Local Government Finance Bill

Debate between Baroness Hollis of Heigham and Lord Beecham

Tuesday 16th October 2012 Lords Chamber

[Baroness Hollis of Heigham]

I support the amendments, particularly the one spoken to so ably and powerfully by my noble friend Lady Lister which overlapped with the amendment moved by my noble friend Lord Smith, speaking from his Wigan experience.

The Minister spoke earlier in the day about the need to get council tax benefit under control because of its doubling and so on over the past decade, 12 or 14 years. My noble friend, so to speak, revised his statistics by insisting that this was the result primarily of the increase in council tax. Let us do a counterfactual and assume that this system had been in place in 1997. The result is that all of that increase in council tax benefit generated perfectly properly by the increase in council tax would be expected to be carried by the local authority. A grant that starts at 90% would the following year be 75%, the year after that perhaps 50%, and so on. As council tax rose and as claims rose, and as the grant remained capped, the local authority would have to pick up more and more of these moneys. I do not see how it can reasonably be expected to do so. It is not just a question of take-up; where local authorities may differ is in the degree to which they may depend on a single industry. Norwich, for example, is very dependent on financial services, and in particular on the former Norwich Union, now Aviva. If that company was to make a major decision and relocate, for example, to Sheffield, which is a second source of Aviva jobs, it would have a dire effect on the Norwich economy, and on the demand for benefits, including council tax benefit. The local authority would have no obvious resources with which to respond to what my noble friend Lady Lister called an economic shock.

For a number of reasons, there will be an ethical dilemma. First, it is not in the council’s interest to promote people’s entitlement to benefits they should have—and we know that pensioners underclaim. Secondly, the council can be very vulnerable to significant economic shocks such as the closure of a factory or even, with the NHS consultation coming through, of a local hospital, where we could very well see 1,500 jobs go very quickly. Many holders of those jobs will be poorly paid women who will come into the council tax benefit claims system. They will be trying to get money from a limited pot, and the resources available to others will diminish. The third problem is that there will continue to be modest future council tax rises, and unless the money keeps pace with that increase, taking into account inflation and everything else, we will find that people who receive aid with their council tax benefit will get a smaller and smaller share of the moneys that they should get.

This means that we will be asking local authorities each and every year to revise their scheme not so much because of local needs but because the amount of bidding for it has outpaced the resources available. I fear that if the Minister does not take this issue very seriously, she will embed instability into the future projections of local authorities’ need to fund their council tax benefit system, so they will continue each and every year to have to revise their scheme to take account of the new needs and take-up, and of the increase in council tax. Unless we have some back-up mechanism to enable local authorities to fund this, we will have major problems down the road that—bluntly—could make some poll tax issues look quite small by comparison.

[Lord Beecham]

My Lords, the localisation of council tax, coupled with the localisation of the social fund, will give local authorities the unenviable task of dispensing a capped budget on two important areas of welfare benefits. Hitherto, the responsibility for funding both schemes has come from central government. Now local authorities will have to administer the scheme, and presumably also deal with the local consequences in the form of pressures on their budgets and the difficulties that will be occasioned to many of their residents. It is another case of the Government passing the buck to local government, but not providing the resources for local government to deal with it.

The noble Lord, Lord Shipley, and I were both at one time leaders of a council that has done a great deal to promote the take-up of benefits—not only council tax benefits but other benefits as well. The welfare rights department and other agencies of the authority, in collaboration with the voluntary sector, succeeded to a significant extent in promoting claims. Over the past few years in particular, several million pounds were won for potential claimants, who had their rights enshrined in practice as well as in theory. This is fairly typical of local government across the piece. Nevertheless, something like £1.8 billion in council tax benefit remains unclaimed. Much of that is thought to be money that would have gone to owner-occupying old-age pensioners.

I congratulate the Government on one thing; I repeat the congratulations I uttered in Grand Committee. The change of style from a benefit to support—it was called a rebate in earlier days—may well encourage people, particularly perhaps elderly people, to claim. This is something that does not seem to have been taken into account in relation to the total amount of funding that will be provided. However, that is the only thing that one can congratulate the Government on because when I tabled a Written Parliamentary Question last year asking what steps the Government would be taking to increase the take-up of the benefit as it then was—and, for the moment, still is— the Answer was “nothing”. So even at that time the Government were not keen apparently to promote the take-up of these benefits.

