Local Government Finance Bill

Baroness Lister of Burtersett Excerpts

Thursday 19th July 2012 Grand Committee

[Baroness Hanham]

If it takes on the default scheme, it takes it on exactly. If it has to use a completely different scheme, it would have to consult on it and indeed it might not be able to give exactly the same benefits.

[Baroness Lister of Burtersett]

I am sorry to prolong this, but I am getting a bit confused—well, not really, because I was confused to begin with. If there were a modified version of the default scheme, would that still count as the default? I think my noble friend is saying that some authorities will not be able to afford the default scheme as it stands because the 10% cut has got to come from somewhere, so if they take it out of the default scheme, would that still be called the default scheme modified or would it be considered a different scheme, which they would have to consult on?

[Baroness Hanham]

The default scheme is the default scheme, and the default scheme comes into operation in two ways. One is that the local authority does not have a scheme by the time we get around to 31 January next year, in which case the default scheme would be imposed. The second is that it can choose to use the default scheme as its scheme, and that will then still be the same. If it then does not have enough resources, it has to make the judgment as to where it gets those resources from. As I already explained to the noble Lord, Lord Greaves, that would not necessarily come just from the council tax support; it would come from its wider budget and whole programme.

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Moved by

[Baroness Lister of Burtersett]

80: Schedule 4, page 58, line 32, at end insert—
“( ) A scheme must set out the steps, including consulting local charities and organisations providing advice on benefits, which the local authority will take to ensure that—
(a) it estimates the numbers of people eligible to an application for reduction under the scheme;(b) persons entitled to a reduction will be made aware of their entitlement; and(c) assistance is available to such persons who wish to make an application.”

[Baroness Lister of Burtersett]

My Lords, in moving Amendment 80, I will speak also to Amendment 81 as they are linked in terms of their objectives.

The Government’s recent report on the 2010 child poverty targets noted that one reason why the child poverty target was not met was that,

“not enough families got the support that they were entitled to”.

It cited the 2009 Child Poverty Unit report that estimated that,

“there were 400,000 children living in relative income poverty as a result of their families not receiving all the benefits and tax credits to which they were entitled. Improving take-up and support for families with children was identified as an important element of the agenda to tackle child poverty”.

However, the report continues:

“DWP take-up statistics show a downward trend in the take-up of most major benefits among families with children since 1998”.

Amendment 80 is drafted to address this concern, although it is not confined to families with children. Whereas in the past increasing take-up has always been a win-win situation for local authorities, improving living standards for their residents and helping the local economy, under the new cash-limited council tax reduction schemes, it is a zero-sum game, in which improved take-up for one group, particularly pensioners, means less money available for others. We have already had a preliminary skirmish around this issue involving in particular my noble friend Lady Hollis, who cannot be in her place today, and the noble Lord, Lord Greaves.

For the first time ever, we have an incentive to depress take-up written into the template of a statutory income maintenance scheme. That cannot be right. Take-up of means-tested benefits is a perennial problem and take-up of council tax benefit is among the lowest. The latest government statistics show that between 31% and 38% of those entitled did not claim council tax benefit, although that may be a slight overestimate of non-take-up. In other words, it is possible that as many as nearly two-fifths of those eligible are not claiming. Take-up is particularly low among pensioners, of whom between 39% and 46% are not claiming, and among couples with children, of whom between 41% and 48%, nearly half, are not claiming. Overall, the trend in take-up of council tax benefit has been downward. Since 1993-94, take-up has fallen by at least 6 percentage points for pensioners, by around 7 percentage points for non-pensioners, and by a massive 15 percentage points for couples with children. However, all those figures are approximate.

In its 2009 report, Take Up the Challenge, the Child Poverty Unit set out what it called,

“a strong argument for local authorities and partners to focus on increasing take up of benefits and tax credits by poor families with large unclaimed amounts”.

