My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Local Government Finance Bill, has consented to place her interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
I appreciate that several noble Lords are wishing to leave the Chamber but we all want to hear the noble Baroness, Lady Hollis. Will noble Lords please leave quietly so that the noble Baroness may move the first amendment today?
1: Before Clause 9, insert the following new Clause—
“Council tax reduction schemes
(1) The Secretary of State shall make provision for an independent review of all council tax reduction schemes made under the provisions of this Act, to consider their effectiveness, efficiency, fairness and transparency and their impact on the localism agenda; and to make recommendations as to whether such schemes should be brought within universal credit.
(2) A review under subsection (1) shall take place within three years after this Act comes into effect.”
My Lords, I am grateful. This first amendment is a very modest and simple one. It simply asks for a review of the Bill within the next three years; that is all. I know that many around the House are worried about aspects of the Bill. We thank the Minister for the one-year transitional grant, as any additional money is welcome, but returning to councils just one-fifth of the council tax benefit cuts in a transitional one-year grant creates additional problems in itself. There are a lot of loose ends in the Bill, a lot of unknowns and a lot of concerns, which is why the amendment, which is a modest one, ask for a review of these proposals. If what the Bill proposes is sturdy and robust, a review will show it. If it is not and needs adjustment, a review will show it. If it needs more radical reforms such as moving into universal credit, a review will show it. The amendment seeks evidence, which is something that we should do, and I very much hope that it will attract the support of the entire House.
To remind ourselves, council tax benefit is being removed from our national social security system, when now it is fully funded to meet individual need wherever that person may live, to, in five months’ time, a rebate scheme with 10% less money in it, based on local discretion, with each local authority inventing its own local version. However, I fear that such local versions will depend not on a council’s unique insight into unique local need but on its prosperity, its reserves, its property values, its demography, its pensioner numbers, its benefit claimant numbers, its second homes and empty homes—everything and anything except the particular need of the particular individual who needs financial support, irrespective of where in the country she may live.
What are our concerns? We list them in the amendment. I suggest that they include effectiveness, efficiency, fairness and transparency, and I shall spend a moment on each. This cannot be an effective way to construct council tax support. It depends solely on the accidental variations between authorities—how many pensioners, how many second homes—but in no sense are those accidental connections associated with the amount of need of the council residents in its patch. In other words, this version of localism has nothing to do with local need and everything to do with local council finances.
Essentially, as we argued on Report, richer authorities are keeping the national scheme—essentially, the social security system—because they can afford to. Poorer authorities are not, because they cannot. In my view, the proposals are not effective because they do not, and many of our local authorities cannot afford to, meet local need—and that, of course, is the entire point of the council tax rebate in the first place. So I do not believe that they are effective.
Are they at least efficient? Do they represent value for money, the second test in our amendment? I think not. From the local authorities’ point of view, we risk poll tax mark two. Up to 2 million families may be paying for the first time towards their council tax. Set it too high—a 30% minimum, as is the case in several authorities in Norfolk—and families cannot pay. Set it too low, after the transitional grant at £1.50, and the council cannot collect. On the one hand, families cannot pay; on the other, councils cannot collect.
The Minister’s own transitional grant Statement sensibly accepted that:
“Councils will rightly want to avoid collecting small payments, and it may consequently be better value for money for councils to avoid designing schemes which seek to do so”.—[Official Report, 15/10/12; col. WS 164.]
The Minister’s Statement also says that there should be no sharp reduction for those entering work. Quite. But if councils exclude pensioners from the cuts as they are required to do, if they avoid collecting small sums from benefit claimants as the Minister urges them to do, and if they seek to protect work incentives as the Government and all of us would wish them to do, then the entire population of those on council benefit is covered and protected: no cuts for anyone. So where, in poorer authorities, do the other four-fifths of savings of that £500 million, minus the transitional grant, come from the year after next? Where do the full savings of £500 million come from the year after that?
Small sums are exactly what local authorities will need to collect. If they do not, they cannot balance their accounts. But if they do, they face huge numbers of defaulters, whom they cannot afford to chase. Confidence in the whole basis of council tax finance will be destabilised and, as with the poll tax, take years and years to rebuild. Many of us in this Chamber were in local government during the poll tax period, and we know what subsequently happened. If we are not careful, we will be going in the same direction again. Efficient? I think not.
Our third test is fairness. Council tax benefit is part of income support. How can it be fair that the income of our poorest and most vulnerable families should depend not on their need but on the financial ability of their local authorities to meet their need; not on their poverty but on the poverty of their local authority; not on who they are but on where they are?
What may this mean for our poorest? We must add this cut in council tax support to the cuts in housing benefits. I do not know whether anyone in government is seeing how the two sorts of cuts are interacting. I have worked out that the carer in her forties and the widow in her fifties could lose 28%—between a quarter and a third—of her current benefit. I only ask your Lordships how they will manage. If they go into debt, they face eviction and, without children, they may not be offered alternative accommodation. So they sleep where? Rough?
Our final test in this amendment is transparency: people should be able to understand what they can claim and what they should get. Do we really think that asking families, means-tested for universal credit, then to apply for council tax benefit and, through a different means test, for council tax support—the means test varies from council to council—is easy to understand and transparent? The means test is also for a system which may change each year as the local authority finances improve or worsen. A widow this year may pay nothing; next year she may pay nothing or 8.5% or any figure above or below it. The year after that, she may pay any figure between nought and 30% or, in one authority, 60% of her council tax—from nothing to 60%. They will not get much help from the CABs, because half of their branches have been cut. Housing associations which, as with my own Broadland Housing Association, span a county, will be dealing with seven different council tax benefit schemes, each of which may be different for each of the next three years.
One of the prizes of universal credit is transparency, which will aid populations and encourage people back into work. This multitude of council tax benefit schemes, each possibly changing every year, sabotages universal credit, a scheme I want to see succeed—as I am sure the entire House does.
All these concerns about effectiveness, efficiency, fairness and transparency may not be realised. I hope that I am wrong about that, but only an independent review will tell us if these schemes are robust, stable, well researched and fully claimed. If they bear fairly on the poorest and are collected officially and with dignity, then a review will confirm that. If local authorities need other sources of revenue, such as a single person discount, which the noble Lord, Lord Best, argued so powerfully for on Report, then a review could consider that. If, however, as I fear, we face something of a shambles, and local authority funding lurches from one transitional grant to another to cover non-payment, and if local authorities come in desperation themselves to favour a single, national scheme which can, and should, be incorporated into universal credit, then a review would tell us that too.
DCLG will have to track all this, whether it likes it or not. That is what Governments have to do. This amendment would ensure that such tracking is done independently and publicly, by putting in place a review to which local authorities would contribute so that we can all learn from it. Its cost is negligible, so financial privilege cannot be involved. However, such an amendment, with the support of your Lordships, would allow Members of the other place to think again now that they see the potential effect in their constituencies, both of the proposed scheme after consultation—and those results have come through only in the last fortnight or so—and in the last week, the effect of the transitional grant. No MP could have had this vital information about how it affects their constituencies when they voted this Bill through. Above all, such an amendment and review would help ensure a fair, affordable and stable council tax benefit scheme in future.
I hope that the Minister will support this modest, cost-free, evidence-seeking amendment, and that the House will also do so. I beg to move.
My Lords, I rise to speak in support of this amendment. My reason is that we need to understand better than I believe the Government do the impact of various changes being implemented at the same time over coming months.
Next year, a large number of people will be taken out of income tax because of the rise in the threshold. At the same time, universal credit, and its housing elements in particular, will begin implementation. We should note that demand for housing benefit is now rising because rents are going up, as opposed to going down, as the Government expected would happen a few months ago. At the same time, council tax benefit will be devolved to councils, being renamed “council tax support”, and it is likely that demand will rise because of the name change alone. In addition, there is a 10% cut in the grant given to local authorities for council tax support, and in actuality, many think that that cut is nearer to 12.5% because of that rising demand.
The Government have said that councils can make up the cut by charging 100% on empty homes and second homes. We know that that can work for some councils because they have enough numbers of one or the other, or both, to do it. However, it will not work for all. Many councils do not have enough empty or second homes to enable an increase to 100% to deliver the 12.5% cut in the budget. Even the transitional relief announced last week, prior to Report, will not solve the problem for all, and in any case, that transitional relief is only for one year.
The Local Government Association—I declare my vice-presidency—thinks that the Government’s package substantially underfunds the 8.5% cap on what an individual household would pay and that councils will need to find another £100 million to make up their loss. Putting aside the problems of councils, the problems for individuals could be very severe in the face of so much change at once and the need, in particular, of many working-age households to start paying some council tax.
I agree that as a minimum the Government should commission an independent review to report as speedily as it can, but certainly within three years, on how all the changes are working. I realise that the Government keep things under review but the problem is that more than one Whitehall department is involved and the Government need the support of an independent body such as the Institute for Fiscal Studies or the Joseph Rowntree Foundation to assess the impact in an independent way.
I regard this amendment as modest and the Government could and should accept it. I hope that the Minister will accept it as a helpful contribution to our understanding across government of the impact of these substantial changes.
My Lords, I hope that the Minister is able to accept this amendment or something akin to it. I agree with the noble Baroness, Lady Hollis, that it will be important to review the effects of localising the council tax benefit system. Down the line we will need to ask whether this change has led to a chaotic situation of dozens of different schemes and whether this localist approach has produced variations in benefit schemes that reflect not what local financial circumstances force on councils but what genuinely fits local conditions. We also need to ask whether it would be better to return to a national scheme incorporated into the universal credit arrangements.
My own emphasis for a review, however, would be on analysing the consequences of the cuts to council tax benefit on the households affected and on those councils which find it necessary to start collecting council tax from the lowest-income families who did not previously have to pay. What has been the cost in extracting these new taxes? What has happened to those who could not pay? It is a very serious matter deliberately to reduce the income of those who are trying hard to get a job, are not able to work or are in work but on the very lowest earnings. No government would want to hurt those of our fellow citizens who are living on the breadline and finding life a considerable struggle.
As I noted in Committee, the Institute for Fiscal Studies, the Joseph Rowntree Foundation and others have shown that it is those of working age on the lowest incomes who have seen the least improvement to their living standards over the past decade. The gap between rich and poor has widened and income inequalities have increased. It is those in relative poverty who expend the highest proportion of their incomes on fuel and food, and so now face the greatest pressures in making ends meet.
The various welfare benefit cuts introduced since 2010—with the largest still to come—are bound to have a cumulative effect. The same households that are hit by one cut may well be affected by another. Thus, many of the 660,000 households affected by the forthcoming “bedroom tax” will also be caught by having to start paying council tax from the very same day—1 April 2013. What will be the knock-on effects of the council tax benefit measures when added to all the other benefit changes? What unforeseen consequences may emerge from these measures? Are there impacts on physical and mental health, with consequential costs to the NHS? Are there burdens for children’s services? Are mounting rent arrears leading to homelessness, with higher costs for central and local government? When do these cuts reach a point when any reasonable person would see them as punitive and unacceptably harsh?
In response to an amendment in my name to the Welfare Reform Bill, the noble Lord, Lord Freud, agreed to a thorough-going and high-quality review of the impact of housing benefit cuts. He has made the point that he wants government policy to be based on sound evidence, which good research should bring forward. That can enable in-flight corrections to policy. For example, the noble Lord, Lord Shipley, mentioned the hopes of the noble Lord, Lord Freud, that cuts to local housing allowances and housing benefit would lead to rent reductions but they have not materialised. If the researchers for the review of the noble Lord, Lord Freud, show clearly that rents have instead been rising, Ministers may be wise to think again about their approach. In the case of council tax benefit, the cuts, unusually, are outside the remit of the Department for Work and Pensions, and an evidence-based review will need to be undertaken by the noble Baroness the Minister’s Department for Communities and Local Government. A parallel exercise there to the DWP’s would seem essential if lessons are to be learnt in time to rectify deficiencies in the new system. For example, I have learnt from working on this Bill that the Secretary of State has had the power since 1992 to vary the 25% single person discount for households. A review of the kind proposed by this amendment could be the catalyst to persuade the Secretary of State to use that power and allow a different discount level where the local authority concerned needs this change. It is this kind of policy change that a review could stimulate.