Local Government Finance Bill

Debate between Baroness Hollis of Heigham and Lord Beecham

Wednesday 10th October 2012 Lords Chamber

[Lord Beecham]

My Lords, I shall speak to my noble friend’s amendments, and the amendments in my name and that of my noble friend Lord McKenzie.

My noble friend Lord Smith rightly referred to the concern about the threshold level above which protection would be given. I note that in the debate in Committee, the Minister said that the Government had been carefully considering these issues,

“together with the safety net support threshold in the range of 7.5% to 10% below baseline funding”,

and said that that offered the, “best combination on balance”. She went on to say:

“We will be consulting local government over the summer before any final decisions are taken”.—[Official Report, 5/7/12; col. GC424.]

It would be interesting to know what representations there have been and what progress was made during those consultations because, on the face of it, it looks as though the Government are still on course for that higher figure. My noble friend Lord Smith rightly pointed out the severe financial problems facing local authorities—a combination both of cuts in government grant and the rising demand for and costs of services. Many authorities will find themselves in an unprecedentedly grey financial situation. The noises outside suggest that the heavens appear to echo my sentiments.

The problem is shared by many authorities. I ought to declare an interest as a member of Newcastle City Council and, like others, I am an honorary vice-president of the Local Government Association. In Newcastle, we are contemplating reaching a position whereby we have to find £90 million a year by the end of a three-year period. That is £90 million every year, which is a significant proportion of the budget. Consequently, any diminution of resources from the reduction in business rate income would be a matter of even greater significance.

[Baroness Hollis of Heigham]

Perhaps I may interrupt my noble friend. The staff of the House are getting the engineers to see what is going on. Alas, we do not have any surveyors left.

[Lord Beecham]

I shall endeavour to proceed despite the interesting background noise.

There is a serious question about the extent of the threshold and, as my noble friend rightly pointed out, there is another question about how it is to be financed. The assumption was that the Government would be meeting this cost, and it was a reasonable assumption. Indeed, that was the position put last year by a senior Treasury official in consultation with local government finance officers. We are now faced, apparently, with a safety net cut of £245 million. Originally, it was thought that that would be met from the Government’s AME contingency of around £400 million, topped up with some of the set-aside, which could have provided a potential £700 million. In addition to that source, the Government are, of course, sitting on around £600 million extra in business rates. I slightly anticipate the answer that the Minister may make in response to the question of my noble friend Lord McKenzie: that figure is the extra amount collected by councils for the department last year, and it will probably be more this year.

Local Government Finance Bill

Debate between Baroness Hollis of Heigham and Lord Beecham

Monday 16th July 2012 Grand Committee

[Baroness Hollis of Heigham]

There is a considerable reduction.

[Lord Beecham]

In all events, it is fairly modest, but that will also disappear unless it is retained. If it is retained we come back in a vicious circle to the fact that it will be retained essentially at the expense of the working poor, whom, I say with due respect to the noble Baroness, Lady Hanham, we constantly hear that this whole scheme is designed to incentivise. That mantra is wearing a little thin. It is absurd to imagine that the whole burden can simply be borne by those people. It may have to be, if the Government require councils to do it or if councillors feel obliged to do it, because it is unlikely that they would be able to fund any move towards meeting the needs of this or any other group.

However, it is clear that authorities should consider the impact of the scheme on disabled people in their areas. I would like to know whether the Government have conducted any kind of analysis and tried any kind of modelling, with or without the assistance of individual local authorities on how this might work in practice. If they have not, frankly, that would be disgraceful. They may have and, in that case, I commend them. But there is no evidence in the impact analysis that anything like that has happened. In a matter of this significance, for this group in particular but not only for this group, that is simply not good enough.

At all events, these amendments at least focus some attention on the issues. They have the disadvantage of not supplying the answer in terms of the financial resources to meet those needs—and again one would have to go back to the Government. When it suits the Government, money can be found. As I implied in the question to the Minister, who is not departmentally responsible for these matters although he is something of a transport buff, money has been found to fund the deferment of the increase in fuel duty. There may or may not be good reasons for doing that—perhaps there are, but it was found. Apparently, the somewhat hapless Treasury Secretary believes that there was significant under-spending across government from which that money was drawn. Perhaps some of that money might have been used to moderate the impact of these provisions. Again, there was the other obsession of the Secretary of State about weekly bin collections, for which £250 million was offered. I gather that not much of it has been accepted, so there may be a saving there. As my noble friend pointed out earlier this afternoon, that money might be used either for the purposes of delay, which does not seem to be likely to commend itself to Ministers, or at least to help meet the needs of the very groups which they will apparently be advising local government to protect as far as possible.

