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Yvonne Fovargue (Makerfield) (Lab)
It is a pleasure, Mr Howarth, to have this debate under your chairmanship. I requested it because of my concern about not only the impact of council tax localisation and the 10% cut in subsidy to already hard-pressed local authorities such as mine in Wigan, but the cumulative effect of the welfare benefit changes disproportionately impacting on people in low-paid work. Council tax benefit is widely claimed; some 5.9 million low-income families claim it, more than claim any other means-tested benefit or tax credit in the United Kingdom. It is a crucial benefit for people in work who are struggling to pay rising bills for food and fuel, and contributes hugely to making low-paid work pay.
A consultation paper published in August 2011 made it clear that although no detailed regulations had been published—they have not been published even today—current claimants of pension age will see no reduction in support and that their entitlement will continue to be protected by national rules. Will the Minister say whether any more categories of claimant are likely to be protected by statute? In Wigan in 2010-11, there were 34,000 claimants, and the Department for Work and Pensions paid a grant of £26 million. On current expenditure, a 10% cut would obviously lead to a £2.6 million shortfall, on top of swingeing cuts of more than £66 million already being made to Wigan council’s funding from central Government.
Another issue to be considered in Wigan is the number of pensioners claiming council tax benefit. More than 40% of people of pension age are claiming it, so the burden on those of working age becomes disproportionately higher with a potential 20% reduction across all working-age customers, and that is before the protection provided to any other groups that the authority might wish to protect—carers, for example.
It is worth reminding hon. Members that council tax is one of the few debts for which the final penalty is imprisonment. Even with council tax frozen and no cuts in council tax benefit, the number of people seeking help from the debt charity, Consumer Credit Counselling Service, because of council tax arrears rose by more than a quarter in 2011. The cost, both human and financial, of collecting more money from people who are already at their wits’ end and struggling to pay their bills must be factored in by local authorities. My council has identified that collection will be difficult and involve a high level of direct contact. In effect, it is saying that it could cost more to collect than the amount collected.
Kate Green (Stretford and Urmston) (Lab)
I congratulate my hon. Friend on securing such an important debate. She echoes many of the points that have been made by my local authority, Trafford council—particularly about the cost of collecting council tax and management of the benefit. It has pointed out that as housing benefit moves to universal credit, the current team that processes both benefits in the local authority will not be able to shrink by the same sort of proportion as the value of council tax benefit will, so it will become extremely inefficient. Some 80% of current benefit staff will have to be retained, but only for a rump of processing. Does that make cost-effective sense for councils?
Yvonne Fovargue
No, it is not cost-effective, and another factor is that council tax benefit offences are imprisonable. Does it do anyone any good to put people into prison for a short time for a very small debt?
Stephen Timms (East Ham) (Lab)
I welcome this debate. Has my hon. Friend seen the announcement by the Institute for Fiscal Studies on this very point? It said:
“The poll tax experience showed how difficult it can be to collect small amounts of tax from low-income households that are not used to paying it.”
Is that not the scenario that we are getting back into?
Yvonne Fovargue
My right hon. Friend must have read my notes, because I am coming to the Institute for Fiscal Studies. It warned that limiting spending will give councils an incentive to discourage low-income families from living in the area. As in the past, they will be left to chase desperately poor people through the courts for small amounts of unpaid tax. During the 1990s, I worked in an advice agency; I can honestly say that I do not want a repeat of the poll tax debacle. That policy, like the current one, involved the poorest people paying the most in the most deprived boroughs.
When I look at the options being considered by Wigan council, I despair. Wigan has an excellent council with an enviable track record of working with employers, and a very active local chamber of commerce that provides new employment opportunities and supports existing businesses. However, given the difficult economic climate, and despite active promotion of employment and growth, Morrisons recently announced the closure of Rathbones bakery, with 160 job losses. Any closure or relocation of a major employer places an increased burden on already hard-pressed councils, and insisting that they collect a small amount of council tax from people adds to that burden and puts them in an impossible position.
The issue is compounded by the fact that the grant is predicated on the amount of benefit in the previous year, so any large influx of people into the council tax benefit system will have a destabilising effect on the council’s budget. Indeed, there may be a perverse incentive to encourage such people to leave the borough—a return to the poll tax scenario.
Wigan and similar local authorities have stark choices. They could abolish backdating for working-age customers, but savings would be minimal. They could abolish the second adult rebate, but the savings would also be minimal. They could establish a weekly minimum payment of £1 upwards, but again the savings would be minimal. They could change the capital disregards on a sliding scale, penalising people who save, but, once more, the savings would be minimal. They could disregard income from child benefit, maintenance payments and disability benefits, but that would hit the most vulnerable the hardest and could be open to challenge on grounds of discrimination.
Such a move would certainly save money, albeit with the greatest cost falling on the most vulnerable. Awards could be capped at a percentage of liability, which could deliver savings, but, as my right hon. Friend the Member for East Ham (Stephen Timms) said, given the huge increase in the number of council tax bills, collection would be very difficult because some people would be paying council tax for the first time. That would lead to an increase in collection costs. Again, there are echoes of the poll tax.
The new scheme would have to be in place by January 2013 with the IT changes completed and ready to go online. Is the Minister confident that the IT systems will be in place in time for an introduction in 2013? My local authority certainly has worries about that. It wants to know how progress of the IT systems will be monitored, and how they will be supported in their introduction.
Another issue that localisation of council tax benefit raises is its relationship, or not, with the universal credit. The credit is supposed to simplify the benefits system, reducing the number of different benefits and means tests. Keeping council tax support separate and allowing it to vary throughout the country surely undermines that simplification. Universal credit was supposed to rationalise work incentives by replacing the jumble of overlapping benefits with one single means test. That may vary throughout the country, so how will people judge how well work will pay, if it does, in different areas? Will the Minister explain how work will always pay, given that a localised scheme will be introduced prior to the universal credit? How will the two line up and interrelate?
That is not the only change that will affect working families in April 2013. For those who also claim housing benefit—let us not forget that seven out of eight housing benefit claimants are in low-paid employment—the outlook is even more bleak. The under-occupation penalty or bedroom tax will also come into effect. Wigan has a shortage of one-bedroom properties, and more than 8,000 residents are under-occupying. They will be unable to move, because we simply do not have one-bedroom properties, so they will face a minimum 15% reduction in housing benefit—approximately £12 a week.
The increase in deductions for non-dependants is already increasing by approximately 30% a year. In 2013, the deductions will be almost double what they were in 2010.
Sheila Gilmore (Edinburgh East) (Lab)
It is interesting that my hon. Friend mentions the non-dependant deduction in relation to housing benefit. Was she as surprised as I was that the Prime Minister said in a speech on Monday that it was dreadful that housing benefit was lost if an adult child went into work? He did not seem to realise that his own Government had just substantially increased the deduction.
Yvonne Fovargue
Yes, that was somewhat surprising.
