Local Government Finance Bill

Clive Betts Excerpts

Wednesday 31st October 2012 Commons Chamber

[Brandon Lewis]

I thank the hon. Gentleman for his question. I will come to that specific point, as the hon. Lady raised a similar one.

Where councils want to join forces to pool their business rates, sharing the rewards and risks with their neighbours and thinking together strategically about how they should invest the money—a topic on which we have spent some time this afternoon—they will be able to do so. I will come back to that in response to the points raised by my hon. Friend the Member for Bromley and Chislehurst (Robert Neill).

The proposals for business rates retention will give all local authorities unfettered access to tax increment financing. There will be no constraints. From April 2013 local authorities will be able to get on with implementation. We are also making £150 million available to fund a limited number of new development deals—projects in the core cities.

A number of Members commented at length on issues related to pooling. My hon. Friend the Member for Bromley and Chislehurst was the first to raise this in his remarks. I record my thanks to him for the fantastic work he did in bringing the Bill to the point at which I inherited it. He gave a great speech outlining some of the thoughts underlying the Bill and answering a great number of questions from Members to help everybody in the House have a fuller and better understanding of where the Bill is coming from and therefore what it aims to deliver.

Business rates retention changes the ground rules for local government and moves power back to where it should be. To pick up on a point made by my hon. Friend the Member for Peterborough (Mr Jackson), it effectively puts local money back with local people in local communities—local money for and by, to coin a phrase, local communities.

[Mr Clive Betts (Sheffield South East) (Lab)]

I note the Minister’s support for the concept of pooling. It is right that if local authorities choose to bring their capacities together, they should be allowed to do so. Does that not rather contrast, however, with the Government’s response to the Select Committee’s report on housing, in which we suggested that local authorities might be able to pool their capabilities to borrow under their housing revenue account—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Mr Betts, I do not know how long you have been in the Chamber. I presume you have not just come in. That was a very long intervention. I am sure the Minister will recognise the question that you have posed to him already. I take it that you had finished the question, as it was so long.

[Mr Betts]

Yes.

[Brandon Lewis]

I thank the Chairman of the Select Committee. I would like to thank him for his courtesy in inviting me to the Select Committee on Monday, and I enjoyed talking through some of the issues that local councils face. He tempts me to move outside the scope of the amendments, and I think the Deputy Speaker has made clear his views on their scope, but I will expand a little further on pooling without being tempted too far outside the terms of the amendments.

Pooling gives councils a new tool to support economic growth across their area and greater ability to invest in the things that will have a greater impact on economic growth. As has been noted, the more the money comes together, the bigger its multiplier effect—the leveraging—can be. My hon. Friend the Member for Bromley and Chislehurst made a comparison between this and the debate earlier this week on pension schemes, and how, by bringing that money together and building it up into bigger pots, it can have a much more beneficial impact on local areas. That is why it is important that we allow councils to support economic priorities that have a benefit across a wider area. We are allowing councils better to weather any downturns in business rates income by sharing fluctuations in those rates. I will come back to the issue of a particular business.

It is worth local authorities looking at and thinking through the effects of pooling, which will give them greater resilience and greater buying power and allow greater economic growth. I encourage local authorities to consider it, and they have until 9 November to submit proposals. Earlier this year we had more than 20 expressions of interest from authorities. I stress that pooling is wholly voluntary but in terms of resilience, buying power and the ability to grow, I encourage councils to look carefully at it.

We heard queries about whether pools may cross county boundaries and whether they must be linked geographically or in any other way. In the true spirit of localism, it is for councils themselves to determine the make-up of a pool. They will not be restricted to pooling within a county boundary, allowing rates retention to support the priorities of local enterprise partnerships where this is what councils want.

--- Later in debate ---

[Helen Jones]

My hon. Friend makes his point eloquently. The Government have always failed to acknowledge not only that this policy affects the same economies again and again, but that it has a devastating effect on local attempts to grow their economy. The very people who are losing money are those who went out and spent money in local shops and businesses, because, by the very nature of their low incomes, they have to spend everything they get. Councils are now faced with the most awful decisions and the people being hit hardest are people with disabilities, their carers and, most of all, the working poor—the people who this Government try to pretend do not exist.

We all remember the former Housing Minister, the right hon. Member for Welwyn Hatfield (Grant Shapps), telling a Select Committee that if someone was working they would not get council tax benefit, because they would not need it. He did not believe that people who were in work received council tax benefit. He did not believe in the existence of those 743,000 people who are on non-passported council tax benefit and are in work. I admit that I sometimes find it difficult to believe in the existence of the right hon. Gentleman, because he has so many different identities—I often wonder whether he is an internet marketing guru masquerading as a member of the Government—but those working people on low incomes are certainly there and cannot be ignored.

Among the options that councils are consulting on are: paying no award less than £5 a week; restricting awards to the cost for a band D and, in some cases, even a band A property; restricting awards between 80% and 90% of value; increasing the taper; and abolishing the second adult rebate. The list goes on and it gets worse. One council—Tendring—is proposing residency criteria, so that people will only become eligible for support if they have lived in the district for five years. If someone moves there for work—after all, the Government want people to move for work—and happens to lose their job, hard luck: they will not get a penny. Those of us who know our history will recognise that proposal immediately for what it is. It is a reinstitution of the Poor Law—if someone needs relief, they should move back to their own parish, or in this case their own borough. On that basis, I wonder whether the Government live in the 21st or the 18th century.