It explained that take-up can contribute to tackling child poverty and related issues such as social exclusion and health inequalities. There are also benefits for the local economy with money claimed in benefits and tax credits being spent in local communities. It continued:

“Furthermore, improving take up will help local authorities and partners to ensure that hard to reach and vulnerable families are receiving support, and are in contact with services”.

It pointed out that:

“A significant amount of benefits go unclaimed by people who are working”,

so that the:

“Lack of awareness of in-work financial support available through benefits and tax credits can be a barrier to parents entering and sustaining employment”.

To the extent to which the new localised schemes will still cover working people, improving take-up will reinforce the Government’s aim of tackling poverty through paid work.

The report concludes that,

“spending on increasing take up can provide good value for money”.

Given that, it was disappointing and surprising that in a Written Answer to my noble friend Lord Beecham, to which he referred in an earlier session, the noble Lord, Lord Freud, stated that the Department for Work and Pensions,

“does not promote benefits … The department has not spent money in the 2011-12 financial year on promoting the take-up of welfare benefits, and we have no planned expenditure to promote take-up of welfare benefits for the next financial year”.—[Official Report, 23/4/12; col. WA 302.]

It was even more disappointing and surprising to learn the other day that the DWP proposes to cease publishing estimates of take-up of means-tested benefits. I found that out by accident. I did not find it out as a Member of this House; I found it out as a social policy academic. I also found that my colleagues here were unaware of that really rather serious step.

Can the Minister tell the Committee what the Government’s position is on improving benefit take-up? Do they still believe that take-up is an issue? It would appear that they are content for people on low incomes not to receive the money to which they are entitled, despite the arguments put by the Child Poverty Unit, and now it would appear that they want to bury the evidence of such non-receipt.

As the Government are, in effect, washing their hands of the issue of take-up, it is therefore left to local authorities and voluntary organisations to do what they can to improve take-up. Local authorities have an honourable history in this area. They played a key role in countering the impact of benefit cuts in the 1980s by instigating often very successful take-up campaigns. The Child Poverty Unit report and an earlier DWP best practice guide give examples of the kind of take-up work that local authorities still do, including improving take-up of council tax benefit. Indeed, under the Social Security Contributions and Benefits Act 1992, local authorities now have a statutory responsibility for council tax benefit take-up. Each billing and levying authority,

“shall take such steps as appear to it appropriate for the purpose of ensuring that any person who may be entitled to council tax benefit in respect of council tax payable to the authority becomes aware that he may be entitled to it”.

Amendment 80 builds on this and would write a similar, if differently worded, responsibility into this legislation.

It has been suggested that the change of name from a benefit to a reduction or discount could in itself improve take-up, especially among pensioners. The noble Lords, Lord Tope and Lord Shipley, suggested that in an earlier discussion. I have no objection to the change of name, which could be helpful, but at the same time I return to the fundamental point that the cash-limited nature of the scheme will, as many organisations have pointed out, create a disincentive to local authorities to encourage take-up. This is particularly with regard to take-up among pensioners, whose entitlement, as we have already discussed, is protected by law. As many noble Lords have warned, the more money is paid to pensioners the less there is for other so-called vulnerable groups and for low-income working people.

In the face of this dilemma, it will be very tempting for local authorities to keep quiet about council tax reduction schemes and it is therefore crucial that there continues to be some form of statutory responsibility placed upon them to encourage take-up, hence Amendment 80. Another element in the dilemma is that even lower take-up could exacerbate another problem identified by organisations such as Citizens Advice and the IFS, which is of more people not meeting their council tax demands and there being extra work for local authorities trying to collect the arrears. Already, according to a recent report in the Guardian, the Consumer Credit Counselling Service has seen a 27% increase in the number of people contacting it for help with council tax arrears between 2010 and 2011.