This is a difficult period in which to be a young person. The single room rent changes for the under-35s looking to rent privately are coming in, limiting housing benefit to £57.73, when a one-bedroom flat in Wigan costs approximately £90 a week.
Singly, any one of the changes will affect people on a low wage in a way that is extremely hard to cope with; cumulatively, they could well deliver a fatal blow. It is well reported that only a small decrease in income will push a struggling family from the position of just about managing to pay their bills to that of not coping, and sinking into unmanageable debt.
Mr Howarth, you would not expect me to miss an opportunity to remind hon. Members that the advice agencies that were hitherto there to help people and rescue them from that struggle are also struggling, and that the removal from the scope of legal aid welfare benefits and most debt work will have a significant impact on those agencies. That is coupled with the local authority reductions in funding, which could be even larger given the measure under discussion and the cuts that local authorities may have to make. There may be little or no support for people who could face the loss of their liberty due to council tax arrears.
As the Select Committee on Communities and Local Government stated:
“The proposals for the localisation of council tax support seem to us to provide an illusion of delegation with a minimum of real discretion, virtually guaranteeing that the funds available to support working-age…people will be squeezed.”
These hard-working families are already squeezed; councils are squeezed; and it is inevitable that, yet again, the poor and the vulnerable will suffer.
Annette Brooke (Mid Dorset and North Poole) (LD)
It is a pleasure to speak under your chairmanship, Mr Howarth. I congratulate the hon. Member for Makerfield (Yvonne Fovargue) on securing the debate. Being out of circulation for a month or two has not lessened my concerns about this issue. I want to place those concerns on the record again.
In the debate, we are considering three distinct aspects, but they are getting tangled up with one another. One is the localisation of council tax benefit. As a Liberal Democrat, I am firmly in favour of as much localisation as possible. Indeed, it is difficult to disagree with it, but the constraint of having to protect all pensioners—a laudable aim—clearly puts great pressure on some councils.
Let me give the example of East Dorset, part of which I represent. There, it is estimated that the impact of the cuts in council tax benefit for those in work will be something like a 33% reduction. We do have these differentials.
Joseph Johnson (Orpington) (Con)
The concerns that the hon. Lady is raising on her local council’s behalf are shared by the London borough of Bromley, which has a large retired population and an increasing ageing population. The impact that she mentions is, in Bromley, in the order of 25% for the working-age population. That is a concern that they share, too.
Annette Brooke
I thank the hon. Gentleman for that intervention. The point is one that we need to keep reinforcing. As the hon. Member for Makerfield pointed out, what is happening is not true localisation, because councils have very little flexibility. Although I am certainly up for the localisation of council tax benefit, what we have before us at the moment—of course, it has still to be discussed fully in the other place—is not delivering what we want.
The second strand is deficit reduction and the cut of £500 million. That is a distinct aspect, even though it has a knock-on effect on the whole picture. I shall return to that in a moment. The other strand is that the Government have made it possible for councils to raise additional income through the empty homes premium and the flexibility to increase council tax on second homes. Again, I applaud that, but we all know that even though the sum of money that could be raised is £500 million, things will not match up council by council, so we do not have a complete solution to the problem that we are discussing, although some help is available.
I feel very strongly that, as the Local Government Finance Bill and all its implications are being discussed in the other place, there must at the very least be consideration of some transitional measures to help the people who will be hit. They will almost certainly be the low-income working families. Those people are right on the margins and just trying to improve their lot a little, but they get well and truly clobbered. As people have pointed out, that goes against the principle of universal credit, and I think that across the House we do support the principle of universal credit.
I cannot help but refer to the fact that £500 million was found yesterday to defer the increase in fuel tax. That will help our hard-pressed constituents, but, as I understand from “Newsnight”, it was found in underspent budgets. My message to my hon. Friend the Minister is this. Please can he go and have a look at those underspent budgets, because at the very least a transition would help some of our very vulnerable and well deserving people. They are hard-working, but are going to be in quite a trap over the next year.
Of course, if we do not make reductions in council tax benefit—many authorities will not want to do that—we move to cuts in other services, so the effect knocks on and on. I even had representations from my fire authority on Friday. It was concerned about potential cuts in its budget as a consequence of what is happening. It is an enormous issue. Everything sounds simple and laudable to start with, but as we work through all the implications, there is a strong case for at least looking for some mitigation measures. I hope that the Minister will put pressure on his colleagues. I know that the issue will be hotly debated by all parties in the other place. I hope that we will have an improvement in the situation.
Mr George Howarth (in the Chair)
Order. It might be helpful if I explain that the first of the two Front Benchers will be called at 10.40 am. There are rather a lot of hon. Members wishing to speak. If Members exercise a self-denying ordinance and stick to five minutes, we should be able to get everyone in. I will leave Simon Danczuk with that thought.
Simon Danczuk (Rochdale) (Lab)
Thank you, Mr Howarth. I welcome the debate and thank my hon. Friend the Member for Makerfield (Yvonne Fovargue) for securing it. My comments will concentrate on two things: first, the purpose of the policy change and, secondly, the impact that it will have on our constituents.
One would like to think that Government make such changes to improve services, to improve people’s lives and to improve decision making. Unfortunately, this change does little to improve matters, because of how the policy is being introduced. If I were a cynical person, I would argue that the change is about saving money and redistributing money away from poorer areas. The Government have cut the funding for council tax benefit by 10%, as the hon. Member for Mid Dorset and North Poole (Annette Brooke) pointed out. That is a saving of £500 million, but surely that is an arbitrary figure. It is another example of the Government making decisions without evidence. It is not based on fact. Why is it 10%?
I understand from the Local Government Association that the Government estimate a decline in the number of council tax benefit claimants in 2013-14 of about 12%, but as the Local Government Association states, it is not clear why the number is expected to decline. Perhaps the Minister can shed—[Interruption.] Yes, the number is probably going to increase. If the Government’s other predictions are anything to go by, in terms of unemployment, economic decline and the amount of money that the Government need to borrow, surely the number of council tax benefit claimants will increase. The Government are pushing their cuts on to local government to administer. That is the reality. Not only that, but because they have protected certain groups, such as older people, areas with higher need will carry a greater burden. That is after local authorities have had funding cuts of 19% over the past two years.
Let me point out that the public are not daft. The local government settlement, public health funding, the new homes bonus, repatriation of the business rates and now council tax benefit are all skewed towards better-off areas. In effect, the Government are stuffing money into the back pockets of wealthy local authority areas. That is the reality of the policies they are pushing forward. The public can see exactly what they are doing and they see that it is unfair.
The Government are also shifting risk. That cannot be dressed up as localism, because the Secretary of State for Communities and Local Government has given himself powers to prescribe who receives the benefit. Unhappy with wheelie bin collections and council newspapers, he gave himself more power. For such a big guy, the Secretary of State is obsessed with the minutiae of local authorities. He has the power, but local councils carry the risk. When the Department for Work and Pensions managed the budget, it was based on annually managed expenditure. When it transferred to councils, it was based on a cash-limited funding pot, so all the financial risk has switched from central to local government.