This is a modest amendment with minimal financial implications. It could prove of immense value to the Government and to those who could be hugely disadvantaged by the benefit cuts in the Bill. I heartily commend it.
I am sorry, I was slow to get to my feet. We speak in full support of this amendment, moved so comprehensibly by my noble friend Lady Hollis. I am delighted that it also has the support of the noble Lords, Lord Shipley and Lord Best, who made a hugely important point about the collection of issues coming down the track, particularly from next April, and the need to look at those on a comprehensive basis, as well as the importance of any review being independent.
As we discussed throughout our deliberations on the Bill, the council tax support scheme represents a major change to the benefit system, affecting millions of people. We know that it has been introduced with inadequate funding and, further, has been introduced at a time when probably the biggest change to the social security system since Beveridge is being phased in, with universal credit. As my noble friend made clear, we consider that council tax reduction schemes should revert to being a national, demand-led benefit, as now, inculcated into universal credit, and this amendment seeks a recommendation of an independent review on this issue. But it does not insist on it, and this is not the only issue that it wishes to be the subject of the review; it seeks a comprehensive look at how the localised system is working.
The fact that local authorities have had to operate council tax benefit schemes does not necessarily make them experts in the design of such schemes. Of course, designing an individual scheme that has to work alongside and be consistent with other national benefits, the rules of which are still to a certain extent being worked out, is particularly problematical. The design must lead not only to a system that is practical and efficient to operate but one that addresses the needs of the poor and most vulnerable, while also containing adequate work incentives. It is clear that the variety of schemes on which local authorities have been consulting do not all meet these criteria; proposals include requiring minimum payments of 20% or 30% for all working age claimants, introducing a maximum limit, increasing tapers, reducing savings limits and counting child benefit as income. Having espoused the mantra that it is up to local authorities and not central government, at the 12th hour the Government have had to come forward with a package to encourage local authorities to comply with some national norms—a taper rate of not more than 25% and those currently passported to full benefits to be subject to not more than 8.5% of what would otherwise be their full liability.
The extent to which the package is sufficient, with just one year and less than one-quarter of the funding cut imposed, remains to be seen. Early evidence is that it is insufficient. It still leaves the prospects of the poll tax mark 2 and horrendous collection problems for local councils. The point is that on the first consultation by many local authorities, many proposals diverged from some key principles which the Government at least nominally sought to encourage, particularly protection of vulnerable people. That is because councils have been left with impossible choices—poll tax mark 2. The Government of course hope that this will all settle down; we think that they are wrong—but an independent review within three years will test that matter.
My Lords, I apologise to the noble Lord, Lord McKenzie, for trying to leap in ahead of him. He will have to be quicker getting to his feet and I will have to be slower getting to mine.
I thank the noble Lord, Lord McKenzie, and the three other main contributors to this debate for tabling this amendment, which has been raised before and relates to the monitoring and evaluation of the reforms that we are talking about here—council tax support. However, the amendment would go wider than that, as the noble Lords, Lord Shipley and Lord McKenzie, said, and seek formal review across all the welfare programmes.
This amendment seeks to require the Secretary of State to undertake a formal review of council tax support three years after its implementation, and the noble Baroness, Lady Hollis, was considering whether it should be brought within universal credit. The noble Lord, Lord Shipley, made it clear that he wants the provision to go much wider than that.
We have had several discussions on this issue during the passage of the Bill. I will say again what I have said before: namely, that in the first instance it is for councils to keep these schemes under review. The Bill requires each billing authority to do just that, each financial year, and to consider whether or not to revise or, indeed, replace its scheme, which a local authority is entitled to do. Local authorities are closest to their local communities and therefore are closest to those who need the council tax support. Therefore, they will be in the best position to decide how they set their council tax in future, bearing in mind the needs of their population.
I am not convinced that a major independent review as a set stage is required or, indeed, that it would be particularly helpful for local councils. Therefore, noble Lords will not be surprised when I say that I cannot accept the amendment. However, I recognise that it is right and proper for the Government to keep the framework in which councils operate under review. I can confirm that we will take steps to do this. We are already considering with local government what minimal data we will require from councils to enable us to keep this policy under review. I have no doubt at all that local councils will keep us informed of how it is progressing.
There were rather snide or slightly underappreciative comments about the transition scheme announced last week. As we discussed, the transition scheme has been set up to ease in these changes and to ensure that there are incentives and support for councils to help deliver the Government’s objectives.
Furthermore, as we have debated at each stage of the Bill’s passage, the Government do not believe that council tax support should be part of universal credit. Indeed, it was deliberately separated from it. Therefore, I cannot accept the requirement to consider the integration of council tax support with universal credit, nor am I in a position to accept on behalf of the Government a wide review across welfare provision.
However, the noble Baroness is right to remind us of the importance of monitoring and evaluating policy. The Government do that, particularly where there are major policy changes. The Government will continue to keep this policy under review and make adjustments as they see fit to ensure their objectives are delivered. That seems to me the proper way of doing it. It is far too long to sit and wait for a review in two or three years’ time if something needs to be amended or changed. The Government need to be advised of what is happening and amend something where they can if that is necessary. I assure the House that that is what will happen and that the measure will be kept under permanent review. Therefore, I hope that the noble Baroness will withdraw her amendment.
My Lords, I thank very much other noble Lords who have spoken—the noble Lords, Lord Shipley and Lord Best, my noble friend Lord McKenzie, and of course the Minister for her reply. However, points came up in the argument that I did not feel the Minister addressed. The noble Lord, Lord Shipley, who was absolutely spot-on, made the point that because this issue interlocks with welfare reform, it needs a broader approach than the Minister seemed to suggest in her reply. My friend the noble Lord, Lord Best, says he is worried that one possible outcome could be chaos or, equally, we could find that the variations that come our way are acceptable and appropriate, but he remains worried about the implications of this change for the poorest people in our community. As in the Welfare Reform Act, when he successfully persuaded the Minister and the whole House that we needed to monitor the legislation in an independent way, the House backed him, agreed with him and supported his amendment.
We need to know the effects on local authorities, on some of the poorest people in our communities, on work incentives, and on the Conservative Government’s flagship welfare reform—universal credit, which I support. We have to have such a review. The Minister said that individual councils would be keeping the schemes under review; of course they will. This is no substitute for an individual and independent review across the whole field of welfare reform—in so far as this is a part of welfare reform—and council tax benefit. We need that review, otherwise the reviews that the noble Lord, Lord Freud, has agreed to will be incomplete and partial, and no one will be able to put the pieces of the jigsaw together. As I have said, they affect some of the most vulnerable people in our society—disabled people, families with children in poverty, carers and some of the most fragile and frail.
It is because the amendment is very modest and because this is the only way that we are going to get coherent government policy to ensure, as I and everyone else wish to, that support for welfare reform is effective, especially for those who need it above all, that having failed to persuade the noble Baroness of the desirability of the amendment, I hope perhaps we can persuade the House.
2: Before Clause 9, insert the following new Clause—
“Power to make grants discretionary
(1) Section 11 of the Local Government Finance Act 1992 (discounts) is amended as follows.
(2) After subsection (5) insert—
“(6) Notwithstanding subsection (3) above, the billing authority shall have discretion to set the appropriate percentage at a rate between 20 and 25 per cent.
(7) In subsection (6) above, the discretion to set the appropriate percentage at a rate other than 25 per cent shall not be exercisable for pensioners.
(8) In subsection (7) above “pensioner” means a person who has attained the qualifying age for state pension credit.””
My Lords, Amendment 2 stands in my name and in the names of my noble friend Lord Shipley and the noble Lord, Lord Jenkin of Roding. It has been drafted by the Local Government Association; reflects exactly the policy of the Local Government Association; and has the support of all four groups on the Local Government Association.
We had a long debate on this issue on Report. As the matter was explained fully at that time, I do not intend to go through all of it again today. The amendment differs from the amendment that we debated on Report last Tuesday in two important respects, and, together, those two differences meet the objections that were raised in that debate. First, the amendment would restrict to only 5% the discretion given to local authorities to vary the single person discount. At present that discount is 25%; under this amendment, it could not be less than 20%. Secondly, everyone of pensionable age would be exempt from the change. They would all remain entitled to a 25% single person discount, as at present.
In her reply to last week's debate the Minister commented that she herself received and welcomed the 25% discount. I can reassure her that if this amendment is successful, she will continue to receive the 25% discount, which I know she will welcome.
Perhaps rather more significantly, the Minister also pointed out that an unrestricted amendment—an amendment which would have allowed local authorities, in theory at least, to get rid of the single person discount altogether—could represent a potential tax increase for more than 8 million people. Although I do not think that that would ever have happened, this amendment will ensure that it cannot happen. A very high proportion of people currently in receipt of the single person discount are pensioners and will therefore be exempt from this, and not all local authorities will need or choose to vary the current discount. Therefore, the number facing a very small tax increase will be very significantly less than those maximum figures quoted in the previous debate on this subject.
Nearly all those people will also have benefited from a freeze in their council tax for the past two years, and they will probably do so for a third year, next year. I do not pretend for a moment that this is easy or welcome—there are many in receipt of the single person discount for whom any tax increase will be difficult—but we are talking about a few pence per week from people who are already paying council tax. Surely that is better, or less bad, than local authorities having to take rather larger sums, and certainly much larger sums as a proportion of their income, from the poorest members of their community, many of whom have not previously had to pay any council tax.
The Bill already gives power to local authorities to vary the discounts that they give on empty properties and second homes. Although that is welcome, in many areas it is nowhere near enough to bridge the gap created by the 10% reduction—or as my noble friend Lord Shipley said in the previous debate, more likely, in effect, the 12.5% cut in funding for council tax support. Areas with large numbers of claimants tend not to have many second homes. If the Government are so willing to allow local authorities to vary these two discounts, why has the Secretary of State so resolutely refused even to discuss allowing them to make a small variation in this third discount scheme? The Local Government Association calculates that if this limited discretion were given to local authorities, all but 14 local authorities would be able to meet the funding gap fully without making any charge on claimants.
If the amendment is not agreed and implemented, the LGA states that 90% of the schemes currently being consulted on by local authorities intend to charge working-age claimants generally between 15% and 25% of their council tax. I suspect that the funding scheme announced last week by the Government will not make a significant difference to that, because local authorities will find that the costs of implementing it for one year only will make it simply not worth doing. We will see, but I doubt if any local authority will charge council tax claimants because it wants to; it will do so because it has no choice.
I understand that the Labour Party is resolutely opposed to the localisation of council tax support, which Parliament approved when it passed the Welfare Reform Act, and to the 10% funding reduction for council tax support which came from the 2010 spending review. I suspect that quite a few Liberal Democrat councillors, and no doubt many Conservative and independent councillors, share that view. I have some sympathy for the Labour Party wanting to see this in the much wider context of local government funding and taxation—but that is not where we find ourselves today. The funding cut will happen next April; council tax support will be localised from next April; and the wide-ranging review of local government funding will certainly not happen by next April, or even in the next few years.
In a few days the Bill will become law. If it is passed as it stands, from next April most working-age claimants will have to pay a significant part of their small income in council tax, often for the first time; and local authorities will have to collect relatively small sums from people who have not previously had to pay and who will find it very hard to start doing so. However, if the amendment is agreed and implemented, that need not happen. The funding gap can be breached by much smaller sums from those in the wider community who are already paying council tax, most of whom will benefit from a three-year freeze in general council tax increases.
That is not the world as we would wish it, but it is the world in which we find ourselves. To borrow a phrase used by the noble Baroness, Lady Hollis, in our debate on Report, this is “the real red line”. That is why the amendment is strongly supported by all four groups in the Local Government Association. I trust that it will receive equally strong support from all sides of the House. I beg to move.
My Lords, I will speak very briefly in support of the amendment because I see that very many speakers are listed for the debate that is to follow, and I am sure that they do not want to sit here too late.
