge extra demand anyway as a result of other changes currently in train, not least around legal aid and advice, so there is huge pressure on them in terms of delivery. But other organisations should be involved.
I come back to the workplace point. We have talked repeatedly about the working poor who are likely to face increased pressures; not even all the working poor by any means claim benefits, as we have already heard. It would be useful for local authorities to consult employers and trades unions and particularly public sector employers, who ought to have the highest sense of responsibility towards their workforce, to engage them in the process of helping people to claim their entitlement. Arguably, it is in the interests of any employer to do that, as employers might almost see this—although I am not commending this as an ethical approach—as a way in which to help people without having themselves to bear the cost of increasing wages. I would much rather see wages go up but, in the absence of that and in the present economic circumstances, it is perhaps unrealistic to expect them to do that. Employers could then at least be engaged in promoting this kind of take-up. Therefore, those parts of the amendment moved by my noble friend that talk about consultation with organisations should, as I am sure she would agree, embrace not just the charity or third sector but also employers and trade unions. People should also be connected to a proper estimate of the likely entitlement. It really is a matter for the Government to rethink their position if, as my noble friend has described today, they are simply not going to do that, which would be a gross dereliction of duty. It is bad enough that they do not seem to be interested in promoting take-up as a department; it is worse if they do not even want to know what the extent of the demand really is.
In respect of Amendment 81, I take the point made by the noble Lord, Lord Shipley. The sense of the amendment is that it would be in the totality of the approach to funding that the Government would be required to see that the discount scheme was capable of dealing with all eligible claimants. That would be our preference, but that does not necessarily mean that it should be directly funded by the Secretary of State. It would be a question also of the department seeking to know what is happening on the ground in terms of this range of 330 different schemes and different levels of discount. The principle is certainly worth looking at. Perhaps the amendment might need further refinement on Report. The noble Lord has a point, but so does my noble friend.
I hope that the Minister will look with some sympathy at this, and in particular that she will agree to take back to her ministerial colleagues the concerns that have been raised today. The noble Baroness is not responsible for the Department for Work and Pensions—not yet. I mean: who knows with a reshuffle coming? It is all possible and it would be welcome if someone with her experience and humanity were in that department. However, if she stays in her present post, it would be very helpful if she were to engage with her ministerial colleagues.
I am actually a little surprised at the noble Lord, Lord Freud, whom my noble friends found really quite helpful and sympathetic to these points when they spent a great deal more time than I did on the Welfare Reform Bill. It may be that this is something that has eluded his attention, in which case a gentle word in his ear from the noble Baroness might just result in a very welcome and necessary rethink on the Government’s part.
That is certainly necessary and very much a priority if any of us in local government are to be able to do the job of assisting people who desperately need it by tackling the problems of poverty and its associated issues, which in turn impose huge costs on the public purse. Let us not forget that this leads to greater expenditure on health and the other benefits that might accrue because of poverty of lifestyles, education and the like. It is actually an investment, not a simple expenditure, to support people in the enjoyment of a reasonable income that meets their needs. I hope, in that sense, that the noble Baroness will be sympathetic and engage with her ministerial colleagues.
My Lords, this has been an interesting discussion. The trouble is that it has been negatived to some extent by the fact that there are already duties on local authorities, as described. With regard to Amendment 80, local authorities already have a duty to consult persons whom they consider likely to have an interest in their schemes under paragraph 3(1)(c) of new Schedule 1A to the Local Government Finance Act 1992. That is inserted in the Bill by Schedule 4, so that is already there. I do not think we can start setting out on the face of the Bill all those people and organisations to whom local authorities might want to put their proposals, so the amendment is not necessary. I do not say that it is not a sensible point; it is, but it is not necessary.
Of course, local authorities will have to consider carefully the number of potential applicants when they design the scheme, so that they have a sound basis for their financial planning. However, I do not think, and I know that it will not be accepted, that creating a requirement for local authorities to do so would be particularly helpful. To create an additional requirement would duplicate what should already be standard good practice in their financial management.
The amendment also requires authorities to publish as part of the scheme the steps that they will take to ensure that people are informed of their entitlement and what assistance they will offer. The noble Lord, Lord Shipley, spoke in favour of that. Sub-paragraphs (1) and (5) of paragraph 2 of new Schedule 1A to the Local Government Finance Act 1992 already require authorities to set out the classes of person who are entitled to a reduction and the procedure for making an application. That seems to cover more or less what the amendment is about.
In fact, local authorities will want to ensure that those who are eligible for support claim what they need to, so that they avoid going into arrears with their council tax, which would not help them or indeed the local authorities. Again, to stipulate how local authorities should do that is to put an unnecessary requirement on them when they are already responsible for the administration of council tax generally and the provisions that already exist.
We are absolutely clear—and let me make this very clear today—that people should claim what they are entitled to. It is absolutely true that not all eligible pensioners or people who are eligible for benefits take them up, and there are a number of reasons for that that I am sure noble Lords could explain. One of the reasons is the stigma attached to council tax benefits. Some people say that they do not particularly want their personal circumstances divulged, however beneficial it would be for them, and not everybody knows how to tackle what is sometimes quite a complicated system, although I accept that there are many organisations available to help them. Under the Bill, those organisations will be available to take claimants through the system, and they will. There is no barrier to people making a claim.
As it designs its scheme, the local authority will have to take into account the fact that it may not have all the claimants available to it to start with. Part of the reason for putting this scheme of business rates retention and council tax benefits into the hands of local authorities is that it is expected and hoped that local authorities will continue to encourage enterprise and business, as many local authorities do at the moment, to get people out of benefits and into employment. We hope there will be a balancing act between those who need and are entitled to benefits and those who are perhaps just working their way through them on a temporary basis. However, how its scheme takes care of that is a judgment for the local authority.
When I was speaking earlier, I pointed out a fact that is relevant here: between 1997-98 and 2009-10, council tax benefits doubled. We are not talking about insignificant sums of money but about huge sums of money. We are trying to ensure that we get unemployment down so that those benefits are not required in the same way, but the 10%—
I am again seeking information as I do not know as much about this as other members of the Committee. When the Minister says that council tax benefit doubled over that period, is that before or after taking account of inflation? It obviously makes a great deal of difference.
My Lords, it is after taking account of inflation, so it is a very substantial increase. The 10% saving across the piece in the council tax benefit scheme is making a small contribution to help tackle the deficit.
Localising support for council tax increases financial accountability and helps to make local authorities fully responsible for decisions over council tax levels. They now have a requirement to make sure that that is transparent to people who are claiming it and to people who are helping with it.
Amendment 81 would not only prevent a reduction in funding to local authorities. It could, in fact, lead to an increase in government expenditure because it would require the Secretary of State to provide funds to cover all eligible claimants under a new local scheme, however the scheme had been designed. One of the things that would be quite difficult to work out is how many people are eligible for the benefit if they do not apply for it. The amendment is simply not credible or affordable. The saving scored in the spending review has to be delivered, and local authorities are charged with finding ways to deliver that.
It may be helpful if I tell noble Lords what they already know: local authorities will receive the same amount of money this year to support council tax benefits as they received last year, minus 10%. That will be fixed for seven years until the next business rates reset. Meanwhile, if they can get the number of council tax benefit claims down, if they can get people into employment, if they can make a scheme that goes across the whole of their business front, then from now on they will know how much they will get. It is extremely helpful to them because they can always work within those parameters.
My Lords, I am very grateful to all noble Lords who have contributed to this debate, and, in particular, to the noble Lord, Lord Shipley, for his very welcome support for Amendment 80. I shall come back to a point that the noble Lord made in a moment.
My noble friend Lord Beecham echoed my concerns about ending publication of the take-up statistics, which is currently being consulted on. It is still a proposal being consulted on, but I know at least one eminent professor who could not find it on the DWP website. It is quite difficult to get yourself into this consultation. I hope that the Minister will take this Committee’s concerns about the implications back to the noble Lord, Lord Freud, particularly with regard to the introduction of the universal credit scheme, which is being used as a justification for withdrawing the statistics. Improving take-up is one of the arguments being put to us for why universal credit will be an improvement on current arrangements. It seems very strange, just at the point when there is a big reform of the system, partly justified by reference to improving take-up, that there is a proposal to stop publishing those statistics. Perhaps the Minister could relay that back to the noble Lord, as I am not sure that he will necessarily read the report of these proceedings.
I am not very good at picking up regulation-speak and Act-speak. I am not sure whether the Minister was saying that the duty on local authorities will be the duty that I referred to—for example, a duty to do their best to ensure take-up—or whether it was a much weaker duty. I shall read the record, but I sense that it is not as strong a duty as we are asking for in terms of local authorities doing their utmost to maximise take-up of benefits. The current duty is to take such steps as appear to be appropriate for the purpose of ensuring that any person who may be entitled to council tax benefit becomes aware that he may be entitled to it. I do not think that what the Minister said was as strong as that. I shall look at it and I shall take on board the suggestions of the noble Lord, Lord Shipley, that if those duties are not strong enough, we will want to return to this on Report and take into account the suggestions being made about the wording of the amendment.
The noble Lord, Lord Shipley, made the point that I was trying to make very well. He talked about a conflict of interest. He said that that cannot be right. I do not think that the Minister addressed what I think is an ethical issue. It worries me because if they have the money fixed for seven years and if take-up improves, they will have to find other ways of finding the money. My noble friend Lady Sherlock pointed out that that might harm the very people we are trying to help. That is not necessarily an answer. As the noble Lord, Lord Shipley, said, not in all cases will authorities be able to find the money from second homes, single person discounts and so on.
I do not feel at all reassured. I thank the Minister for her very full reply, but I do not think that it dealt with—I am not sure that it could deal with—this fundamental ethical question about the conflict of interest that local authorities face, which was referred to by the noble Lord, Lord Shipley. I suspect that we shall want to return to this on Report.
Before my noble friend withdraws the amendment, will the Minister clarify something that she said in her reply to the noble Lord, Lord Greaves? She said that council tax benefit expenditure had more than doubled in that period. Can she clarify that she means that it has more than doubled in real terms? The noble Baroness nods. The reason that I ask is that it was not clear from the impact assessment, so I wanted to be clear that I had understood it properly.
Amendment 80 withdrawn.
Amendment 81 not moved.
81A: Schedule 4, page 58, line 32, at end insert—
“( ) Where the Secretary of State has agreed to make a payment on account in accordance with paragraph 26 of Schedule 7B, consideration shall also be given to the provision of additional funds for the council tax discount scheme.”
My Lords, I do not propose to detain the Committee long on this amendment, although it is influenced by the discussion we have just had about seven-year fixed resources. It deals with situations where the Secretary of State has agreed that an in-year payment is to be made under the safety net provisions of the business rate protection scheme. Such payments are to be made under regulations to be promulgated by the Secretary of State. The amendment requires that a payment on account under the safety net provisions should also be a trigger for consideration of additional funding under the council tax support arrangements. The point is obvious. As we have discussed before, the localisation of council tax support switches risk from central government to local authorities. That requires local authorities to estimate the effect of their local discount schemes, including take-up, on their band D equivalent numbers.
The challenges that that presents to local authorities in budgeting have already been discussed. In most instances, a significant, possibly catastrophic, reduction in the business rate base will have other consequences, which are likely to include employment—or, more likely, unemployment—consequences. Redundancies will place strain on the benefit system and certainly on any local council tax support scheme. Some of those events may be predictable, but some will not. They may be the result of decisions taken continents away. Some councils may be able to take the strain; others may not. All that the amendment would provide is a process which triggers consideration of additional funding being made available in-year to support unpredictable claims on council tax support schemes. I beg to move.
