Report (2nd Day) (Continued)
Schedule 4 : Amendments relating to council tax reduction schemes
Amendment 103A not moved.
104: Schedule 4, page 59, line 43, at end insert—
“(8A) Before making regulations under sub-paragraph (8), the Secretary of State must consult with local authorities regarding any proposed requirements for schemes.”
My Lords, I have come back especially to move this amendment, which requires the Government to consult with local authorities before they make regulations. It is a probing amendment, but I am concerned that there appears to be absolutely no limit on what the Government can require and what regulations they can make. In these circumstances, it seems that an obligation to consult is absolutely essential. Apart from anything else, it rather undermines the Government’s stated aims for,
“a policy of decentralisation that will give local authorities increased financial freedoms”.
Yet here we are with the Government still prescribing in detail exactly what local authorities can do. This is unnecessary and mildly demeaning to local authorities. I hope that the Government might think again and possibly even accept this amendment. It simply requires the Government to consult. I am sure that my noble friend will tell me that they are going to do that anyway. Well, let us have it in the Bill. I beg to move.
My Lords, I thank my noble friend for his brevity. I am not sure that I am going to be able to be enormously helpful to him. This takes me back a bit to the Localism Bill, when one thing that my noble friend had a go at was regulations and the amount of powers within a Bill. Amendment 104 would retain the power to prescribe requirements in regulations but would require the Secretary of State to consult with local authorities about the proposed requirements. If we did that, it could potentially delay changes to regulations. In July we published draft versions of the regulations that prescribe requirements, so we have given noble Lords and local authorities the opportunity to scrutinise and comment on them. An update was published on 7 September.
The amendment would require the Secretary of State to consult before making any amendments to the regulations in future. I do not think that this is necessary; the Government would of course consider whether it would be appropriate to consult on a case-by-case basis, depending on the requirements that we proposed prescribing. In reality, it would mean that consultation took place.
I am not sure whether Amendments 105 and 106 have been moved. They have not. With that explanation, then, I hope that my noble friend may be willing to withdraw his amendment.
I understand what my noble friend is saying. This was a London Councils amendment and I should have declared an interest as one of its joint presidents. London Councils was hoping that perhaps this might have gone into the Bill but, given what my noble friend said, I beg leave to withdraw the amendment.
Amendment 104 withdrawn.
104A: Schedule 4, page 60, line 33, at end insert—
“( ) sections 32 to 34 of the Welfare Reform Act 2007 (benefit for persons taking up employment) so far as applying in relation to council tax benefit.”
My Lords, I shall speak first to Amendments 104A, 105A and 106B. These amendments are technical, ensuring that we, the Government, can deliver our policy to protect pensioners, enabling regulations to provide for a default scheme that largely replicates current council tax benefit, while at the same time providing reassurance to local authorities that their schemes can incorporate certain work-incentivising features of current council tax benefit, where they choose to do so. The amendments also allow such provisions to be applied in Wales.
Taken together, these amendments to Schedule 4 achieve this by ensuring that regulations prescribing requirements for schemes, prescribing the default scheme and providing for schemes in Wales may incorporate provisions equivalent to those that are, or indeed could be, provided for in or under sections of existing legislation relating to council tax benefit, with modifications. Specifically, I refer to Sections 32 to 34 of the Welfare Reform Act 2007.
The amendments will provide the Secretary of State, billing authorities and indeed Welsh Ministers with powers to draw up schemes that achieve largely the same effect as the council tax benefit system with respect to extended payments. Extended payments are a work incentive, included in both the default scheme regulations and prescribed requirements regulations. They allow for a person, for four weeks, to continue to have their council tax support calculated as if they were still in receipt of certain prescribed benefits when entitlement to those benefits ends.
These technical amendments will enable regulations prescribing the requirements for pensioner protection, and the default scheme, to make sure schemes can be constructed in a way broadly consistent with existing arrangements under council tax benefit for extended payments. In relation to local schemes, this will assist local authorities who wish their first scheme to work in a way very similar to the existing scheme.
These technical amendments will promote work incentives and ensure that the Government can give effect to their policy on protecting pensioners. They will also, under the default scheme, ensure that this type of reduction can be offered to low-income taxpayers in authorities that have failed to bring forward their own scheme in time. It also provides local authorities with the flexibility to incorporate extended payment features of the current system into their local schemes, where they choose to do so, and, I have mentioned previously, it provides for Welsh Ministers to do so in their own context.
I turn to Amendment 106ZA. This amendment is necessary to ensure that the Government’s intention to allow flexibility over the payments that must be made by authorities in regulations about funds, such as instalment of the precept, applies, as intended, only to payments relating to council tax receipts. As noble Lords will know, new paragraph 6 of Schedule 1A to the Local Government Finance Act 1992 enables billing authorities to vary the payments or instalments that are required to be made under the collection funds regulations enabling cash flow pressures to be shared with major precepting authorities, subject to their agreement. The intention is to assist with concerns over cash flow pressure that billing authorities may face if, for example, job losses in an area lead to an increase in the demand for council tax reductions. This power can be used only where the authorities concerned agree the approach. We do not plan to require local authorities to enter into any such agreement or to amend regulations about funds to prescribe the approach to reducing payments in year. However, we want to make it clear that this power enables authorities to vary the payments required to be made in regulations under Section 99 of the Local Government Finance Act 1988 about funds relating to council tax only. This is because the same regulation-making power in the Local Government Finance Act 1988 will also be used to make regulations in relation to the new business rates retention system.
As I mentioned at the start, these are technical amendments to ensure that the power in the Bill for major precepting and billing authorities to come to an agreement to vary payments or instalments applies, as intended, only to payments in relation to council tax. I trust that noble Lords will support these amendments.
My Lords, I am grateful to the noble Lord, Lord Ahmad, for explaining the government amendments. We have no particular issue with them. In respect of the extended payment arrangements, I understood the Minister to say that they would be the subject of local discretion. Is there anything in the requirements of the transitional funding pot that would encourage or discourage the use of these arrangements, or is it neutral?
Amendment 104A agreed.
105: Schedule 4, page 61, leave out lines 1 and 2
I shall speak also to Amendment 106. I was caught by surprise when the noble Lord, Lord Smith of Leigh, did not move his amendment, or I would have spoken to all three of my amendments together.
Amendment 105 is very straightforward. I do not understand the need for the sub-paragraph that I want to take out. It gives the Secretary of State power to make regulations about the procedure for preparing a local scheme for council tax reliefs. The Government seem determined to get right down into minute detail controlling local authorities. I wonder why this is necessary. When rereading the Hansard report of when I moved this in Committee, I found that my noble friend said that the amendment would,
“remove the default scheme from the Bill altogether”.—[Official Report, 19/7/12; col. GC 176.]
None of us can begin to understand why that should be so. This is nothing whatever to do with the default scheme. It is simply a question of the Government wanting to have regulations to tell local authorities the procedure for introducing a scheme or an amendment. I do not understand that.
Amendment 106 is slightly more complex and may take me a moment or two longer. The sub-paragraphs on page 62 of the Bill require local authorities wanting to make revisions to the local scheme or to replace it to do so by 31 January in the preceding year. This is another amendment that I moved in Grand Committee. We were trying to understand whether the Government had considered the impact of the proposed legislation on the local authority budget and council tax setting process, particularly when there is a procedure under the Localism Act whereby an excessive increase in council tax can be the subject of a referendum.
In response, at col. GC 171 of the Official Report on 19 July, my noble friend suggested that the authorities will need to take their funding levels into account when designing local schemes. Those advising on this believe that this response simply does not reflect fully the conflict of timing between the two requirements and the impact on local authority financial freedom. By putting in a limit of 31 January, the current provisions would prevent an authority revising its local scheme after that date, even though it was necessary to reflect potential new financial realities on the outcome of a local referendum. Again, this seems to be a further and rather undesirable way of controlling local authority decisions.
I am sure that my noble friend will take the point that if you have a power in the Localism Act for the referendum, and the referendum overturns the council’s original proposal, the local authority would have to make a fresh assessment of levying council tax. I do not see how they can do that by 31 January because it would take two or three months for the referendum to come to fruition and for the result to be known. Perhaps between now and Third Reading my noble friend might look at that again in the light of the combination of having to revise the scheme and then being faced with the consequences of a referendum.