As long as local authority council tax reduction schemes are funded by central government on a cash-limited basis, the traditional presumption that it is in the interests of both authorities and those eligible for assistance that take-up is maximised will, as I have said, no longer hold. Personally, I believe it is unethical to establish an income maintenance scheme for people on low incomes on this basis and I hope that the Government will think again. If they are not willing to do so, however, there is one step that they can take to mitigate the double-edged sword that improving take-up would now become. The money transferred to local authorities, whether or not they are subjected to a 10% cut—it goes without saying that I am opposed to such a cut—should be based on estimates of the numbers currently entitled to council tax benefit, rather than on the numbers actually claiming. The difference is considerable. In 2009-10, between £1.7 billion and £2.42 billion was unclaimed in council tax benefit. This should be included in the money devolved to local authorities, whether or not they are subjected to a 10% cut.

Amendment 81 is designed to address this issue in a different way by requiring the Secretary of State to ensure that there is sufficient funding available to meet the council tax reduction for all eligible claimants, so that if take-up improves it does not pose the dilemma that I have outlined for local authorities. In the absence of such a provision, can the Minister tell the Committee what the Government’s advice to local authorities will be as to how they should deal with the take-up dilemma created by the cash-limiting of the grant they will receive to run council tax reduction schemes? I hope that in the interests of maximising take-up the Government will be minded to accept Amendment 80, or to introduce their own amendment to retain a local authority responsibility to promote take-up, but that in doing so they will also address the perverse incentive they have created to depress take-up through an amendment on the lines of Amendment 81. I beg to move.

[Lord Shipley]

My Lords, I support Amendment 80, so ably moved by the noble Baroness. I will also speak on Amendment 81, which is slightly more problematic. It perhaps does not cover all of the issues quite as it might. First, there is an issue with the non-claiming of council tax benefit. There is a whole set of numbers; the noble Baroness mentioned £2.4 billion. These things are notoriously difficult to be certain about, but we can all agree that it is a very big number. A large number of people who are eligible to do so are not claiming council tax benefit. That gives rise to a conflict of interest for local authorities. That is a serious and important issue. That must be addressed. It may be in the financial interest of a local council not to promote or advertise the council tax support scheme. That cannot be right.

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[Baroness Lister of Burtersett]

My Lords, I am very grateful to all noble Lords who have contributed to this debate, and, in particular, to the noble Lord, Lord Shipley, for his very welcome support for Amendment 80. I shall come back to a point that the noble Lord made in a moment.

My noble friend Lord Beecham echoed my concerns about ending publication of the take-up statistics, which is currently being consulted on. It is still a proposal being consulted on, but I know at least one eminent professor who could not find it on the DWP website. It is quite difficult to get yourself into this consultation. I hope that the Minister will take this Committee’s concerns about the implications back to the noble Lord, Lord Freud, particularly with regard to the introduction of the universal credit scheme, which is being used as a justification for withdrawing the statistics. Improving take-up is one of the arguments being put to us for why universal credit will be an improvement on current arrangements. It seems very strange, just at the point when there is a big reform of the system, partly justified by reference to improving take-up, that there is a proposal to stop publishing those statistics. Perhaps the Minister could relay that back to the noble Lord, as I am not sure that he will necessarily read the report of these proceedings.

I am not very good at picking up regulation-speak and Act-speak. I am not sure whether the Minister was saying that the duty on local authorities will be the duty that I referred to—for example, a duty to do their best to ensure take-up—or whether it was a much weaker duty. I shall read the record, but I sense that it is not as strong a duty as we are asking for in terms of local authorities doing their utmost to maximise take-up of benefits. The current duty is to take such steps as appear to be appropriate for the purpose of ensuring that any person who may be entitled to council tax benefit becomes aware that he may be entitled to it. I do not think that what the Minister said was as strong as that. I shall look at it and I shall take on board the suggestions of the noble Lord, Lord Shipley, that if those duties are not strong enough, we will want to return to this on Report and take into account the suggestions being made about the wording of the amendment.

The noble Lord, Lord Shipley, made the point that I was trying to make very well. He talked about a conflict of interest. He said that that cannot be right. I do not think that the Minister addressed what I think is an ethical issue. It worries me because if they have the money fixed for seven years and if take-up improves, they will have to find other ways of finding the money. My noble friend Lady Sherlock pointed out that that might harm the very people we are trying to help. That is not necessarily an answer. As the noble Lord, Lord Shipley, said, not in all cases will authorities be able to find the money from second homes, single person discounts and so on.