As the noble Lord said, this amendment is shorter than some others and would expand the scope of the business rate safety net into the council tax support scheme, so that there would effectively be a safety net for benefit, as there is for the business rate. The provisions we have made for the business rate safety net will ensure that no council’s retained rate income falls by more than a set percentage below its baseline funding. Business rates provide a significant revenue stream for local authorities, and unexpected volatility of rates could have a significant impact on an authority’s budget, so it is right that we make that safety net available.
However, revenue from business rates is of a different order of magnitude from the cost of council tax support. In 2010-11, the contribution of business rates to the pool—that is, the net yield after allowances for collection costs—was more than four times the cost of council tax benefit expenditure. During the passage of the Bill, comments have been made about the impact of a large local employer closing down—the noble Lord used that as his example—on business rate revenue and demand for council tax support. There is a distinction between the two. Although there is a clear, direct link between the closure of a business and a reduction in business rate revenue, the impact is likely to be more complex in relation to demand for council tax support. To take one example, employees may not be residents of the borough or the council area; they may come from a much wider area, in which case that will affect other local authorities instead.
Councils have greater control over their council tax support scheme than over business rates, although they are encouraged to make sure that those increase. They will be able to design their scheme to reflect their local circumstances and, particularly, to work with their major precepting authorities to agree an approach to managing risk. Authorities will be able to plan and manage council tax reductions carefully, just as they already do for many other vital local services. Mechanisms are already in place to share the effects of a reduction in council tax collection rates between billing and major precepting authorities. They will enable financial pressures which result from increases in demand for support to be shared. In addition, we are making provision in the Bill to enable billing authorities to arrange with major precepting authorities to vary the amount of precept to be paid in-year to reflect any shortfall in council tax receipts. This could help to protect billing authorities from financial pressure in-year, until they manage to get the matter sorted out.
I hope that with those remarks the noble Lord will feel able to withdraw his amendment.
I thank the Minister for her reply. Of course, I will withdraw the amendment as we are in Grand Committee. I accept entirely that the arrangements require an approach to managing risk and that, particularly in the early years, they will be new challenges for local authorities. They always have to manage risk, but the particular risks that come with the business rate retention and council tax support schemes are new and additional risks.
The Minister said that local authorities had greater control over their council tax support schemes. I accept that point, but they do not have that in-year control. One point that we will discuss at a later stage is the ability of the local authority to change and revise its council tax rebate scheme. My understanding is that it cannot do that in-year. If it can, I would be interested to know that. Even if it could, that would not necessarily help with the problem that we are trying to focus on here, when you have a catastrophic situation and a closure leads to big reductions in local employment. I accept entirely the point that it would not just be people in a particular locality; big factories, so far as they still exist, are likely to draw in labour from a number of authorities. In Luton about a decade ago when the Vauxhall car plant closed we saw what impact that had on the local economy. It would have had an impact on the council’s finances under these new arrangements. Having said that, I think that there is only so much merit in pressing the case and, for the time being, I beg leave to withdraw the amendment.
Amendment 81A withdrawn.
82: Schedule 4, page 58, line 42, leave out from beginning to end of line 13 on page 59
My Lords, I move Amendment 82, and will also speak to Amendments 86 and 93ZA in this group. This will take a few minutes, but I hope that your Lordships will find it worth while.
These amendments all relate to the devolution from central government to local government of decision-making about council tax discount schemes. The Committee has discussed extensively the principle of devolving responsibility for these discounts—the old council tax benefit—from the Department for Work and Pensions to local authorities. The noble Baroness, Lady Hollis, and others have made the case very eloquently that localising the support for those on low incomes has distinct disadvantages over it remaining centralised and becoming a part of the new universal credit arrangements. The Local Government Association, of which I am president, and some Members of this Committee, most prominently the noble Lord, Lord Deben, take a contrary view.
My amendments concentrate not on whether the arrangements should be localised, per se, but on the ways in which localisation can be made to work properly. The amendments are aimed at making the process of localising council tax benefit or discounts fit for purpose by allowing local authorities proper discretion to tackle the difficult position in which they are placed because of the requirement on them to save a further £410 million per annum.
My starting point in pursuing these amendments has not been so much about the principle of localisation but about addressing the implications of the cuts, which could mean taxing many poorer households throughout the country. If the £400 million has to be paid by those currently receiving council tax benefit, bringing them into the tax system where they have not previously been required to pay, those households must dip into other benefits provided for them to pay for their food, clothing, heating and so on. As I spelt out at Second Reading, these are the people who have gained the least from the boom years of the UK economy, and I am anxious that through this Bill their standard of living is not reduced further.
I recognise that I am not going to prevail in reversing a Treasury decision on cutting public spending. I have learnt from previous efforts to spare those on the lowest incomes from the imposition of the new bedroom tax in the Welfare Reform Act that even when your Lordships give wholehearted support to such measures, the other place is very likely to overturn the decisions taken in your Lordships’ House, no doubt using financial privilege as the basis for its objection. But while we may be powerless to prevent this latest reduction in support to local government, because of the overriding necessity for deficit reduction, we can influence the way in which that cut in funding is distributed. In particular, my hope is that we can amend the Bill so that local authorities can safeguard some of our poorest citizens from the necessity to start paying local taxes out of their very low incomes.
From the perspective of local councils, there are practical problems in being asked to raise revenue by reducing discounts on council tax for the poorest households. The cost of collecting council tax from those with no spare income is likely to be very high. Because arrears and the cost of prosecuting those who fall into arrears will be a serious problem, the amount to be found by each council is likely to be much greater than the headline figure of 10% of last year’s council tax benefit bill. Costs seem certain to grow as more people become eligible for help. The 10% CTB cut is clearly an underestimate of where this is all going, and it comes on top of the 28% of cuts in government funding which local authorities are already having to handle.
Amendment 82 and the consequential Amendment 86, which need to be read with the subsequent Amendment 93ZA in mind, start with the premise that local authorities, in facing up to the new cut, need to be able to use their discretion, creativity and sense of priorities in determining who should pay in their local communities. What irks local authorities, in being thrust reluctantly into the position of tax collectors from the poor, is that central government is giving them new responsibilities but denying them the autonomy to decide how best to discharge those responsibilities. In several respects, government is tying the hands of councils and requiring them to implement the cuts in centrally determined ways that are quite counter to the ethos of localism.
My amendments, put together by the Local Government Association, seek to liberate councils from several straitjackets prescribed by Whitehall and thereby to enable every local authority to do what it sees as best in its own local circumstances. Amendment 82 addresses the insistence by central government that current council tax support for pensioners be left alone so that any cuts in benefits fall wholly on those of working age. I have no desire to see the living standards of any poorer households, including any low-income pensioners, reduced at this difficult time. I would want to ring-fence all those least able to pay, as the current arrangements seek to do. But if I were to single out any one group for less harsh treatment, it might not necessarily be the pensioner group.
I say this for three reasons. First, since this is the largest group of claimants, excluding everyone in it has serious consequences for the rest. Pensioners account for 40% of claimants nationally and for more than half of those eligible for the present CTB in a number of local authority areas. In East Dorset, for example, 70% of claimants are pensioners. Preserving the status quo for pensioners hugely increases, and frequently doubles, the burden on the remaining households. Secondly, this Government and their predecessor have done more to improve the position of pensioners than has been the case for the poorest people who are below pension age. The recent IFS report, Pensioners and the Tax and Benefit System, points out that those over state pension age have seen their incomes increase more quickly than those of working age over the past 15 years. Measures such as winter fuel payments, free eye tests, free bus passes, prescriptions and TV licences have given extra help to pensioners.
The Government have also introduced a very important change that favours pensioners over those of working age—the so-called triple lock on the value of the state pension. This ensures that it will rise each year by the greatest of earnings growth, consumer prices index inflation, and 2.5%. But benefits for people of working age generally rise only in line with CPI.
The latest report on this theme from the Joseph Rowntree Foundation, produced by Professor Donald Hirsch, shows how benefits, excluding housing costs, income support and pension credit, now cover in full the income that independent assessment deems necessary for a pensioner couple to reach a minimum standard of living; that is around £235 per week. But current benefits obtainable by a young couple with two children achieve not 100% of the minimum income standard, but only 60%. The same goes for a single parent with one child, and for a single working-age person: the support from the state now covers only 40% of the minimum income that they require.
While I would have absolutely no desire to reduce the disposable income of pensioners, the case for treating them quite differently from younger people on the lowest incomes is not clear, and I am not taking into account that some income-poor pensioners are capital-rich and may be living in quite valuable homes while, of course, being eligible for council tax benefit.
Thirdly, the IFS report shows that pensioners will lose less on average than those of working age from the benefit changes now being introduced by the Government to deal with the fiscal deficit. I am very aware that it is pensioners alone who have been spared the other new tax for poor people—the bedroom tax on council housing association tenants who are deemed to have a spare room—and pensioners are most unlikely to be affected by the total benefit caps that will reduce support for many thousands of families with children. It is other groups that are currently being most affected by the newly introduced and forthcoming welfare benefit cuts.
Local authorities will undoubtedly want to protect some non-pensioner groups who are currently getting help to cover their council tax. The Committee has noted that the Government want vulnerable groups to be excluded. It is hard to see whom among those currently obtaining council tax benefit are not vulnerable. Clearly, the case for preserving existing support for disabled people is very strong and, as we discussed earlier, it may be illegal to discriminate against people with disabilities under equality legislation.
Similarly, families with young children may merit special protection, not least in pursuance of the legislation that aims to end child poverty and prevent homelessness. Many will argue, with good reason, that the help to carers should be fully preserved. Yet if all the cuts were then to fall on the working poor, the extra burden on those families on the edges of employment—the people to whom so much of the welfare reform agenda is addressed—would be quite disproportionate.
If council tax benefits discounts are going to be reduced for present claimants, clearly not everyone can be excluded. Amendments 82 and 86 would at least make it possible for local authorities, however invidious the task, to exercise their local judgment on where the axe should fall and use discretion in relation to all types of claimants, not just pensioners.
Let me now cut to the chase and explain how the amendments work alongside my Amendment 93ZA to resolve the tough dilemmas created by the Bill. The amendment joins Amendments 82 and 86 in removing other central government constraints on council tax arrangements, this time relating to the single person discount. That discount is a concession that benefits all single person households including those on high incomes. Putting my own cards on the table, I hope that if councils have the power to take their own decisions in these matters, they would avoid cutting council tax benefit for the needy groups that currently receive it and consider cutting the single occupancy discount at present fixed at 25%, which goes to millionaires and the poorest alike. A third of all properties get the single person discount. It is received by far more people than the council tax benefit discount. If it was reduced, local authorities would receive extra council tax from those able to pay and would not need to change the eligibility for council tax support for those on the lowest incomes. Then the Treasury could still save its £400 million-plus, but without hurting vulnerable and disadvantaged households, including low-income pensioners.
The Bill opens up the possibilities for councils to raise more tax on second homes and empty homes. I think this is welcomed throughout local government, but in many areas the opportunities for raising significant sums from second homes and empty properties is quite limited, and there are doubts over whether it will always prove possible to collect council tax where homes are empty because, for example, they have been repossessed and their owner has no money. Moreover, giving some discount ensures that owners are encouraged to register their properties as being unoccupied and thereby enables councils to take other action to get them back into use.
I have nailed my colours to the mast and suggested that the best extension to the flexibilities which the Bill is giving to councils would be to vary the level of discount for single occupancy. This is the big one when it comes to discounts, but it is not means-tested and clearly this concession is not targeted on those most in need of help. Moreover, it is not necessarily good social policy to reward single occupiers of, for example, large properties, yet the larger the property and the more valuable the property, the greater will be the benefit to the occupier of the single person discount.