If the referendum is lost, there would be nothing to worry about and the original budget and council tax would stand. But if the referendum is successful, as I understand it, the council would have to renew it and make a new one that complies with the requirements that will follow from the referendum. I hope that my noble friend may be able to offer some comfort on that. I beg to move.
My Lords, as regards Amendment 106, we have a deal of sympathy with the point raised by the noble Lord. My noble friend Lord Beecham thought that the referendum date was May, which in a sense just reinforces the point made by the noble Lord. I am aware that when we discussed it in Committee, the Minister said that the Government were not keen on in-year adjustments, which one can see as a general principle. However, it seems to me that a major point is being raised.
We are less comforted by Amendment 105. It depends on what is encompassed within the concept of procedure for preparing a CT scheme. One of the things that presumably needs to be addressed is the cut-off point between the existing council tax benefit arrangements and the new arrangements, particularly when people, if they are able, are making backdated claims. At the moment, someone can make a claim and it can be backdated. If you make a claim after 1 April and seek to get it backdated, you need something in place to settle those cut-off points. I do not know whether that is a procedure but you can certainly see the Secretary of State having some interest in those sorts of arrangements.
Certainly, Amendment 106 seems to make quite a powerful point. I might add that if the discovery of this £100 million and the transitional fund had happened a couple of months later than it has, that would be good cause for needing this flexibility as well.
My Lords, Amendment 105 would remove the ability of the Government to make regulations about the process by which a council tax reduction scheme is prepared, such as requiring certain documents to be prepared, and the manner in which those documents are published. I should make clear that the Government’s intention was set out in the statement of intent published on Thursday 17 May. In that policy statement we stated our intention not to make regulations at this stage about the procedure for making a scheme, which still holds.
The rationale for not regulating is on the basis that local authorities already routinely consult on a range of issues, and additional prescription should not be required. In other words, they ought to know when they should need to consult.
I am pleased to note that at least 305 councils—or 94% of them—have already commenced their consultations on the schemes, during which vulnerable people will continue to receive protection. However, as with all aspects of policy, we will keep this under review. As the need to consult on schemes for local council tax support is a new requirement, it may become apparent that it is desirable to prescribe certain elements of the process in future years. Retaining this power ensures that, if necessary, we are able to take steps for future years to ensure that the consultation process is fair for the taxpayer.
The effect of Amendment 106 would be to remove the deadline of 31 January for making and revising schemes, and to remove the Secretary of State’s power to change that deadline by order. It is important to maintain the 31 January deadline to ensure that local schemes can be in place in time for April 2013 and that people continue to receive protection from the scheme. Allowing changes after this date would create uncertainty for the people who are benefiting from the scheme as they would face having their awards changed part way through the year. It would also create uncertainty for taxpayers generally, as reductions are reflected in the tax base on which council tax is levied; I do not think that this would be helpful.
When we discussed this amendment in Committee, my noble friend Lord Jenkin asked about the relationship between the setting of the scheme and council tax referendums. Indeed, this point has just been made again tonight. If I may, I will briefly repeat what I said in Committee:
“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”,
and that information will be available. I confirm that any referendum that took place would have to take place in May, after the setting of the council tax should have taken place. In Committee, I went on to say:
“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”.—[Official Report, 19/7/12; col. GC 171.]
Any authority that considers that it might breach the referendum principles must prepare a shadow budget setting out how it would carry on its services under a lower rate of 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 amounts of support that they can claim. I hope that with that explanation the noble Lord might be willing to withdraw his amendment.
On Amendment 106, I am very grateful for the support of the noble Lord, Lord McKenzie of Luton. He is quite right to say that the referendum has to happen in May—on the first Thursday in May in the financial year to which the increase relates. However, if the referendum succeeds in overturning the original rate of council tax that was to be levied and the local authority has to hold another one, it would have had to make any changes to the council tax relief scheme by the previous January, which means that it will not be able to make any adjustment to reflect the lower rate that it is now going to have to levy.
If it is the Government’s intention that if there is a referendum local authorities cannot change the council tax relief scheme after the result is known, that ought to be made clear. I do not think that it has been clear hitherto. Is my noble friend prepared to add a few words to what she has said? If she is saying that local authorities cannot change the scheme after a referendum, everybody will know where they stand. However, if they are to be allowed to change the scheme, the date of 31 January has to be moved. There has to be an option to choose something else. Will my noble friend go a little further and clarify that that is what the Government intend?
My Lords, I can clarify the position and confirm it. It will not be possible for a local authority to change its scheme if a referendum is triggered; in other words, it would have to carry on with the scheme which it had put together and sort out the funding subsequently.
My Lords, in the circumstances, obviously it would be sensible for me to withdraw the amendment but we may seek to clarify the position further. I want to read very carefully what my noble friend has said to clarify the position. I may bring forward an amendment at Third Reading to renew this discussion. In the mean time, I beg leave to withdraw the amendment.
Amendment 105 withdrawn.
105A: Schedule 4, page 62, line 2, at end insert—
“( ) sections 32 to 34 of the Welfare Reform Act 2007 (benefit for persons taking up employment) so far as applying in relation to council tax benefit.”
Amendment 105A agreed.
Amendment 106 not moved.
106ZA: Schedule 4, page 63, line 3, at end insert “that make provision in relation to council tax”
Amendment 106ZA agreed.
106A: Schedule 4, page 63, line 3, at end insert—
“(4) Both billing and precepting authorities shall be entitled to hold such balances to deal with the shortfalls in council tax receipts as agreed by their auditors.”
My Lords, in moving this amendment I recognise the contributions that have been made around the House today saying that the new council tax support scheme poses a much higher degree of risk to local authorities. There is great uncertainty about the collection rates under the new scheme and how we will be able to get money from people who currently are not paying. That is not in contention.
Those of us who have been involved in local government finance for a number of years recognise that local authority treasurers and finance officers are by nature a conservative bunch in the non-political sense of that word; in other words, they take a gloomy view of life and they want to make sure that they cover all the bases. We welcome their advice although we do not always necessarily take it. Therefore, I am not asking in this amendment that authorities should take the advice of their own treasurers or finance officers. However, auditors may take a more objective view on the balances that an authority needs to hold. Anyone who takes a prudential view of a local authority believes that it is necessary to increase balances, whether a billing authority or a precepting authority is involved. In the past certain announcements or indications have emanated from the Department for Communities and Local Government which seemed to indicate that local authorities which maintained high balances were storing up money, and consequently they might be hammered in the future. I hope that the Minister can assure us that that is not the case and that the Government will support the concept of prudential balances.
As regards Amendment 107C, this matter was raised in Grand Committee in a slightly different format. I seek clarity on whether or not the Government will impose a freeze on council tax support from now on. If that is the case, that is not fair because all local authorities will see a change in the number of claimants. This will in part reflect the state of the economy and the number of pensioners in an area. At my age I was pleased to see that in the Greater Manchester area Wigan has the highest increase in the number of pensioners. That is good news for people like me but it is not good news if you are running a council tax support scheme because the more pensioners you have to deal with the greater the inflexibility of the scheme for everyone else, which tends to increase the burdens falling on them. In the spirit of recognising new burdens, a local authority cannot be expected simply to absorb such changes given the general problems affecting local government finance.
What we are trying to do is make sure that payment for support to each local authority reflects the actual need for council tax benefit, and is based on some historic situation, similar to the point made by the noble Earl, Lord Lytton, about council tax never being updated and still calculated on 1991 figures. We do not want to get into that situation and make this an equally problematic area. I hope that the Minister will think about that. I beg to move.
My Lords, I shall speak to Amendment 108. Its purpose is twofold—first, to ensure that a local authority has a duty to do what it can to ensure that local residents claim the council tax discount to which they are entitled and, secondly, to ensure that any consequent increase in expenditure, which exceeds 10% of its 2012 grant, is reimbursed.