I do not feel at all reassured. I thank the Minister for her very full reply, but I do not think that it dealt with—I am not sure that it could deal with—this fundamental ethical question about the conflict of interest that local authorities face, which was referred to by the noble Lord, Lord Shipley. I suspect that we shall want to return to this on Report.

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[Lord McKenzie of Luton]

My Lords, Amendments 84 and 87 stand in my name, but I shall first address the issues in Amendment 83ZA, which has just been spoken to. It goes without saying that I support Amendment 88 in the name of my noble friend Lady Sherlock.

As far as Amendment 83ZA is concerned, we are not enamoured of the Secretary of State having a raft of central powers, but we have to balance this against our concerns about a fragmented system. With the prospect of hundreds of different authorities adopting hundreds of different schemes, all with different criteria, some standardisation of approach has merit. For example, the form and content of documents to be produced raises the question of what distributional analysis should be included and what the requirements should be for a general impact assessment and indeed an equality impact assessment. Having some central guidance on these matters may help to head off problems of potential judicial review for some councils.

Amendments 84 and 87 continue the theme of the default scheme which, as we have discussed, has now been produced in all its glory—all 155 pages of it. Despite its lateness, it has moved us on. It has been difficult in the time available comprehensively to absorb its content and to read across the existing council tax benefit provisions, and we have an outstanding question to the Minister from our earlier amendment about where the default scheme has not been able to replicate existing arrangements. However, given that Amendment 84 is just a probing amendment, I am content to proceed on the basis that any discrepancies or differences are minimal, and that the first part of the amendment has been addressed.

That being so, we are seeking from the Government their view of the protection that their scheme provides to vulnerable people. What, on the basis of 155 pages of regulations, is included in the default scheme for vulnerable people and how does the default scheme address their needs? In this age of austerity, we presume that the Government would not sanction any scheme that provides superfluous or excessive relief, so we are simply asking them to spell out how they are providing for vulnerable people in the default scheme and which aspects of the scheme provide particular support for which groups. Given that the Government have made judgments about who should be protected by the default scheme, they should have a view about who should be considered under local schemes. The amendment does not require any local authority to follow the Government’s view on this; they can exercise their own judgments, but should be able to do so armed with the knowledge of why the Government have made certain decisions.

[Baroness Lister of Burtersett]

My Lords, perhaps I may crave the Committee’s indulgence and go back to an issue that we discussed at our last meeting. Although this is not technically about the default scheme, it is about vulnerable people and about carers. The Minister very kindly wrote to my noble friend Lord McKenzie and copied the letter to other members of the Committee. It responded to our concerns about carers not being mentioned as a vulnerable group. In her letter, the Minister said,

“The guidance we have published on the statutory requirements in relation to vulnerable groups does not refer to carers”—

as we said—

“but as was made clear in the discussion, it is not intended to be exhaustive”.

The guidance talks about disabled people, duties under the Child Poverty Act, homelessness, and even the Armed Forces covenant. When local authorities have ticked all those boxes, and when they have addressed the requirement on them to take account of work incentives, very few local authorities will say, “Hang on, let's see if there are any other vulnerable groups that we should be thinking about”, and turn their attention to carers.

I ask the Minister to take this away, not to put it on the face of the Bill, but perhaps the department would consider reissuing the guidance so that it specifically mentions carers among vulnerable groups. I have not heard the Minister say anything to suggest that she does not think that carers are a vulnerable group. So if the Government accept that carers are a vulnerable group, and as we do not have concern for any other vulnerable groups that are not mentioned in the guidance, is there any reason why they could not be put in the guidance? My fear is that, yet again, carers will be overlooked.

[Baroness Hanham]

My Lords, I thank my noble friend Lord Jenkin and the noble Lord, Lord McKenzie, for their amendments and the noble Baroness, Lady Lister, for Amendment 88, which stands in her name and that of the noble Baroness, Lady Sherlock.