What about the argument that the level of council tax should reflect the amount of use the property’s occupiers are likely to make of local services? It may be the case that one person living alone will require fewer services from the council than a couple but, of course, some single people may make much heavier demands than some couples, and this argument is no longer to apply in relation to empty properties and second homes where there are, no doubt, lower requirements for the emptying of bins and the provision of other services, but where this will no longer necessarily lead to substantial discounts if local authorities choose not to offer them in the future.
The Bill recognises that council tax is a tax on property, irrespective of the uses made of council services by those who occupy, or do not occupy, that property. I cannot think that there are any grounds for arguing that a discount should always be applied at a fixed 25% by local authorities in all areas to benefit all single occupiers.
I have been greatly helped in preparing for these debates by the report of the Institute for Fiscal Studies called Reforming Council Tax Benefit by Stuart Adam and James Browne, to which others paid tribute earlier. I am delighted that the Joseph Rowntree Foundation was the major funder of this work, once again proving the JRF’s considerable value as a source of support for independent evidence and analysis. The IFS report spells out the options which all local authorities should consider in devising a scheme of their own. It recognises that the option of cutting services still further after the 28% reduction in support from central government would be nigh impossible as well as unacceptable in most areas. Instead, it would seem infinitely preferable for councils to be empowered to look at ways of tweaking the single person discount. The LGA has estimated that cutting it altogether would raise some £2.3 billion more in council tax, well over four times as much as is needed to compensate for the cut in CT benefit. No one is suggesting a complete removal of this discount. The IFS has calculated that reducing the single person discount from 25% to 17.5%, but leaving all pensioners, whatever their incomes, unaffected would raise enough money to avoid the need for any council tax benefit cuts to existing claimants.
My preference would be for a reduction across the piece from the present 25% to 20%, embracing better-off pensioners just like anyone else and spreading the cost very widely and thinly. Poorer single people, including poorer single pensioners, would continue to have their council tax paid, as now, and only the better-off would face a change. The extra cost to those affected would be well under a £1 a week: IFS modelling of this option in Wales shows that a reduction of the single person discount from 25% to 20% would mean an extra £50 a year on average with, of course, less for those in lower value properties where council tax is smallest. As a result of higher incomes in England and a smaller proportion of occupiers receiving council tax benefit, these very modest costs would be lower in England than in Wales. Frankly, because of the cost of a fairly small reduction in the single person discount being spread over so many people, I suspect that few would notice the difference, particularly in areas where the flexibility on empty and second homes can raise some of the funds needed.
However, if individual local authorities wanted to use the flexibility which Amendment 93ZA provides in more sophisticated ways, the single person discount could be reduced on a differential basis. For example, there could be a smaller discount for single people in the most expensive band H properties, with a slightly lower reduction for those in band G, so spreading the load on a progressive basis. The discount could be retained at the full 25% for those in the lowest value bands. It would be entirely a matter for local authorities to determine the best arrangements for their area.
Raising the necessary funds to satisfy the Treasury by modifying the single person discount also addresses some of the key problems facing local authorities in this regard. This approach addresses the administration problem by being cheap to handle and the collection problem since it avoids having to chase very poor people for small sums of money, to say nothing of the legal and penal costs in pursuing those who do not pay. It removes the need for councils to define who is vulnerable or to make the terrible choices between groups in need as to who should pay. It ensures local authorities do not break the law by discriminating against certain groups. It would certainly help with the timing problem in getting a scheme up and running since no very great changes to IT systems and computer software would be necessary if the single person discount was simply applied at a different percentage to those already receiving this concession. Most of all, it would address the fairness problem by removing from councils the very onerous and, for many, very objectionable task of levying a tax on those least able to pay it and diminishing the living standards of those who are having the toughest time in this period of recession.
In summary, these amendments would give local authorities the flexibility to take local decisions on whether pensioners should be included in any changes to council tax discount arrangements and on whether the single person discount should be reduced. This would allow good judgment to prevail locally, and no new burdens would be placed on the poor and vulnerable groups currently helped by the council tax benefit. I beg to move.
My Lords, my noble friend Lord Tope and I have three amendments that are grouped with the amendment that the noble Lord, Lord Best, has addressed. He made a very compelling speech. If it really is possible to make the reductions he suggested in the single person relief that would eliminate the need to have to make difficult cuts across the board, particularly to those at the bottom end of the income scale—others have devoted a good deal of time in this committee to analysing those problems—it should be looked at extremely carefully. I must confess that I have not read the IFS report, but I have seen the figures produced by the LGA and they seem pretty persuasive. I look forward to hearing what my noble friend has to say about them.
The other theme from the noble Lord, Lord Best—and I say, in parenthesis, that he has absolutely no reason to apologise for the length of his speech, which was one of the most important speeches we have heard during the Committee stage—was the question of local discretion against central direction. It is to this that my three amendments are addressed. They do not have quite the sweep of the noble Lord’s amendments, particularly Amendment 93ZA, but they are nevertheless important.
Amendment 82A looks at the problem posed by Amendment 82, where the Government are making regulations—it is all on pages 58 and 59 of the Bill—to,
“prescribe classes of person which must or must not be included in a scheme”,
“prescribe reductions, including minimum or maximum reductions, which must be applicable to persons in prescribed classes”.
This is a sweeping arrogation of power to central government when in fact the whole philosophy of the Government, both in the Localism Act 2011 and indeed in this Local Government Finance Bill, is to increase the discretion of local authorities. I find this conflict very puzzling. One wonders what is moving my noble friends in Government to adopt this stance.
I addressed this issue at length during the course of the Localism Bill, and I certainly do not want to repeat everything that I said then. However, if one is going to allow, or say that one wishes to give, local authorities a wider choice and broader discretion because they are accountable to their own taxpayers, then to take that away by prescribing centrally what they must or must not do seems to me to be an inexplicable conflict. I do not understand the reasoning, except to suspect that people want to talk about localism but they do not actually trust local authorities to have that discretion. That, I think, is what lies behind this. If you are going to adopt a programme of localisation, proclaim it as such and hope to gain support from it, it seems disingenuous to say at the same time, “We do not trust them to do that responsibly.” This is something that the Government must address and the noble Lord, Lord Best, made a very powerful speech on this issue.
All that my Amendment 82A is saying is, “Please may we be assured that local authorities will be consulted before any of the powers in paragraph 2(9) are used.” This does not seem to me to be in the least bit unreasonable. If the Government are going to retain these powers, and it seems from the Bill that is what they want to do, they should at least consult local authorities before they do that. It could have quite a dramatic impact if the Government were to propose, for instance, prescribing a new class in addition to the pension credit beneficiaries. Am I not right in saying that when we have been talking about pensioners we have been talking about pensioners in receipt of pension credit? One has to be very careful. I am a pensioner, and I do not get any of the benefits, such as council tax—nor do I look for them, or expect them. We are talking about the poorest pensioners all the time, and we should make that absolutely clear. The idea that there could be more classes, which could be prescribed in the same way, seems very difficult to me and should at least be the subject of consultation.
Another point that I agreed with the noble Lord, Lord Best, on is that the commitment, given publicly, that no pensioner benefits will ever be taken away, seems a bit unreasonable. I declare my interest: I have a free bus pass, I get free prescriptions, and then people say, “You’re looking very well” and I say, “Yes, it’s the pharmaceutical industry that helps to keep me going.” Some of the benefits that one gets in cash form go straight to my favourite charities—but it seems to me unreasonable that these benefits should go to everybody, irrespective of how well off they may be. That is Amendment 82A; to consult is the least that we could ask.
My other two amendments here are essentially probing amendments. Amendment 88B raises a conflict to which I think the noble Lord, Lord McKenzie, referred earlier—the conflict of timing in having the requirement to produce a scheme for council tax support and the provisions of the Localism Act, which give the public the power to require a referendum if council tax is imposed at a rate that appears to be unreasonable. If the scheme has to be in force by a particular date and the council is seeking to levy a council tax, while recognising that because of the requirements it may have to put up that council tax and that that may be subject to the powers of a referendum, there is a conflict of timing there. I do not see how it would work. It has been suggested to me that one effect it will have is to make absolutely certain that a council does not conceivably put itself into the difficulty of provoking a referendum, which may be what the Government want. These seem to be two separate policies which have not been thoroughly thought out. It may be that I have misunderstood and I shall look forward to hearing my noble friend’s response.
Amendment 88D is the third to which the noble Lord and I have attached our names. Again, it is about central government taking what seem to be quite excessive and unreasonable powers. Yes, there have to be transitional arrangements, but surely to goodness local authorities could be trusted to make those arrangements themselves. Why do the Government need to have the powers to prescribe transitional provision for the commencement of local schemes? It is the same phenomenon: they do not trust local authorities to do it.
I am now an unabashed supporter of localism and at our last sitting my noble friend Lord Deben, if I may say so, made a tremendously powerful speech on that subject. He was a very much better Secretary of State for the Environment than I was and I listened to him with fascination. However, that is my view too and I utterly support it. It is quite inconsistent for the Government to be taking these centralised powers, over even such things as how the transitional arrangements are introduced. Is that necessary? Yes, this is a probing amendment but please could we have an answer? I think what we are all looking forward to is the answer to the fascinating proposals from the noble Lord, Lord Best, about the level of the single person benefit.
My Lords, my name is with that of the noble Lord, Lord Jenkin, on the amendments to which he has spoken and I endorse all that he has said in speaking to them. I also endorse strongly what he said in relation to the amendment moved by the noble Lord, Lord Best, to which I am extremely sympathetic. The noble Lord, Lord Jenkin, is right to say that the noble Lord, Lord Best, has made a powerful case. Perhaps I might also reflect on what the noble Lord, Lord Jenkin, said in his conclusion. I certainly do not want to adjudge who might or might not have been the best Secretary of State for the Environment—I am not going into such dangerous territory—but he is absolutely right in his enthusiasm for localism. Localism means that you have to trust local authorities. Inevitably, some local authorities will sometimes take decisions with which many of us might disagree, but that is also what localism means.
We had what I thought was a very helpful letter this week from the noble Earl, Lord Attlee, to the noble Lord, Lord McKenzie, which answered many of the points that were made in our session on 10 July. In the noble Earl’s letter of 16 July, he said that,
“the very point of localisation is that it is the council who has the greatest insight into council tax payers in its area, their ability to pay council tax and should take these decisions”.
Before that he said:
“Local authorities will be able to take their own decisions about the design of schemes”.
Elsewhere in the letter he says that local authorities,
“are best placed to take decisions about who should receive support”.
That really makes the case for our amendments and perhaps I should just sit down, saying that the Minister has made the point for us. That is at the heart of this argument. If we are to have localisation of council tax support—there are varying degrees of enthusiasm for that although I think we all accept that it is to happen—then that is what we should have. However, paragraph 2(8) of Schedule 4 gives the Secretary of State power to make regulations prescribing requirements for schemes. Paragraph 2(9) mentions all the things that those regulations may cover, including prescribing,
“classes of person which must or must not be included in a scheme”.
It has been made very clear that the Secretary of State intends to prescribe that people of pensionable age will be excluded from this. That may or may not be right, but to me that does not meet the test of localism set out very fully by the noble Earl, Lord Attlee, in his letter. In no way does that leave local authorities best place to take decisions about who should receive support and in no way does it recognise that local authorities are in the best position to judge what is appropriate for the needs and circumstances of their area.