In making the case, I can do no better than quote two noble Lords from the Liberal Democrat Benches who expressed concerns in Grand Committee about the potential conflict of interest that local authorities now face as a consequence of the cash limit imposed on the council tax discount settlement, so that the authority will now have to find the money to fund any increase in take-up rather than have it reimbursed by central government.
The noble Lord, Lord Greaves, who is not in his place, warned that,
“Under the new system, there would be a real incentive for local authorities to discourage people from claiming”.—[Official Report, 10/7/12; col. GC552.]
The noble Lord, Lord Shipley, kindly spoke in support of a similar amendment that I moved. He described it as,
“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”.—[Official Report, 19/7/12; col. GC147.]
It is not right. It is unethical to build into the template of a statutory income-maintenance scheme an incentive to depress take-up.
Noble Lords will be aware that take-up of means-tested benefits is a perennial problem, and take-up of council tax benefit is among the lowest. The latest government estimates indicate that as many as nearly two-fifths of those eligible might not be claiming their entitlement. Take-up is particularly low among pensioners and among couples with children, of whom between two-fifths and 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 six percentage points for pensioners, by around seven percentage points for non-pensioners, and by a massive 15 percentage points for couples with children, although these figures are approximate.
Take-up matters. The Child Poverty Unit has identified it as a crucial element in the child poverty agenda, suggesting that as many as 400,000 children were living in income poverty in 2009 because their families were not receiving the benefits or tax credits to which they were entitled. The unit also pointed to the benefits for the local economy, as the money is likely to be spent in local communities, and to the importance of increasing awareness of the financial support available to those entering employment.
Given the importance of take-up, in particular to the child poverty agenda, it is extraordinary that the Government now want to cease publication of the official estimates of take-up. If there are no official estimates, we will lose one important indicator of the effectiveness of benefits and of the Government’s own universal credit reforms, one objective of which is supposedly to improve take-up. I asked the Minister if she would make the noble Lord, Lord Freud, aware of the Grand Committee’s concerns on this issue. I should be grateful if she could tell your Lordships’ House whether she has been able to do that.
In Committee, when I moved a similar amendment, the Minister responded that the Bill already,
“seems to cover more or less what the amendment is about”.—[Official Report, 19/7/12; col. 152.]
I am afraid that it does not. There is nothing in the Bill that places a clear duty on local authorities to maximise take-up of the discount. This is in fact a step backwards from the current situation with regard to council tax benefit. Under the Social Security Contributions and Benefits Act 1992, local authorities 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 108 is in the spirit of this obligation and would write a similar, although differently worded, responsibility into this legislation.
The Minister made a fair point in Grand Committee that in fact it might be in local authorities’ interests to encourage take-up so as to reduce the likelihood of a rise in arrears, which, as had already been noted, many are predicting as a result of what will in effect be a return to the poll tax for many low-income residents. Of course, the Minister did not make that point about the poll tax, although I noted that the noble Lord, Lord Jenkin, reminded us of that sorry saga. I hope that the Minister is right that some local authorities might see it in that way, but why not encourage them?
The point was also made in Grand Committee that the change of name might itself lead to an increase in take-up, especially among pensioners. That would be excellent but it would then create the problem for local authorities of how to find the money to pay for the additional claims. As many noble Lords have warned during the passage of the Bill, the more money that is paid to pensioners, the less money there is for other vulnerable groups and for low-income working people.
In Grand Committee, the noble Lord, Lord Greaves, pointed out that a successful take-up campaign,
“would reduce the amount of money coming into that authority”,
from council tax receipts. He asked whether the Government would,
“adjust the grants to that specific authority over a period to take account of that”. —[Official Report, 10/7/12; col. GC 554.]
The answer of course was no—hence the second part of Amendment 108. This is designed to minimise the conflict of interests facing local authorities that I identified earlier. However, we need to think, too, of the impact of economic shocks, such as a factory closure, that could lead to a big and sudden increase in the numbers claiming the discount.
Local authorities are already having to take the hit of a 10% cut in funding, leaving aside any transitional payments. In fact, according to the LGA, they are being asked to absorb an even bigger cut because of a reduction in the projected amount of spending on council tax support. Moreover, the figures take no account of the money currently unclaimed in council tax benefit—in 2009-10, between £1.7 billion and £2.42 billion. If, as is predicted, the change of name leads to an increase in take-up among pensioners, surely this should be allowed for in the budget devolved to local authorities to fund the discount scheme.
Can the Minister tell your Lordships’ House 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 discount schemes, particularly those authorities which cannot realistically raise the extra money from second homes or empty properties? If the Government are not prepared to accept this specific amendment, will they at the very least be willing to consider writing into the legislation the current duty on local authorities to ensure that residents who are potentially eligible are aware of their entitlement?
This amendment is not raising some abstract technical point of local government finance. It has implications for the living standards of some of the most deprived members of local communities. It attempts to address the ethical dilemma created by the Government for local authorities, which, as my own authority, Nottingham, put it, are caught between a rock and a hard place.
My Lords, I should like to speak to Amendments 107C and 108. The noble Lord and the noble Baroness in whose names those amendments stand will be reassured to know that I support their comments. There are several issues of principle which I hope the Minister will take on board in her response.
There has been a lot of discussion about demand: what the demand is and what it could be. The figure of 60% has been mentioned for current take-up. If that is true, it implies that 40% of those who might take up the entitlement are not doing so. However, the facts on growth and demand can be understood only if there is a clear means of collecting data to a common format. Given that council tax support is being localised, it would need to be to a common format because different councils may do things slightly differently. Therefore, there has to be a means for knowing what actually happens. I think that guidance needs to be given on what that common format should be.
The second point of Amendment 107C, tabled by the noble Lord, Lord Smith, about altering,
“the funding for council tax support to reflect the changes to entitlement”,
is extremely important. It is unclear what the impact of the £100 million transitional funding will lead to because, of course, that money has not yet been allocated. Therefore, in my view it should in theory be allocated to meet need and demand. Depending on how and when that money is allocated and whether it has met the problem identified in earlier debates, an 8.5% cap could be difficult for some councils to deliver without dipping into their own resources. We have to have an information base that is commonly reported and commonly understood.
I agree entirely with the noble Baroness, Lady Lister, about conflict of interest. I did say that it is not even a potential conflict of interest, in one sense because it is just a conflict of interest. If a council advertises council tax support systems very widely it will end up paying out more money. I am absolutely sure that all of them would want to do that but it could mean some difficult choices for those councils. Therefore, there has to be clear guidance on what constitutes publicity that is reasonable. What do the Government expect? It is not about regulating but guiding. What do the Government expect councils will do to ensure that information gets out to those who might wish to apply?
My noble friend Lord Greaves said in Grand Committee that there is an issue about reimbursement. The amendment now calls for a sum in excess of 10% to be reimbursed. Of course, there is now an extra £100 million transitional grant as well. We have to understand it a little better. I think that it means that a cut of 12.5% as opposed to 10% is what will actually happen, based on 2013-14 take-up levels. That £100 million may go some way to meeting that problem of the cut being higher than we had anticipated. How that works through in terms of transitional relief distribution, to which authorities, how much and exactly for what purpose will need to be carefully understood. Those are very important issues of principle and I hope to hear from the Minister how the Government will help us to address those problems.
I support the amendments, particularly the one spoken to so ably and powerfully by my noble friend Lady Lister which overlapped with the amendment moved by my noble friend Lord Smith, speaking from his Wigan experience.
The Minister spoke earlier in the day about the need to get council tax benefit under control because of its doubling and so on over the past decade, 12 or 14 years. My noble friend, so to speak, revised his statistics by insisting that this was the result primarily of the increase in council tax. Let us do a counterfactual and assume that this system had been in place in 1997. The result is that all of that increase in council tax benefit generated perfectly properly by the increase in council tax would be expected to be carried by the local authority. A grant that starts at 90% would the following year be 75%, the year after that perhaps 50%, and so on. As council tax rose and as claims rose, and as the grant remained capped, the local authority would have to pick up more and more of these moneys. I do not see how it can reasonably be expected to do so. It is not just a question of take-up; where local authorities may differ is in the degree to which they may depend on a single industry. Norwich, for example, is very dependent on financial services, and in particular on the former Norwich Union, now Aviva. If that company was to make a major decision and relocate, for example, to Sheffield, which is a second source of Aviva jobs, it would have a dire effect on the Norwich economy, and on the demand for benefits, including council tax benefit. The local authority would have no obvious resources with which to respond to what my noble friend Lady Lister called an economic shock.