I made my main point when I supported the similar but different amendment moved last week by the noble Lord, Lord Best. I will not repeat it but will instead make two points. First, in the debate on the previous amendment there was a reference to this issue being “poll tax number two”. I spoke about the poll tax on 16 October. The difference is that, for whatever reason—and people may want to criticise it fiercely—it was part of the original poll tax concept that “everybody should pay something”. In the circumstances, that was not acceptable to the public. In the present circumstances, the proposal by the Government is not intended deliberately to do that—but inadvertently this will be the result unless the amendment or something very like it is agreed. As was said in the debate on the previous amendment, and as my noble friend Lord Tope said, large numbers of people who hitherto have not had to pay council tax because they were given council tax reliefs will find themselves having to do this. This is something that we should try to avoid.
My second point picks up on something on which my noble friend the Minister has apparently laid great stress. On 16 October, she said,
“we have never consulted on reducing council tax discounts”.—[Official Report, 16/10/12; col. 1422.]
Does that mean that Parliament cannot pass an amendment for a proposal on which the Government have not consulted? Are we to be excluded from expressing our views and amending a clause in the Bill because Ministers chose not to consult on it? That is an extraordinary proposition, and I cannot believe—I say this with some kindness—that my noble friend has really worked out the consequences of what she said. It would put an enormous barrier in the way of Parliament debating legislation of this kind if Ministers could simply say, “You cannot possibly have this because we did not consult on it”. Ministers may not have consulted on it but some of us in Parliament and the Local Government Association, as my noble friend Lord Tope said, have come down strongly in favour of this amendment.
I simply cannot accept the argument that because the Government chose not to consult on something this House is prevented from passing it. With those two arguments, I totally support my noble friend Lord Tope. As I have made very clear to my Front Bench, if he presses this matter to a Division, I shall certainly support it.
My Lords, I also spoke at Report so I will be brief. It gives me some distress to say to my noble friend Lord Tope that, when he said that this amendment addresses the arguments against the amendment that we debated at such huge length on Report, I cannot agree with him. It does not address certain fundamental points of principle. I acknowledge that it is supported widely within the Local Government Association and by many council leaders who will be glad for a penny if they can get hold of one. However, the reality is that when you are making decisions about council tax you are not making decisions within a single box relating to benefit, you are looking at the totality of a local authority’s budget and budgetary decisions.
I hear my noble friend Lord Jenkin of Roding, who I unreservedly admire and whose expertise on these matters the House respects hugely. With respect, however, I must say that I think he is wrong to try to construct a doctrine whereby the Government are saying that because they had not consulted, Parliament cannot determine—because of course Parliament can determine. I made that point on Report. I say as a local authority leader that we have not consulted on this matter. We have not asked the public about it because it was not within the parameters of the scheme that was proposed.
Were Parliament suddenly to decide that this new broadening of the tax base should take place, it would be an enormous surprise to the council tax payers in almost every authority up and down the land suddenly to discover that a new tax was falling on many single person households. While I acknowledge that the popular and sensible move to protect pensioners is being taken, that only means that this change will bear down more heavily on other people involved as recipients of this discount, such as lone parents. We discussed that on Report. The amendment would mean that it would fall even more disproportionately on those heads.
Regardless of whether the provision is a doctrine of government, I do not think that the amendment addresses the problem. I have said throughout the course of the Bill’s passage that I would have preferred for this to be wrapped up in universal credit. I have been open about that. But it is a bit like the lady who swallowed a fly and then had to swallow a spider to catch the fly. It would make a further structural change in council tax benefit, which by definition has not been thought through or considered, to impose taxation on a large subset of single-parent households. I do not know whether we are talking about 8 million or 5 million of them; it could be fewer. Perhaps the Minister will tell us. But I do not think that that is a good way to make policy. It seems to be making policy on the hoof. Some of us might think that we are having rather a lot of that lately and I do not think that this House should add to it.
My Lords, I rise to support this amendment. Indeed, it would be very strange if I did not support it since I have worked on this issue for some months. With help from my indefatigable colleagues at the LGA, we have formulated this revised version of my earlier amendment after last week’s debate. So perhaps I should explain why it is not me who chose to bring this back before your Lordships.
The original amendment would have given full discretion to local authorities to vary the single person discount. This would have enabled councils to raise the necessary funds to compensate for the Government’s 10% cut to council tax benefit, making it unnecessary for them to start levying council tax on the poorest non-pensioner households. The modifications in this new version of the amendment, as set out by the noble Lord, Lord Tope, seek to address the criticisms raised in the debate last Tuesday. They limit the flexibility for councils to reduce the single person discount from 25% to no less than 20% and maintain the full 25% discount for single pensioners, regardless of their income. These constraints would very probably have been adopted by local authorities in any case, but having them in the Bill means there can be no cries of, “It’s a widow’s tax” or “It could mean lone parents being asked to pay another £5 per week”. The revised amendment means that most widows would be excluded and virtually everyone paying council tax in the bottom council tax bands would be charged well under £1 per week more. The relatively few single people in the most valuable properties, those in the top council tax bands, would be likely to see an increase of only a little over £2 per week if their council chose to use the discretionary power to the full. Since the single person discount reduction would come in a year when the Government are requiring another freeze for the overarching level of council tax, the reduction from 25% to 20% could not be even a fraction as painful and problematic as cutting council tax benefits by £3 to £5 or more for the poorest.
I had hoped very much that the Government and those of your Lordships who were hesitant to support the more open-ended amendment would be brought on board by the modified version. The LGA has articulated the very strong support of council leaders for this amendment, most particularly those leaders representing less affluent areas where more people are in receipt of council tax benefit and there are fewer opportunities to raise more taxation from high-value empty properties or second homes. This is the lifeline that could save councils from having to cut services or support to the most economically and socially vulnerable.
I promised my Cross Bench colleagues, who have been incredibly supportive, that if I failed to secure any movement in the position of the Government or the Labour Benches, I would not try their patience further and take up the time of the House with a battle that could not be won. Sadly, the Minister has made clear to me that despite the strength of feeling of the LGA and local authorities of all political persuasions, the Government will not budge. Equally, noble Lords on the opposition Front Bench have remained adamant that despite the strongest representations by Labour councils, they cannot support any change to the fixed 25% single person discount. I have had to conclude that my efforts have failed and it is not for me to bring back this matter to the Floor of the House. It would be like entering Frankel for a final race in the knowledge that he was bound to lose. However, I entirely respect the efforts of the noble Lords, Lord Tope and Lord Shipley, in continuing the fight, and of course I am hugely appreciative of the magnificent support that I and the LGA have had from the noble Lord, Lord Jenkin of Roding, throughout this lengthy saga.
Maybe there will be a last-minute change of heart by the Government or the opposition Front Bench. Certainly, all concerned have had a chance to see if the Government’s transitional £100 million grant could save the day. The verdict, I fear, is that although it will put back the day of reckoning for a year in some areas, it will not save the day in the least well-off areas, and for future years, of course, the position remains untenable in very many more places.
It may be that all that is left is a protest vote, but if protesting is all that we can do at this stage then protest I do. It is terrible to impose on councils the task of collecting taxes from people who do not have the money to pay; and it is terrible to subject those already struggling to survive on the very lowest incomes to a further reduction in their living standards. I do protest and, of course, I strongly support this amendment.
My Lords, last week, I reluctantly supported a similar amendment and, within a week, I have not changed my mind thoroughly—although I preferred the previous amendment because it was more localist than this one, which is more restrictive. I need to declare an interest as a vice-president at the LGA, but that is not why I support the amendment. I support it because I am a leader of a council and will have to make the kind of decisions that noble Lords have described. This may be the least-worst option for some of us. I do not quite agree with the noble Lord, Lord Best. The amendment will not save the day. As I said last week, it will be a help, but it will not save the day, because the gap between what my authority needs to raise to meet the shortfall in the council tax benefit scheme could not be raised under this particular text. However, it will help to mitigate some of the worst impacts that would be felt by other members of my community who are poor and cannot afford to pay the large amounts that they will have to pay if the council tax benefit scheme is introduced in the manner proposed. While I am reluctant to support the amendment, it is much better than having to do some of other things that, without it, I would have to do.
My Lords, I agree entirely with the noble Lord, Lord Smith, that this is the best of the options that we have available. Crucially—and it is the reason why I thought that the Government might be willing to accept it—the amendment would cost them nothing.
In her Written Statement last week announcing a £100 million transitional grant, the Minister said that it was,
“to help those councils who choose to do the right thing”.—[Official Report, 15/10/12; col. WS164.]
The problem with that is that it does not recognise that many councils cannot do that. There are several reasons why this is the case. We have heard reference to the council tax freeze—last year, this year and now next year. Last year was fine, because the Government built into the baseline of all local authorities the amount that they had lost through the tax being frozen, but, in this financial year and the next financial year, no money has been or will be built into the baseline. That means in practice that councils will have to absorb inflation and rising costs.
There was an expectation that councils, in being able to tax at 100% empty or second homes, would be able to make up the gap in their finances. The problem is that many councils do not have many empty homes or second homes and therefore cannot use that means to make up the gap in their finances.
We should also note, as I reminded the House on Report, that according to figures from the Institute for Fiscal Studies, councils in poorer parts of England have had budget cuts since 2010 at almost three times the rate of councils in the south of England. That is partly a result of the loss of working neighbourhoods funding.
The consequence of all these factors is that many councils have no flexibility or room for manoeuvre. This amendment would give them some extra flexibility. It would mean a small extra weekly sum from a large number of working-age, single person households, most of which have had a freeze in council tax for the past two years and would otherwise have a freeze next year. It would be enough in most cases to take poor working-age households out of paying council tax, thereby preventing a regressive tax being implemented.
Last week, at Report, I reminded the House of a statement made by the Deputy Prime Minister a few days ago. I shall repeat his words because I think they are hugely relevant. He said:
“As we have to tighten our belts … as we have to make more savings as a country … you start at the top and work your way down, not the other way round”.
I agree that those who are poor should be protected. The reason why I give my full support to the amendment is that it does just that: it protects the poor better than the Bill. Given that it has the full support of all political groups on the Local Government Association, I hope that your Lordships’ House will feel able to support it.
At this stage, we get down to essentials, as we did in the previous amendment. That amendment addressed the crux of the problem. I appreciated what the noble Baroness, Lady Hollis, said about this being in the universal credit. That has come through from various noble Lords. However, we are where we are, as my noble friend Lord Tope said, and we must deal with that.
The important thing about the amendment is that it gives discretion to local authorities. That discretion is important. Speaking as a councillor in the London Borough of Barnet, I believe that that would help my council, although it would not help all councils. It is an extension of the localism which we debated previously. This amendment and the previous amendment tabled by the noble Baroness, Lady Hollis, support the poorest in society. That is why, contrary to my normal beliefs, I voted for the previous amendment and will certainly vote for this one.
My noble friend Lord True spoke about the difficulties that it would impose on local authorities to have the change at this late stage and asked how it would help. As I said, local authorities have discretion whether to do this or not, and that discretion does not have to be applied this year—it could be applied next year. Many local authorities may decide to use their part of the £100 million in transitional relief this year to ease the pain but, as I pointed out on Report, it will help only this year. By next year, the amendment, building on the review suggested by the noble Baroness, Lady Hollis, will mean that local authorities can achieve my aim and, I hope, that of many noble Lords: to help the poorest in society.
My noble friend Lord True said that that was swallowing a spider to catch a fly. Without the amendment and the previous amendment, the Bill is a particularly dangerous fly and I think that it is worth swallowing the spider.
My Lords, let me start with a point of agreement with the noble Lord, Lord Tope, which is that the Government—his Government—have underfunded the requirement placed on local councils to introduce local council tax reduction schemes. That is the root cause of the problem that his amendment is intended to address.
It is now widely recognised that the cut in grant to support local schemes is more than 10%. For a start, the national control total is based on falling claimants, although the reverse is the case in a number of areas. That is to the disadvantage in particular of those areas which have been hardest hit by the extended recession. The IFS estimates that the grant for support—this is before the transitional grant—will cover only 81% of the costs of claimants nationally and that for one in 10, the figure will be less than 75%, a grim prospect indeed.