The other risks associated with the policy concern timing, as my hon. Friend the Member for Makerfield (Yvonne Fovargue) pointed out. Will councils be ready in time? Is the software ready and appropriate? What happens if local groups challenge the decisions made locally? All the change is happening in a short time frame, when local authorities face unprecedented cuts and other major changes to their financial systems.
In conclusion, the issue is not only about systems and whether the power lies with central or local government; what concerns me most is the impact that the change will have on hard-working families—people who are not that well-off and people who struggle to make ends meet. Everyone here knows that in many towns and cities across the country, local councils will have to do the Government’s bidding when it comes to increasing the amount of council tax that working families pay, because council tax benefit is being cut. As my hon. Friend pointed out, the Select Committee on Communities and Local Government, of which I am a member, said
“The proposals for the localisation of council tax support seem to us to provide an illusion of delegation with a minimum of real discretion, virtually guaranteeing that the funds available to support working-age unemployed people will be squeezed.”
I rest my case.
Andrew Gwynne (Denton and Reddish) (Lab)
It is a pleasure to see you in the Chair, Mr Howarth. I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on the case that she put forward in opening the debate today.
I would go further than my hon. Friend the Member for Rochdale (Simon Danczuk) and say clearly that the measure is not about reforming the benefit system or creating a fairer system, but a cynical move by the Government to impose crude cuts on individuals who can least afford it. It is a cynical way to cut the money given to local councils.
As we have seen, and heard from my hon. Friend, local authorities, including my own, are facing a massive financial squeeze. The Government were not satisfied with the in-year cuts that they placed on Tameside and similar authorities. Tameside has had to reduce the budget over three years by almost £100 million, which has a major impact on what a local authority can do. It is not only Tameside; the picture is mirrored across the country. The areas most in need feel the pinch the hardest, which means that their local authorities’ capacity to help them is greatly diminished.
A Government proposal such as council tax benefit localisation affects real people. The figures from Tameside council show that in 2011-12 nearly £20 million— £19.3 million—was spent on council tax benefit, which is 32,245 claimants. A 10% reduction would amount to £2 million. According to the Government, among those claimants, the 13,569 pensioners, who received £8,481,078-worth of council tax benefit, are protected, which means that the squeeze is forced on 7,990 families with dependent children, who last year received £5,288,698-worth of council tax benefit. Those are the same families with dependent children who are being attacked at every level of Government policy, not least through the reduction and removal of tax credits.
Ms Karen Buck (Westminster North) (Lab)
Does my hon. Friend agree that among those who will be rubbing their hands at the prospect of the measures will be the bailiff agencies? There has already been a significant increase in the use of bailiffs to recover arrears from the kind of low-income families that he mentions. My local authority used bailiffs 30,000 times over three years for council tax and housing benefit. The faster the population churn, the more likely it is that bailiffs will be used. Using bailiffs for very small amounts of money—huge for the families concerned, but small for the bailiffs—is likely to lead to yet another surge in the sector.
Andrew Gwynne
I agree with my hon. Friend completely. I know from my casework the pressures that are put on local authorities to collect the money owed to them and to collect it quickly. They utilise all tools at their disposal, including bailiffs, which brings great distress to families who simply struggle to find even small amounts of money. It pushes them further into poverty. I totally accept the point she makes.
What has been completely lost by the Government in all the debates that we have had, most recently in the consideration on the Floor of the House of the Local Government Finance Bill, is that council tax benefit is an in-work benefit. Listening to Ministers at the Dispatch Box, one would think that the changes were all about the feckless poor, who do not deserve the benefit, and about removing money from them—the undeserving poor. I will not get into a debate about the deserving and undeserving poor—I leave that to the coalition parties—but I know from my constituency that a great number of the people who receive council tax benefit are in work. They are in low-paid, and often part-time, work. If we are to create a benefit system that is about making work pay, the way to do it is not to go ahead with such measures.
The Minister and I share a local authority. I have mentioned Tameside.
Julie Hilling (Bolton West) (Lab)
On the in-work benefit point, does my hon. Friend not think that it is an absolute nonsense that the Government say that the 10% reduction will strengthen local authorities’ incentive to promote employment and growth in the local economy, given that those who receive the benefit are already working? As he said earlier on the cuts, local authorities do not have the money left for the job and growth promotion tasks that they might have wanted to do.
Andrew Gwynne
My hon. Friend is right. That shows what nonsense many of the statements of the DCLG are. It makes no logical sense.
My constituency shares a local authority with the Minister’s. One of the perks, I suppose, of having a cross-borough constituency is that I can quote two councils. The Minister will know that, even in Stockport, which is by all standards a much more prosperous borough than Tameside, there are areas of deprivation and social need. There will also be families in low-paid work, who will feel the squeeze from measures such as the one we are debating. From a local point of view, therefore, I urge the Minister to listen to Stockport council, which has concerns about such measures, and wants them to be thought through better before they must be implemented.
I agree with the hon. Member for Mid Dorset and North Poole (Annette Brooke) about localism. We all believe in localism—certainly those of us who came through local government. I spent 12 almost happy years on Tameside council, which was a great training ground. However, if we are to make localism work, it must be genuine. The council tax benefit reforms are, I fear, localising the cuts and the blame, not genuinely localising a scheme of council tax benefits. That is because the Government have made the false assumption that all councils have a level playing field. Tameside council is completely different from Stockport council. It has a different level of ability to raise income and supplement loss of income, whether that is through localisation of the business rates or raising extra council tax, to pay for services or shortfalls in budgets such as council tax benefit. I urge the Government to consider their proposal carefully, because they are clobbering the working poor.
Grahame M. Morris (Easington) (Lab)
It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing this significant debate and I pay tribute to her. She has highlighted an important issue.
I want to follow on from some of the points made by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne). I agreed with many of the comments of the hon. Member for Mid Dorset and North Poole (Annette Brooke), who made them in a calm and reasoned manner and highlighted the effect of benefit changes on the working-age population. I thank Durham county council, my local authority, for furnishing me with some figures to suggest the scale of the impact in my area.
The Consumer Credit Counselling Service reports a rise of almost a third in the number of people who rent their homes and seek advice on council tax debts, and a rise of more than a quarter across both renters and owners. That dramatic increase comes as a result of the worsening financial situation for ordinary people, particularly in my area, that is made tougher by the plethora of coalition Government policies, which seem to be hitting the poorest hardest. By scrapping the existing council tax benefit system at the same time as cutting funding for benefits, the Government will only exacerbate the financial problems that ordinary families face in areas such as Easington.