It might be helpful, once again, to explain the Government’s intention in relation to the default scheme. I have done this a couple of times already today. The Bill provides that a default scheme should come into effect only where a billing authority fails to adopt a scheme before 31 January 2013. This is intended as a safeguard, to ensure that where a local authority fails to adopt a scheme by the deadline, there is still provision for people in financial need in that authority’s area to receive support with their council tax.

This scheme will be provided for in regulations and the Government have been clear that this default scheme should retain the criteria and allowances currently in place for council tax benefit. To this end, the Government have published a detailed statement of intent, setting out how they expect to provide for the default scheme in regulations, and confirming that the intention is to recreate, as far as possible, the current council tax benefit system in operation. Monday’s publication of draft regulations covering the default scheme should put beyond doubt our intentions in relation to the operation of the scheme.

These regulations also give an indication of how the default scheme will deal with claimants on universal credit, which we were discussing earlier. Regulations will need to take account of these claimants, but because of changes in the underlying calculation of the universal credit award, there may be some possible changes in the level of council tax support for those moving to universal credit. This is as a consequence of wider changes to benefits and the design of universal credit, and not a direct consequence of localisation. It is not intended that the default scheme will provide for any reductions in support where there is no change in circumstances; for example, which might be because someone has moved from an existing benefit to universal credit. Local authorities will still need to manage the 10% reduction in funding and there will therefore be a strong financial incentive for local authorities to avoid the imposition of a default scheme, as this will limit their ability to adjust awards to manage the funding reduction.

Amendment 83ZA would remove the default scheme from the Bill altogether. For the reasons I have explained, the amendment cannot be accepted. The default scheme is designed to be a safeguard to ensure that where a local authority fails to adopt a scheme by the deadline, there is still provision for people in financial need in that authority’s area to receive support for their council tax. That safeguard needs to remain in place.

Amendments 87 and 88 are intended to guarantee that under the default scheme there will be no reduction in the level of support for working-age persons and to put in place transitional protection for the persons whose support is reduced under the terms of the default scheme. Amendment 84 seeks similar protection for vulnerable groups.

I agree with the intention behind the amendments, but the Government already fully intend that the default scheme will retain the current criteria and allowances and do not intend there to be any change in the level of award where an individual’s circumstances are unchanged. In May, the Government published a detailed statement of intent on the default scheme, explaining that this will closely follow existing council tax benefit regulations, so the amendments are unnecessary.

The noble Baroness asked whether the statutory guidance would include carers. I think that is probably not necessary. The difficulty is that once you include carers, you have to include a whole lot of other people, which reduces the discretion.

[Baroness Lister of Burtersett]

The point is that a whole lot of other people are already in the guidance that has already been issued. I am not sure whether it is statutory, but I worry that so many other groups are mentioned. I know that the list is not exclusive, but carers should be in the list because if they are not, they will be overlooked. I am not asking for any change in the statute or for the noble Baroness to give an answer now but for her to take it away to consider whether the department could reissue the guidance so that it explicitly mentions carers.

[Baroness Hanham]

I am very happy to look to see what the guidance actually includes and whether that would up with us trailing a huge long list, but I will do that before our next sitting and let the noble Baroness know in advance.

[Baroness Lister of Burtersett]

Thank you very much.

[Lord Jenkin of Roding]

The whole Committee will be grateful to my noble friend for her careful answer to the points made in the debate. We shall want to read carefully what she has said and, if so advised, to return to the matter later. Before I withdraw the amendment, perhaps I may say that I am about to withdraw myself. I have to make preparations to get off to celebrate my diamond wedding in Scotland. I hope that I may be forgiven. With that, I beg leave to withdraw the amendment.

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[Lord Deben]

My Lords, I have a real difficulty with the amendment because it seems to be another example of trying all the time to limit localism. There are too many mechanisms for that. One is to stop it being localised in the first place and the other is to make it so difficult for people by having to report in so many ways that you remove the whole advantage.