The Government need to be honest about this. If they are not going to provide resources, they should acknowledge that local authorities will find it extremely difficult to do so. They should not be raising expectations that it will be done easily, if at all. That would be a shabby way in which to proceed, and I know that the noble Earl, Lord Attlee, and the noble Baroness, Lady Hanham, are not politicians of that stamp—absolutely not. But those with greater responsibility than, unfortunately, lies within their powers, need to demonstrate that that is not a course that they wish to pursue.

[Earl Attlee]

My Lords, I thank the noble Baroness, Lady Sherlock, for the explanation of her amendments. Noble Lords have asked a number of questions about specific groups and local authorities’ responsibilities in relation to those groups. I want to be clear that the legal requirements that established those duties, which your Lordships have already considered as part of legislation, will remain. As accountable public bodies, local authorities will need to continue to take account of all relevant duties. I am grateful to noble Lords for bringing some of those duties to the attention of the Committee.

The noble Lord, Lord Deben, asked me some interesting questions about the organisation of the machinery of government. I am confident that I know how to exercise that machinery but it is rather above my pay grade to try to change it by addressing the issues that he raises. The noble Lord used the term “above my pay grade” after I had drafted my speaking notes on his contribution.

The noble Lord, Lord Beecham, talked largely about financial issues. It is important to remember that, across local government spending, this is only a 0.4% reduction in the budget.

--- Later in debate ---

[Lord Deben]

They do have control over it—they have an election. If they do not like what the county council has done they can vote against it. If the noble Baroness is really saying that the only system that people can understand is a single-tier system, she is making a mistake that is very much wider than this. Many people know which do what, and, if they do not like what one of them does, they vote against them in the local election, as we all know.

[Lord Beecham]

Does my noble friend agree that although there is a significant reduction in the amount of central government support for the benefit, it is still approximately 90% government funded? So it is going towards a council tax, but the funding is still essentially central. Unfortunately, some more of it will fall on the locality as a result of what the Government are doing, but the greater part is still centrally funded.

[Baroness Hollis of Heigham]

My Lords, that is absolutely true, even more so in two-tier authorities where 75% of the expenditure that falls on local residents is through the county council precept. The precepting authority does not have to do the same as the billing authority, which has to devise the discount scheme.

I understand the noble Lord, Lord Greaves, on the postcode lottery, because I would defend local decision-making as far as possible. The point here is that what a local authority has in terms of resources will depend on the accident of the demography of its particular locality. If only 30% of its population are pensioners, it will have to find a lower degree of cut on people’s working age than if 60% of its population are pensioners. That is an accident of demography. Equally, when anybody seeks help with their council tax discount, it will be determined not by their own efforts, their willingness to vote or the resources of the local authority, but by how many pensioners and other vulnerable people are ahead of them in the queue. That is not localism; it is rationing by queue, with central government having already determined that certain constraints, such as the number of pensioners, shall be imposed on the system. In that sense it is random—you need not call it a postcode lottery, but it is one. The size of cut that your locality will face is accidental, and it will not necessarily bear a resemblance to your particular need. Even though it may be identical in the neighbouring authority, it will experience a different income because the demographics will be different. That is not reasonable.

I suggest to the noble Lord and the Minister that if there were no proposition to find £500 million of cuts, there would be no such scheme about localising council tax benefit before us today. This is not localism; it is the exporting of cuts to localities by central government and then dressing it up in the fancy clothes of localisation issues, even though people’s needs have not originated by virtue of the locality and the random demography of that patch will determine who gets what. That is not localism. It is exporting cuts without any constraints, which will be experienced differentially by vulnerable people who happen to have been unlucky in the lottery of living in one authority rather than another. I regard that as deeply unfair.

As my noble friend Lord Smith said about where the cuts will fall, it is not about centralism versus localism but about the centre exporting its cuts. The noble Lord, Lord Best, may speak to his amendments on a subsequent day in Committee. The noble Lord, Lord Shipley, was absolutely right. Given this distinctiveness between local authorities, there will be judicial reviews. Mencap will run them if CPAG does not, according to how they are treated. They will probably have a very good case.