For a number of reasons, there will be an ethical dilemma. First, it is not in the council’s interest to promote people’s entitlement to benefits they should have—and we know that pensioners underclaim. Secondly, the council can be very vulnerable to significant economic shocks such as the closure of a factory or even, with the NHS consultation coming through, of a local hospital, where we could very well see 1,500 jobs go very quickly. Many holders of those jobs will be poorly paid women who will come into the council tax benefit claims system. They will be trying to get money from a limited pot, and the resources available to others will diminish. The third problem is that there will continue to be modest future council tax rises, and unless the money keeps pace with that increase, taking into account inflation and everything else, we will find that people who receive aid with their council tax benefit will get a smaller and smaller share of the moneys that they should get.
This means that we will be asking local authorities each and every year to revise their scheme not so much because of local needs but because the amount of bidding for it has outpaced the resources available. I fear that if the Minister does not take this issue very seriously, she will embed instability into the future projections of local authorities’ need to fund their council tax benefit system, so they will continue each and every year to have to revise their scheme to take account of the new needs and take-up, and of the increase in council tax. Unless we have some back-up mechanism to enable local authorities to fund this, we will have major problems down the road that—bluntly—could make some poll tax issues look quite small by comparison.
My Lords, the localisation of council tax, coupled with the localisation of the social fund, will give local authorities the unenviable task of dispensing a capped budget on two important areas of welfare benefits. Hitherto, the responsibility for funding both schemes has come from central government. Now local authorities will have to administer the scheme, and presumably also deal with the local consequences in the form of pressures on their budgets and the difficulties that will be occasioned to many of their residents. It is another case of the Government passing the buck to local government, but not providing the resources for local government to deal with it.
The noble Lord, Lord Shipley, and I were both at one time leaders of a council that has done a great deal to promote the take-up of benefits—not only council tax benefits but other benefits as well. The welfare rights department and other agencies of the authority, in collaboration with the voluntary sector, succeeded to a significant extent in promoting claims. Over the past few years in particular, several million pounds were won for potential claimants, who had their rights enshrined in practice as well as in theory. This is fairly typical of local government across the piece. Nevertheless, something like £1.8 billion in council tax benefit remains unclaimed. Much of that is thought to be money that would have gone to owner-occupying old-age pensioners.
I congratulate the Government on one thing; I repeat the congratulations I uttered in Grand Committee. The change of style from a benefit to support—it was called a rebate in earlier days—may well encourage people, particularly perhaps elderly people, to claim. This is something that does not seem to have been taken into account in relation to the total amount of funding that will be provided. However, that is the only thing that one can congratulate the Government on because when I tabled a Written Parliamentary Question last year asking what steps the Government would be taking to increase the take-up of the benefit as it then was—and, for the moment, still is— the Answer was “nothing”. So even at that time the Government were not keen apparently to promote the take-up of these benefits.
I congratulate previous speakers, particularly my noble friend Lady Lister, on raising this issue. It ought to be a duty of local authorities to promote the take-up of benefits of this and other kinds. As other noble Lords have pointed out, the results of doing that under the regime the Bill prescribes will be to compound the difficulties that authorities are facing, often in making provision for the very people for whom these benefits are intended.
As we have heard in previous debates, there is also a knock-on effect into the local economy. The money that goes in benefits is not horded but spent. It is spent in shops and on local services and helps to maintain, if not stimulate, employment in the local economy. All of this is likely to exercise a downward pressure on the local economy which can only be to the disadvantage of the community as a whole.
My noble friend’s amendment does not go all the way and suggest that the whole expenditure should be met by central government. It is a concession which, I dare say, she felt obliged to include in the amendment rather than one necessarily of her first choice, but I hope that it will persuade the Government to look sympathetically upon it. We cannot countenance a situation in which it is a disincentive to local authorities—and, indeed, other agencies—to promote the take-up of something to which people are entitled. No means-tested benefit scheme is perfect. It will never reach everyone, for a variety of reasons, and so there is no hope at all of getting a 100% take-up of this kind.
It is interesting, of course, that government welfare benefits are not capped—so far, at any rate. As I understand it, it is only the budgets that are administered by local authorities which will be capped. It is a distinction which we will find very difficult to sustain in local government, and even more difficult to explain to people.
The £1.8 billion will never be wholly taken up. There will be within that figure, no doubt, numerous small claims which people probably would not bother with but, nevertheless, with a figure of that size, there must be a substantial underpayment of benefits which could assist many people and also help the communities in which they live. If the Minister cannot affirm today that the Government are prepared to move on this, I hope she will take it away and come back at Third Reading with something which goes at least some way towards meeting the aspirations that the noble Baroness and other noble Lords have proclaimed tonight.
My Lords, I shall start by answering the noble Lord, Lord Smith of Leigh, with regard to reserves. We have discussed this issue before and we have all accepted that local authorities need to have, and must have, reserves. The amendment is almost exactly the same as the one the noble Lord laid on a previous occasion and would make it explicit that local authorities are entitled to hold reserves to deal with any shortfalls.
I entirely agree that it is sensible for local authorities to consider what reserves they are going to budget for. We acknowledge that reserves can help local authorities to respond to unexpected and exceptional circumstances. Local authorities can build-up reserves for particular aspects and they can act as a support for budgets. However, individual authorities are already free to determine the level and use of reserves as part of their own overall financial risk management. It is a matter for individual authorities to consider taking into account their local priorities. 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. For that reason, I do not think that the amendment is necessary.
With regard to Amendment 106A, that would require the auditor to agree the level of reserves. As I explained when the previous amendment was tabled in Committee, that would not be appropriate because the auditor is meant to be independent and therefore should not give advice on reserves, although he can comment if he thinks they are not appropriate. Sometimes auditors ask what is going to be done with the reserves, but they do not direct how much should be held in order to help cover expenditure. I hope it is clear that there is nothing against reserves. From time to time it might be suggested that if they were too large, they could be used for something the local authority had not thought of, but that is good financial management anyway. I hope that the noble Lord will be able to accept that as the final answer. I have said the same thing twice, and I hope that it is sufficient.
Amendments 107C and 108 would both require the Government to provide additional funding in certain circumstances to support local authorities to deliver council tax reductions, and indeed the noble Baroness, Lady Hollis, drew attention to the situation where there might be a big change in circumstances as regards the amount of money being held by a local authority. Central government are not going to leap in and help out in those situations. The funding for council tax support is going to be formed as part of the baseline funding under the new local government finance systems, and as noble Lords know, that will not be changed until the reset. However, we recognise that there will be fluctuations in the demand for council tax support, and primarily we will be looking to billing authorities to work with their major precepting authorities to agree an approach to such management risks.
As noble Lords will be aware, mechanisms are in place to share the effects of a reduction in council tax collection rates between billing and major precepting authorities, and that will be the same for financial pressures that result from increases in demand for support so that it can be shared. We are also 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. It will be a partnership between the billing authorities and local authorities if the sort of pressure that is anticipated—it will not happen everywhere—comes to pass.
The noble Lord, Lord Shipley, asked about the data that have to be collected. Our expectation is that data requirements on local authorities will be very small and significantly less than those in relation to council tax benefit, which is the one where council tax support is coming from. We are working with local authorities to establish what data on the value of reductions offered under the scheme will be collected for both pensioner and working-age people, and we also want to make use of the information collected in the Family Resources Survey to support future policy evaluation. We do not expect too much data to be required.
In relation to the publication of statistics, the Department for Work and Pensions has conducted a consultation on proposals to cease publication of the annual Income Related Benefits: Estimates of Take-up. The consultation closed on 4 October, and a response will be published in due course. No doubt the noble Baroness knows about it. If she does not, she should ask me and I will make sure that she gets to see it. There were a number of options in the consultation paper. The DWP is not going to cease any data collection, just the calculation of estimated take-up rates—which was the point made by the noble Lord, Lord Beecham—and the data source is and will continue to be available, so it will be possible to do the calculations later.