Ring-fencing council tax benefits for pensioners is, on the face of it, an idea to protect some of the most vulnerable, but the other side of the coin is that the impact on working-age households will be all the more severe. Indeed, just before the debate I twittered that I hoped to catch your eye, Mr Howarth, and one of my constituents, Madeleine, contacted me and asked me to be at pains to point out the impact on people like her—single adults in work who are claiming council tax benefit.
There are 43,710 homes in the former Easington district council area that makes up the bulk of my constituency, 13,800 of which are in receipt of council tax benefit. That amounts to almost one third of households. As my hon. Friend the Member for Makerfield said, council tax benefit is the most comprehensively claimed benefit. It is claimed by 5.9 million households across the UK, a rate that is higher than for any other means-tested benefit or even tax credit. The plans to force local authorities to deliver a localised benefit system will create unfair disparities between council areas and regions.
Welfare benefits are, in the main, determined at a national level; I am referring to the determination of benefit levels and qualifying entitlements. However, the present proposals have the potential to undermine the fairness of the overall benefits system. The Institute for Fiscal Studies has made it clear that the proposals mean that councils must choose between cuts in essential services, cuts to benefits for working-age households or a council tax rise. Sir Merrick Cockell of the Local Government Association has highlighted a starker choice for councils:
“They can either cease helping the working poor, or continue to support them by taking money from other services or putting up council tax”.
A report by the LGA yesterday suggested that by 2020, because of external pressures—principally meeting the costs of adult social care—local authorities are likely to provide only those services that they are statutorily obliged to provide. Not only is the coalition shirking its responsibility and passing the buck to local government; it is cutting funding by 10% for good measure— £500 million, as the hon. Member for Mid Dorset and North Poole said.
The policy of localisation of council tax benefit is completely at odds with the Government’s rhetoric that there should be no increase in council tax. Durham county council has 63,000 claimants and an estimated spend of £55 million for 2012-13. Almost half of claimants in Durham are pensioners, who the Government stipulate will face no cut. Therefore the burden will clearly fall on the one quarter of claimants in County Durham who have dependent children; the one tenth of claimants who are in work on low wages; and those who are out of work and looking for work. The latter group has grown in number, particularly in the north-east and especially in my constituency, under the policies of the coalition Government. Indeed, the DWP’s own research shows that 3 million households currently entitled to claim council tax benefit do not do so. That figure is likely to rise in tough economic times.
It is true that pensioners are protected, but the proposals place only an “expectation” on councils to protect vulnerable groups. As my hon. Friend the Member for Makerfield said, that throws up a raft of other problems. Indeed, Durham county council is not alone in its concern that councils may face a legal challenge owing to local interpretations of which groups should be treated as more vulnerable than others; my hon. Friend mentioned carers.
Other concerns include the danger that as the financial burden will now fall on local taxpayers, should costs increase owing to conditions largely outside a council’s control—I might mention the rising cost of adult social care—the impact on services, benefits or rates will be overwhelming. The proposals are inherently unfair and go against the grain of the Government’s plan for a streamlined benefits system. It is not acceptable for the Secretary of State to wash his hands of his responsibilities.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
It is a pleasure to serve under your chairmanship, Mr Howarth. I make heartfelt apologies to the hon. Member for Makerfield (Yvonne Fovargue) and to all hon. Members for not being here at the start of the debate. We had a bit of a train crisis meeting, so I apologise for my delay. I will make a short contribution because I am conscious that many others wish to speak.
My hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) and I have written to the Secretary of State asking for more clarity on this matter. I hope that the Minister will be able to give us that today. If not, perhaps he could put out further notices clarifying the definition of what is “vulnerable” and what is a “vulnerable group”.
At the moment, council leaders and officers are struggling with how this system will look. Initially, the view was pessimistic, but that is often the case when there is a cut in funds, and there has to be a redistribution of the pot. In constituencies such as Suffolk Coastal, a significantly higher proportion of the population are pensioners. There are concerns that the impact of the measure on people of working age will be considerably more, given that pensioners will see no impact on their council tax benefits.
However, I say as a supportive Back Bencher that there is a challenge on us all to try to do things with the welfare state. We should see the issue as a way to encourage our local government partners to be part of the solution, which is to attract businesses and employment and to make the system a key part of encouraging people to get out to work.
Helen Jones (Warrington North) (Lab)
I know that, through circumstances beyond her control, the hon. Lady was not here for the early part of the debate. The point that has been made over and over again is that council tax benefit is an in-work benefit. Many of the recipients are deemed, as those who are disabled are, to be incapable of working. Therefore, the argument that councils can mitigate that by attracting more employment fails at that basic level.
Dr Coffey
I understand why the hon. Lady says that. [Hon. Members: “Because it is true!”] Hon. Members should allow me to develop my argument. The average wage in Suffolk is considerably lower than that of counties nearby. It is probably lower than that in Lancashire and possibly lower than that in Liverpool, where I grew up.
District councils must try to attract higher-quality, skilled businesses to our area, so that they are not solely reliant on tourism and agriculture, which traditionally pay fairly low salaries. This system is part of a mechanism to encourage local councils to attract such businesses. With more businesses in an area, there will be a greater retention of business rates, with district councils, not county councils, taking 50% of such rates. Perhaps this measure is a blunt stick to encourage local councils to do their bit and to help their residents get higher skills and higher-value employment. We may be using a blunt stick to achieve that, but the aim is to say to local councils, “You have a role to play in the economic benefits for your area, and you should not simply be a processing house for benefit claims.”
Mr Howarth, I said that my speech would be short. I have taken one intervention, and I now leave it to other hon. Members to continue the debate.
Mr Clive Betts (Sheffield South East) (Lab)
It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing this important debate. I want to make three points. The first goes back to something that the Communities and Local Government Committee said in October, following the evidence that we took last July. We were against not the principle of the changes but the way in which the Government were going about them. Importantly, we said:
“We recommend that the Government delay the introduction of the new Council Tax support system by a year or more, if consultation with local authorities indicates that this would reduce the risks inherent in introducing many complex changes concurrently.”
That is an important point. Since then, the Local Government Association has repeatedly said that it has concerns with the timetable. In its briefing to us, it said that it urged the Government
“to give councils the necessary time to do this in the most considered, flexible and cost-effective way possible.”
In January, Capita wrote to all the local authorities for which it provides services, saying that it did not think that it could deliver the necessary systems in the time scale. I do not think that that advice has changed. Certainly, when I spoke this morning to Councillor Bryan Lodge, the cabinet member for finance in Sheffield, he said that the advice had not changed. When we had the debate on the Local Government Finance Bill in January, it was interesting that the Minister did not draw attention to that letter from Capita, although he was well aware of it at the time.
What is the situation now? Are the Government saying that despite all the concerns of local councils, the LGA and service providers such as Capita, they believe, in their wisdom, that this can all go ahead on time and without any problems—not just for councils and the administrators, but for the people who receive the benefits at the end of the line?