I say to the noble Lord, Lord Tope, and his colleagues in particular, that they accept this position as an inevitability. It is not. We are in this position because they as part of the Government do not knock on the Chancellor’s door or lobby Ministers to get a different outcome. It is in their hands to do it. They can influence their coalition partners better than we ever can. If they could do that, it would be a much more effective way of dealing with what we agree is a very serious problem.
In moving the amendment, the noble Lord explained, and other noble Lords reiterated, that this amendment differs from the amendment moved by the noble Lord, Lord Best in two respects: it gives discretion to local authorities to reduce the single person’s discount by up to 5% so that it cannot be lower than 20% and it does not allow local authorities to change the discount for pensioners, who are protected from any such change. However, as the noble Lord, Lord True, said, it does not address all the issues raised when we debated the amendment moved by the noble Lord, Lord Best. This more restrictive proposal will still have the effect of increasing levels of council tax support, other things being equal, because it will increase council tax levels for some, pushing them into the scope of the benefit. The LGA argues that an average reduction of 5% in the single person’s discount for non-pensioner households coupled with the use of the discretion on empty properties and second homes would close the funding gap for most authorities. It is further argued that this would involve spreading the pain of the cuts so that more people would be contributing, but contributing a smaller amount, towards the shortfall. This may well be right, but it does not necessarily make the resultant distributive effect of the outcome acceptable.
We should also recognise the point made by the noble Lord, Lord Shipley, that not all councils have an equal ability to raise revenue from other freedoms in the Bill. Second homes, for example, are not evenly spread. One of the difficulties with the noble Lord’s proposal is that looking at aggregate in the position is all very well, but things are played out at individual local authority level. This is supposed to be the essence of localism, which the noble Lord supports. The IFS has done some modelling of the proposition, albeit with a 7.5% reduction in the single person’s discount, and I believe that the thrust of analysis holds good. One of its conclusions is, unsurprisingly, that changing the discount would produce more in relatively prosperous areas than in poorer areas. The prosperous areas, which are likely to have lower demands for council tax support and more income from second homes, would be able to retain a higher level of single person’s discount than poorer areas. It is all right for the rich; it is the poorer areas that will bear the consequences of this. Further—and, I grant you, with a 7.5% reduction in the single person’s discount—the IFS estimates that losers would include 20% of the poorest income decile group, 16% of the second poorest income decile group, 22% of the third poorest income decile group and 86% of lone parents in work. This is reinforcing the point that in many respects the proposition requires the poor to pay more to protect the very poor.
We well recognise that councils whose resources have been cut to the bone and are struggling to protect the most vulnerable see this as a lifeline, and I understand where my noble friend Lord Smith is coming from, but there has got to be a better way. Frankly, if the noble Lord is supporting an increase in the tax base by a change to the single person’s discount, it would be more logical for him to argue that there should be a mandatory change at national level and the additional resources should be reflected in the local government settlement with a redistribution in favour of poorer areas. That would be a better way to approach it, but that is not his position, nor is it ours. As we argued on Report, the answer is for the Government to provide proper levels of support. The Government have implicitly recognised this in providing the transitional grant but, as ever, that is too limited and time-limited. I suggest to the noble Lord that by pressing this amendment he is seeking to let his Government off the hook and asking poor people, among others, to pay the price. We cannot support the amendment.
My Lords, I thank those noble Lords who have returned to the battle on this front, and I thank the noble Lord opposite for indicating where his party stands on this.
It might be worth reminding the House why we are in the position that we are in. We still sit on one of the largest deficits that this country has ever seen, and everything and every aspect is having to make a contribution to that. If we had not inherited that financial situation, we would not be here.
Let us be clear: the amendment is a tax rise on millions of single people, even in the reduced form that now comes before us. An amendment to give local authorities complete discretion over the level of discount was discussed for over an hour and a half on Report, but ultimately was not pressed. The Government were opposed to any change in the single-person discount then, and our position has not changed now. The single-person discount was part of the regional council tax system. It was part only of the system, not of anything to do with what was then council tax benefit. It is correct that it was not included or considered as part of the consultation on changes to support for council tax benefit. Noble Lords have said, “Well, that doesn’t matter; we can produce this in this House if we wish to”, and of course that is absolutely right—that can be done. In broad terms, though, the country has not been asked about this, although we have heard views about it. The noble Lord, Lord True, is correct in what he said; it goes back to the fact that this was not part of the original local government scheme.
The single-person discount exists because, by and large, single-adult households make less use of local authority services. I accept that there are some who do not—those who need adult support or social services support—but by and large single people, and I return to the fact that I am a beneficiary of this particular discount, do not make as much use of the facilities.
I do not want to repeat my arguments from Report but I want to be clear on the impact that the amendment would have. Changes to the single-person discount would be, as I have already said, a significant tax increase. Although the amendment clearly excepts pensioners, it would still hit other groups such as single parents and low-income people of working age. It is important, perhaps, to be aware that in October 2011—the noble Lord, Lord McKenzie, came to this conclusion in a different way—more than three-quarters of the claimants of single-person discount were in dwellings that were banded A to C. Only one-third live in band A and only 10% of such claimants live in properties that are band E, so the effect would fall disproportionately on the people who lived in the lower-cost accommodation—and I suspect that most of those would be people who by definition would not be considered to be very well off. So the amendment would tax those whom noble Lords are seeking to help.
Noble Lords have previously commented on the amount of revenue that may be raised by reducing the rate of discount. I would like to sound a note of caution. People losing their single-person discount under this amendment may ultimately find themselves in greater need of help with their council tax. This would mean curtailing the impact of any additional resources, putting more people in need of council tax support and creating unintended pressures on councils. I am sure that the House would agree that it is not quite the outcome for this amendment that would be expected or hoped for.
Finally, without a direct correlation between distribution and financial need, it is not at all certain that the limit of new funds that the amendment would realise would indeed help those councils which the noble Lord is trying to support—another point which the noble Lord, Lord McKenzie, made very strongly in his comments.
I have made it clear from the outset that the Government will not be supporting this tax rise on several million people. I tell the House that the Government will not be able to support this amendment.
My Lords, I am of course grateful to all noble Lords who have spoken in this debate, particularly to those who have spoken, from all sides of the House, in support of the amendment. I pay particular tribute to the noble Lord, Lord Best, who has indeed fought this fight, not to make policy on the hoof, as the noble Lord, Lord True, suggested, but who has tried to bring it about for many, many months. The noble Lord, Lord Best, will understand if I say that his view that it is not worth entering the race if you are bound to lose is not shared by most Liberal Democrats. Similarly, we are grateful to him for his offer of a protest vote. That is something that we are also used to gratefully receiving; we sometimes put them to surprisingly good effect, as I hope that we will today.
The Minister has said, quite rightly, that if this amendment were passed, it would be a tax rise for some. It would. It would be a small tax rise where local authorities chose to vary the single-person discount, and not all of them will do that. It would be a small tax rise for those in receipt of the full 25% discount.
The cut in funding for council tax support being implemented in the way that most local authorities are having to do so is itself a tax rise for the people least well able to afford it. I do not pretend for one moment that the amendment is ideal, the perfect solution, the cure-all. Of course it is not. It is what the noble Lord, Lord Smith, quite rightly described as the least worst option. It is the least worst option that is before us tonight. We have heard speeches in support of it from all sides of the House tonight. I hope very much that we will see them translated into support.
I find it inexplicable—I have used that term before—that the Labour Party is choosing today to vote with the Conservative Government and against the amendment.
My Lords, as the noble Lord never ceases to remind us, we are actually part of the Government, and willingly so. We have been lobbying for a long time on this issue. I do not lightly bring an amendment to the House which I know that my coalition partners cannot agree with. I do so because we are at the very last stage of the Bill. This is the last opportunity that any of us in this House have to do something about it. I am now going to give the House the opportunity. I beg leave to test the opinion of the House.
3: Before Clause 9, insert the following new Clause—
“Guidance to authorities
The Secretary of State shall issue guidance to local authorities as to what persons or category of persons shall be deemed to be vulnerable for the purposes of ongoing council tax support.”
My Lords, this is a straightforward issue which was the subject of much debate in Committee. The amendment requires the Secretary of State to,
“issue guidance to local authorities as to what persons or category of persons shall be deemed to be vulnerable for the purposes of … council tax support”.
This issue has to be revisited in light of the actual scope of schemes on which local authorities have consulted and the Government’s reaction by way of the transitional grant. Hitherto, the Government had set their face against prescribing the protection which councils should provide for vulnerable groups and the nature of that protection, other than for pensioners where statutory protections have been included. They have reminded local authorities of their equality duty, the duty to prevent homelessness and the obligation to mitigate child poverty but have washed their hands of greater engagement on the subject.
What effect has this had on councils in drafting and consulting on schemes? The LGA tells us that councils are seeking to give protection to vulnerable groups through their equalities impact assessments, although the outcome of this has not been analysed. Apparently, the groups identified in consultations as being vulnerable are people with a disability, lone parents with children, carers, war widows and young people leaving care. Notwithstanding this, some of the draft schemes appear to pay scant regard to protecting vulnerable people. There is a common theme of everyone of working age having to make a minimum contribution—perhaps 20% or even 30% of the liability. Some draft schemes look to include child benefit and maintenance payments as income.
In introducing the transitional grant, the Government have expressed their concern that while some councils are doing their utmost to avoid increasing the burden on those currently on benefits, who are vulnerable by any definition, other councils are asking, or being forced to ask, for significant contributions. Therefore, the Government are seeking to drive a national uniformity of approach by making transitional grant available if certain criteria are met. In particular, as we have just discussed, the funding can be accessed if those currently on 100% council tax benefit are supported so that they pay no more than 8.5% of what would be the full liability.
Although the transitional funding is too little and only for one year, it is at least a step in the right direction that the Government identified those currently being passported to full council tax benefit as a group who should be protected—at least to a level. If not specific guidance, it is the Government giving clear signals as to some whom they consider are vulnerable. Those being passported are those on means-tested benefits—income support, income-related JSA, income related ESA and the guaranteed pension credit. It will be seen that this is a broad group encompassing lone parents with young children, recipients of carer’s allowance, the unemployed and disabled people subject to employment and support allowance. This should not be the extent of the protection available to vulnerable people, especially those with a disability. At present, if someone is means-tested rather than passported, certain types of income are ignored—DLA, the care and mobility components, and constant attendance allowance. Clearly, guidance should cover these issues. Importantly, they do not need to be identified by reference to local criteria. It is not local judgments that are in play here in the Government introducing this national uniformity approach.
Surely the lesson, even at this early stage of the new arrangements, is that unless some authoritative guidance is provided by the Secretary of State, some vulnerable people will be further disadvantaged. The transitional grant criteria may not endure as authoritative when grant disappears or when those individual benefits are replaced by universal credit. The Government have effectively crossed the Rubicon and accepted that central guidance and/or encouragement to drive good practice has proved to be essential. Clearly, many councils will strive to protect vulnerable people but the financial pressures on them, now and in the immediate future, will be overwhelming. Keeping national markers is one way of helping to avoid the voices of the most disadvantaged being lost. I beg to move.
My Lords, I take pleasure in supporting the amendment so ably moved by my noble friend. In Committee, we asked for guidance as to who were vulnerable and what council tax benefit protection for them was appropriate. The Minister replied, correctly of course, that although there was a power under the Act for the Secretary of State to issue guidance to that effect, he did not propose to do so.
In the past week, we have had the welcome news of the £100 million transitional grant for those on benefit but, as my noble friend emphasised, it lasts for one year only. While reducing the cuts for many vulnerable people for one year, it creates the poll tax mark 2 problem of trying to collect small sums from 2 million people. The following year, vulnerable people will again be fully exposed to the cuts. This is simply not fair to local authorities or to the vulnerable people living in them, who may be facing three different schemes in each of three years—full protection this year, up to 8.5% next year, and the full cut the year after. The Government’s transitional grant reflects the fact that they now see just what localism can mean in practice, and they do not like what they see.