Noble Lords asked about pressures on budgets. I hope that I have answered that. On the question of promotion, it will be up to local councils to make sure that they get people coming for council tax support. The noble Lord, Lord Beecham, is correct that one of the things we understood to be holding people back from applying for benefits was the name, so “council tax support” will we hope make them more interested in doing it. Once again, local authorities will have to manage their budgets in order to deal with that.
I hope that with those explanations, the noble Lord will be willing to withdraw his amendment.
My Lords, I thank the Minister for her response. I am not sure that I take it as an assurance that she recognises that we need to hold more balances now as a result of the Bill that we are currently enacting. She might not carve her name in history like her predecessor Lord Bellwin, but until we get the “Hanham reserves” to support this, I will accept what she has said.
I thank the noble Lords who supported me on Amendment 107B: the noble Lord, Lord Shipley, and my noble friend Lady Hollis, who raised the issue of the economic shock and the impact that could have on council tax benefit. I remind noble Lords that that will have an impact the other way as well because it will probably affect the business rate collection, so local authorities will be squeezed in both having to pay out more council tax benefit and receiving less business support.
I sincerely regret that the Government have now confirmed that the real value of any contribution they make to the council tax support scheme is going to fall significantly over time. None of us really understands what that will be, it depends on the changes that happen over a period of time, but we need to say before we start that it will bring instability into the system. I regret that, but I beg leave to withdraw Amendment 106A.
Amendment 106A withdrawn.
106B: Schedule 4, page 67, line 5, at end insert—
“( ) sections 32 to 34 of the Welfare Reform Act 2007 (benefit for persons taking up employment) so far as applying in relation to council tax benefit.”
Amendment 106B agreed.
Amendment 107 had been withdrawn from the Marshalled List.
107ZA: After Clause 10, insert the following new Clause—
“Arrangements for future council tax benefit schemes
The provisions of section 9 shall cease to have effect after 31 March 2016 and the Secretary of State shall make arrangements for the reintroduction of a national council tax benefit scheme consistent with universal credit.”
My Lords, this is an amendment of last resort, designed to ensure that the deeply flawed and ideologically driven provisions in relation to council tax benefit in this Bill, if enacted, will lapse three years hence, to be replaced by a national scheme compatible with universal credit—assuming, of course, that the latter is operational and effective at that time.
It is based upon a philosophical objection to the faux localism implicit in more than 300 different schemes in which councils will be expected to determine, in the manner of Poor Law guardians, what levels of council tax support will be afforded to individuals and families in a wide range of circumstances. We reject this abandonment of a national minimum entitlement to this and other benefits, as we reject proposals for differential regional pay structures.
The provision of a basic standard of living, whether by means of direct financial assistance through the welfare system and/or relief from charges for such imposts as council tax, is and ought to be the responsibility of national government. As envisaged in Amendment 108 in the name of my noble friend Lady Lister, which we have just debated, local authorities should have a duty to promote take-up and a discretion to enhance support, although not to limit or curtail it. To adopt a phrase now resonating in political debate, in terms of welfare, we are—and if we are not we ought to be—one nation.
We cannot ignore the context in which these changes are proposed, any more than we can ignore the implications for millions of people. The Government assume a fall in demand but, as we have heard several times today, the opposite seems more likely, even if the Government adhere to their policy of not promoting take-up. As we have already heard, the likelihood is that some pensioners at least will take advantage of the welcome change in the nature of the benefit, but, still, a large amount goes unclaimed. The stuttering economy is unlikely to afford many opportunities for full-time work to present working-age claimants while others, not least in the public sector, are likely to lose their jobs. In addition, changes to housing benefit will hit many households hard, whether the infamous bedroom tax or other pending reductions. In debates yesterday in this House and today in the House of Commons on the Housing Benefit (Amendment) Regulations, it appeared that some £1 billion in housing benefit would be lost, a considerable proportion of that to families or households with a disabled person living in them.
Let me illustrate the impact of some of the cuts with examples from my own authority. We currently have 21,000 claimants of working age, about 5,000 of them in work. A single person earning £61 a week with one non-dependant currently receives £12.77 in council tax benefit. That person will lose £4.36 a week out of an income of £61. A lone parent with one child earning £107 a week, but with benefits and the rest bringing the total income up to £241, loses £2.40 a week. A couple with two children earning £186, but with benefits of one kind or another producing a total of £379, loses £3.40 a week, all of that in council tax benefit. These are all band A examples—70% of households in Newcastle are on bands A and B, and the full band A council tax is £1008.
The reductions in council tax benefit which I have exemplified, if they were the result of a council tax increase, would reflect a council tax increase of between 12% and 20%, which is vastly more than any council could impose without being compelled to have a referendum. There will be no council tax freeze, therefore, for 20% of Newcastle's households. Let us imagine the reaction of Mr Pickles to general council tax increases of the scale now to be imposed by these measures on the working poor and people on benefits.
However, as I and others have indicated, it does not stop there, because the changes in housing benefit, in particular the bedroom tax, aggravate the problem considerably. A single person over 25 on JSA of £71 a week in a two-bed council house will pay an extra £12.30. A couple on JSA with one child in a three-bed house and an income of £193 a week will pay an extra £15.88 a week. A lone parent with one child in a three-bed house earning only £235 a week will pay an extra £14 a week as a result of the changes in council tax benefit and housing benefit.
As if all this were not enough, the residents of Newcastle, as in much of the rest of the country, face unprecedented cuts in local services, many of them designed for these particular groups of people anyway, as the result of a combination of massively reduced government financial support and the rising cost of, and demand for, services, especially in the field of adult care. Over the next three years, Newcastle, with a net budget of some £266 million, will have to find £90 million. That is not a cumulative figure over that time, but an annual budget reduction, a problem compounded by the latest council tax freeze, which, as the noble Lord, Lord Shipley, pointed out, stores up extra financial problems for the years ahead.
In its analysis of the effects of localisation, the IFS referred to the reduced incentives for local authorities to facilitate low-value housing development, the increased incentive to discourage low-income families from living in the area, and a disincentive to encourage the take-up of council tax support. On top of this, and crucially, funding will no longer come from the Department for Work and Pensions but will now be taken in its capped form from the central share of the allegedly localised business rate. Effectively, therefore, it will come from local government itself rather than from the general taxpayer as has hitherto been the case.
These are very grave consequences for a great many people. The least that the House can do to avoid these outcomes and the damage that they will inflict on individuals, families, communities and the local economy is to ensure, as far as it can, that the malign consequences of this part of the Bill will endure only for three years and that Parliament will then have to review them—and, I hope, replace them.
This is not the same amendment as that moved earlier by my noble friend Lord McKenzie which would, as it were, have stopped the Bill dead in its tracks now. That argument has been lost. This is a fall-back position in which a sunset clause would require a re-evaluation of the position after three years. I recalled in the Second Reading debate that the first leaflet I delivered as the new candidate for the ward I still represent was to promote the then Labour Government’s rate rebate scheme. Forty-six years on it appears that, unless there is a change of heart by this Government, I will have to deliver another leaflet on the same issue, this time explaining the changes and the damage they will cause to thousands of householders and their families. I hope that this House if not the Government will allow me to offer some hope that the damage will not be long-lasting, and that this amendment will receive support. I beg to move.
My Lords, I thank the noble Lord for all the information he provided. I turn again to the position that local authorities will make up their own schemes, work out their budgets and decide within the mechanism of what they have got what they need to do. We have already said that they have the flexibility within those budgets to decide what they do to make the council tax support work. Considering putting this back for three years would not give any stability at all to this whole process.
My Lords, in the absence of any indication of positive support from the Government or anywhere else in the House, and given the lateness of the hour and the relatively small number of Members, however talented, that we have around us, I feel obliged—very reluctantly—to withdraw the amendment.
Amendment 107ZA withdrawn.