I just think back to Sheffield in 1999 when we had privatised the housing benefit service and transferred it to Capita in a rushed and botched way. I remember the constituents, often elderly, coming to my surgeries in tears not because they had done anything wrong but because the administration of their benefits was in chaos and, as a result, the arrears on their council tax and rent had risen. They were distraught because they had never been in arrears in their lives. I worry that we will go back to that situation.
The responsibility will be not with local councils but with the Government who will push this through on an unacceptable and unattainable timetable. I say to the Minister that it is not too late to stop. I am talking about not the intention but the ridiculous timetable on which the Government have embarked. If this was simply a question of localism and of saying to local councils, “Do it the way you want,” there would not be a problem.
George Hollingbery
I am a member of the Select Committee and have something to do with the production of its report and the idea behind it. I have always recognised that this is something of a complex area.
Does the hon. Gentleman agree that there are some very real technical complexities in putting this system in place, but there is also an appetite among Ministers for shared systems and projects across large local areas? For example, in Hampshire, there are 16 different district councils, so a shared scheme across the area would make a lot of sense; it would save money in administration and so on. Necessarily, though, it will be a complex system to put in place, with legal agreements that will need to be considered and thought through. A little more time for that might also be very welcome.
Mr Betts
The hon. Gentleman makes a good point; we will get a better scheme for having it slightly later. The savings will be better, as will the service to our constituents.
I say to the Minister that if this was simply a question of saying to local councils, “Get on and devise your own schemes,” they could do it. The problem is that they do not know how to devise a scheme in respect of the advice and detailed regulation that come from Government, because they have not got it yet. It is because the Government are insisting on regulating the details of a localised scheme so closely that they are in these difficulties.
I have two further brief points. One is about the 10% cut. If councils cannot devise their own schemes, they will have to opt for the existing scheme, which means that they will have to find the 10%; £4.5 million in Sheffield on top of the £200 million of cuts that the council is trying to make. That goes for every council in the country—cuts on top of cuts. That is the problem that the Government are forcing on local councils. There is the invidious choice of finding this money from other services, which are already being cut very substantially, or making the cuts in the benefits of people of working age on top of the cuts in benefits and working tax credits that those same families are having to take. It is the cumulative effect on those families that the Government have done no proper analysis of.
Finally, we still do not know from the Government how the administration of the system will work. They are localising council tax benefit and centralising housing benefit. There is a simple arrangement now for people whose income changes: they go down to the local council and speak to someone. In Sheffield, there is the home visiting service for the elderly and disabled, where someone comes along and helps them sort out both benefits. Now we will have a council tax benefit that we go to the council for and a housing benefit that we will have to go online for—or on a telephone to someone in Jobcentre Plus. For elderly people, that will be an impossible arrangement.
The Government say they will talk to local councils to find a way forward. As I understand it, there is no clear idea from the Government about how these two complex benefits will be arranged in the future when we will have two completely separate systems that people have to go through to get their problems sorted out.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Diolch, Mr Howarth, for calling me to speak.
I congratulate the hon. Member for Makerfield (Yvonne Fovargue) on securing this important debate and on making a very informative speech. She speaks with great authority on these issues, as a former worker in the Citizens Advice service, a service that I am also very proud to have worked for before entering this place.
I will concentrate my remarks today on the effect of these proposals on Wales. Of course, I should begin by saying that I am not opposed to the devolution of council tax benefits to Wales; normally, I would be here in Westminster Hall strongly welcoming that move. However, it seems inherently wrong that it should be done with the insistence that a 10% cut be made to the amount of benefits that can be provided. Essentially, we are telling some of the most vulnerable members of our society, who currently rely on benefits to maintain their standard of living, that they will get less in future.
No justification has been provided for the cut at a time when many families are struggling to make ends meet and when the median income is declining sharply, as we saw from the HBAI, or households below average income, figures released recently. Following a week in which tax avoidance by multi-millionaires was the main news story, it is depressing that we are once again debating measures whereby the UK Government are attacking the living standards of those at the bottom of society—working people who require additional support.
There are 328,000 claimants of council tax benefits in Wales, making it one of the most widely claimed benefits in Wales. In my own local authority area of Carmarthenshire, there are 19,090 households that receive council tax benefit in one form or another—approximately 23% of all dwellings on which council tax is charged. Sadly, though, and at the risk of upsetting the colleagues around me today, I must say that the Labour Government in Wales have spent more time on scoring political points against the Tories in London than on developing solutions to the problem of a 10% cut.
The cut was first announced in the summer of 2010—immediately after the general election—and yet two years later, and only months before its implementation, the Labour Government in Wales are still complaining that they do not have the necessary information. Last week’s meeting of the Welsh Government with the Secretary of State for Wales was, according to media reports in Wales, not overly fruitful, although perhaps the Minister can update us on that meeting when he sums up later.
We are still waiting for the Welsh Government to announce their position on this cut, although hopefully they will do so soon, given the publication last week of a report from the Institute for Fiscal Studies, which made a number of suggestions. The IFS said that, to meet the 10% cut, the Welsh Government could impose a straight “salami slice” that would reduce the amount of support for all claimants. Alternatively, they could make reforms that would reduce the amount of support for council tax received by those living in higher-banded properties. They could introduce reforms that means-test support for council tax more aggressively, or introduce a reform to the current discount for single residents, changing underlying council tax liabilities.
We have yet to hear the Welsh Government’s response to the IFS report, but they have said that they face a challenging budget and will simply pass on the cuts in one form or another to Welsh local authorities. Given that Labour said in the election for the National Assembly of Wales that they would shield Wales from Westminster’s cuts, it is a gross dereliction of duty for it simply to pass those cuts on. That “challenging budget”, after all, comes as a result of Labour’s failure to reform the Barnett formula when they were in power in Westminster.
In the meantime, the Scottish Government have announced that they will protect recipients of council tax benefit from the cuts. The contrast between a strong Scottish National party Government in Scotland and a lethargic, supine Labour party in Wales could not be clearer. My party strongly favours fiscal responsibility and accountability for the decisions made by the Welsh Government, but this 10% cut should not be passed down to Wales by the Con-Dems and nor should it be passed on to the people of Wales by Labour.
Sheila Gilmore (Edinburgh East) (Lab)
Thank you, Mr Howarth, for giving me the opportunity to speak. I also thank my hon. Friend the Member for Makerfield (Yvonne Fovargue) for calling this debate. My contribution will follow on neatly from that of the last speaker, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), because I will talk a bit about the situation in Scotland.
When I came into the House two years ago and this whole debate about localism began, I was wont to go around saying to my colleagues, “Huh! We’ve had this for the last three years”—I think that was how long it had been by that point—“and it isn’t working.” That was because the Scottish nationalist Government had introduced in 2007 a policy of localism, although they did not quite call it that and they did not perhaps talk about it in quite the same way as others. However, the impact has been exactly the same as elsewhere.