I do not think that we should be debating here whether pensioners or any other group of vulnerable people should, or should not, be protected if we believe that it is localism. That is a decision for local authorities that are best placed to judge the circumstances in their local area. If we mean localisation, I do not think that is a decision for Parliament or the Government. That is a consequence of localisation. If the noble Baroness, Lady Hollis, were here now, she would probably be feeling a little agitated. We need to recognise that as a consequence and know where those decisions are to be taken.
The noble Lord, Lord Best, has raised the very important issue of the single person’s discount. I very much agree, not that Parliament or the Government should take that decision, but that the local authority should be given the flexibility to consider that in their armoury when dealing with this issue, just as they will have the very welcome flexibility with empty homes and second homes, the single person’s discount, part of which, of course, is recognising that council tax is not just a property tax but, in a small part, is a personal tax. That flexibility would be very important indeed. I hope that the Government will give very serious consideration to that during the coming month or two before Report stage.
When considering this sort of legislation, we always have to consider, not what the situation is now, but what it will be for the lifetime of the Bill that we will eventually enact. We will not have forever the present Secretary of State with his very well known commitment to localism and his benevolent approach to these matters. One day, there may be another Secretary of State—who knows, that day may not be so far off—who takes a less benevolent approach. It is to that future Secretary of State that we are giving pretty well unfettered powers to do whatever he or she may choose to do with this scheme, to impose it on local authorities, with no requirement even to consult. That, as my noble friend Lord Jenkin said, is the least modest requirement of Amendment 82A.
Amendments 88B and 88D, also in my name, as he rightly said, are probing amendments. I think he made the case on those very well indeed. As they are probing amendments, I look forward to hearing the results of our probe when the Minister replies. The key issue before us in this debate is what do we really mean by localisation and localism and do we really trust local authorities with the armoury of powers available to them to make those decisions without the benevolent eye of the Secretary of State telling them what they can and cannot do.
My Lords, this has been a good debate. We heard a very powerful speech from the noble Lord, Lord Best. We have acknowledged in this Committee, on the Welfare Reform Bill and other committees his principled and powerful leadership on a range of important issues but I am sorry to say that we cannot travel the whole of the journey that he outlined for us today on this particular occasion.
I will come to Amendment 93ZA shortly, but our starting point is different. Although we have supported localism across a whole range of areas, our position on council tax support or council tax benefit is that it should be part of universal credit. If that is not possible, it should be a national scheme. That is the right way to structure it. Therefore, anything that moves us away from that position creates difficulty for us.
If Amendment 82 is carried, it would not only deal with the issue of removing the powers in relation to pensioners, there is a whole range of other issues that it would cover. We should look at the draft regulations, which we now have, which cover things such as temporary absence from the UK, persons treated as not being in GB, persons subject to immigration control and a whole raft of things which if central government do not put down the rules, would be pretty nigh impossible for local authorities to deal with consistently. Whatever improvements there may have been for pensioners, we do not want to diminish their current living standards. We are talking about those on council tax benefit: we are not talking about rich pensioners so far as this is concerned.
Amendment 82A in the name of the noble Lord, Lord Jenkin, is simply about consulting. It seems entirely reasonable: one could never really object to a process requiring consultation. The noble Lord, Lord Jenkin, also spoke to Amendment 88B. When I referred to it earlier, I had a slightly different take on it. His particular point is its interrelation with potential council tax referendums and how that timing works. Like the noble Lord, I would be interested to understand the Minister’s response on that. But there is another issue, which we touched on earlier. If you need to fix a local council tax support scheme in-year because you realise that something is going wrong—because you do not have the data right or you have the wrong amounts—what is the process for being able to change that in-year rather than having to wait for a year and change the scheme in January to operate in the subsequent year? That is a problem.
On Amendment 88D, if we are talking about transition provisions between council tax benefit and localised council tax support, there must be a role for the Secretary of State or for those currently responsible for the benefit system. Part of it would be how you would deal with back-dated claims—for example what happens across the dividing line? That cannot just be left to the individual decisions of local authorities. Surely, central government is entitled to have a say in that because it impacts on their bit of the council tax benefit system.
We had a preview of Amendment 93ZA from the noble Lord, Lord Best, on Monday. As we know, the discount is currently set at 25% in legislation, but with a power for the Secretary of State to change the percentage. It is not one of those things currently subject to local discretion. The origins of the policy set out in the helpful note provided by the Lords Library—and endorsed by my noble friend Lady Hollis, who was involved in creating the legislation at the time—explains that council tax consists of two elements: 50% being a property element and 50% a personal element. The personal element assumes two adults resident in a property. In circumstances where only one is present, a 25% discount is given. That is how it is derived.
The noble Lord argues for the setting of the percentage to be devolved to local government, particularly the billing authorities, consistent with the Government’s localism agenda and the provisions to them of powers to settle discounts for empty properties and second homes. Any change from the 25% discount might be argued to undermine the integrity of the council tax system, although in the context of broader things this might not be the most important issue. If the starting integrity of the system is to change, should that be done on an ad hoc basis at local level or does the responsibility rest with the Secretary of State? At local level, there is no opportunity to redistribute on the basis of need the extra revenue that change in the discount would engender.
Noble Lords have, as we have, referred to the IFS report, which analysed the proposition of a reduction of the discount to 17.5% but with pensioners being protected—and seemingly no other vulnerable groups being protected. It is not a proposal: it is simply an example of how it might work on the basis that the change would garner revenues that in total would match the 10% cut that the Government seek to impose. But that is not distributed evenly between local authorities. It would raise, for example, 14% in London and almost as much in the south-east, but only 8.5% in the north-east. On the IFS example, 20% of people in the poorest income decile would lose out. The big losers would be single people and lone parents in work.
So there are issues about going down this path, and those issues would be exacerbated and much less comprehensively addressed if done on an ad hoc basis at individual local authority level. We have not had the opportunity to study the distribution analysis of the noble Lord’s proposition, which we should clearly do before Report.
There may be a case for the Government to address the appropriateness of this relief and if they are to do so, to see how the revenues might be redistributed on the basis of need. But any change to that has to be done at national level. Dealt with at individual local authority level, it could certainly generate inconsistencies and distributional effects that we would not, overall, be comfortable with. I am afraid that on this particular amendment we are not able to follow the noble Lord.
My Lords, I thank all noble Lords who have taken part from all sides in debate on the amendment. I hope that I will be able to provide some reassurance as we go through that all is not quite as terrible as has been put forward.
Before discussing the detail of these amendments, it might be helpful for me to set out the Government’s intentions in relation to regulations. On regulations in general, it is not our intention to prescribe closely the operation of local schemes in relation to working-age claimants. The Government have said that local authorities should have flexibility in relation to their local schemes. That is why very few elements of schemes in relation to working-age claimants are intended to be prescribed and any that are will be largely administrative.
The Government have been clear from the outset that we intend to protect pensioners from any reduction in support as a result of this reform, and support for that has been expressed on both sides of the House. This policy will be given effect through regulations. I confirm that low-income pensioners will be protected.
The default scheme, which we will discuss in detail when we come to group 38, is intended as a legal backstop to ensure that local authorities cannot avoid their duties to bring forward a scheme and so fail to offer any support to those in financial need in their area. That will be prescribed in regulations.
The Government also intend that, in line with wider government policy and existing council tax benefit arrangements, non-EEA nationals who have leave to enter or remain are subject to a prohibition on accessing public funds, and those nationals who are inactive or do not satisfy the habitual residence test will be treated as not being in Great Britain and will not have an entitlement to council tax reduction. We think that this is important to avoid cost pressures on local authorities, and will give effect to it in regulations.
As noble Lords will be aware, we have published statements of intent setting out what we intend to provide in regulations, and have published draft regulations for the default scheme and prescribed requirements, so there can be no doubt as to our plans.
I turn to the amendments. Amendment 82 would remove the ability of the Secretary of State to prescribe requirements for schemes by regulations under paragraph 2(8) of new Schedule 1A. The Bill provides that the Secretary of State may prescribe, in regulations,
“other requirements for schemes”.
As has been referred to many times, the Government have published a detailed statement of intent on regulations. That explains that this power will be used by the Secretary of State to impose requirements on authorities to make provision in their schemes for people of pension credit age—those who are referred to as pensioners—to exclude certain people of limited immigration status from schemes, and to put in place any key administrative requirements for all schemes.
The Government have made it clear that they intend to use prescription to retain, for pensioners, the criteria and allowances currently in place for council tax benefit. The Government have been clear that pensioners who have worked hard all their lives and have had no opportunity to increase their income, should not experience a reduction in support as a result of the introduction of this reform. The Government will achieve protection of pensioners by prescribing a rules-based scheme in regulations. As at present, that will be means-tested, so the amount of support will be based on individual circumstances and changes of circumstance will also be taken into account.
In protecting pensioners and giving consideration to the design of their local scheme, billing authorities will, of course, have choices about how they manage the reduction in funding under the reform. They will be able to choose whether to pass the reduction on to council tax payers, use flexibilities over council tax, or manage the reduction within their budgets.
The Government also intend that, in line with wider government policy and existing council tax benefit arrangements, people from abroad not currently eligible to apply for council tax benefit for the reasons I outlined before will not be able to apply for council tax reductions.
Finally, the Government set out in their statement of intent that they also intend to prescribe for all schemes a small number of administrative regulations and powers currently provided for under social security legislation and which will need to be provided for in future under the regulations we bring forward for council tax support—for example, the requirements for applicants to provide adequate information to local authorities in support of their claims.
The recent publication of draft regulations covering the default scheme and prescribed requirements, including requirements for pensioners, should put beyond doubt the Government’s intention in relation to prescribed requirements and the operation of the default scheme.
I therefore see no benefit in Amendment 82, which would leave low-income pensioners vulnerable to increased council tax bills. Persons currently unable to claim council tax benefit can benefit from local council tax reduction schemes, and mean that local authorities would not be required to put the effective arrangements in place for administering such schemes.
My noble friend Lord Jenkin referred to consultation. Amendment 82A would require the Government to consult on regulations prescribing requirements for schemes.
I recognise the importance of external scrutiny of our plans for the detailed framework by which local authorities will be required to operate their schemes. That is why, on 17 May, the Government published the statements of intent for the key regulations to deliver that policy and further statements of intent on data sharing and fraud on 9 July. They provide an opportunity for us to engage with local authorities on the detail of our plans before draft regulations are brought forward, and provide them with the key information that they need to develop those schemes. That will provide further clarity on the content of the regulations and enable local authorities and other professional groups to scrutinise them while in draft form. It will also make clear how we intend to use the key regulation-making powers in the Bill, while it is subject to consideration in this House.
Given the publication of statements of intent and draft regulations, there is no need for the additional requirement to consult local authorities that Amendment 82A would impose.
Amendment 86 would remove the requirement for the default scheme to be compliant with regulations made under paragraph 2(8) of new Schedule 1A to the Local Government Finance Act 1992. Under paragraph 2(8), the Secretary of State may make regulations prescribing matters for schemes. The Government’s intention, again set out in the statements of intent published in May, is that matters covered by the prescribed requirements for all schemes should have identical treatment in the default scheme. This relates primarily to the treatment of claimants of pension credit age, and persons from abroad of limited immigration status.
The matters included in the default scheme will differ from the prescribed requirements for all schemes only in that the default scheme will also include provision for matters on which the prescribed requirements are silent, and over which local authorities will have freedom, in particular the design of the scheme for working-age claimants. I do not think that it would be helpful for the prescribed requirements and the default scheme to take a different approach to dealing with the same matters. I see no benefit to local authorities or local residents in my noble friend’s amendment.