I am glad of the real decency that the Minister has shown, and we expect nothing less of her, but vulnerable people will still have to deal with the fallout when the transitional grant has expired unless, as the amendment argues, funding is provided on a sustainable basis. Let me take Norfolk as an example. I declare an interest as Deputy Lieutenant and a former city councillor and county councillor. There are seven district councils and these are their proposals so far: Norwich is struggling to retain the existing national default scheme and is making cuts to do so, and there is therefore no minimum contribution for people on benefit. Great Yarmouth is proposing a minimum contribution from benefit claimants of 20%. King’s Lynn proposes a figure of 25%. Breckland, Broadland and North Norfolk propose a straight 30%, even though North Norfolk and Broadland have high numbers of second homes, which one would have thought would have given them some head space to protect people against the cuts. South Norfolk proposes to compress bands down to band D and then drop below D to bands C, B and A, and then levy 20%. That means a 28% minimum contribution for benefit claimants in band A properties and potentially up to 60% for the high bands. I am very happy to share my workings with anyone who queries that.
Therefore, there are five schemes among seven neighbouring authorities in one county with different minimum payments for vulnerable people on benefit ranging from 0% to potentially 60%, to say nothing about different rules for savings, income, backdating and the second adult rebate. It is quite likely that many of these councils will take up the transitional grant—I hope that they do—but in the year after that they will be back up there with these awful cuts.
Yet we are still told, although less stridently, that this is all about appropriate local decision-making—for example, that local authorities are uniquely placed to decide that they should permit backdating, because presumably the individual local authority knows its patch and has a high proportion of people with fallible memories and slow response times, so it keeps backdating, while a neighbouring authority is scrapping backdating because it is confident that its residents are much sharper than those of the authority next door and will be quick to claim. For one to have backdating and the other not on some reading of the mentality of the residents is presumably an unusual assessment of local need. Or it may be that one authority knows that its residents need savings of up to £6,000 in total because its unique insight into local need tells it that its residents will not face divorce or disability, which makes such savings necessary, while the authority next door is less sanguine about its capacity to foretell the future needs of its residents, so it allows them £16,000 in savings. Do your Lordships really believe that all this is about unique local insight into unique local needs in the name of unique localism?
Alternatively, let us take income. Every scheme that I have seen regards disabled people as vulnerable, but some include DLA as income and others do not. As DLA—if you take the middle-rate care and higher-rate mobility components—can be nearly £100, if it is counted as income that household will make a significant contribution to council tax benefit and to council tax; if it is not so counted, it will probably be exempt. Therefore, there could be two blind people in identical circumstances but one would be made deliberately poorer than the other because, unluckily, he lives in the “wrong” authority and the value of his DLA awarded nationally is cut by local discretion. Is that what we intended when we awarded DLA? What is the point of a national benefit funded by taxpayers if it is vulnerable to local cuts made by local councillors? That is what is going to happen.
All my life I have fought for and believed in local government. Assessing and meeting housing need, for example, is a proper duty of local authorities and a proper subject for local discretion. However, what is not a proper local decision is for local authorities to determine what income vulnerable people should receive. That is and should continue to be a matter of individual entitlement, national criteria and common responsibility and not a matter for local discretion and local handouts.
Disabled people and their carers are scattered across the country. Although they may happen to live in a particular locality, their disability is in no sense local. Therefore, their income support—and council tax benefit is part of their income support—should not be a local responsibility and it is not up to the locality to meet it. Whether there are 2,000 disabled people in Merthyr Tydfil or 200 in west Oxfordshire, they are the responsibility of us all.
I do not believe for a moment that local councillors want to treat disabled people unfairly or more harshly than their next-door neighbours. They do not want to add more financial distress to the lone parent with a five year-old child, desperately searching for work. They do not want to undermine the support that a carer seeks to give to an elderly parent. However, as my noble friend has argued, without sustainable funding for their vulnerable residents, that is what they are going to be doing in 18 months’ time.
The Government have given themselves and local councils a breathing space of a year. They and we should use that year to come up with fairer, better and stable arrangements for meeting the financial need of the most vulnerable people in our society. I support the amendment.
My Lords, I will intervene very briefly. We have heard two very powerful speeches from my noble friends in support of this amendment. The more I have listened to the debate during the passage of this Bill, the more I have come to the conclusion that all the talk about protecting vulnerable groups is simply a fig leaf. The Government say that they want to protect vulnerable groups but they do nothing to ensure that local authorities do so. Indeed, there is not even any mention of vulnerable groups in the eligibility criteria for the transitional funding. They know full well, while also saying that local authorities should have regard to work incentives, that they are putting local authorities between a rock and hard place.
My own authority, Nottingham, is not going to protect vulnerable groups because it is going to spread the pain out among all working-age people. My noble friend Lord McKenzie has suggested that this is probably what many authorities are going to do. The Government can then turn around and blame the local authorities by saying that it is the local authorities that are refusing to protect vulnerable groups, having set up a scheme but not having given them enough money to ensure that they protect vulnerable groups. It really is not on. What are the Government going to do to monitor the impact of the new scheme on local groups? If this monitoring produces the evidence that vulnerable groups are not being protected, what action will the Government take? Ultimately the buck should stop with the Government, not with the local authorities, in terms of ensuring that vulnerable groups are protected.
My Lords, I thank the noble Lord for introducing this amendment and for his explanation, as well as the other speakers. Amendment 3 is quite a tight amendment—although we have rather waltzed away from it—that would require the Secretary of State to issue guidance setting out who is considered vulnerable for the purposes of local schemes.
As noble Lords are aware, the Government have made it clear that local authorities should make good provision for vulnerable people in their communities. However, we do not believe it would be helpful to create a new definition of vulnerability, particularly when local authorities already operate within a framework of responsibilities in relation to vulnerable groups. The Department for Communities and Local Government is at the moment working with the Department for Work and Pensions to ensure that local authorities will continue to receive appropriate data on current benefits and universal credit for those who would be considered vulnerable. This could include data that would help local authorities identify individuals they considered to be vulnerable, such as those who have a disability, so that they are able to provide that support in future.
As I said before, local authorities are well aware of their responsibilities and their own priorities and do not need further hand-holding by central government. I am satisfied that local authorities are already alive to the need to protect the vulnerable and to draft schemes, which many are considering, on how to support those they consider to be vulnerable. A number of councils, including Arun, South Tyneside, North East Lincolnshire, Portsmouth and Daventry, to name just a few, are all proposing schemes that make some special provision for people who the council consider particularly vulnerable, whether disabled people or families with young children.
As we have discussed previously, we have already published guidance that reminds local authorities of the statutory framework in which they operate and of their existing responsibilities in relation to people who are considered to be vulnerable. I am pleased to have had the opportunity, throughout our discussions at various stages of this Bill, to draw attention to these important responsibilities. As I indicated to the noble Baroness, Lady Lister, on Report, I am content and happy to bring this guidance to the attention of local authorities again, while alerting them to potential future legislative changes relating to carers, as set out in the draft care and support Bill, which they will also want to be aware of. However, given that local authorities already have an established and understood framework of statutory responsibilities in relation to promoting equality of treatment for individuals who are vulnerable through the design of their schemes, I do not believe that there is any value in creating new guidance.
I am aware, however, that a number of draft schemes propose a significant increase in the tax burden on those currently paying no council tax. It is disappointing that a number of councils have not felt able, in the light of their responsibilities towards vulnerable groups, to design schemes that avoid placing very great financial pressures on those least able to pay. That is why we have introduced the transition grant, to help those authorities which undertake to avoid significant cuts to awards in the first year, to find other more sustainable ways of managing the reduction in the future.
To be compliant with the grant criteria, an authority must develop a scheme that ensures that no one who would be eligible for 100% support based on current criteria can be asked to pay more than 8.5%. We have discussed that previously at length, so I do not need to go through the whole system again. I have the guidance here and I give a commitment to the House that it can be put forward again to local authorities to remind them of their duties.
The noble Baroness says that she already has the guidance. The guidance spells out the equality duties and so on under legislation. However, it does not actually cover some groups of people; for example, carers are not part of the groups covered under the legislation. Nor does the guidance easily translate the vocabulary of rights and discrimination, which is what the Equality Act is about, into the need for financial support. If the Minister proposes to reissue that document, could she add an addendum on the implications of that document on this piece of legislation?
My Lords, I thank my noble friends Lady Hollis and Lady Lister for their support for the amendment. My noble friend Lady Hollis ranged over those draft schemes which, to her knowledge, are in a different place on a whole range of different components. She made the point about how local schemes undermine the import of national benefits, particularly DLA. My noble friend Lady Lister questioned whether there was any serious attempt on behalf of the Government to ensure that vulnerable people are protected.
The Minister said that she would reissue the guidance, such as it exists, which is to be welcomed. However, it does not go very far. Is not the lesson to be learnt from this that when you saw how schemes were being developed, what consultations had taken place and what was emerging from that, there was clearly insufficient protection for vulnerable people in many schemes? I think the Minister recognised that. That is still on the basis that councils, in the Minister's terms, should be well aware of their equalities duties, homelessness duties and child poverty duties. They are already in a position where they should be aware of that framework, yet they are still, as we know, being forced, due to a lack of funding, to come forward with schemes that simply do not protect vulnerable people sufficiently and the Minister herself has recognised that. That is why the transition grant had to be brought in, in a sense, to try to bend what individual councils were doing into some sort of national criteria.
One would have thought that that experience would validate the need for some ongoing guidance because that grant will disappear after a year and the import of it will dissipate over time. It is a great pity that the Minister and the Government do not feel able to do more on this front. It is a very critical time for local council tax support schemes. We know that funding is very tight and we should be doing absolutely everything that we can to protect the most vulnerable. This is an opportunity for the Government to be part of that. I regret that they are choosing not to do that. Having said that and given where we are, I beg leave to withdraw the amendment.
Amendment 3 withdrawn.
4: Clause 9, page 5, line 32, at end insert—
“( ) No council tax reduction scheme shall, taking account of withdrawal of other benefits, have a taper which produces an overall withdrawal rate greater than that which would result from the application of the default scheme.”
My Lords, the amendment is designed to help the Government. To that extent, I hope that the Minister will embrace it enthusiastically. I spent some time as a special adviser at the Treasury. During work on my first Budget, I learnt one important fact: it is possible for things to be simultaneously very important and extremely dull. I am afraid that my speech may fulfil that theory completely, but I hope that the House will bear with me. In preparing for it, I was very grateful for advice from many quarters, including the National Policy Institute and the Children’s Society. I am also grateful to the Minister for allowing me access to her officials, to help me understand the implications of government policy.
At present, the taper rate for council tax benefit is 20%. In other words, for each additional £100 of income somebody has, they lose £20 in council tax benefit. That does not sound much, but it comes on top of a series of other tapers. If someone is on a low income but pays tax and national insurance and gets tax credits, after a certain point, for every £100 she earns, she will lose £32 in tax and national insurance, and another £41 in lost tax credits, leaving her with £27 out of the £100. The housing benefit taper is set at 65%, so she will be left with £17.60. The council tax benefit taper is set at 20%, so she will have about a fiver left out of the £100 extra that she has earned. That is what is called a maximum taper of 96%.
That may sound bad, but it could be about to get a lot worse. The National Policy Institute found that some councils were either proposing an increased taper or were consulting on increasing the taper from the current 20%. For example, I looked up the draft scheme proposed by Trafford Council. It includes a proposal to increase the taper from 20% to 30%. Interestingly, the text of the paper outlining the draft scheme states in paragraph 6.6:
“The draft scheme is designed to underpin the principle ‘Encouraging and supporting people back into work’ and the Government’s welfare reform principles below … People should get more overall income in work than out of work … People should get more overall income from working more and earning more”.
Is this what will happen? With a 30% taper on council tax, that person will face a combined taper of 99%. Of the extra £100, she will get to keep little more than £1.
Increasing the taper from 20% to 30% does not save very much, either. The report from the Institute for Fiscal Studies showed that it saved about 2% nationally across the council tax bill. However, as the IFS noted, because it reduces support at low levels of earnings, it reduces the incentive for some families to have someone in low-paid work. If the taper were to go over 35%, the worker would actually lose money. In other words, she would earn an extra £100 but would have less money in her pocket than before she earned it.