The problem is that talking about delegating decisions to local authorities is all well and good, but if at the same time the financial squeeze is put on, that is not real delegation of power. That is what we have seen in Scotland; we have now seen it for five years. We have had a council tax freeze, which nobody has been able to break out of. It is a very populist notion. I know that people think, “Oh, that’s great, you’re freezing the council tax,” but we must remember that those who receive council tax benefit—the poorest and most vulnerable people—got absolutely nothing from it. The measure is actually highly regressive, and it is also cumulative year on year.
In that financial strangulation, a council tax freeze is applied. Then, as has happened in Scotland this year, local government starts to be given less money and is told, “There you are, it’s over to you for all sorts of decisions.” That has been very damaging and very difficult for local government. Although some local councils in Scotland embraced the notion of a council tax freeze at the outset—wrongly, I think, and my own Labour group on the City of Edinburgh council, although they were then in opposition, pointed out the flaws in the notion right from the beginning—most of them have now realised that the situation is very difficult for them indeed. Without a local area having the power to raise its own resources and have control over its finances, localism is not really localism, and that is the root of a lot of the problems that we have discussed this morning.
Obviously, Scotland faces the same situation as other places, in that the money is simply being cut by Westminster. What the Scottish Government have done about that so far is disappointingly limited: they have said they will not impose the 10% cut, although the cut will be coming from London. That sounds good on the surface, but only half of that money is coming from Scottish Government funds; the rest will come from local government. Therefore, local government in Scotland is experiencing the squeeze in exactly the same way as local government in other places.
The Scottish Government made that announcement shortly before the local government elections in May and said, “We will be saving Scotland from this 10% cut,” but they did not say that that will have an impact on other services, and that half of the money to deal with the cuts will be found from local government, which already has reduced resources. To anybody who thinks that the Scottish Government have some magical way out of these difficulties, I would say, “That is just not the case.”
I regret the fact that, at the moment, there is still a lack of clarity in Scotland about how the proposal will work in future, how it will be developed and how a new form of benefit will come out of the present situation. It is all too easy for the Scottish Government. Their line on most things at the moment is to say, “Well, if you vote for separation, everything will be solved.” It’s land of milk and honey stuff, but a lot of the problems that I have mentioned will still be there.
I hope that in the next few months the Scottish Government will not wait for this nirvana that they claim is to come but instead will start to think seriously about how we create a proper benefit in Scotland for all the groups who receive council tax benefit. For example, the current system for council tax benefit has some details that we do not want to lose. On carers, the current structure of council tax benefit includes a carer’s premium, which makes a difference to many households with caring responsibilities. We have just had carers week, and a lot of warm words have been said about carers. Let us hope, however, that all local authorities up and down the country that will be affected by this change—both the Scottish Government and the Welsh Government will be creating a new form of benefit—do not forget carers.
Mr George Howarth (in the Chair)
Order. Three Members still wish to speak. If they can each confine themselves to speaking for three to four minutes, we should be able to get everyone in.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
Thank you, Mr Howarth, for giving me the opportunity to speak. I draw attention to the interest that I have declared in the register.
I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing this debate, which highlights what I consider to be a very instructive example of how not to effect change in social policy. We can have arguments about the merits of localising council tax benefit, and those arguments have been deployed today. Some people believe that the change is important as part of a localist agenda; others believe there is a problem in separating the administration of housing benefit from the administration of council tax benefit. Those arguments are perfectly legitimate, but let us put them aside for a moment and assume that making the change is a sensible route to follow. How would this Government—if they were an intelligent, sensible Government—go about making it?
There are three fundamental objectives. The first is to be clear about the policy, so that everyone involved knows exactly how the change will work, what the expectations are, and what the success measures will be—how it will be judged a success or otherwise. The second key objective is to have detailed consultation with everyone affected. As we have heard, the number of people receiving the benefit is approaching 6 million—no other benefit has more recipients. Such a consultation should identify any especially adverse impacts on particular groups, contradictions between elements in the policy that could have perverse effects, and any other such anomalies, so that the policy can be refined and then work effectively. Thirdly, there needs to be plenty of time, to enable the change to be introduced in an orderly and well-planned way.
The Government have failed all three tests. That is an extraordinary comment on how they, looking increasingly like a bunch of incompetents, have approached the issue. Although the objective of localisation is clear, the policy is still wrapped in ambiguity. How will the arbitrary 10% cut that the Government are imposing—a cut that runs against any principle of sensible policy change—be implemented if the Government’s objectives are to be met? Those objectives are that pensioners and other vulnerable households should be protected, and that there should be no work disincentives. I challenge the Minister to tell us—he has failed to do so when previously challenged—how any organisation can make a 10% cut in the overall benefit level while protecting pensioners and without creating work disincentives. Protecting pensioners will result, on average, in a 16% cut to others, substantial numbers of whom are in work. We still wait to understand the detail. Why is the policy not clear, even now?
Consultation, the second objective, has been notable by its absence. A few local authorities are beginning to consult with their residents, but they are shackled because the full details of the scheme are not yet available. The legislation is still only part way through Parliament—in the upper House—and the regulations have not been published. Local authorities are trying to do the right thing but are unable to do so properly, and the vast majority of the population, therefore, have very little idea of what will soon hit them.
That brings me on to the third criterion, the implementation timetable, which is, perhaps, the most lamentable failure of all on the part of the Government. The scheme must be implemented from April 2013, which means that councils must have all arrangements in place by the end of January next year, which is just seven months away. Before that, they must carry out detailed consultation, to ensure that all groups in the area are aware of the implications, and they then need to refine their policy to take account of the results. They also need to brief software suppliers, put the administrative arrangements in place, and do all the publicity, so that people know how the new arrangement will operate and, indeed, as the Select Committee Chair, my hon. Friend the Member for Sheffield South East (Mr Betts) rightly highlighted, to ensure that people understand how the complex new arrangements, which will involve different applications for housing benefit and council tax benefit, will work. All that must be done in seven months. In the best possible circumstances, with the regulations published and everything clear, that would be a tall order, but in the current situation, where we do not even know what the law will require, it is impossible. That is why people are saying, “It is simply beyond the scope of any reasonable local authority to be able to administer this without administrative chaos.”
I remind the Minister of what happened when housing benefit was introduced. His party was not part of the Government at that stage—it was a Conservative Government—but the process was highlighted at the time, in the early 1980s, as probably the worst administrative fiasco in the history of the welfare state. I put it to the Minister that he is now part of a Government who are moving in a direction that could well receive similar criticism in seven months’ time, when they try to put in place, with an impossible timetable and a lack of clarity on policy, a series of measures that will have far-reaching effects on the income levels of large numbers of people. This is a shambles. It is not how administrative or social policy should be carried out, and I sincerely hope that the Government will listen to all the appeals to delay the measure, to allow proper time for the administrative changes to be made in a proper way.
Mr Virendra Sharma (Ealing, Southall) (Lab)
Thank you, Mr Chairman, for this opportunity to speak. I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing such an important and timely debate. I also congratulate everyone who has contributed so far, and I agree with every word they have said.