Amendment 88B would remove the deadline of 31 January for making revisions to or wholly revising schemes. The Government are clear that schemes cannot be amended in-year but that changes may be made between years. It is necessary to set a deadline of 31 January for revisions to schemes to provide certainty to council tax payers about when a final scheme will be issued. To remove that deadline, as Amendment 88B would do, could create significant uncertainty for low-income groups concerned about what support they will be able to claim.
I understand that the intention behind this amendment is to probe whether the Government have considered the impact of the legislation on the local authority budget and council tax-setting process, particularly given the current power for local residents to veto excessive council tax increases under the Localism Act 2011. The noble Lord can be assured on this point. Local authorities will need to take account of the potential impact on council tax when designing their schemes. They will already know their provisional funding allocations, and the Government expect to have published the proposed referendum principles at the same time as the provisional local government finance settlement. The need to consider the affordability of the proposed scheme and its impact on council tax is no different to taking decisions about the level of funding for other services and their potential impacts on council tax.
It is correct to say that it will not be possible for local authorities to go back and change their scheme if a referendum is triggered, and a council tax increase vetoed, but it is absolutely right that we do not create unnecessary uncertainty for people in financial need about the amount of support that they can claim.
Amendment 88D would remove the powers under paragraph 9 of new Schedule 1A for the Secretary of State to make transitional provisions in relation to the commencement of reduction schemes. That was also included in the statement of intent published in May, which set out the Government’s intention for the transitional provisions. We have discussed some of them before. It is intended that regulations will provide that a person who is in receipt of, or has made an application for, council tax benefit immediately before 1 April 2013 is to be treated as having made an application for a reduction under a local scheme.
This provision will remove the need for claimants already in receipt of, or who have already applied for, council tax benefit to have to apply for a reduction under a local council tax reduction scheme. This is a sensible measure, which will minimise the administrative burden on claimants and local authorities. Regulations will facilitate billing authorities’ use of existing council tax benefit applications and information in calculating reductions for council tax bills for local council tax reduction schemes in 2013-14.
On Amendment 93ZA, perhaps I ought to declare an interest not as a millionaire but as someone who receives the single person reduction. This amendment would give individual local authorities discretion to change the rate of the council tax single person discount from the current 25% and potentially to offer no discount at all, although I know that was not quite what the noble Lord said. He suggested that there might be a discount of lower than 25%.
The technical reforms to council tax in the Bill will help local authorities keep the overall level of council tax down and will thereby support the hard-working and vulnerable bill payers. Changing the single person discount would not be in keeping with this intention. Although the amendment would offer local authorities some additional flexibility, it would be a potential tax hike on 8 million people, hitting single parents and some lone pensioners the hardest. This discount has been in place since council tax was created and has wide public support. The amendment would also affect the operation of the discount for empty dwellings as the discount that applies when there is no resident could be varied by the billing authority. This change is not necessary as the Government have already planned to extend local authorities’ discretion over discounts for empty dwellings to allow them to set a rate of anywhere between 0% and 100%. The noble Lord will perhaps not be surprised to hear that the Government cannot support the amendment.
In summary, the Government have been clear about how they intend to use their regulation-making powers and, in particular, that they intend to follow the existing system in prescribing support for those of pension credit age and excluding foreign nationals from support. I do not imagine that the noble Lord intends to increase the administrative burden on local authorities and claimants, which would be the effect of Amendment 88D, or to allow support for pensioners to be reduced, which would be the effect of Amendment 82. I am sorry that that was rather a long explanation, but I hope that it will help the noble Lord to withdraw his amendment.
My Lords, I am grateful to the noble Lord, Lord Smith of Leigh, for putting his name to my amendment. I am very grateful to the noble Lords, Lord Jenkin and Lord Tope, for their support. The noble Lord, Lord McKenzie, is unable to support the amendment because of the combined effect of the two amendments. I shall respond to his objections, since I hope for support from his side. He objects in principle to the idea that localisation is a way to deal with this issue. That is a fundamental disagreement of principle, and I understand that the Committee is divided on that point. However, if he is unable to secure the amendments he wants to ensure that localisation does not come about, as a fallback, he and his colleagues might consider whether the lesser evil here would be found in allowing local authorities greater discretion to do what they might see as the right thing with the powers that they are going to be given.
The noble Lord makes the point that there is a historic basis for what sounds like a rather pseudo-scientific formula for calculating the 25%. The 25% here is a human invention, based on an assumption that there will be two people in the home and that half of this tax relates to the provision of services. Therefore, if there is only one person, and if one calculated this on a basis that more accurately reflects the real composition of households—and households have got smaller, as we know, over the years—I think that having 1.8 people in the home, and halving that, would create the same position as I find myself in. The precision of a 25% reduction for this purpose is entirely artificial and could be changed if anybody wished it so.
The more serious objection made by the noble Lord, Lord McKenzie, was that this would bring more people into having to make a larger payment than they do at the moment. The average cost across the piece of a reduction from 25% to 20% might be something like 90 pence per person. People in the lower bands, who pay less council tax and for whom the 25% is therefore a lower amount, would have to pay a rather smaller sum than the 90 pence or so per week that would be the average across the piece. I still take the point that some people at the lower end might find themselves paying perhaps 50 pence a week more than they would have done to save people poorer than themselves from having to have their council tax benefit reduced. However, it would be possible to nudge the scheme so that those in the lower council tax bands were not affected and remained at 25%.
As the noble Lord rightly says, more distributional analysis is needed of how one would work it to try to ensure that people on low incomes were not losers in that respect, while still keeping the payment that the rest might have to make at less than £1 a week as a target of the additional cost. That distribution sounds so much more preferable than targeting £3 or £4 a week on the poorest, who currently will have to pay the price of this.
The Minister talked about protection for pensioners. She is very keen that pensioners are not to be harmed by these new measures, as am I. My point is that other vulnerable groups also deserve our attention. Pensioners may not have done as badly as some other groups in terms of other benefit cuts and other ways in which the tax and benefit system have worked over recent years. If it is so obvious to all of us that pensioners need to be singled out, why not allow local authorities, which will no doubt come to that judgment on their own, to make that decision, rather than pre-empting them deciding whether spreading the load more evenly across pensioners would be seen as a preferable route in their own local communities?
I feel entirely dissatisfied that my remedies for trying to ensure that these measures are not harmful to people on the lowest incomes are not meeting with universal approval. However, at this stage, I beg leave to withdraw the amendment.
Amendment 82 withdrawn.
Amendments 82A and 83 not moved.
83ZA: Schedule 4, page 60, line 1, leave out sub-paragraph (4)
I can deal with this more briefly than the previous debate. I to some extent share the disappointment of the noble Lord, Lord Best, at the reaction that he got from both Front Benches. Amendment 83ZA is a probing amendment to ask whether we really need to prescribe in this way the details of how a local scheme should be produced, or when the scheme is revised or replaced.
There are very good reasons why, once a scheme is up and running, the local authority should be perfectly able to decide if and when revisions are necessary. If they are going to have true discretion and flexibility over the provision of local support schemes, the procedures relating to the preparation of the schemes and their revision should also be under local control. I beg to move.
My Lords, this particular amendment finds me echoing the words of the noble Lord, Lord Jenkin of Roding, that the Secretary of State is being required to get involved in minutiae. If one looks at the five regulations in paragraph 3(5), one almost finds that local authorities are being required to photocopy both sides of every piece of paper, put first-class stamps on everything and so on, and this is mollycoddling of the greatest degree. If we are talking about localism, the idea that the Secretary of State can suggest to any local authority that they should do things in this manner tends to assume that it is made up of idiots who cannot run anything. That really is the opposite of localism.
This is little more than a probing amendment, as the noble Lord, Lord Jenkin of Roding, said, but one that goes very much to the heart of localism and the Secretary of State’s tendency to get involved to a completely unnecessary degree.
My Lords, Amendments 84 and 87 stand in my name, but I shall first address the issues in Amendment 83ZA, which has just been spoken to. It goes without saying that I support Amendment 88 in the name of my noble friend Lady Sherlock.
As far as Amendment 83ZA is concerned, we are not enamoured of the Secretary of State having a raft of central powers, but we have to balance this against our concerns about a fragmented system. With the prospect of hundreds of different authorities adopting hundreds of different schemes, all with different criteria, some standardisation of approach has merit. For example, the form and content of documents to be produced raises the question of what distributional analysis should be included and what the requirements should be for a general impact assessment and indeed an equality impact assessment. Having some central guidance on these matters may help to head off problems of potential judicial review for some councils.
Amendments 84 and 87 continue the theme of the default scheme which, as we have discussed, has now been produced in all its glory—all 155 pages of it. Despite its lateness, it has moved us on. It has been difficult in the time available comprehensively to absorb its content and to read across the existing council tax benefit provisions, and we have an outstanding question to the Minister from our earlier amendment about where the default scheme has not been able to replicate existing arrangements. However, given that Amendment 84 is just a probing amendment, I am content to proceed on the basis that any discrepancies or differences are minimal, and that the first part of the amendment has been addressed.
That being so, we are seeking from the Government their view of the protection that their scheme provides to vulnerable people. What, on the basis of 155 pages of regulations, is included in the default scheme for vulnerable people and how does the default scheme address their needs? In this age of austerity, we presume that the Government would not sanction any scheme that provides superfluous or excessive relief, so we are simply asking them to spell out how they are providing for vulnerable people in the default scheme and which aspects of the scheme provide particular support for which groups. Given that the Government have made judgments about who should be protected by the default scheme, they should have a view about who should be considered under local schemes. The amendment does not require any local authority to follow the Government’s view on this; they can exercise their own judgments, but should be able to do so armed with the knowledge of why the Government have made certain decisions.
My Lords, perhaps I may crave the Committee’s indulgence and go back to an issue that we discussed at our last meeting. Although this is not technically about the default scheme, it is about vulnerable people and about carers. The Minister very kindly wrote to my noble friend Lord McKenzie and copied the letter to other members of the Committee. It responded to our concerns about carers not being mentioned as a vulnerable group. In her letter, the Minister said,
“The guidance we have published on the statutory requirements in relation to vulnerable groups does not refer to carers”—
as we said—
“but as was made clear in the discussion, it is not intended to be exhaustive”.
The guidance talks about disabled people, duties under the Child Poverty Act, homelessness, and even the Armed Forces covenant. When local authorities have ticked all those boxes, and when they have addressed the requirement on them to take account of work incentives, very few local authorities will say, “Hang on, let's see if there are any other vulnerable groups that we should be thinking about”, and turn their attention to carers.
I ask the Minister to take this away, not to put it on the face of the Bill, but perhaps the department would consider reissuing the guidance so that it specifically mentions carers among vulnerable groups. I have not heard the Minister say anything to suggest that she does not think that carers are a vulnerable group. So if the Government accept that carers are a vulnerable group, and as we do not have concern for any other vulnerable groups that are not mentioned in the guidance, is there any reason why they could not be put in the guidance? My fear is that, yet again, carers will be overlooked.
My Lords, I thank my noble friend Lord Jenkin and the noble Lord, Lord McKenzie, for their amendments and the noble Baroness, Lady Lister, for Amendment 88, which stands in her name and that of the noble Baroness, Lady Sherlock.
It might be helpful, once again, to explain the Government’s intention in relation to the default scheme. I have done this a couple of times already today. The Bill provides that a default scheme should come into effect only where a billing authority fails to adopt a scheme before 31 January 2013. This is intended as a safeguard, to ensure that where a local authority fails to adopt a scheme by the deadline, there is still provision for people in financial need in that authority’s area to receive support with their council tax.