Clause 11 : Power to set higher amount for long-term empty dwellings
107A: Clause 11, page 8, leave out lines 1 to 5 and insert—
“(9) In determining whether a dwelling is a long-term empty dwelling, no account is to be taken of any one or more periods of not more than 6 weeks during which either of the conditions in subsection (8)(a) and (b) is not met (or neither of them is met).
(10) The Secretary of State may by regulations substitute a different period (of not less than 6 weeks) for the period which is for the time being specified in subsection (9).””
My Lords, I have written to the noble Lord, Lord Beecham, who raised the question of when an empty home was an empty home, and whether it was based on whether it had furniture in it. The situation is that the six weeks will matter regardless of whether it has furniture in it. It will end up in the same situation and local authorities can make their decisions on the basis that the home is empty.
My Lords, I am grateful to the noble Baroness for sending us a letter on this in advance of our discussions today. We are happy with the proposition included in the amendment. I think that we had an amendment in Committee that may have prompted the thought but, on reflection, perhaps it was not precisely on point. This amendment is precisely on point and intended to stop-up a loophole. We support it.
Amendment 107A agreed.
107B: After Clause 12, insert the following new Clause—
“Equalisation of additional council tax income
As part of the local government finance report the Secretary of State shall—(a) report on the capacity of each billing authority to raise revenue under sections 10, 11 and 12, and(b) alter the distribution of revenue support grant to equalise resources.”
My Lords, my view of the political process these days is somewhat prejudiced because I watch “The Thick of It”. I can understand the meeting taking place in the Department for Communities and Local Government with government advisers and civil servants when the idea was mooted for changing the council tax benefit, saving £500 million as a contribution towards deficit reduction but at the same time raising money through changes to the council tax scheme by technical adjustments which would actually fund it. In previous times, that might have been called a stealth tax, but we do not use those words any more.
That might seem superficially attractive, but the major flaw, as my noble friend Lord McKenzie of Luton said earlier, is a misunderstanding of geography. It works very differently in different parts of the country. As we said earlier, the capacity of local authorities to raise money through technical changes depends on a number of factors, including the number of second homes. I made the point that Wigan is not seen as a place in which people live in second homes, and we understand that we might raise £20,000 from that source. I suspect that in the London Borough of Kensington and Chelsea, which the noble Baroness used to run, a single house might raise that. So we are limited in the amount that we can afford.
Secondly, there is a mismatch with the need for council tax benefit support. Those authorities with the least capacity to raise it probably have the greatest liability to pay out council tax support. In Wigan, 25% of our households are on some form of council tax support at the moment, and 65% of those are on full benefits. That is because we have a large number of people on low incomes as well as a large number of pensioners.
The Institute for Fiscal Studies, in its report on the cuts which my noble friend Lord Beecham mentioned, showed that the geographic distribution is not fair. Places such as Wigan, Newcastle and many others have the triple effect of having difficulty raising funding through the council tax adjustment, the need for expenditure on council tax support and the biggest level of cuts to implement.
Last week, when we were debating business rates, I noted with interest that the noble Baroness stressed the importance of equalisation to provide fairness in the distribution of business rates. The amendment is there to say: if it is right to do it for business rates, to ensure that there is a fair playing field for local authorities, we should do it also for the amount of money that can be raised through council tax administrative changes. Then we would have a level playing field and would not need to fritter away £100 million in a strange manner; it could simply be applied and the system would be fair. I beg to move.
My Lords, my noble friend Lord Smith raises an interesting point in his amendment. There are two bits to it. One is the extent to which local authorities have the capacity to raise revenue under the new freedoms that they get under the Bill; and the second is how that should be dealt with under the revenue support grant as an equalisation process. One difficulty with this in the longer term is that, as I understand it, we do not know whether we will have revenue support grant on an ongoing basis. That is tied up with the issue of the central share, how it is to be used and what redistributive mechanism there will be. Obviously, the greater the local share, the smaller the central share. The more that the central share is used in Section 31-type grants or their equivalent, the less capacity there is in the system to equalise—to do what my noble friend rightly says should be done.
I am not sure what the resources component of the current revenue support grant in the three-part calculation is, or the extent to which that would pick up those issues. It certainly should if it does not. This is an imaginative and appropriate amendment and I look forward to hearing the Minister’s response.
My Lords, perhaps I might address the two strands of this amendment. First, the level of discounts and the empty homes premium will be a matter for local authorities to determine annually. I do not think it is the role of the Secretary of State to pre-empt the decisions of a local authority, and the high volume of changes among individual council tax payers throughout the year, by speculating on the amount of income that they could raise through their discounts and any premium.
Turning to the second strand, I am unclear whether this was the noble Lord’s intention but my officials advise that the drafting of the amendment could force a general redistribution of resources against unspecified criteria, rather than a more specific redistribution of resources raised by the various discounts and premiums. This picks up on the point that the noble Lord, Lord McKenzie, was making. The Government have been consistently clear that they wish local authorities to have discretion over the level of, and keep the receipts from, the empty homes premium. They will not want to intervene actively to redistribute revenue support grant in any way that would run counter to the direction of the new government policy on business rates retention, which seeks to end the begging-bowl approach to local government finance. The business rates retention scheme, which effectively works in with this, will be created by this Bill and will create a direct link between the business rates collected and local authority income. It also gives the local authority the ability to help people into employment and with the council tax support scheme. However, the sort of equalisation that the noble Lord is looking for will not be available in the way that he seeks.
My Lords, I thank the Minister for her response. I suppose that I am not surprised by what she said but I am obviously still somewhat disappointed because she focused on the detail of the amendment and not the principle behind it. The principle was that in the system being set up we have created an unfair opportunity for some authorities to raise revenue to pay for any change to the council tax support system. As we heard earlier, many authorities will not need to implement any change whatever while other authorities, which do not have that capacity but have a greater need for council tax benefit support, will be making very difficult decisions and reducing the support that they give to many deserving people on low pay who currently benefit from that scheme.
I take the point that it may not technically be a correct amendment in the way that I wanted it to be but my “distribution” was simply intended to move it back. If the Government were to assume that we would all implement the system to the full extent, whether we do or not, that would be one basis for doing it. What we are seeing now is that the Government are accepting that this Bill will create two nations: the nation of those who can afford to pay for the scheme that is being introduced and the nation of those who cannot. I wonder what the impact of that will be in the long term. I beg leave to withdraw.
Amendment 107B withdrawn.
Amendment 107C not moved.
Clause 13 : Regulations about powers to require information, offences and penalties
Amendment 107ZD not moved.
107D: Clause 13, page 12, line 28, at end insert—
(a) regulations under this section specify a sum as a penalty (or a minimum or maximum penalty), and(b) it appears to the Treasury that there has been a change in the value of money since those regulations were made or (as the case may be) the last occasion when an order under this subsection was made,the Treasury may by order substitute for that sum such other sum as appears to them to be justified by the change.(3B) An order under subsection (3A) does not apply in relation to any act done or omission which began before the date on which the order comes into force.”
My Lords, this series of amendments is necessary to provide a route of appeal to a valuation tribunal in England or Wales against any penalties that may be created in regulations under the powers provided in this Bill. Moreover, it gives Her Majesty’s Treasury the power to increase the level of any such penalties in line with inflation. Minor amendments are also being made to enable provision to be made for new penalties to be collected and enforced in the same way as existing penalties under the council tax system. These amendments make no assumptions about the penalties themselves or the offences that may be imposed as an alternative to prosecution, as these have yet to be determined. These amendments seek to ensure that, when such penalties are created in regulations, be it by Welsh Ministers or by the Secretary of State, with Parliament’s approval through the affirmative procedure, there is an available route of appeal.
The amendments also ensure that where there is a change in the value of money, the amount of any penalties may be varied by order made by the Treasury, subject to the negative resolution procedure, without requiring the affirmative procedure to make the necessary regulations. This is consistent with the procedure for increasing the existing penalties that authorities may impose in relation to council tax under Schedule 3 to the Local Government Finance Act 1992. This ensures that where a decision is taken to increase these penalties in line with inflation, any new penalties may be increased by the same order.
Amendment 107E provides that the creation of any new penalties would not impact on the well established system of penalties within the council tax system.