The Minister said that local authorities should, in her words, develop schemes that are relevant to their authorities. That challenges the core of my argument. She assumes that vulnerability and poverty are so peculiar and distinctive to a particular local authority as to justify separate local schemes. I simply do not accept that for one moment. Whether you are autistic, have a disability, are a carer with an elderly mum or are a child in poverty, it is not generated by your locality although it may be experienced in your locality. Given that it is not distinctive to your locality, it is not relevant to your local authority. Therefore, there should be a national scheme.

I leave the Minister with two questions. Who will she exclude from the scheme? We know that pensioners are automatically covered. Unfortunately, we have not had the pleasure of seeing the guidance because it did not come out on Friday but on the very day when we are sitting. Therefore, we cannot cross-refer to it, which is shame. The Minister says that vulnerable people will apparently be protected. The working poor will also need to be protected, so who is not? That is 100%. Who is not protected? Who does the Minister think should see their council tax benefit cut, given that pensioners, vulnerable people and the working poor and their incentives are protected?

Secondly, if there was no £500 million cut, does the Minister think that any local authority in the land would seek to establish its own distinctive council tax scheme and to pull it out of universal credit? She knows that would not happen. I have put two questions to her. She is welcome to respond to me—to tell me what is wrong with council tax benefit, who is already covered but should be excluded and whether, if we did not need £500 million of cuts, any local authority would touch this scheme with a barge pole. I think everyone in this Room today knows the answer to all those questions. They are not answers that enforce the Minister’s argument.

Local Government Finance Bill

Debate between Baroness Hollis of Heigham and Lord Beecham

Tuesday 3rd July 2012 Grand Committee

[Baroness Hollis of Heigham]

My Lords, I had not intended to come in on this part of the Bill; I was waiting for council tax to come up. However, the points made by the noble Lord, Lord Greaves, have triggered a set of questions for me. Does the department have a “who pays, who gains” outcome as a result of these changes? If so, can the Minister share that with us? I am very unclear.

I am delighted to see that the noble Lord, Lord Jenkin, has been converted from the error of his ways. Let me remind him that before the business rate was nationalised—I think it was the only thing that was nationalised under the Thatcher Government—authorities like my own, which were no longer unitary after the disaster of 1974, none the less received a business rate. This meant that those who lived outside the fringes of the city area and who did not pay the domestic rate, contributed through the business rate to the city’s well-being. This meant that a city could therefore serve as a regional centre while having only the property rate of a rural district council.

More important still, it meant that the leader of the council—myself—or the chair of finance would take great pains with the Chamber of Commerce. Every year, I went with a prospective budget, and it had a very direct influence over how we constructed our budget. As a result, until the nationalisation of the business rate under the noble Lord, Lord Jenkin, and as there was a direct pay-off to our revenues, I was willing to forego rateable value on new property; I was willing to invest in apprenticeship schemes; I was willing to do the environmental works, the roads and so on, to get small enterprises off the ground; and we were willing to help SMEs to develop through local enterprise trusts. We did all that because there was a direct pay-off. I could never understand the huge folly of a Conservative Government, which is above all expected to be business-oriented, cutting that link with the city authorities—admittedly, they largely tended to be Labour authorities at that time—which gave them an incentive to build their business.

After nationalisation of the business rate, the result was—I did the figures—that my local authority was contributing something like £14 million a year in business rate to the Exchequer and receiving back something like £7 million. The adjacent Conservative authorities, which did virtually nothing, were contributing about £2 million and receiving back about £4 million. In other words, they were piggy-backing off the flow of the nationalisation of our business rate to rural areas, because they had never had a concern to develop business in their areas, partly because they had high property values and did not want to be contaminated by it. It also meant that I no longer had any incentive to do something similar. I forgot to declare that I, too, am a vice-president of the Local Government Association.

I applaud this move, even if it does not go as far as I would like. However, I understand the need for an equalisation grant, otherwise Westminster would retain far too large a share and other local authorities would have very little. As a result, it will be really important for us to see what greater equity there will be now in terms of the statistics between who pays in and who gains and what the return is. Some authorities, such as my own, are district councils trying to do a unitary job with district council revenues—thank you very much to the Government for that—and they will be glad to have that money if it allows them to look after their business economy as well as the wider economy, in terms of building tourism and so on for the whole area.