This scheme will be provided for in regulations and the Government have been clear that this default scheme should retain the criteria and allowances currently in place for council tax benefit. To this end, the Government have published a detailed statement of intent, setting out how they expect to provide for the default scheme in regulations, and confirming that the intention is to recreate, as far as possible, the current council tax benefit system in operation. Monday’s publication of draft regulations covering the default scheme should put beyond doubt our intentions in relation to the operation of the scheme.
These regulations also give an indication of how the default scheme will deal with claimants on universal credit, which we were discussing earlier. Regulations will need to take account of these claimants, but because of changes in the underlying calculation of the universal credit award, there may be some possible changes in the level of council tax support for those moving to universal credit. This is as a consequence of wider changes to benefits and the design of universal credit, and not a direct consequence of localisation. It is not intended that the default scheme will provide for any reductions in support where there is no change in circumstances; for example, which might be because someone has moved from an existing benefit to universal credit. Local authorities will still need to manage the 10% reduction in funding and there will therefore be a strong financial incentive for local authorities to avoid the imposition of a default scheme, as this will limit their ability to adjust awards to manage the funding reduction.
Amendment 83ZA would remove the default scheme from the Bill altogether. For the reasons I have explained, the amendment cannot be accepted. The default scheme is designed to be a safeguard to ensure that where a local authority fails to adopt a scheme by the deadline, there is still provision for people in financial need in that authority’s area to receive support for their council tax. That safeguard needs to remain in place.
Amendments 87 and 88 are intended to guarantee that under the default scheme there will be no reduction in the level of support for working-age persons and to put in place transitional protection for the persons whose support is reduced under the terms of the default scheme. Amendment 84 seeks similar protection for vulnerable groups.
I agree with the intention behind the amendments, but the Government already fully intend that the default scheme will retain the current criteria and allowances and do not intend there to be any change in the level of award where an individual’s circumstances are unchanged. In May, the Government published a detailed statement of intent on the default scheme, explaining that this will closely follow existing council tax benefit regulations, so the amendments are unnecessary.
The noble Baroness asked whether the statutory guidance would include carers. I think that is probably not necessary. The difficulty is that once you include carers, you have to include a whole lot of other people, which reduces the discretion.
The point is that a whole lot of other people are already in the guidance that has already been issued. I am not sure whether it is statutory, but I worry that so many other groups are mentioned. I know that the list is not exclusive, but carers should be in the list because if they are not, they will be overlooked. I am not asking for any change in the statute or for the noble Baroness to give an answer now but for her to take it away to consider whether the department could reissue the guidance so that it explicitly mentions carers.
The whole Committee will be grateful to my noble friend for her careful answer to the points made in the debate. We shall want to read carefully what she has said and, if so advised, to return to the matter later. Before I withdraw the amendment, perhaps I may say that I am about to withdraw myself. I have to make preparations to get off to celebrate my diamond wedding in Scotland. I hope that I may be forgiven. With that, I beg leave to withdraw the amendment.
Before the noble Lord withdraws his amendment—I would not wish to keep him from his celebration and we pass on our best wishes to him for it—I note that, again, the Government refuse to give any practical help to local authorities on the issue of vulnerable people. We know why that is, as they are leaving local authorities high and dry to make those difficult decisions, not wanting to take any responsibility themselves. That will be a continuing theme of the Bill, and I am sure that we will return to it.
My Lords, I cannot let that go unchallenged. It has been clear from the outset of the discussion on the Bill that the intention is to give local authorities the maximum flexibility to decide how they want the scheme to operate. The noble Lord may not agree with that, but it is not the intention of the Government not to give support but to ensure that local authorities manage their own affairs.
In a sense, the noble Baroness is saying that the Government are imposing on local authorities the judgment on whether to help vulnerable people at the expense of slightly less vulnerable people. If the Government are imposing such decisions, they should take responsibility for making those judgments.
Amendment 83ZA withdrawn.
83A: Schedule 4, page 60, line 18, at end insert—
“( ) If a local billing authority is subject to judicial review in respect of a failure to complete the steps set out in sub-paragraph 1 because of any delay in the issue of regulations or guidance, or in the coming into force of this paragraph, the Secretary of State shall reimburse the authority for any costs incurred in connection with such a review.”
My Lords, this should be a fairly short debate. Given the limited time for consultation, particularly the limited period between now and the end date of January by which schemes have to be approved, the risk exists that some councils—particularly those in shire county areas, to which my noble friend Lady Hollis has referred fairly frequently throughout the Committee—will have difficulty in conducting a full consultation process. The Government have indicated that the normal three-month period may be reduced. However, in any event we will have a summer month—well, a month—when people are likely to be away. August is almost upon us, and that is not a good time to engage in proper or full consultation with the range of individuals, organisations and precepting authorities that will be required, particularly in the shire county areas.
Given the proliferation of schemes we are likely to see, there is therefore a danger that when people begin to compare one with another, as they no doubt eventually will, there may be a challenge to some authorities’ schemes. That will perhaps be in good part because the local authority has not been able to consult as fully as it would have wished or would be expected to do. Since that would be a consequence of this government-imposed timetable, particularly its start and end dates, it seems only reasonable in that event—providing that a court would be satisfied that it is a question of the externally imposed timetable, rather than any culpability on the part of the local authority—for the Secretary of State to reimburse the local authority for any costs.
I hope that this is an academic point and will not materialise in practice. It may be that the Bill is not necessarily the place for it. However, I seek some assurance from the Government that if an authority is caught out in these circumstances, they would look sympathetically at its plight and seek to make good any cost to the authority incurred otherwise than by its own neglect. That is because any additional costs will ultimately fall not upon the council but upon the very council tax payers for whom these benefits—or discounts, as they will become—are intended in the first place. That would be reasonable; there should not be many cases, but there may be some. It would be hard on an authority for its council tax payers to have to bear that cost, particularly in the shire districts that have to consult with a number of precepting authorities, including their county. I hope that the Minister will look at that position sympathetically, not necessarily in the form of legislation, as this is a probing amendment, but by way of a policy stance.
My Lords, I thank the noble Lord for his explanation of this amendment. Paragraph 3(1) of new Schedule 1A to the 1992 Act requires local authorities to consult with their major precepting authorities, publish a draft scheme and consult on that scheme with,
“such other persons as it considers are likely to have an interest”,
in its operation of that scheme before they make it. The amendment seeks to require the Government to indemnify a local authority for costs associated with any legal challenge made to it in respect of a failure fully to comply with the requirements if that failure was because of any delay in the sub-paragraph coming into force or the late issuing of guidance or regulations. The Government have taken—and will be taking—steps to ensure that no local authority is in a position where it cannot comply with the requirements in Paragraph 3(1).
Let me clearly reiterate that local authorities have been aware of this policy and its proposed implementation for some time. The policy was first announced in the spending review of 2010. In August 2011, we published a consultation on this policy, followed by a government response alongside the draft Bill in December 2011. Since then, we have provided information and funding to help local authorities design their schemes.
On Report in the other place, the Government amended the Bill to allow for consultation on a scheme to take place before the Bill receives Royal Assent and the provision comes into force. Paragraph 3(2) of new Schedule 1A means this should not be a barrier to local authorities proceeding. The Government have published detailed statements of intent for the key sets of regulations and draft regulations for the two key areas, the default scheme and the prescribed requirements, including requirements for pensioners, while the Bill is still in this House. Since then we have provided information, tools and funding to help local authorities design their schemes. The Government have already published the guidance they promised on existing local authority responsibilities in relation to vulnerable groups and promoting work incentives. The Government have issued a funding consultation setting out provisional funding allocations for all authorities. We have also provided a free online calculator to help local authorities analyse the potential impacts of their proposed schemes, and we have announced and paid out £30 million of initial funding to help meet the costs of planning and analysing draft schemes.
It does not seem to me that there are any grounds for the noble Lord’s amendment, since local authorities already have the detailed information they need to design and consult on a scheme and need not be constrained by the timescale for primary or secondary legislation coming into force to comply with the requirements on them to consult. With this explanation, I hope the noble Lord will feel able to withdraw his amendment.
One basic premise underlies the Minister’s assertions, which is that the Bill will pass in its present form. I think that is a somewhat premature conclusion. Changes could be made. We are not yet at Report stage, let alone at Third Reading or Royal Assent, and authorities are being asked to proceed with these schemes in advance of the completion of the legislation. If the Government had accepted, as they should have done, the proposal to delay implementation, particularly in respect of this aspect of the Bill, there would not be a problem. There would be ample time to consult properly and, indeed, to prepare schemes thoroughly.
As for the information that is supplied, I have here two of the three documents that were published last Friday—I can just about hold them—entitled Draft Council Tax Reduction Scheme (Prescribed Requirements) Regulations. If authorities had been consulting before now—there were, no doubt, in general terms—they are going to have to go back and wade through this document, which is not 150 pages, but only 87 pages, coupled with the Explanatory Notes which, at first glance, explain very little. That is before the default scheme, which we discussed earlier this afternoon. I do not have a copy of that at the moment, but I think it is the 150-page document that the Minister said is very clear and apparently does not much change the existing scheme. I do not know whether that is the case because I have not seen the document. It would be interesting to know whether the Explanatory Notes refer to any changes between the existing scheme and the current scheme because if it was just the existing scheme, it would presumably not be necessary to publish anything. People would just be referred to existing schemes, so I am assuming there must be changes, otherwise it would not require the publication of anything very much.
The Minister referred to the consultation requirement. In fact, as my noble friend Lord McKenzie implied earlier, there are two consultations because you have to consult the precepting authorities first. In county areas, there is the shire county and there may also be a police authority. Sometimes it is part of the county council, and sometimes it is not. If we take the Thames valley, for example, there would be a precepting authority for policing covering a number of counties, so the districts in those areas will have to consult it as a precepting authority and perhaps also a separate fire authority. I am not sure about other areas, but in metropolitan areas, there will also be a passenger transport authority as well as the police and fire authorities, so there will be at least three precepting authorities to consult. District councils will presumably want to consult each other, if only because of the relationship with the precepting authorities. This is not a simple process. It is to be conducted not only in advance of legislation, but in a hurry.
It may be all right on the night, but if it is not, it is not likely to be the fault of authorities, particularly small authorities with limited resources. That has not happened. As the Opposition, all we are asking for is an understanding on the part of the Government if things go wrong in terms of a judicial review and that, if it can be established that the authority is not at fault, but simply has not been able to manage this complex process, then they will meet the costs. The noble Baroness has pointed out, perfectly fairly, that £30 million has been provided to help local authorities through the process. I do not think we are looking at anything like that amount in the event of a few charges by way of judicial review. The noble Baroness is not giving any ground tonight. I hope she will look at this again before Report stage and consult with colleagues and perhaps with the Local Government Association as well, which I do not think has expressed a view about this, but which may do well to consider its position. The LGA will no doubt help its member authorities, but these are not straightforward, simple matters. As I say, the whole thing rests on an assumption that may yet prove to be unfounded, that the Bill will pass in its present form.
My Lords, before the noble Lord makes a decision about his amendment, it might be helpful to remind the Committee that when we were talking about the amendment of the noble Lord, Lord McKenzie, earlier, we said that we would write to him and set out the very few differences that there are in these regulations. I am advised that the annex to the Explanatory Notes sets out those limited number of changes and the relationships between the two lots.
Amendment 83A withdrawn.
Amendments 84 to 88B not moved.
88C: Schedule 4, page 62, line 3, at end insert—
“(4) Both billing and precepting authorities shall be entitled to hold such balances to deal with shortfalls in council tax receipts as agreed with their auditors.”