Time is short, and it is difficult to put every argument forward. As a former councillor of 28 years in the London borough of Ealing, I am only too well aware of the impact that this Government policy will have on those least able to bear the financial consequences of the irresponsibility of the bankers and the Government’s failed economic policies.
Before I address directly the localisation of council tax benefit, I want to remind the House of the cuts that local government is already struggling to deal with, as a result of the Government’s decisions to cut too deep and too fast. Local government across the country is taking a 28% budget cut, a much greater cut than for almost any other arm of Government. In Ealing, the council is faced with an £85 million cut over four years, which is more than 30% of its controllable budget. It has found 70% of the cuts through creating greater efficiencies, cutting out waste, renegotiating contracts, increasing its income, cutting back on senior management and finding new ways of working. Only 30% of the £85 million cuts have fallen on front-line services. That is what a Labour council can do when faced with an unprecedented financial challenge, made worse by the Government’s economic incompetence. But, as the cuts continue to roll in, it can only do so much.
The Government’s scheme to give councils the responsibility for delivering council tax benefit while cutting the funds to pay for it by 10%, is just the latest additional financial burden that councils face. The Government are also telling councils that they must protect pensioners from any cuts to their council tax benefit, which is a good thing, but, with the 10% cut in the grant, other groups of council tax benefit recipients, including the working poor, will receive cuts of up to 40% in their benefit, depending on the number of pensioners in their area. Where does that leave the Government’s policy to make work pay? In tatters, I suggest.
In addition, the grant, reduced by 10%, is a one-off settlement, which means that councils will have to bear all the risk of any future increases in council tax benefit take-up caused by the loss of local jobs. That is a considerable risk, given the current fragile state of the UK economy and the ongoing crisis in the eurozone. The eurozone could fall apart at any moment, and cause a further wave of financial turmoil and job losses. What should a council do if a major employer experiences difficulties and goes to the wall, creating significant job losses and a huge take-up in council tax benefit? On top of the already draconian cuts it is dealing with, it will have to cut other services to meet its council tax benefit obligations.
This is localism of the worst sort. The Government are giving the responsibility and the risk to local government, but are cutting the budget by 10% and telling councils who they should give the benefit to. True localism would give councils both the financial means and the freedom to decide how to administer the benefits, and to whom.
Local government is already bearing the brunt of the Government’s failed austerity programme, and this cut is a cut too far. It will hit the already vulnerable, including the working poor, and it flies in the face of everything that Members on this side of the House believe, and of what the Government profess to believe. The Government are out of touch, and are cynically trying to blame local councils for the cut that they themselves are choosing to make. The public will see through that, and the blame will lie fairly and squarely with the Government, unless they U-turn yet again.
Stephen Timms (East Ham) (Lab)
I shall be extremely brief. It is a serious mistake to miss council tax benefit out of universal credit. Universal credit was supposed to be universal, but if council tax is not included, it will not be.
I have three questions for the Minister. First, will universal credit be counted as income in the means test for council tax benefit? Secondly, will local authorities have access to universal credit data when calculating people’s council tax benefit? Thirdly, does the Minister accept, as has been made clear in this debate, that many councils will not be in a position to implement the new system in time for April next year?
Helen Jones (Warrington North) (Lab)
It is a great pleasure to serve under your chairmanship, Mr Howarth. I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing this debate, and all my other hon. Friends who have spoken. They are too numerous to mention individually in the time available, but all of them have expressed concern about the unfairness of the policy. It is unfair even according to the standards of the Government, who seem to have elevated inequity into a policy position.
The policy represents a circle that is impossible for councils to square. The shift from annually managed expenditure to cash-limited expenditure, coupled with a 10% budget cut—while pensioners must be protected, which we support—means that the brunt of the cuts will fall on the most vulnerable people in the community. Who are those people? Many of them are poor working families. The cuts that they will bear—entirely arbitrary, depending on how many pensioners are in the local authority—will range from 13.4% to 25.2%. The national average will be 17%. If councils try to protect other vulnerable groups such as disabled people and carers, as the Government default scheme suggests they should, the cut for working families could be as much as 40% of benefit.
The Government trumpet that they have taken people out of tax by raising the tax threshold. Those gains, such as they were, have already been wiped out by increases in VAT and changes to housing benefit and tax credits. For many poor families, they will be wiped out yet again by the increase in council tax. The sad thing is that the Government do not even recognise the existence of such families. The Minister for Housing and Local Government, the right hon. Member for Welwyn Hatfield (Grant Shapps), said to the Select Committee that
“if somebody is in work they will not be receiving the benefit because they will not need to”.
How wrong can one be, and how wilfully blind? A parliamentary answer that I received from a Department for Work and Pensions Minister, the hon. Member for Thornbury and Yate (Steve Webb), told me that 743,600 people are non-passported recipients of council tax benefit and in work. There are others on passported benefits, of course, who are in part-time work.
Looking at the local authorities of which my hon. Friends have spoken, there are 3,430 such people in the Wigan borough and more than 2,000 in my own. Stockport has 2,860, Tameside has 2,830, Rochdale has 2,900 and County Durham has an incredible 5,810. Do the Departments talk to one another, or is this, as most of the Opposition believe, a piece of Government spin designed to convince everyone that the benefits go to people who are out of work?
The implication, of course, is that people are out of work through their own fault. That would be nonsense even if it were true, given that there is a double-dip recession and 2.6 million people are unemployed, but it is not true. The benefit often goes to families trying to do the right thing by going out to work for low wages because they believe in the value of work and in setting an example to their children. The hon. Member for Suffolk Coastal (Dr Coffey) said that councils that pay higher wages can attract more businesses. That is interesting, given that Government policy is clearly to depress wages in many areas of the country by targeting regional pay in the public sector. They are driving wages not up but down.
Who else will be hit by the legislation? There is no protection at all in the Bill for people with disabilities—even those in the support group for employment and support allowance, who are not expected to seek work even if it is available, which in the current double-dip recession is unlikely. Nor is there any protection for those in the work-related activity group, who by definition are not expected to seek paid employment to increase their income. How ludicrous it is, then, for the Government to claim that their purpose is to spur councils on to create more jobs when many of the people affected are in work or defined as unable to seek work.
Another group who will suffer, mentioned by my hon. Friend the Member for Edinburgh East (Sheila Gilmore), is carers. Carers are defined by the national insurance credit regulations as caring for 20 hours a week or more for someone in receipt of certain benefits. Carers are the people whom the Prime Minister called the unsung heroes of society in 2010. Now they will be rewarded with a council tax increase. What are they supposed to do? If they stop caring and go out and get a job, the state will pick up a burden costing millions of pounds for the social care that they were providing. A tax increase for carers and disabled people and a tax cut for millionaires—nothing could better sum up the Government’s distorted priorities.