For me, the advantage is that localities make their own decisions. If there are circumstances in which the Secretary of State feels that concern is so widely held that he ought to find out more about it, he has all the powers to do that. We really do not want a situation where every time we give powers to localities, the clever Dicks from the centre say, “We can’t let them get away with it. We have to have a whole series of ways to make sure that they report on everything”.

My real objection is that this is all part of a pattern that we have seen for years. We promise localism, but do not quite give it to them. If we get away with a bit of localism, then let us make sure that that there is a whole lot of reporting, measurement and all the rest of it. I would like local authorities to make their decisions about this. Only if there is a real reason and a real concern should we take any further action at all. When there is a real reason and real concern, I am all in favour of immediate action, but putting this sort of thing into operation is otiose.

[Baroness Lister of Burtersett]

My Lords, I take a rather different position, as the noble Lord would probably expect. Some of us here are refugees from the Welfare Reform Bill, which sat for what felt like many years, but certainly for many months. One of the few things that we achieved on that Bill, partly in response to amendments from the noble Lord, Lord Best, was a commitment to monitor various aspects of the changes.

That is important, regardless of what the noble Lord has just said. We are making a big change to the basic safety net by removing it from being a national benefit to being a local one. At the very least, we need to know as a Parliament what impact that is having on some of the poorest people in our communities. I am sure that the Minister will do this, but I cannot believe that the Government have no plans whatever to collect some form of information so that we know what effect it will have, especially if the DWP take-up statistics are now in doubt.

If we can achieve nothing else in this Committee, it would be good if we could achieve some commitment to monitoring the impact of what is a very significant change. My noble friend Lady Hollis has explained very well why it is such a significant change to our income maintenance provisions.

[Baroness Hanham]

My Lords, I thank noble Lords for their contributions. It will not be entirely a surprise when I say that I support my noble friend Lord Deben’s general emphasis on this issue.

Paragraph 7 of new Schedule 1A to the Local Government Finance Act 1992 is inserted by Schedule 4 to the Bill and enables the Secretary of State to require authorities to supply specified information to the Secretary of State. The Government, in their equality impact assessment of this reform, made it clear that the powers could be used to collect information to support future evaluation of the policy.

Council tax support will become part of the council tax system that we have been through today. The Government already collect key data for the council tax system, including data on exemptions and discounts. We are currently working with other government departments and local government to determine the necessary data that will be required in future as part of the council tax system, or through other mechanisms, to monitor the policy and how best to collect this. To ensure proper scrutiny, new requests for data from local government will need approval by the single data list gateway group, which has been established by this Government to consider and challenge new data requirements from local government.

Amendment 92 requires a report on the impact of work incentives. To do so would place another administrative burden on local authorities. The purpose of the policy is not to make local authorities report to the Government on work incentives; rather it is to encourage local authorities to get people back into work. It will not be in the interest of local authorities to lock their residents into poverty and low aspirations. They will want to design schemes which support claimants into work, and the department has issued guidance helping local authorities to understand the importance of work incentives and how they can design schemes which support the objectives of universal credit.

The second part of Amendment 93ZB would require the Government to adjust funding allocations to reflect any changes in the number of eligible claimants. The amendment does not make it clear whether this is funding from within the council tax support scheme or additional funding from outside. Funding for council tax support will be included as a fixed allocation within the business rate retention scheme. Councils will have the responsibility and flexibility to deal with these on a local level. Councils, in designing their schemes, will need to consider the risk of variation in demand. In relation to in-year fluctuations in demand, mechanisms are already in place to enable billing authorities and major precepting authorities to enter into arrangements. This will enable financial pressures as a result of unexpected increases to be shared.

The Government do not think that it will be necessary or helpful for local authorities to be asked to provide that a report be published in Parliament. There are transparency requirements on local authorities to make sure that all of what they do is understood and made clear and, where possible, put on the internet. We think that that will be sufficient to ensure that there is wide knowledge of what each local authority is doing.