Amendment 107F amends existing powers to make regulations to deal with a situation where a person dies and was liable to pay a penalty, so that provision may also be made in relation to any new penalties created in regulations under new Section 14C.
Amendment 107G provides a clear route of appeal against the new civil penalties that may be imposed by local authorities under regulations made under new Section 14C. Where regulations allow for the imposition of a penalty as an alternative to prosecution, the amendment enables a person to appeal the amount of that penalty. This would be to the Valuation Tribunal for England for penalties affecting English authorities, while such penalties as the Welsh Ministers may decide to create would have a route of appeal to the Valuation Tribunal for Wales.
These amendments seek to make technical changes to ensure that any penalty regime that may accompany these schemes works alongside and mirrors the existing council tax penalty regime. I must admit that this exhausting list of penalties conjures up pictures of football. However, I shall not talk about this at such a late hour. With all the penalty explanations that I have given, I ask noble Lords to support Amendments 107D to 107G.
My Lords, I thank the Minister for his explanation of these amendments, with which I do not believe we have a problem. I was slightly intrigued by references to the Treasury being able to act where there has been a change in the value of money. Amendment 107D states that,
“the Treasury may by order substitute for that sum such other sum as appears to them to be justified by the change”.
I had a joke about the value of the pound in your pocket, but I think the Minister is too young for that.
From what the Minister said, this simply replicates existing arrangements that are in the system somewhere. The thought of the Treasury being able to roam at will and take a view on changes in the value of money, and therefore being able to bring forward changes to the level of penalties by order, was a bit of a concern. The amendment does not say anything about the regularity with which that can be done. On the basis of the wording, it seems that it can be done at any time; it is not once a year or uprated by other issues. Indeed, when it comes to changes that appear justified to the Treasury, we all know that what the Treasury thinks is justified is not necessarily anything that we will be comfortable with. However, I will not press this matter. If the Minister says that this simply replicates existing arrangements, I am happy with that—or not unhappy.
Amendment 107D agreed.
Amendments 107E to 107G
107E: Clause 13, page 12, line 29, after “of” insert “paragraph 1 of”
107F: Clause 13, page 13, line 21, at end insert—
“( ) In section 18(1)(c) (death of person liable for penalty), after “him” insert “under regulations under section 14C or”.”
107G: Clause 13, page 13, line 24, at end insert—
“( ) Schedule 3 (penalties) is amended as follows.
( ) After paragraph 3(1) (appeals) insert—
“(1A) A person (“P”) may appeal to a valuation tribunal if aggrieved by the imposition on P of a penalty under regulations under section 14C, unless P agreed to the imposition of the penalty as an alternative to criminal proceedings being taken against P in respect of the act or omission to which the penalty relates.”
( ) After paragraph 3(3) insert—
“(4) Where a penalty is imposed on a person (“P”) under regulations under section 14C, and P alleges that there is no power in the case concerned to impose a penalty of the amount imposed, P may appeal to a valuation tribunal under this sub-paragraph against the imposition.”
( ) In paragraph 6(1) and (5) (regulations about collection) after “paragraph 1 or 2 above” insert “or under regulations under section 14C”.
( ) In Schedule 11 to the LGFA 1988 (tribunals), in paragraph 10A(1)(d) (orders), after “under” insert “regulations under section 14C of or”.”
Amendments 107E to 107G agreed.
107H: After Clause 13, insert the following new Clause—
“Calculation of billing authority’s council tax base
(1) In section 34 of the LGFA 1992 (calculations to be made in setting council tax: additional calculations where special item relates to part only of billing authority’s area), after subsection (4) insert—
“(5) Regulations under subsection (4) that apply to billing authorities in England may contain different rules for the purposes of calculating item TP in relation to different kinds of special item.”
(2) In section 45 of the LGFA 1992 (calculations to be made in setting council tax: additional calculations where special item relates to part only of major precepting authority’s area), after subsection (5) insert—
“(5A) Regulations under subsection (4) that apply to authorities in England may contain different rules for the purposes of calculating item TP in relation to different kinds of special item.
(5B) Regulations under subsection (4) that make provision by virtue of subsection (5A) may make consequential amendments to this Act.””
This amendment is necessary as part of the Government’s policy for providing funding certainty for parish and town councils. As noble Lords will be aware, the funding arrangements consultation was published in May. It set out the Government’s policy that billing authorities and town and parish councils should work together to manage the impact of localising council tax on town and parish budgets and the levels of band D council tax for parish residents.
Noble Lords will be aware that in response to that consultation some concerns have been raised by town and parish councils that the approach set out in the consultation would not provide enough certainty over funding. We have listened to those concerns, which is why in August we published a further consultation setting out proposals for providing that level of certainty. In short, we are proposing amending secondary legislation to allow the calculation of the tax base for town and parish areas to be calculated excluding council tax support reductions. The effect will be to maintain the status quo for town and parish councils and their residents.
The amendment to the Bill is a technical amendment to ensure that the proposals for town and parish council areas in respect of parish precepts do not need to be applied to all other special items for part of a billing authority or major precepting authority area. Noble Lords will also be aware that the Government have recently consulted on the proposals for providing certainty for town and parish councils, and part of that consultation is to seek views on how other special items, such as waste and transport levies, should be treated.
This amendment will enable the council tax base to be calculated differently, depending on which special item is being considered. For example, if there is good reason why the council tax base for all other special items should be calculated with council tax support reductions included, the current legislation would not allow us to deliver that without also applying the same rules to the calculation of the council tax base for parish precepts. We may therefore be unable to provide the certainty town and parish councils so desire.
I recommend this amendment as it is a sensible way of ensuring that we can provide certainty for town and parish councils without automatically forcing the same rules to apply to the calculation of the tax base for other special items. With this explanation, I trust that noble Lords will support this amendment
My Lords, I am grateful to the Minister for his explanation of this amendment. I would like to read the record and ponder a bit, but I accept what he says. This is not an issue of contention for us. Perhaps he will recap. I believe he said there was an updated consultation in August with town and parish councils about working together with billing authorities. He will correct me if I am wrong. If that is right, will he say when the Government’s response—if that is not the Government’s response—is likely to be ready?
Amendment 107H agreed.
Clause 14 : Provision of information about council tax
Amendment 108 not moved.
109: After Clause 14, insert the following new Clause—
“Consultation on new bands of council tax
The Secretary of State shall consult with local government on the introduction of a new higher (I) band, or bands, of council tax.”
109ZA: After Clause 14, insert the following new Clause—
“Enforcement of council tax defaulters’ income and expenditure
(1) Councils shall take reasonable steps to obtain from all council tax defaulters a statement showing income, expenditure and debts before—
(a) applying to the magistrates court for a liability order;(b) issuing a distress warrant to the bailiffs;(c) deducting sums of arrears from jobseekers allowance or income support, universal credit or other means tested benefits;(d) commencing bankruptcy proceedings;(e) applying for a charging order;(f) commencing committal proceedings.(2) Regulations will govern the procedures to be followed by local authorities when undertaking a means enquiry and obtaining the information required in subsection (1).”
I shall speak also to Amendment 109ZB. I shall be very brief. Amendment 109ZA would require councils to take reasonable steps to obtain from all council tax defaulters a statement showing income, expenditure and debts before taking action to recoup the council tax debt. Amendment 109ZB would provide for local authorities to have in their contracts with bailiff companies dealing with the enforcement of council tax a provision for the bailiff company to return the liability order or warrant in specified circumstances. These circumstances are glaringly obvious examples of when such a return should be made. Where there is an error in the decision to issue the liability order or warrant in the first place, surely the warrant should be returned. If the liability order or warrant was imposed before the relevant facts of the case were known, how could such a thing happen and how could it be left like that? The circumstances also include other cases where absolutely obviously it would be unjust or pointless to go ahead with processing the liability order.
It is arguable that the amendments speak for themselves and need no explanation. Quite clearly, if the householder has no money or already has a debt payment regime that does not enable any further payments to be made, it is wise for the local authority to know about it rather than waste its time applying to the magistrates court for a liability order, issuing a distress warrant to the bailiffs and so forth. At the same time, a liability order will cause incredible stress to the person on the other end of these communications.