As some of my hon. Friends have mentioned, as with the Government’s plans for business rates, the poorest areas will be hit hardest. I have already given some figures. The number of people in Manchester who are in work and receiving council tax benefit is more than 8,000. In Liverpool, it is more than 6,000. In Salford, a much smaller authority, it is 3,500. By contrast, South Bucks has 420, Melton has 440 and the City of London has 40.
That means that councils with a lot of people in that category are being hit by a triple whammy. First, defaults will rise. As my hon. Friend the Member for Makerfield reminded us, that is an imprisonable offence. Secondly, it will be much harder for councils to mitigate the effect on people in work, simply because there are more of them. Thirdly, they will lose a significant amount of money from their local economy, as people try to make up the shortfall with income that they would otherwise have spent in local shops and businesses. My own local authority, for instance, will lose £1.3 million. Wigan will lose £2.6 million, Tameside £1.9 million and County Durham a whopping £5.5 million.
George Hollingbery
Is it not true that from an individual rather than a collective point of view, the cuts will actually fall hardest on those areas with the oldest demography rather than the greatest poverty? That is where the most distortion will happen. Collectively, there are areas with more people in receipt of benefit, but of course the budgets reflect that already.
Helen Jones
Actually, they do not. If the hon. Gentleman looks at the Local Government Finance Bill, he will see that its impact falls on the poorest authorities in the country. I have no doubt that there are difficulties in some areas with pensioners, but let me give him figures on what some of the wealthier areas will lose: Hertfordshire will lose £293,000 and Melton £246,000. Like the rest of the Government’s financial initiatives, this is designed to hit the poorest areas most—and, of course, it transfers all the financial risk to local authorities.
If more pensioners claim, as is likely under this system, that will be a good thing, but the money will have to be found in a cash-limited system. If unemployment increases, especially if a big employer closes down, the money will have to be found either from the poorest people receiving benefits or from cuts in benefits elsewhere. When the Government say that they wish to include council tax in the local business rate system, they fail to say that safety nets will kick in only if a council’s income falls between 7.5% and 10% below the baseline.
Helen Jones
I am sorry, but I have to wind up; otherwise, I will exceed my time.
This ill-thought-out system will produce disincentives against working and hit the poor and vulnerable most. The Minister needs to think again.
The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)
It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate the hon. Member for Makerfield (Yvonne Fovargue) on launching the debate, and the many colleagues who have contributed to it. It will be extremely challenging to answer all the points raised, so I will pick out what seem to me to be the key ones. It is time that will limit what I am able to say, certainly not the strength of the arguments.
There has always been recognition in the House that welfare spending needs to be targeted properly and that more needs to be done to tackle poverty by getting people off benefits and into work. Part of achieving that, and part of the Government’s strategy for doing so, is to return control over council tax support to councils and for local authorities to have the freedom to decide how to help provide for the most vulnerable in their communities.
Andrew Stunell
Yes, although it will reduce my chances of answering all the points that have been raised.
Grahame M. Morris
I am grateful to the Minister for giving way on this fundamental point. Will he recognise that housing benefit is an in-work benefit?
Andrew Stunell
I suspect that the hon. Gentleman meant to say council tax benefit, which is what we are debating. I certainly accept the figures given by the hon. Member for Warrington North (Helen Jones). Of course, some of the recipients of the benefit are in work. That is not in doubt or dispute.
I remind Members that council tax benefit expenditure more than doubled between 1997 and 2010. Much of this debate has centred on two different but overlapping things: localisation, which, on the whole, Members present seem to approve of; and the reduction in the total amount of money being distributed, which, on the whole, they seem to disagree with. I understand the difficulties that this creates, but I remind Members that the reason why we have to reduce central Government spending is the inheritance that the Government received in 2010.
Andrew Stunell
No, I will not.
At that time, there was a gap of £400 million every day between the amount being spent by the outgoing Government and the amount they were receiving, in tax and other receipts—£400 million was being added every day to the national deficit. The measure we are discussing is part of the Government’s strategy to put this country’s finances back on a firm footing. As has been noted, it consists of a reduction of £500 million per year—not per day—as a contribution to closing the gap between public expenditure and public income.
That brings me to the contributions of hon. Members representing constituencies in Wales and Scotland. In both those nations, the allocation of the reduction is strictly in accordance with the Barnett formula, and that reduction is no more ring-fenced in its decrease than any increase under the formula. It is entirely a matter for the Welsh and Scottish Administrations to decide how to proceed on the schemes in their respective countries. It is important to make that point.[Official Report, 17 July 2012, Vol. 548, c. 1MC.]
That brings me to the many points that have been made about the implications and ramifications of the reductions. I want to illustrate how far wide of the mark some of those comments were by reference to a point made by the hon. Member for Mackerfield.
Andrew Stunell
I apologise for mispronouncing the constituency name; I ought to know better, as I come from that part of the world.
Under our proposed scheme, Wigan metropolitan borough will face a reduction of £2,130,661. I am happy for that to appear on the record.
Andrew Stunell
No, I will not give way on any points, because I want to proceed.
In another part of the Local Government Finance Bill, we are giving Wigan metropolitan borough the capacity to change its current discounts and exemptions for empty homes and second homes. Wigan metropolitan borough, which I am sure the hon. Member for Makerfield would agree has considerable social and economic problems, will be able to raise £2,173,854, if it chooses to exercise its discretion fully. The difference between those two figures is £43,000 in Wigan’s favour; under the Bill, it will have capacity to raise more revenue than it will lose.
That important point very much undermines the arguments made by a number of Members. It brings a sense of reality—[Laughter.] The nature of things is that very few Members of Parliament have detailed experience of local government finance systems; they are highly dependent on the advice they receive from local authorities and their senior finance officers. If Opposition Members asked their individual local authorities how much they would be able to increase their income if they took advantage of the Bill’s proposed discounts and exemption changes, I think that, almost without exception, those Members would be substantially surprised.
In my remaining two minutes, I want to thank my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) for her comments. I welcome her back, because she has been absent from the House for some time. She has not lost her touch. She made it very clear what she thinks about the issue and has been consistent and persistent in making her point. The authorities in Dorset and Poole can, if they choose to, offset the reduction in support for council tax benefit via changes to the exemptions that they levy.
The hon. Member for Makerfield made a point about the schemes that local authorities will introduce, but I am sure that it will be obvious to her that Wigan can continue with exactly the same scheme as it has now, if it wishes to do so. If it continues with that scheme, it will not need the guidance and support that we have already issued to local authorities on all the relevant matters. Indeed, some local authorities are already carrying out public consultations on alternative schemes and will have them in place by 1 April.
Mr George Howarth (in the Chair)
The hon. Gentleman is experienced enough to know that that is not a point of order.
Andrew Stunell
Wigan does not have to do that, because if it takes advantage of the discounts and exemptions that we have given it, it will be able to carry on with its current scheme.