What is the solution? The Government explained that their solution to the problem of high marginal deduction rates was the introduction of universal credit. This was explained in another place in a Written Answer by the DWP Minister, the right honourable Chris Grayling, on 1 April last year. In response to a question from Liam Byrne, he said:
“Universal credit will improve the incentives to increase hours of work. At present some 0.7 million households in low paid work lose 80% or more of any increase in earnings. Under universal credit, virtually no households will have deduction rates above 76%”.—[Official Report, Commons, 1/4/11; col. 518W.]
Sadly, that was before taking into account the fact that council tax support would fall outside universal credit. Even on the current 20% taper, someone paying tax and national insurance could just nudge over the 80% combined taper. With a 25% taper on council tax support, the combined taper reaches 82%—and onwards and upwards. Therefore, we have a problem with the plan for universal credit to be the vehicle for stopping large numbers of people having high marginal deduction rates. It also means that the Government can no longer offer any assurance about people being better off in work, because the answer to the question, “Will I be better off in work or if I work more hours?”, will in future be simple. It will be, “It depends where you live”.
It is also worth remembering that the welfare to work programme is national. When the Government increase conditionality and tell a lone parent that she must take a low-paid job even if it means working in the school holidays when she would rather be with her children, they will not in future even be able to guarantee that she will be better off because they cannot necessarily guarantee how her local council will treat council tax support. Of course, by the time she has had to face other changes to tax and benefits and indeed possibly pay 7% of any maintenance in charges, she could be quite a bit worse off.
However, this is Third Reading and we cannot unpick the mess that is caused by keeping council tax support outside universal credit. But we can limit the damage. If the Minister cannot accept my marvellous amendment I hope that she will at least ensure that the guidance issued to local authorities makes clear the consequences of higher tapers. I fear that not all councils will necessarily understand the consequences of these decisions. I therefore hope that she will do that and recommend that the maximum taper be limited to that in the Government’s own default scheme.
I hope that the Minister will be able to accept this narrow amendment. All that it does is to insist that authorities cannot create schemes with means tests that are more aggressive than the Government's own default scheme. In so doing, it would ensure that the working poor could at least keep some of any increase in earnings. Surely we can all agree on that. I beg to move.
My Lords, Amendment 5 deals with the issue of work incentives. One of the central tenets of the coalition Government’s welfare announcements was that there should be no disincentive to work. “We will make work pay”, they said. However, there is no reference to work incentives in the Bill. The proposed schemes devised by councils to localise council tax benefits actually contain many disincentives to work. Since Committee, we have had the announcement of a transitional £100 million to assist councils in 2013-14. The government Statement referred to maintaining positive incentives to work and called for no sharp reductions in support for those entering work. But the changes will still have a massive impact on the working poor. Incidentally, the announcement also laid bare the myth of localism.
Let us remind ourselves that council tax benefits are in-work benefits. Nearly 750,000 people are non-passported recipients of council tax benefit and in work. It is the most comprehensively claimed benefit, despite the fact that a large number of eligible older people do not claim it. People who do claim it are in low-paid and often part-time work. In Committee, I outlined at least seven disincentives to work contained in local authority proposals to localise council tax benefits. I do not intend to go through them today in detail as they are already on the record, but they include: increasing tapers; the further exploitation of non-dependent deductions; removing working tax credit income disregards by varying amounts; making workers with income regarded as greater than need contribute more through increasing the rate of withdrawal; capping support at the level for band D, E or F; and, finally, everyone paying something—a return to the poll tax, but without anything included within income support, jobseeker’s allowance or ESA to counter it.
The £100 million transitional grant is supposed to reassure us that the Government are putting in place protections for the poorest and most vulnerable. That is not the case, as outlined by my noble friend Lady Lister. It is a temporary measure to help push through the new poor law. The irony is that the recently announced transitional grant will benefit councils that are relatively better off, which will find it easier to devise schemes that qualify for the grant. The Local Government Association has indicated that it is “questionable” how many of the 104 councils proposing a minimum payment of 20% stand to benefit.
The Minister’s Written Statement urges the development of well-designed council tax support schemes and to “avoid collecting small payments”. I believe that in practice local authorities are in an impossible position. The impact on those in work is completely sidestepped in that Statement. With 23 applications for every job vacancy, some working people are clinging on to their jobs by their fingernails. Comparatively small amounts being chipped away on council tax benefit, the bedroom tax, wage freezes and energy price increases will, when taken together, make the difference between just about holding things together and the whole pack of cards collapsing. Being presented with a council tax bill or an unexpected increase in that bill could be the pivotal point for some working families in deciding that work does not pay.
Where are the greatest number of working people who will be affected? County Durham has 5,810 working recipients of council tax benefit. There are more than 8,000 in Manchester, over 6,000 in Liverpool, 3,500 in Wigan and 3,500 in Salford. These are some of the poorest areas in the country, while South Bucks has only 420 and the City of London has 40. This redistribution of wealth is shameful and will have consequences for employment. The Government need to demonstrate that they are in favour of work incentives as opposed to benefit disincentives or this measure will be seen as an attack on the working poor. That is why I have tabled my amendment.
Rather than rising to speak, the noble Lord was nodding his head, so I was not sure whether he was going to intervene. We shall have to come to an agreement for the next two groups of amendments.
Amendment 2, moved by the noble Baroness, Lady Sherlock, and Amendment 3, spoken to by the noble Baroness, Lady Donaghy, are concerned with the interaction between the local schemes and work incentives. I share the concern that work incentives should be supported. That is why earlier this year the Government published guidance to which the noble Baroness, Lady Sherlock, referred, setting out the key features that local authorities should consider including in their schemes to support work incentives. All noble Lords have acknowledged that the transition grant scheme will provide a financial incentive for local authorities to implement those schemes that support work, ensuring that there are no cliff-edges—that is the 25%—as claimants enter work and increase their earnings, and that support is tapered away steadily as their earnings increase. Amendment 2 is intended to control the rate at which council tax support and other benefits are withdrawn to help preserve those work incentives.
In Committee we set out our intentions for the default scheme that will come into force if a local authority fails to adopt a local scheme. We clarified in particular how we intended to take universal credit income into account in that scheme. Officials from my department have continued to work closely with officials from the Department for Work and Pensions to refine the proposals we set out earlier this year so as to ensure that the default scheme avoids unintended interactions with universal credit and supports the strong work incentives that universal credit was intended to deliver. Indeed, my officials have discussed this with the noble Baroness, Lady Sherlock.
The approach set out in the default scheme to treating universal credit income clearly supports work incentives, and I will expand on two key features. First, universal credit will be tapered away by 65% before it is taken into account as income under council tax support schemes. This means that the 20% taper under the default scheme will apply only to residual income once universal credit has been tapered away, and helps to control the overall withdrawal rate. For people below the income tax and national insurance thresholds, the combined marginal deduction rate would be 72%, which for many households would be a significant improvement on the current system. Secondly, the default scheme reflects the fact that universal credit will allow people to earn more income before it starts to be withdrawn. The default scheme allows for council tax support to be withdrawn earlier, minimising the extent to which the means tests interact. Local authorities will not be required to treat universal credit cases in the way provided for in the default scheme, but there are very good reasons why they should want to use this framework as a starting point.
Amendment 3 is intended to require local authorities to have regard to work incentives in designing their local schemes. As I explained when this amendment was first tabled in Committee, I agree with the noble Baroness that work should be supported. As I have said, the Government have published guidance that will help authorities to do that. We are very happy to revise and reintroduce this guidance in order to set out clearly the approach that the department is taking to provide for the treatment of universal credit in the default scheme and to emphasise the benefits of this approach to local authorities, which I think is more or less what the noble Baroness, Lady Sherlock, is asking for. I am also content to use the refreshed guidance to set out the implications for work incentives of increasing the taper rate to help local authorities in their considerations. More particularly, officials will continue to discuss the content of the guidance with the two noble Baronesses as it is developed, and I am very grateful to them for their constructive contributions. I hope that, with their help, we will be able to produce guidance that they can accept. While I cannot accept the amendments, I hope that my assurances go some way to addressing their concerns.
My Lords, I am grateful to the Minister. For the record, I would like to clarify that I think her comments about Amendment 2 in fact relate to Amendment 4 and those about Amendment 3 relate to Amendment 5. Obviously the amendment numbers have changed—I see that the noble Baroness is nodding in assent—so I should like to clarify the record for those who read the proceedings in Hansard later.
I would have preferred it if the Government had felt able to accept the amendment, but I am grateful to the Minister for her willingness to change the guidance in the way she has described, and for her department to continue to engage. In the light of that, I beg leave to withdraw the amendment.
Amendment 4 withdrawn.
Amendment 5 not moved.
Clause 13 : Regulations about powers to require information, offences and penalties
6: Clause 13, page 10, line 18, after “or” insert “knowingly”
My Lords, in moving Amendment 6, I shall speak also to Amendment 7. Clause 13 provides for the creation of new criminal offences that could apply to claimants who provide information to the best of their ability, or indeed to advice workers acting in good faith on behalf of their clients. Many innocent people could find themselves liable to criminal charge or under investigation by the police. Proposed new Section 14B(1)(b) introduces a criminal offence for failing to comply with any requirement under specified regulations—I will not go into the detail of the regulations—or failing to comply with the requirements of any arrangements entered into in accordance with such regulations. Proposed new Section 14B(1)(c) creates a criminal offence for,
“failing, when required to do so … to provide any information or document in connection with a person’s liability to pay council tax”.
The sub-paragraphs also apply to a refusal to comply, but these amendments do not apply to people who refuse to comply, because presumably if someone refuses to comply, that is done knowingly and willingly. I am focusing simply on the failure to comply, and I shall try to explain why we need some adjustment. The amendments require that a person knowingly fails to comply with a requirement if their failure is to amount to a criminal offence. My noble and learned friend Lord Lloyd will suggest some alternative wording that might be introduced into this proposed new section, and indeed I sent a note to the Minister to explain that.
I want briefly to explain why the thrust of the amendment is important. Clause 13 will not apply to the great majority of council tax payers whose council tax is based on the predetermined value of their property. They do not have to submit information about their income year by year. The people who may find themselves charged with an offence will be single and vulnerable people entitled to a discount assessed on the basis of their circumstances.
The groups of vulnerable people at risk of criminal charge will include those with serious mental impairment and their carers; spouses or dependants of foreign students who may not speak English very well; people in prison or other forms of detention or in a bail hostel; and people in hospital or in care homes and hostels. Without help, these claimants are at risk of providing wrong information. Many of them have difficulty getting through each day without worrying about whether a form they completed months previously remains correct in every detail.
The circumstances of these vulnerable people often change frequently. People with chronic conditions, for example, move in and out of hospital fairly regularly. The citizen can never be sure, at the time of or after submitting information, that the regulations will not have changed since the year before. A significant risk to council tax payers arises from Regulations 3, 10 and 11 of the Council Tax (Administration and Enforcement) Regulations 1992, which require information to be supplied by taxpayers within 21 days if they are served by written notice or assumptions change in the course of the financial year. If Clause 13 of the Bill is passed without our amendments, council tax payers who are unaware of Regulations 3, 10 and 11—surely nearly all of us—and who therefore fail to act in accordance with them become potentially liable to a criminal prosecution.
Let us put ourselves in the position of someone coming out of hospital, probably still severely unwell. These days, as we know, people do not remain in hospital a single day longer than they absolutely have to. They will probably find a pile of post on their doorstep. We can expect those people to concentrate on getting well, coping with daily life, shopping, cooking and doing the usual daily chores. It may be some weeks before they feel up to dealing with the pile of unopened mail—maybe beyond the 21-day limit. Such a council tax payer will not have knowingly failed to comply with any requirement for information, yet they may find in that pile of mail an order requiring them to provide information which they will inadvertently have failed to comply with. Can any one of us seriously suggest that, in that situation, that person will have committed a crime?
Alan Murdie, a barrister who edited the CPAG handbook on council tax for 14 years and who has kindly briefed me for this debate, is concerned that this situation will be made worse because the standards of administration of council tax are apparently worse than at any time in the past 20 years. He is well placed to make that judgment. At best, says Alan Murdie, people will be pursued in error and, at worst—I must say that this shocked me, but I trust this person who deals with these situations all the time—the provisions will be used to extort money from people by unscrupulous officials. Mr Murdie says:
“The council tax is the most complicated local taxation system ever devised. Even after 20 years many aspects of the tax are unclear and open to argument and errors are rife throughout the system. The council tax has gone beyond what ordinary members of the public can understand”.