For the sort of authorities that the noble Lord, Lord Greaves, mentioned, which may well need this money but may not receive it, there is a problem, too, of the distribution between those authorities whose money comes from small but highly valued premises—solicitors’ premises and so on—and those that have relied in the past on large physical premises such as factories, which are now closing due to the shift in the British economy. A reason for this request is that we were screwed the last time around and it was a disastrous policy for government, of whatever complexion, as well as for regional economies. I hope that this time around we will get a more equitable and sensible distribution. If the Minister can help us by promising to circulate some of these figures, it would be very valuable indeed.

[Lord Beecham]

My Lords, my noble friend Lady Hollis makes a very good point about the relationship between local government and business. It is interesting that the London Chamber of Commerce and Industry, in its briefing for today’s discussions, makes the point that more than a quarter of a century after the noble Lord, Lord Jenkin, perpetrated his terrible crime, 53% of London businesses apparently think that councils are currently responsible for setting the level of business rates. It says that that reveals a breakdown in communication between councils and businesses. Some of us might think that it simply betrays a complete ignorance of how local government works on the part of those who really should know a little better. However, that does not mean that the situation should not be improved.

I sympathise with the amendment tabled by the noble Lord, Lord Jenkin, because he seems, rightly, to want to rebalance this position. The Government seem to take a rather Augustinian position in respect of localism: “Lord, give them localism—but not yet”, would be one way of putting it. Another way, perhaps more familiar to the Secretary of State in his earlier days as an enthusiastic Marxist, would be to describe it as a form of democratic localism. Democratic centralism was the vogue under the Stalin regime but this is democratic localism, which is to say that all the orders come from on top and are then applied locally. This division certainly seems to portend something of the kind.

In a way, the game is given away by paragraph 9 of the statement of intent on business rates retention. Having previously said that a number of “specific grants”, which I will mention in a moment, will be included in the business rates system, that paragraph goes on to say:

“As a result, the Government is able to set the local share at 50% which delivers our objectives on growth and localism while allowing for future fiscal control to protect the interests of the taxpayer and the wider economy”.

That is a fairly clear statement that the Government are seeking to use this 50% as a controlling mechanism.

Legal Aid, Sentencing and Punishment of Offenders Bill

Debate between Baroness Hollis of Heigham and Lord Beecham

Tuesday 27th March 2012 Lords Chamber

[Baroness Hollis of Heigham]

My Lords, I support the noble Lord, Lord Best, in his Amendment 16. Like him, I am a refugee from the Welfare Reform Act and, like him, I am deeply concerned that the new system of universal credit, which I strongly support, is coming together with huge cuts in housing benefit. This will produce uncertainty and complexity at the same time as withdrawing legal aid—unless the Commons supports the amendment previously passed by your Lordships’ House and unless the House supports the noble Lord, Lord Best, today.

To introduce a new system, with the implications for the tenants of my housing association of losing up to £1 million a year, means that some will face homelessness, eviction and bed and breakfast accommodation, or alternatively will flood the tribunals and the courts system. To withdraw legal aid at the time of introducing these cuts and changes to housing benefit, as well as universal credit, creates a perfect storm that no Government should wish to whirl up. I hope very much that the noble Lord, Lord McNally, will respond positively to the amendment moved by the noble Lord, Lord Best.

[Lord Beecham]

My Lords, I support my noble friend Lady Hollis and, of course, the noble Lord, Lord Best, in moving this amendment. They have made a very powerful case, which was rehearsed on Report. At that time, I quoted Shelter and the Nottingham Law Centre, two separate organisations from the not-for-profit sector, which strongly urged the Government to change their position on this. They are the organisations that provide legal help and advice, not necessarily extending to court proceedings, on the benefits side as well as the remainder of the housing issue—some of which, in fairness, the Government are including within scope.

This is a classic case, as my noble friend has implied, where there is a potential modest saving to the Ministry of Justice budget but a potential extra cost to other departments. If homelessness ensues, particularly where children are involved, very substantial costs are imposed on the budgets of the local authority, and maybe also on the Department for Work and Pensions, which in certain circumstances may be devolved; for example, special needs payments or crisis loans, which a family on the streets may clearly require.

In this context, cost is a consideration which, if anything, tells against the Government’s proposals rather than the other way round. I hope that the Government will recognise the strength of arguments from those dealing with this directly—not from the legal profession in this case, but from the advice sector—and provide for the possibility of timely advice being given to avoid worse consequences for the individuals and their families and, for that matter, the public purse. I hope that the Minister will reconsider the position the Government have hitherto adopted.