My Lords, perhaps I can move the amendment on behalf of my noble friend Lord Smith of Leigh. He did not provide me with a script, but I believe I understand what was in his mind when he crafted the amendment. This is a relatively straightforward issue. It requires that:
“Both billing and precepting authorities shall be entitled to hold such balances to deal with shortfalls in council tax receipts as agreed with their auditors”.
We have touched on this at various stages of our discussions. We have touched on the fact that both the business rate retention scheme and the council tax support scheme will make budgeting that more complex for local authorities. They will be challenged with new issues around the level of balances and what reserves should be held against them for contingencies that might flow. I imagine that if the provisions are agreed with auditors, that would be validation enough, but in moving the amendment I am interested to hear what the Minister puts on the record in this regard. This issue is important to a number of local authorities.
My Lords, I thank the noble Lord for moving this amendment on behalf of his noble friend. I agree with him that local authorities will want to consider what sensible provisions they should make to manage their finances generally. Frankly, I do not think that the amendment is needed.
Individual authorities already decide what reserves they are going to budget for, and would be free to decide to hold reserves for the purpose of easing council tax benefit if they needed to. Determining the level and use of reserves is a matter for individual authorities, as part of their overall financial and risk management. There is no prescriptive national guidance on the minimum or maximum level of reserves, either as an absolute amount or as a percentage of the budget.
Reserves can help authorities to respond to unexpected situations, and give them room for manoeuvre on their finances, including helping to protect key front-line services. All authorities should keep sufficient reserves so that they have a financial cushion to meet sudden unexpected costs. What is sufficient should be determined by the authority themselves, in relation to their overall budgets and their individual circumstances.
Amendment 88C also requires the auditor to agree the level of reserves. I do not think that that would be appropriate, because that could prejudice the independence of the auditor, who might wish to comment later on the level of reserves. I do not think that the auditor could give a blessing to a certain amount of reserves before any auditing was done.
The overall level of reserves is agreed by the authority at the start of the financial year. Under Section 25 of the Local Government Act 2003, the chief financial officer is required to make a formal report to the authority on the budget and adequacy of the reserves. Although I am very grateful to the noble Lord for raising this issue, I do not think that the amendment is needed, or that the proposal that the auditor should agree the reserves would work legally.
I thank the noble Baroness for her reply. I did not—although I can see that one could—read the amendment to say that the auditor had to be part of the process of agreeing reserves rather than taking a view in due course, as it would on the totality of the accounts, but the point is well made.
The amendment may, in part, have been prompted by concerns—real or imagined—that the Secretary of State has his eye on local authority balances and on putting down a marker that, in the new era into which local authorities are moving, it should be recognised that appropriate balances should be permitted, not challenged and viewed by the Secretary of State as a means of chopping back other resources. However, what the noble Baroness said has been helpful, and I beg leave to withdraw the amendment.
Amendment 88C withdrawn.
Amendment 88D not moved.
88E: Schedule 4, page 66, line 19, at end insert—
“LGFA 19881A In Part 1 of Schedule 11 to the LGFA 1988 (the Valuation Tribunal for England), after paragraph A18 insert—
“Power for member of First-tier Tribunal to act as member of the Tribunal A18A (1) A member of the First-tier Tribunal (an “FTT member”) may act as a member of the Valuation Tribunal for England.
(2) An FTT member may only act as a member of the Tribunal—
(a) at the request of the President and with the approval of the Senior President of Tribunals,(b) in relation to an appeal that relates, in whole or in part, to a council tax reduction scheme made or having effect as if made by a billing authority in England, and(c) if the FTT member is not disqualified from being, or acting as, a member of the Tribunal.(3) A request under sub-paragraph (2)(a)—
(a) may relate to a particular appeal or to appeals of a particular kind,(b) may be made only if the President thinks that FTT members are likely to have particular expertise that is relevant to the determination of the appeal, or to appeals of the kind, to which it relates.(4) An approval under sub-paragraph (2)(a) may relate to a particular appeal or to appeals of a particular kind.
(5) The President may withdraw a request at any time; and an FTT member acting as a Tribunal member in response to a request must cease to do so if it is withdrawn.
(6) References in this Schedule and in regulations made under paragraph A19 to a member of the Tribunal include an FTT member acting as a member of the Tribunal.
(7) But sub-paragraph (6) does not apply—
(a) to paragraph A7, A8, A9, A10 or A12 (which make provision about the appointment and removal of, numbers of, and payments to, members of the Tribunal);(b) to regulations under paragraph A19, if and to extent that the regulations provide that it does not apply.(8) The Valuation Tribunal Service may make payments to the Lord Chancellor in respect of the expenditure incurred by the Lord Chancellor in paying remuneration, allowances or expenses to an FTT member whilst acting as a member of the Tribunal.
(9) In this paragraph—
(a) references to an appeal include a review by the Tribunal of a decision made by it on an appeal,(b) “council tax reduction scheme” has the same meaning as in Part 1 of the Local Government Finance Act 1992 (see section 13A(9) of that Act).””
My Lords, these amendments enable First-tier Tribunal judges and other members to sit as members of the Valuation Tribunal for England when requested to do so by the president of the tribunal for England, when that request is approved by the Senior President of Tribunals. That is so that the expertise of First-tier Tribunal members, who currently hear appeals relating to council tax benefit, can be utilised in determining appeals on decisions made on council tax reduction schemes—something which the noble Earl, Lord Lytton, was keen to see cleared up.
The Government are clear that there will be a single appeals process for unresolved disputes on claims for council tax support by a body independent of the local authority. The majority of those who expressed an opinion on the matter in the consultation document and at engagement events support that view.
The Department for Communities and Local Government has agreed with the valuation tribunal and the Ministry of Justice to enable members of the First-tier Tribunal to sit as members of the Valuation Tribunal for England when requested to do so.
When determining a person’s entitlement to a reduction under a scheme, a billing authority may need to carry out a detailed assessment of a person’s means. That may be necessary to comply with the regulations prescribing reductions for persons in receipt of pension credit, if the default scheme is in place, or if a billing authority’s own scheme includes a means-tested element. It is therefore important that the valuation tribunal can access the right expertise in considering appeals which relate to means-testing. The amendments allow the valuation tribunal to be supplemented by members of the First-tier Tribunal for this purpose.
Amendment 88E inserts a new paragraph A18A into Part 1 of Schedule 11 to the Local Government Finance 1988 Act to allow a member of the First-tier Tribunal to act as member of the Valuation Tribunal for England. Paragraph A18A(2) places conditions on when a First-tier Tribunal member may act as a member of the Valuation Tribunal for England. It may only be at the request of the president of the Valuation Tribunal for England and with the approval of the Senior President of Tribunals in relation to an appeal that relates, in whole or in part, to a council tax reduction scheme, and if the First-tier Tribunal member is not disqualified from being or acting as a member of the Valuation Tribunal for England.
Paragraph A18A(3) imposes conditions on whether requests may be imposed for a First-tier Tribunal member to act as a member of the Valuation Tribunal for England. Such a request may relate to a particular appeal or to appeals of a particular kind and may be made only if the president of the Valuation Tribunal for England considers that members of the First-tier Tribunal are likely to have relevant expertise. Paragraph A18A(4) allows the Senior President of Tribunals to approve a First-tier Tribunal member acting as a member of the Valuation Tribunal for England for a particular appeal or for appeals of a particular kind. Paragraph A18A(5) allows the president of the Valuation Tribunal for England to withdraw his request at any time, and requires a First-tier Tribunal member acting as a Valuation Tribunal for England member to cease to do so if the request is withdrawn.
Paragraph A18A(6) provides that references in Schedule 11 of the Local Government Finance Act 1988, and in regulations made under paragraph A19 of that schedule, to a member of the tribunal include a member of the First-tier Tribunal acting as a member of the tribunal. Paragraph A18A(7) makes certain exceptions to when references to a member of the tribunal includes a member of the First-tier Tribunal acting as a member of the tribunal, specifically paragraphs A7 to A10 and A12, which make provision about the appointment and removal of, numbers of, and payments to members of the Valuation Tribunal for England. These do not need to apply to acting members of the Valuation Tribunal for England because they will continue to hold office on the terms and conditions under which they were appointed to the First-tier Tribunal.
Paragraph A18A(8) empowers the Valuation Tribunal Service, the body that provides administrative support to the Valuation Tribunal for England, to make payments to the Lord Chancellor in respect of the expenditure incurred by the Lord Chancellor, in paying a First-tier Tribunal member remuneration, allowances or expenses, while acting as a member of the Valuation Tribunal for England. Further work is being undertaken with the valuation tribunal and Her Majesty’s Courts and Tribunals Service to determine the most efficient approach to administering payments to First-tier Tribunal members. This amendment ensures that the Valuation Tribunal Service has the power to make these payments, should it be concluded that this be the most efficient approach.
Amendments 88F to 88H make consequential amendments to the Local Government Act 2003, which are needed as a result of new paragraph A18A(8). With these explanations, I hope that noble Lords will feel able to approve these amendments.
My Lords, I welcome in general the amendment and will not detain the House very long. It follows what I have been espousing earlier in our debates—namely, the streamlining and consolidation of the appeals process. However, I have two questions for the Minister. As I have not given prior notice of either question, I would fully understand if she would prefer to reserve her position and write to me later. First, will the benefit hearings element, which will now be transferred to the Valuation Tribunal Service, be hybridised with assessment appeals? My concern has always been that once the benefit comes under question and there is an appeal on the question of benefit, it is only a minor step for an advisory service to advise a benefit claimant or potential benefit claimant to appeal also the assessment, or possibly the liability. The question is how are they going to be dealt with, when previously they would have gone to the tribunal for the benefit element and the question of the assessment—in other words the banding—would have been dealt with through the valuation tribunal. If they are going to be consolidated in some way, will they be completely aggregated together or will the benefit element have its own listing and programme? The reason I ask this particular point is because my understanding is that there is a considerable backlog of listings for the valuation tribunal, so the risk is that moving the benefits cases may exacerbate what is already an unsatisfactory situation. How they are managed will be critical.
My second question relates to paragraph (8) of the insertion, relating to the valuation tribunal service making payments to the Lord Chancellor. That is fine, but can the Minister confirm that the Valuation Tribunal Service will be given additional financial resources commensurate with the costs it incurs in dealing with what would otherwise have been benefits tribunal cases, which have been transferred to it? I hope that the Minister will be able to clarify both those points.
Amendment 88E agreed.
Amendments 88F to 88H
88F: Schedule 4, page 67, line 5, at end insert—
“6A The Local Government Act 2003 is amended as follows.”
88G: Schedule 4, page 67, line 6, leave out “of the Local Government Act 2003”
88H: Schedule 4, page 67, line 7, at end insert—
“8 In section 105(2)(aa) (functions of the Valuation Tribunal Service: payments to members of the Valuation Tribunal for England), after “A14” insert “or A18A(8)”.”
Amendments 88F to 88H agreed.
Amendments 89 to 91 not moved.
Schedule 4, as amended, agreed.
92: Before Clause 10, insert the following new Clause—
“Report on effects of provisions
At a date no later than three years from the implementation of this Act, the Secretary of State shall prepare a report detailing the effect of these provisions on—(a) the number of people receiving or eligible to receive council tax support in each local authority, including the number in employment, the number actively seeking work, and the number of pensionable age;(b) the costs incurred by each authority in running the scheme, including the cost of appeals; and(c) the impact on work incentives.”
My Lords, I beg to move Amendment 92 on behalf of my noble friend Lady Sherlock and speak to Amendment 93ZB, which effectively covers the same ground. Amendment 92 would require the Secretary of State to report on the effect of these provisions within three years of their implementation and specifically to report on three aspects of these changes.