Unfortunately, costs added at the liability order stage and on enforcement provide tempting short-term incentives for local authorities to maximise the numbers summonsed. Other beneficiaries include the bailiffs and other enforcement professionals. Costs help to cover up levels of default with paying debtors subsidising those who cannot pay. However, in the long run enforcement is likely to result in greater costs for local authorities, which will have to pick up the pieces from broken families, mental breakdowns and homelessness. Other departments, including perhaps the health department, the local authority or others, may have to pick up the pieces, but in the end the state will pick up the bills.
Essentially, these two amendments are designed to call a halt to proceedings against council tax debtors until the local authority is fully informed about the circumstances of the individual. This is particularly important in an age when debt collection depends almost entirely on computers. The case is analysed by computer, the decision to take action to recoup the debt is made by computer, and the letter to the householder is issued by computer. We are all well aware of being on the receiving end of computer messages and it is thoroughly Kafkaesque, as we all know. The individual has no opportunity to have a conversation with the local authority about their circumstances and to make a plan to pay the debt over time.
Alan Murdie, a barrister with years of experience working with poor people, describes the most vulnerable as pathetically law-abiding but finding themselves caught up in a system that they cannot deal with or comprehend. They do not fall into any identifiable group. Their only common characteristic is that they are all poor. Few of them are able to use appeal mechanisms unaided and they are not the sort of people who go along to the local councillor or their MP. They are not to be politicised. He said, “For many, a sense of hopelessness takes over which leads to inaction”.
Hopelessness often arises from changes and cutbacks in income arising from alterations to the welfare system or when a computer makes a mistake. In many ways, probably the worst thing for these people is to receive an overpayment that they are not aware is an overpayment. Suddenly, some time later, apparently utterly irrationally, they find themselves with a reduced income and a pile of debts of which they had no awareness at all.
I urge the Minister to take seriously the words of Lord Justice Wall, who remarked in the Court of Appeal in the case of Gargett v Lambeth in 2008 that:
“In my view it remains an apparently non-eradicable blemish on our operation of the rule of law that the poorest and most disadvantaged in our society remain subject to regulations which are complex, obscure and, to many, simply incomprehensible”.
I hope that the Minister will see the thrust of these amendments as an attempt to reduce the burgeoning number of defaults, to reduce the administrative burden of unrealistic efforts to reclaim money that cannot and will not be paid, and to reduce unnecessary distress and breakdown of the very poorest people in our communities. Will the Minister give an assurance to the House that the Government will give serious consideration to the issues raised here and bring back their own amendment at Third Reading?
My Lords, I support the thrust of these amendments. I do not imagine that the noble Baroness intends to put it to the vote at this hour. I am not entirely certain that it is appropriate for it to be in the Bill anyway but she certainly raises extremely important issues, which I am quite sure, in a few moments, the Minister will agree with. I would like to endorse that and see how we can take this forward—probably in discussion with the Local Government Association and certainly through issuing good practice. It does not necessarily have to be the Government who do that. The Local Government Association could do that. But these are important issues which need to be addressed.
I certainly endorse what the noble Lord, Lord Tope, said and support the thrust of the noble Baroness’s amendments. The first is a matter essentially for the local authorities. The second impinges on the role of bailiffs. We had a discussion in the Committee stage of the Crime and Courts Bill when I moved an amendment urging the Government to produce a regulatory system for bailiffs, about which there had been a great deal of controversy. The previous Government had passed the Tribunals, Courts and Enforcement Act 2007 which envisaged a code of practice dealing with a whole range of issues, some of which were touched on in the noble Baroness’s Amendment 109ZB.
We were informed in the Committee stage of the Crime and Courts Bill that the consultation period that the Government had initiated about that whole area was ending on 14 May and that conclusions would be reached in the autumn. Well, we are in the autumn—we avoided having a summer in the mean time—and it would be interesting to know how things are going in that respect, although I do not expect the noble Baroness the Minister to know offhand. It seems to me, and it might seem to the noble Baroness, Lady Meacher, that it would be sensible to draw the two discussions together, because certainly as far as the role of bailiffs is concerned, clearly critical to Amendment 109ZB, there are also wider implications. I believe that the noble Baroness, Lady Northover, was dealing with this matter, but I think that she may have moved on and it is probably the noble Lord, Lord Taylor, who now has the remit for this. It would be helpful if the Minister could consult with whoever is now dealing with this matter to see what is happening on that front so that we can have a clear indication of the Government’s thinking—I hope before Third Reading, which does not leave a lot of time—so that the noble Baroness might have an opportunity, if necessary, to press something on that occasion. Therefore it would be helpful if the Minister would indicate that she would be prepared to take this issue back, looking at it with the other department and letting noble Lords know how the land lies in respect of bailiffs and enforcement measures generally, but in particular in relation to council tax.
My Lords, I thank the noble Baroness for moving this amendment. Again, we had some discussion about it in Committee. I have some sympathy about the way in which these enforcements are carried out and the fact that, as the noble Baroness said, sometimes they may simply not be known about.
Again, this is a matter for local authorities. They have to recognise that they have to treat this issue sympathetically, pragmatically and sensibly. I know that it is felt that they do not always do that. I do not think that it is a government direction to do that but—I notice the expression on the noble Baroness’s face—I do think that we can do something in terms of guidance on how they go about this. I will combine, if I may, the two points about guidance because the noble Lord, Lord Beecham, raised the question of the MoJ consultations. We know that those have been concluded, and we also know that there has not yet been a result from them because we have been pressing to see whether we could get anything for today. The MoJ is looking at the question of bailiffs very widely, and we need to look at it from the point of view of enforcement of council tax issues.
I would like to suggest to the noble Baroness that we issue guidance from the DCLG, and that she and her advisers have an opportunity to talk to us about how that guidance should be set up and what should be included. I do not guarantee that we will take it all on board but I think that there is much experience around there that would be helpful. Once the MoJ comes to a conclusion and gets its guidance sorted out, we can pull these together so that there is a comprehensive document. Given that I understand the noble Baroness’s concerns and that we will respond in this way, I hope that she will be willing to withdraw her amendment.
I thank the Minister very much for that understanding and good response. I very much welcome the fact that the consultation on the regulation of bailiffs has been concluded. I was arguing for that 20 years ago. People always say that it takes 10 years—or is it 20 years?—for a good idea to come to fruition. I am pleased that the department will issue guidance and would welcome the opportunity to talk about it. With those assurances, I am happy to withdraw the amendment.
Amendment 109ZA withdrawn.
Amendment 109ZB not moved.
Clause 15 : Power for HMRC to supply information for purposes of council tax
109A: Clause 15, page 17, line 16, leave out subsection (7)
My Lords, in moving Amendment 109A, I will speak also to Amendment 109B. Both are minor amendments. They would remove the requirement for two months to elapse between Royal Assent being given to the Bill and the date on which provisions allowing for HMRC information to be supplied to local authorities in England, Scotland and Wales for purposes relating to council tax, and to the relevant Northern Ireland departments for purposes relating to rates, come into force.
As noble Lords will I am sure be aware, local authorities in England will have the freedom to design their own schemes for working-age people. It is very likely that most, probably all, local authorities will choose to take into account income and tax credit information, information which originates with Her Majesty’s Revenue and Customs, as well as information pertaining to entitlement to benefits, in determining the level of support they wish to provide to applicants under their schemes.
As currently drafted, the provisions in the Bill containing the power for HMRC to share information with local authorities will come into force only two months after Royal Assent is given. These amendments are a sensible measure to take, allowing for information sharing to begin two months earlier than currently provided for, which will give greater certainty to local authorities as they design and implement their schemes regarding the information they will have and the purposes for which they may use it. I trust that with this brief explanation your Lordships’ House will support these amendments.
Amendment 109A agreed.
Clause 16 : Power for HMRC to supply information for purposes of rates in Northern Ireland
109B: Clause 16, page 18, line 34, leave out subsection (15)
Amendment 109B agreed.
Clause 18 : Power to make transitional, consequential etc provision
Amendment 110 not moved.
Amendment 111 not moved.
House adjourned at 10.42 pm.