The council tax benefit regulations alone are apparently longer than the whole of the General Rate Act 1967.
Z2K is experiencing a growing number of cases involving vulnerable people being targeted with demands for money which they do not owe—that, for me, is deeply distressing. Just one example is that of a young man who was threatened with enforcement and imprisonment for tax that he did not owe to Southwark Council. He committed suicide. How many more people are at risk of suicide if these provisions go ahead without any mens rea requirement? The Government risk a re-run of the 1990s, when thousands of people were wrongly jailed for local tax default, resulting in more than 1,000 cases being overturned on appeal in the High Court on judicial review and in cases coming before the European Court of Human Rights.
The amendments will not prevent any vulnerable people being wrongly charged over debts they do not have. The amendments will, however, reduce the number of such cases—I hope significantly. I know that the Minister is aware of the widespread concerns about Clause 13. I trust that the Government will be able to make the limited concession encompassed in the amendments.
My Lords, I strongly support the thinking which lies behind the amendment, for all the reasons so eloquently given by the noble Baroness, Lady Meacher, and for all the reasons which she gave late at night last week at the very end of the Report stage. I regret that I was unable to be present on that occasion.
My only concern now is that the single word that she has chosen to bring about her purpose may not be the very best one. There may, after all, be all sorts of reasons for a person failing to comply with a requirement, good as well as bad, and there may be good reasons even when a person knows that he is failing to comply with the requirement. What is needed is a word which distinguishes between the good and the bad reasons. The ordinary words which are always used to do that, which I think is the objective that the noble Baroness has in mind, would not be “knowingly” failing but failing “without reasonable excuse”. It so happens that those are the very words which are used in paragraph 1(2)(b) of Schedule 3 to the 1992 Act, which is the Act that we are amending and which there imposes a civil penalty of £50. Those words, “without reasonable excuse”, which we already find in the Act, are all the more relevant and important now that we are turning the civil remedies into criminal offences.
I am of course aware that this is Third Reading and that a manuscript amendment is not permitted, but if the Minister is attracted by the thinking behind the amendment, as I certainly hope that she and other Members of the House are, perhaps she will bear these words in mind when she gives the matter further thought.
My Lords, I join the noble and learned Lord, Lord Lloyd, in endorsing the thrust of the amendment moved by the noble Baroness, Lady Meacher, and I respectfully adopt his formulation, which I think meets the drafting point. In any event, I have an inherent aversion to the creation of absolute offences, which is what new Section 14B does. It is not appropriate to criminalise behaviour which could be dealt with in the way of a civil liability, particularly when there is not a necessary element of dishonesty. I hope that, when the legislation goes back to the House of Commons, the Minister will look sympathetically with her colleagues in government at whether the provision could be improved.
However, in addition to the matters which the noble Baroness’s amendments address, I am concerned about some further provisions in the proposed new section. New Section 14B(4) states that regulations under subsections which refer to false statements and the like—that is, subsection (1)(d), (e) and (f),
“that create an offence that may only be committed by a person acting dishonestly … must provide for the offence to be triable summarily or on indictment”.
I have no objection to that, but new subsection (6) states that regulations under those provisions which,
“create an offence that may be committed by a person acting otherwise than dishonestly”,
would incur a lesser sentence. So there is still a provision within the new provision to allow for somebody not acting dishonestly to be brought before the criminal courts under the provisions of new subsection (1)(d), (e) and(f). That is another example of stretching the creation of an absolute offence.
It is clear that people who deliberately fail should be dealt with but, in my view, not necessarily by the criminal courts. It is equally clear that those who may fail inadvertently or for the reasons advanced by the noble Baroness should not be treated as criminals, although there may be and perhaps should still be a procedure for them to suffer some penalty as an inducement to provide information. That point may be more debatable. I join with the noble Baroness and the noble Lord in thinking that those provisions go too far to criminalise behaviour—particularly, as the noble Baroness said, as that may well affect vulnerable people, for whom a criminal sanction is simply inappropriate.
Without the Minister committing herself today, I hope that she will at least agree to discuss this further with colleagues to see whether a less draconian process could be used.
My Lords, I assume that the prosecuting authority would have some regard to the circumstances of any suggested offence under the regulations, but it is very important that the regulations should not include people as potentially liable for criminal sanctions who have not been dishonest in some way or other. The noble Baroness has given examples of people who might find it very difficult to comply with regulations within 21 days in some circumstances. I hope that my noble friend, with her colleagues, may find it possible to modify the statutory language to eliminate the risk of people being faced with criminal charges who are not deliberately doing wrong but who find themselves in difficulties of one kind or another.
I have sympathy with the view that the regulations which deal with council tax are extremely complicated and that it would be easy for someone to fall into a mistake without any deliberation. The last thing that we would want is to criminalise people who make honest mistakes; otherwise, most of us would have some difficulty avoiding the criminal law at some stage, and possibly at more than one stage, of our careers.
My Lords, I have listened with sympathy to the noble Baroness, but I think that she is tackling the wrong end of the spectrum. If it was as she suggested, we would certainly need to do something about it. I may need to give the following explanation.
The clause is intended to allow flexibility to create offences similar to those already in existence relating to council tax benefit. It does not create any additional offence beyond those. The offence that exists is under Section 111 of the Social Security Administration Act 1992. It is that of refusing or neglecting to comply with a requirement to enter into arrangements allowing authorised officers to access electronic records. It is also an offence under that section for a person to refuse to provide information or produce any document when required to do so in accordance with the legislation.
The information may be required from one of several classes of persons and bodies: for example, from banks, employers or utility companies. We seek the flexibility to create a similar offence in regulations where a person falling under those categories fails to comply with the requirement to supply information needed in relation to the council tax support scheme. To be clear, that would relate to circumstances where an individual or organisation holding information about a council tax payer has failed to provide information when required to do so. A small number or persons, such as the self-employed, might fall into both categories, but this is not about requesting information directly from vulnerable taxpayers, as has been suggested. I hope that the noble Baroness will be assured on that point.
I am grateful to the Minister, but she referred to the fact that failure may not necessarily apply to the person themselves. My concern is that it can apply to a vulnerable person—just out of hospital, for example—who has not opened their mail and who unwittingly therefore falls foul of compliance with regulations. That is my concern. There may be all sorts of crimes in relation to bankers and what have you, but my concern is for vulnerable people. It seems from the wording that those people could be caught up in those crimes.
My Lords, I am seeking advice from the Box about the words, “not necessarily”. My understanding is that this is not about the person concerned; this is about organisations from which information may be sought with regard to the ability to pay council tax or possible fraud. It is not about the individual taxpayer.
Perhaps I may read what has been passed to me, because it is important. To be clear, the powers that the noble Baroness seeks to amend relate to powers to require information about a council taxpayer—for example, about their income. Many investigations take place across the system. The powers recreate those which exist in relation to council tax benefit, as I said, and regulations made under the powers are subject to the affirmative procedure, so will be subject to debate in both Houses.
What the noble Baroness seeks to achieve is not part of the provision, because it does not affect the person themselves—the noble Baroness described accurately people who might not be able to give that information, who may be vulnerable and who should be looked after in a different way by the council.
I share the desire of the noble Baroness to protect vulnerable taxpayers, but the amendment will not, for the most part, impact on them. It affects powers that would apply only to those who hold information about the taxpayer—I say this again because we need to be clear about it—not to council tax payers themselves and only in certain circumstances which recreate offences which currently exist under council tax benefit. Those are criminal offences, as I outlined.
Council tax payers who accidentally or unintentionally fail to provide information to the local authority should not be prosecuted or convicted for a genuine mistake, but that is not what the power provides for.
I recognise the concerns expressed by noble Lords, but I think that the noble Baroness is shooting at the wrong fox. When the regulations come to this House, which they will in due course, we will be able to make that absolutely clear. I have done my best to assure the noble Baroness that this is not about individual taxpayers who should not be pursued, but is about where information may be required to see whether it is appropriate to undertake further investigation. I hope that with those explanations the noble Baroness will withdraw her amendment.
I am very grateful for the Minister’s response and to my noble and learned friend Lord Lloyd, the noble and learned Lord, Lord Mackay, and the noble Lord, Lord Beecham, for their contributions to this debate. I have to say that if I am shooting at the wrong fox, the fox is very well camouflaged because I do not see it. It is not clear to me—perhaps it should be, but it is not—that the person and their advice worker, who is also feeling very vulnerable in this situation, cannot be caught up in this legislation. Therefore, I ask the Minister for further discussions about this to see whether there is a way of improving the wording to clarify that the council tax payer and their adviser will not and cannot be charged with a criminal offence when they have acted in good faith.
My Lords, it is not possible to change the legislation because we are in the last dying hours of passing it through this House, but the regulations will come to the House for the affirmative procedure. I am happy to have further discussions with the noble Baroness in the interim.
Amendment 6 withdrawn.
Amendment 7 not moved.
Schedule 1 : Local retention of non-domestic rates
8: Schedule 1, page 23, line 18, at end insert “, and
(h) amounts received by the Secretary of State in the year under regulations under paragraph 42 (payments following estimates of amounts to be disregarded).”
This is a group of very minor amendments to tidy up the Bill. The amendments introduce nothing new. They are consequential on amendments accepted on Report in your Lordships’ House and correct or insert references to new provisions inserted on Report as appropriate. I hope that, with that explanation, noble Lords will be happy to accept them.
My Lords, I take the opportunity offered by these government amendments to Schedule 1 to raise the issue that I have been pursuing throughout the course of this legislation, which I discussed with the Minister last Thursday, and to seek clarification at this last stage of the Bill. I declared all my interests at the previous stages of the Bill and they remain the same.
I shall not rehearse the arguments that we have already heard in this House. I am grateful to the Minister for her time at the meeting on Thursday. I also thank Sporta, SEUK, my noble friend Lord McKenzie and the noble Lord, Lord Best, for coming along to the meeting and lending their support and great expertise. I was also able to inform the Minister that the noble Lords, Lord Shipley, Lord Tope, Lord Adebowale, Lord Mawson, Lord True and Lord Smith, sent their apologies. I thank the Minister and her team for the letter which she sent to me and copied to all those concerned.
I am sure that noble Lords and others are very pleased that, at last, the Government seem to recognise a problem which the political parties, the Cross-Benchers and all the organisations concerned with community-based charities and mutuals have articulated for months. Sporta, in particular, has been active in doing most of the leg-work research and in meeting officials during the summer. However, it is a matter of regret that the Government have decided not to take action on the concerns of a wide range of local community organisations with charitable status during the course of the Bill.
In her letter to me the Minister referred to, “the persuasive arguments that you and your advisers have used”. However, she also said that the department would need to see evidence of the problem. I think the fact that all the leaders and ex-leaders of councils in this Chamber and all the organisations concerned at community level are clear that there is a problem should be persuasive. However, all is not lost. The Minister also informed us that a way of addressing the issue is provided by the amendments that were brought forward on Report specifically with enterprise zones in mind. The Minister’s letter gives a broad assurance that, “the same powers could be used in respect of other reliefs such as charitable relief”. The Minister will not be surprised to learn that what I am seeking today is confirmation of that and that the powers can apply to the central funding of all mandatory reliefs given by all local authorities to charitable organisations, should we be able to persuade the Government of the rightness of this decision in the next year.
I would also welcome confirmation from the Government that they will open their doors to the evidence which the many charitable bodies associated with this cause will work hard to gather over the next period and that they will assist the main representatives of these bodies to understand how and when to present this evidence to the department. Indeed, can a specific mechanism be offered to do this? I would also like to take this opportunity to encourage local authorities to co-operate in supplying evidence of the effect of the legislation on their decisions as regards the formation or expanded use—or otherwise—of local charitable organisations. Indeed, I intend to raise this issue with the Local Government Association. This is especially necessary if, as is feared, such decisions are taken with negative effect at an early stage in the consideration of options.