First, it would require the Secretary of State to prepare a report on take-up of council tax support in each local authority, detailing eligibility and take-up, including figures for those who are in work, actively seeking work and pensioners. This information will be crucial in enabling an assessment of what impact the changes have had on eligibility, support by different groups and, crucially, take-up. As the noble Lord, Lord Shipley, reminded us so powerfully earlier, there is a potential disincentive for local authorities to encourage higher take-up because they would have to absorb the cost of any increased take-up as the funding will no longer be demand-related and will come not from DEL but AME.
The amendment would also require the Secretary of State to report on two other aspects: the costs incurred by each authority in running the scheme and the impact on work incentives. That is simply good governance. We are having robust debates here about the likely effect of these changes. We fear these changes could damage incentives; while the noble Earl, Lord Attlee, has opined that they would have the opposite effect by incentivising local authorities to encourage their residents into high-paying jobs. Some noble Lords believe take-up may fall; others that it may rise and be expensive. Either way, the Government are confident that that will not be a problem.
This report will answer three questions and many more. We can simply reconvene in 2015-16, if we are still here, and find out who is right. More importantly, policy-makers of the future will learn lessons and, if necessary, a future Government can make changes to legislation in this area. The Minister may say that this is unnecessary, that the Secretary of State will collect this information anyway, but we have heard from my noble friend Lady Lister today that even the DWP proposes to stop collecting take-up statistics. Certainly, we want to return to press that issue. I submit that the need is clear. Government should gather this information and Parliament has the right to see it. I beg to move.
My Lords, I make a brief contribution on the amendment. I am strongly in favour of there being a report, but April 2016, although that is in the end no later than three years, is too far away. Indeed, if there were to be changes consequential to that date, implementation of those changes may take even longer. I would have thought that it would be possible to have a report no later than two years from the implementation of the Act, which would be April 2015. I hope that the Minister will bear that in mind in her response.
My Lords, I have a real difficulty with the amendment because it seems to be another example of trying all the time to limit localism. There are too many mechanisms for that. One is to stop it being localised in the first place and the other is to make it so difficult for people by having to report in so many ways that you remove the whole advantage.
For me, the advantage is that localities make their own decisions. If there are circumstances in which the Secretary of State feels that concern is so widely held that he ought to find out more about it, he has all the powers to do that. We really do not want a situation where every time we give powers to localities, the clever Dicks from the centre say, “We can’t let them get away with it. We have to have a whole series of ways to make sure that they report on everything”.
My real objection is that this is all part of a pattern that we have seen for years. We promise localism, but do not quite give it to them. If we get away with a bit of localism, then let us make sure that that there is a whole lot of reporting, measurement and all the rest of it. I would like local authorities to make their decisions about this. Only if there is a real reason and a real concern should we take any further action at all. When there is a real reason and real concern, I am all in favour of immediate action, but putting this sort of thing into operation is otiose.
My Lords, I take a rather different position, as the noble Lord would probably expect. Some of us here are refugees from the Welfare Reform Bill, which sat for what felt like many years, but certainly for many months. One of the few things that we achieved on that Bill, partly in response to amendments from the noble Lord, Lord Best, was a commitment to monitor various aspects of the changes.
That is important, regardless of what the noble Lord has just said. We are making a big change to the basic safety net by removing it from being a national benefit to being a local one. At the very least, we need to know as a Parliament what impact that is having on some of the poorest people in our communities. I am sure that the Minister will do this, but I cannot believe that the Government have no plans whatever to collect some form of information so that we know what effect it will have, especially if the DWP take-up statistics are now in doubt.
If we can achieve nothing else in this Committee, it would be good if we could achieve some commitment to monitoring the impact of what is a very significant change. My noble friend Lady Hollis has explained very well why it is such a significant change to our income maintenance provisions.
My Lords, I thank noble Lords for their contributions. It will not be entirely a surprise when I say that I support my noble friend Lord Deben’s general emphasis on this issue.
Paragraph 7 of new Schedule 1A to the Local Government Finance Act 1992 is inserted by Schedule 4 to the Bill and enables the Secretary of State to require authorities to supply specified information to the Secretary of State. The Government, in their equality impact assessment of this reform, made it clear that the powers could be used to collect information to support future evaluation of the policy.
Council tax support will become part of the council tax system that we have been through today. The Government already collect key data for the council tax system, including data on exemptions and discounts. We are currently working with other government departments and local government to determine the necessary data that will be required in future as part of the council tax system, or through other mechanisms, to monitor the policy and how best to collect this. To ensure proper scrutiny, new requests for data from local government will need approval by the single data list gateway group, which has been established by this Government to consider and challenge new data requirements from local government.
Amendment 92 requires a report on the impact of work incentives. To do so would place another administrative burden on local authorities. The purpose of the policy is not to make local authorities report to the Government on work incentives; rather it is to encourage local authorities to get people back into work. It will not be in the interest of local authorities to lock their residents into poverty and low aspirations. They will want to design schemes which support claimants into work, and the department has issued guidance helping local authorities to understand the importance of work incentives and how they can design schemes which support the objectives of universal credit.
The second part of Amendment 93ZB would require the Government to adjust funding allocations to reflect any changes in the number of eligible claimants. The amendment does not make it clear whether this is funding from within the council tax support scheme or additional funding from outside. Funding for council tax support will be included as a fixed allocation within the business rate retention scheme. Councils will have the responsibility and flexibility to deal with these on a local level. Councils, in designing their schemes, will need to consider the risk of variation in demand. In relation to in-year fluctuations in demand, mechanisms are already in place to enable billing authorities and major precepting authorities to enter into arrangements. This will enable financial pressures as a result of unexpected increases to be shared.
The Government do not think that it will be necessary or helpful for local authorities to be asked to provide that a report be published in Parliament. There are transparency requirements on local authorities to make sure that all of what they do is understood and made clear and, where possible, put on the internet. We think that that will be sufficient to ensure that there is wide knowledge of what each local authority is doing.
My Lords, I thank the Minister for that reply and the noble Lord, Lord Shipley, for his support. The noble Lord made the point that two years may be more appropriate than three, and I think that we would happily take that on board when we approach the subsequent stage.
My noble friend Lady Lister dealt with a point made by the noble Lord, Lord Deben, about the significance of the change that we have here. About 5 million people are in receipt of council tax benefit at the moment, and those people—the most disadvantaged and poorest in our community—are the ones who are going to be subject to this new system. Our intention is not to limit the localising process, although we do not like it, this is simply about the Government understanding the consequences of their policies. From what the Minister said, it seems that there are potential requirements on authorities to provide a range of information anyway, so that provision does not seem to be limiting the Government’s thirst for localism. The impact on work incentives is crucial. It is a major plank of the Government’s policy, not only on the business rate retention scheme but to the council tax support scheme. The whole thing is designed and driven by trying to get more people into work. There are issues about where the jobs are going to come from and how that is going to work, but it must be of interest to the Government to know how that part of its policy will work in practice. I cannot see why it would not be.
We will return to this issue on Report. It is important that there is a transparent process back to Parliament. It does not negate what local authorities will do or limit the powers or scope that they have under the Bill. All it asks for is a report by the Secretary of State back to Parliament to evaluate how it is working in practice and whether it is delivering what the Government believe that it will—and what we, for our part, are sceptical about. Given that and given the hour, I beg leave to withdraw the amendment.
Amendment 92 withdrawn.
Amendment 92A had been withdrawn from the Marshalled List.
Amendment 93 had been renumbered as Amendment 73A.
Clause 10 agreed.
Amendments 93ZA and 93ZB not moved.
Clause 11 : Power to set higher amount for long-term empty dwellings
93ZBA: Clause 11, page 7, line 44, after “unoccupied” insert “or substantially unfurnished”
My Lords, Amendment 93ZBA is a narrow and technical amendment. It relates to long-term empty dwellings and the power given to local authorities to terminate entitlement to discounts and increase council tax by up to 50% of the applicable rate, so councils will have the power to charge up to 150% of council tax provided that the property has been unoccupied and substantially unfurnished for more than two years. It is accepted that the term “substantially unfurnished” is not specifically defined anywhere in legislation and has been the subject of case law. Clause 11(9) appears to treat property as unoccupied despite short interim periods when it was occupied. However, such intermittent occupancy might imply that the property was not substantially unfurnished during that period, so it would cease to be a long-term empty property. That would seem to negate the purpose of Clause 11(9), so the amendment seeks to ensure that any concomitant period when the property was not substantially unfurnished is equally ignored. I beg to move.
My Lords, this short amendment specifies that in determining whether a property has been unfurnished for any period of six weeks or less during which it was furnished should also be disregarded. Clause 11 sets out that a dwelling is classified as long-term empty and subject to a premium if it has been unoccupied and substantially unfurnished for a continuous period of two years. Any period of six weeks or less during which the dwelling was occupied is disregarded. The amendment would add a second consideration of time to the application of the period by requiring a billing authority to take into account any periods during which the dwelling was furnished. This would add an unnecessary level of complication to the administration of the empty homes premium. It would potentially require billing authorities to monitor the interplay of periods of occupation and furnishing of a dwelling. Clear criteria for the scheme and ease of administration are highly desirable for billing authorities and, perhaps more importantly, council tax payers to know where they are.
I am mystified about why the Government have not merely given local authorities the power to make these decisions as they wish. I do not understand why we still want to control them on these matters. If this would add complication, why do we not get rid of the complication that is here already and say that local authorities can make up their own minds?
I think my noble friend was unfortunately not here during the earlier stages when we went through this point in some detail. I resisted those amendments. I hear what my noble friend says, but that is not the situation. I hope the noble Lord, Lord McKenzie of Luton, is willing to withdraw his amendment.
My Lords, I do not want to prolong this but I am not sure whether we are at cross purposes. The amendment was meant to be helpful and quite narrow. If the legislation is saying that despite the fact that the dwelling is occupied, it is treated for certain periods as being unoccupied—it is understood why that would be the case—the problem with that is that when it is actually occupied, is there not a greater risk that it will be treated as being not substantially unfurnished, because it would need to be furnished for somebody to occupy it? All this amendment tries to do is to ask: when you disregard that period of occupation, why not also assume it to be “substantially unfurnished”? Unless you do that, in a sense you negate in large measure the effect of subsection (9). It may be that the Minister wishes to take it away but that was the only purpose of this amendment. It is not meant to otherwise complicate it or create other difficulties, or to disrupt and undermine the localism agenda. It is a very narrow point.
Amendment 93ZBA withdrawn.
Clause 11 agreed.
Clause 12 : Mortgagee in possession to be liable for council tax
93ZC: Clause 12, page 9, line 5, leave out subsection (2) and insert—
“(2) This section comes into force on such day as the Secretary of State may by order made by statutory instrument appoint.”
My Lords, this minor government amendment allows the Secretary of State to commence the provisions of Clause 12 by order, rather than having them come into force automatically on 1 April 2013. The Government remain committed to the principle that mortgagees in possession of a dwelling should be liable for council tax but are proposing this amendment for practical reasons. As stated in their response to consultation on this reform, the Government do not intend to implement this provision until discussions have taken place with the mortgage lenders sector, leading to satisfactory and workable administrative arrangements. These discussions are being pursued and the Government intend to implement the provisions as soon as practical. However, I move this amendment and hope it is accepted.
My Lords, we clearly do not disagree with this amendment but I note a certain timing discretion given in respect of these circumstances that is not allowed to local authorities for the big challenges that they have, but that is a debate for another time.
Amendment 93ZC agreed.
Amendment 93ZD had been withdrawn from the Marshalled List.
Clause 12, as amended, agreed.
Committee adjourned at 6.03 pm.