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Council Tax: Low-income Taxpayers

Volume 759: debated on Monday 9 February 2015


Asked by

To ask Her Majesty’s Government what assessment they have made of the impact on low-income taxpayers of the changes to the Council Tax Support Scheme and reduction in funding for the Council Tax Reduction Scheme.

My Lords, these are local schemes and it is for local authorities to ensure that the effect on specific groups of council tax payers is both proportionate and fair. We made a £100 million transition grant available in 2013-14 to help councils to develop well designed schemes and maintain incentives to work.

My Lords, in Newcastle alone, as a result of government cuts to council tax support, 18,000 working-age households, 4,500 of which are in work, have lost out, while 11,000 that were previously exempt have to pay 20% of the council tax and 7,000 that were formerly partially exempt now have to pay 20%. Arrears stand at £2.8 million. How do the Government justify this imposition on some of the most hard-pressed families and individuals in the country?

My Lords, we have given councils wide powers to design council tax support schemes for exactly the kind of people mentioned by the noble Lord, and the vast majority of local authorities are applying the same system of premiums and allowances as applied under council tax benefit. Many are also offering additional protection to vulnerable groups.

My Lords, will the Minister explain why a Government who talk so much about tax cuts are happy to countenance this tax increase on some of the poorest members of our society, many of whom are also struggling with cuts in benefits and tax credits and are too poor to benefit from increases in personal tax allowances? It is this Government who transferred responsibility to local authorities, with less money to fulfil those responsibilities.

The noble Baroness makes a point that I cannot agree with. Just recently we announced an additional £74 million for welfare support at local authority level. As we said we would, we have stressed localism and local empowerment, and we have delivered on that. Council tax bills have come down by 11% in real terms since 2010. That is worth up to £1,075 for the average household over this Parliament.

My Lords, can the Minister confirm that it is for each local authority to decide which council tax support scheme they will have? Can he tell us what assessment has been made of the extent to which councils have been able to mitigate the reduction in funding for council tax support by using their new powers to levy additional council tax on empty or second homes?

My noble friend is quite right that this is about ensuring that local authorities are empowered. We have also taken steps to ensure that we have released a greater number of empty homes. There are additional measures that councils can take. For example, I have responsibility for countering fraud, where a bigger effort is being made. Councils currently lose £2.1 billion from fraud and error. There are council reserves of £21.4 billion. It is really for local authorities to decide their priority and to initiate schemes appropriately.

My Lords, does the Minister recognise that there are some areas of the country where incomes are now so low that even the market is abandoning some services in smaller towns? In those areas, the public sector has a particular responsibility. Indeed, the social mobility task force, which was set up by his Government, is saying that it is people in work with the lowest incomes who will be the biggest crisis for this country in the next five years. Will the Minister recognise that the level of cuts on local authorities is making it difficult for those local authorities to help to protect these people who the market has already abandoned?

Local authorities of course have a primary role in ensuring the welfare of all their residents. The noble Baroness talks about particular areas, but I believe that it is also important that local authorities work with the voluntary and private sectors to ensure the provision of services. This Government have sought to prioritise actual budgets so that local authorities can prioritise in their own local areas.

My Lords, we know that initially some local authorities were treating disability payments—DLA and PIP—as though they were income replacement benefits in their local schemes, rather than support for extra costs: that is, they were treating them as income, which obviously reduced the council tax support. What have the Government done to address this concern, or do they see it as none of their business?

The Government have addressed all concerns. I think the noble Lord is being disingenuous about what the Government are seeking to do. We have ensured empowerment to local authorities to prioritise local spending. The impact and effectiveness of this policy, as I am sure the noble Lord is aware, will be reviewed by assessing three years of full data. It is also important to mention that the Government have sought to bring council tax spending under control. Sixty per cent of councils in England have frozen or reduced their council tax this year as well, and the Government have made these freezes possible for five successive years. I think it is about time that we acknowledged that.

My Lords, the Government have introduced universal credit, which we support, which seeks to bring together and simplify means-tested benefits for people of working age in a single benefit. Why, then, are the Government sabotaging that by extracting council tax benefit from the system and turning it into a postcode lottery, where the amount of help you get depends not on your need but on the accident of where you live?

I am sorry, but I do not recognise the noble Baroness’s description. I have already alluded to the fact that the Government will review this policy after three years. At that time, this element will be considered for possible inclusion in universal credit.

My Lords, would the Minister just say yes or no: have the Government transferred responsibility at the same time as reducing the budget? Local government is tired of having freedom to dispense even less money than this measly Government allowed before.

This Government’s priority is efficient local spending. That is exactly what we have sought to do with our transfer.