In the year of the Olympics, the Paralympics and the big society, we are concerned about the impact that these changes might have on sport and exercise for the disabled, the less able, the old, working mothers—everybody, actually. I know of no one in the sport and leisure field who has welcomed these proposals. Indeed, Social Enterprise UK has written to the Cabinet Office about the policy clash produced by these proposals and advised the Minister on why the Bill could have a damaging effect.
We suspect that the impact of these proposals will be damaging for the future of theatres and museums outside London; in other words, there will be fewer of them at local level. Social Enterprise UK believes that, as time moves on, this policy could have a chilling effect on new proposals in the Localism Act for the right to bid and the right to challenge community facilities by local charities, so a great deal is at stake. I thank the Minister for her help with this and for the meeting and the letter. I hope that she will feel able to reassure me that arguments will be heard at an early stage and that adjustments will be considered before too much damage is done.
My Lords, so far as the government amendments are concerned, I understand them to be consequential and to correct other parts of the Bill. I am grateful for the short briefing note that the Bill team gave us. I have no problems with these amendments.
As for the contribution by my noble friend Lady Thornton, I, too, thank the Minister for her engagement and the engagement of the team, and particularly for facilitating the meeting last week. I hope the Government will be able to put on the record the assurance that was given at that meeting, particularly as it concerns the prospects of dealing with the matter through secondary legislation, once the Government become convinced, as I hope they will be, that we do not need to amend primary legislation.
My Lords, the noble Baroness referred to mandatory and discretionary rate relief under particular circumstances. She kindly did not put an amendment forward, but she has done very well in getting her speech recorded in Hansard so that there is no escaping what she has been talking about. I gave her two clear messages when we met. One was that while we accept that there is concern about the effect of the percentage amount of relief available to charitable organisations, we are not totally satisfied that it will have the effect that she thinks. If the organisations that were there provide good evidence and the Government decide that it is of serious significance, there are measures within the Bill that would enable us to make the changes that she seeks. I am very happy to see her again if that should be necessary.
Amendment 8 agreed.
Amendments 9 to 11
9: Schedule 1, page 23, line 31, at end insert “, and
(f) payments made by the Secretary of State in the year under regulations under paragraph 42.”
10: Schedule 1, page 23, line 40, leave out “and (d)” and insert “, (d) and (h)”
11: Schedule 1, page 23, line 42, leave out “and (b)” and insert “, (b) and (f)”
Amendments 9 to 11 agreed.
Schedule 3 : Local retention of non-domestic rates: further amendments
Amendments 12 to 14
12: Schedule 3, page 60, line 4, after “(2)(e)” insert “or (f)”
13: Schedule 3, page 60, line 45, after “(2)(e)” insert “or (f)”
14: Schedule 3, page 61, line 21, after “under” insert “or by virtue of”
Amendments 12 to 14 agreed.
Schedule 4 : Amendments relating to council tax reduction schemes
15: Schedule 4, page 65, line 29, at end insert—
“( ) Such regulations must have regard to the possibility of authorities having to hold a further consultation as a result of the necessary alterations that must be made to their schemes in order to make a successful application to the transition grant.”
My Lords, we have reached—at long last, some of your Lordships might think—the final chapter in debating what this side, at any rate, regards as a fundamentally flawed Bill, particularly with regard to the system of council tax support. The Bill will create significant difficulties for councils in terms of administration, collection and indeed decision-making about who is and is not to be entitled, and it will involve significant hardship for too many of their residents.
The amendment, though, does not address the substance of the Bill; it is more about process, albeit about an important part of it. Under the Bill’s provisions, authorities are required under paragraph 3 of Schedule 4 to consult before making a scheme, publish a scheme in such a manner as they think fit and generally consult anyone with an interest, including major precepting authorities, and then they may publish it. However, sub-paragraph (4) states that the Secretary of State may make regulations about the procedure for preparing a scheme, and it is to that paragraph, effectively, that the amendment seeks to add a rider: that the regulations must have regard to the possibility of authorities having to hold a further consultation as a result of the necessary alterations that must be made to their schemes in order to make a successful application—the amendment says “to the transition grant” but I suppose that it should be “for the transition grant”—which we debated at some length last week.
As we debate the Bill before it leaves us on its return to the House of Commons, councils up and down the country are in the throes of consulting on complex changes to the benefits system affecting millions of people. We have heard in previous debates about schemes that run to well over 100 pages, and no doubt authorities are doing their best to consult their citizens, organisations and indeed the precepting authorities about how the system should be developed. If I may again refer to the experience of my own authority in Newcastle, the city council is faced with a loss of some £3.4 million as a result of the changes to benefits. That in itself, had it been a council tax increase, would have substantially breached the 2% limit that the Secretary of State has fixed from next year because it would in itself constitute a 3% increase in council tax. However, technically speaking, that is not what is happening, although I am bound to say that the rather airy way in which the Secretary of State and indeed the Minister appear to assume that after the transitional year it would be possible to meet that bill, simply by magicking some more savings out of the system, strikes me as a little overoptimistic, particularly when in any event many authorities will be not only generating savings already in the pipeline, as it were, but seeking to meet a substantial reduction in government support over the next few years—in my own authority’s case, some £90 million a year within three years.
Be that as it may, however, the council is seeking to consult on its current scheme, a consultation that has produced a two-page densely printed document setting out the proposals that the council makes. We have already touched on some areas: there is protection for a number of groups, and there is the 20% contribution in general from those who may not even be currently paying council tax. Whether, and to what extent, people will be able to grasp what is happening, particularly if they do not have a well informed knowledge of the current system, is perhaps another matter. Still, the council is providing material online for people to reply to and download, as well as a telephone line and indeed 14 public meetings, between now and the closure of the consultation period on 14 November, bearing in mind that the council has to take through its processes decisions about the scheme and about the budget overall, and there is not a great deal of time to do that.
Now, with the transition scheme, there is an additional factor about which we have not yet been able to consult—nor indeed, I suspect, has anyone else in any systematic way. It may, if the council is so minded, lead to a significant change in the scheme. The particular factor that is relevant is the estimated cost because, even with the transitional grant, Newcastle City Council—I cannot speak for others in this respect because I do not have the information, but there may well be a similar situation elsewhere—will receive a grant, but apparently it will also leave a gap of, in Newcastle’s case, between £470 million and £650 million, if indeed the council accepts the offer of the grant. That is a significant figure, and one that clearly needs to be in the public domain as part of the consultation process. However, we will not know the actual figure until the final revenue support grant settlement and all the details are available which, as I understand it, will be around 20 September. The Government have certainly published the figure for the transitional grant, but what is not clear is the implications of that for the council budgets, given the potential cost to the authority, which, as I say, in Newcastle's case is substantial—according to the city treasurer, in the order of between £470 million and £650 million. If we will not know those details until as late as the third week in December, it will be extremely difficult to achieve an effective consultation before the time when the scheme has to be finalised, which, under the Government's proposals, is 31 January—not a great deal of time in terms of the council’s own decision-making process leading up to a budget, but certainly virtually impossible to have a meaningful consultation, given the Christmas and New Year period and the rest of it, within that very short timescale.
In addition, the council will have to consult the police and fire authorities, which are major precepting authorities, and of course in shire areas there is also the question of individual billing authorities, which might have a different approach—they are perfectly entitled to do so under the provisions of the Bill—within the county. The county will also need to be consulted. I suspect that counties are part of the hidden agenda of this whole measure regarding the transitional relief; it seems, cynical though some of your Lordships might think this, not unconnected with the fact that next year we have county council elections in which a great number of Conservative Party seats are at risk. Mr Pickles is an astute politician, and I suspect that this transitional relief may really be designed to offer somewhat more than transitional relief to current serving Conservative county councillors. However, no doubt the electorate will come to their own conclusions about that.
The purpose of the amendment is to seek from the Secretary of State regulations that would allow for a proper consultation to take place in terms of the change that the Government have introduced at this late stage in relation to the transitional grant. That might mean extending the period by which the scheme has to be settled. That seems probably one of the more sensible ways of dealing with what might be a difficult situation. The danger otherwise is that councils would think that they cannot safely consult—my noble friend Lady Hollis rightly referred to the possibility of judicial review if such consultation was not deemed to be effective—and if councils were relying on a position that was valid until just last week in terms of the scheme that they had devised. Given the financial consequences to which I have referred, although I emphasise that they are possible consequences, in my submission it would be a brave council that decided to go ahead without the security of a further consultation.
Again, I am not expecting a commitment from the Minister, but the amendment would not really change legislation; its thrust is to try to secure some consideration by the Government, within the context of the procedural regulations that they will be making, to ensure that such further consultation as may be deemed necessary and desirable can actually take place with effect. I beg to move.
My Lords, I support my noble friend. He is absolutely right. When we raised the issue of whether changes in the scheme following the transitional grant would require going out to consultation, the Minister seemed to indicate that they would not. Some of us were worried about judicial review. Since then, she has written a letter to my noble friend Lord McKenzie in which she says that individual councils must take their own legal advice on the matter. That suggests to me that the department is no longer as clear as it at first was that local authorities might not be exposed to judicial review if they were substantially to change their scheme from, say, a 30% minimum down to virtually nil or 5% as a result of the transitional grant without going out to further consultation. Given that, I hope that, as a result of the move that the noble Baroness has herself made between the earlier stages of Committee and Report and her subsequent correspondence, she will give some consideration to how best she can meet my noble friend’s concerns.
My Lords, in responding to the noble Baroness, Lady Hollis, I have always made it clear that local authorities are, or have been, out to consultation. I think that those consultations are due to close very shortly and may in many cases already have closed. There is no requirement on the Government, and we are not going to make any regulations, on consultation. I have made it clear, and I do so again now, that if a local authority thinks that the changes that it is going to make as a result of the transitional grant are so significant that it changes its scheme so much, then it must decide whether it thinks that it needs, for its own protection, to go out to further consultation. It will seek its own advice about that. I cannot answer the noble Baroness any more clearly than I already have.
No. Local authorities have their different transitional schemes. A transitional scheme has come in. It will provide local authorities which wish to take it up with extra resources to help them ease into the new system. They must know themselves if they decide that they need it. In many cases, it will not be necessary but, if they need to, they will take that advice.
Local authorities now know what they are going to get from the transitional relief; that has already been published. They will know whether they need to change their scheme according to what they have received from transitional relief and on the basis of what they are proposing if they are going to amend it.
I do not believe that they need extra time. January 31 is, after all, a full four weeks. Most local authorities can undertake a quick consultation on this. I imagine it will be very limited indeed. Most local authorities which are principal authorities are very quick and adept at having consultations with other councils. I must resist the amendment on the basis that it is completely unnecessary.
My Lords, I respond on behalf of my noble friend as this is the last time that we will be speaking on the Bill. With great respect to the Minister, she has not fundamentally dealt with the point that my noble friend was probing. We accept that it would be up to local authorities to make a judgment as to whether or not they needed to consult. However, given where they are and the processes that councils have to go through to come up with a revised scheme—and sometimes the agonising decisions as to whether they can put in the additional funding to close the gap because the transitional money is not going to cover it all in many circumstances—I wonder whether there is time to do that. It would be perverse indeed if, in attempting to take advantage of these provisions, the system simply did not allow them to do that in time to hit the 31 January deadline. That is the point that we were pressing, and it has not been fully addressed. However, we are where we are on it.
I close by saying a brief thank you to some people, certainly to the Minister and the Front Bench for engaging on this Bill and to all noble Lords who have participated. Around the Chamber, we have seen a lot of expertise and wisdom, some of it very long-standing, brought to bear. I certainly thank my team, both Back Bench and Front Bench. I conclude by thanking the Bill team. I know that we see a bit of what the Bill team does. A lot goes on behind the scenes and I am grateful for what it has done on this piece of legislation.
Having seen the noble Lord rise, I apologise for the number of times that I have tried to out-step him throughout the Bill. I am grateful for the noble Lord’s good humour. I am grateful to all Members of the Opposition for the way in which they have put their amendments. I am particularly grateful to those of my political colleagues who have, in most cases, supported me. I have enjoyed taking the Bill through the House. I also thank, of course, my Front Bench and also the Bill team who has been completely outstanding.
Amendment 15 withdrawn.
Bill passed and returned to the Commons with amendments.