It is no wonder that the Government have introduced a £100 million transitional relief fund. There is no better proof of the shambles that they are in than the fact that they have made that announcement after local authorities have begun consultations on their schemes.

[Mr Betts]

My hon. Friend is making a very important point. This should not come as a surprise to the Government. The Communities and Local Government Committee inquiry reported in September 2011, and in the report we drew attention to the problems at that time with the time scale, the difficulties with implementation and the unintended consequences. We asked the Government to consider a delay in order to allow more time for everything to happen. Their only response has been to complicate matters even further with a £100 million offer right at the last minute and in the middle of a consultation process. Could there be a more cack-handed way of running a policy?

[Helen Jones]

I am tempted to say to my hon. Friend, who is the distinguished Chair of the Committee, that I cannot think of a more cack-handed policy, but then again this Government constantly surprise us by coming up with something more cack-handed than we had ever thought of. He is right about the problems with the transitional relief fund. Councils have begun consultation on their schemes, but now the Government want them redesigned to qualify for a transitional grant. Their conditions include the requirement that those currently receiving 100% relief should pay no more than 8.5% of tax, that the taper does not increase above 25%, and that there is no sharp decline in support for people entering work. Having embarked on a system that they insisted should rest on local decision making, they are now dictating how the scheme should be designed.

Even so, that does not solve the problems. There is no legal clarity on whether councils will now have to consult again on these new schemes. Could the Minister give councils some advice about that? There is no indication of how, if they have to do another consultation, its cost will be met, and there is still a £400 million funding gap, even according to the Government’s own figures.

--- Later in debate ---

[Mr Betts]

That is not the only complication, of course. An individual whose income has changed and who has difficulties will now face the problem of going to the local council offices to sort out their council tax benefit, then going to the Department for Work and Pensions—either at the office if they can get there, or online or over the telephone—to sort out their housing benefit changes. Will that not confuse things enormously for people who are already struggling with financial difficulties?

[Helen Jones]

Absolutely right, and because of that there is real doubt among local authorities about whether they can collect payments from people who have never had to pay anything before and simply will not have the money to pay. Treasurers are predicting collection rates of only about 40% or 50%, and local authorities predict huge deficits because of the likelihood that they will not collect most of the money. What, then, are local authorities to do? Will they take people to court when they know that they do not have the money to pay? That would carry a huge cost to recover a small sum of money.

--- Later in debate ---

[Robert Neill]

The words of Little Sir Echo from the Opposition Benches!

My hon. Friend the Minister is absolutely right. The decision to use the default scheme is a local choice. The ability to design schemes in different ways is, and should be, a local choice. It is strange that there should be any objection to that. The Government have provided help, of course, and not only through the transitional scheme, which I regard not as a mark of weakness but as a mature and sensible reflection on how to proceed in a constructive way. [Interruption.] Again, that sense of unreality wafts across from the Opposition Benches. They prefer to exist in this land of denial where nothing is wrong with the current system, when it is manifestly failing.

[Mr Betts]

Given that the hon. Gentleman was previously the Minister in charge of the Bill, will he explain why, if it was a mature and sensible reflection, he did not have it a year ago? How can it possibly strike him as mature and sensible halfway through the period when local authorities are consulting on the policies they are trying to develop?

--- Later in debate ---

[Brandon Lewis]

Coming from a party that had 32 different benefits to work through, I find that quite an amazing comment.

[Mr Betts]

rose—

[Brandon Lewis]

I give way, of course, to the Select Committee Chairman.

[Mr Betts]

It is all down to local councils to decide, but one of the complications is that the Government are localising council tax benefit, but centralising housing benefit. Local councils can get no sensible decisions from the Department for Work and Pensions on whether an arrangement will be allowed whereby applicants can go to one point for information and advice about both benefits. Are the Government to sort out this problem between the two Departments?

[Brandon Lewis]

I am sure we can take that back to the DWP, but I am sure the hon. Gentleman will appreciate that this goes some way outside the remit of the amendments. I will reflect on his comment and come back to him on it. As I have said, councils will have choices about how to meet the cost of support, and local authorities that have consulted on their proposals will need to consider whether they want to apply for the grant or whether they need to make changes to the proposed schemes in order to do that. I shall return to that issue in a few moments, if Members wish it.

Let me deal with the specific amendments. I shall ask the House to agree to Lords amendment 3 and to the other Lords amendments, but to resist the Opposition amendments to the amendments, which I shall ask the hon. Member for Warrington North to withdraw.

Lords amendment 3 requires the Secretary of State to provide for a review of council tax reduction schemes within three years of the Act coming into effect and sets out certain considerations for that review. As Baroness Hanham made clear in the House of Lords, Government routinely review policy and respond to ensure our objectives are met. The transitional grant scheme announced on 16 October was a direct response to those authorities that are proposing schemes that place what the Government consider to be an unacceptable burden on the very poorest. That is why we will accept that amendment, but we will not seek to overturn it.

In accepting the principle that Government should keep policy under review, I would make a couple of points. The terms of the review, as set out in the amendment, do not bind the Government to any course of action as a result of the review’s recommendations. I know that the Local Government Association is keen for us to make that clear. We will need carefully to consider the findings of the review before considering how we will respond. We remain clear that localisation is our preferred policy. It strengthens incentives to support local growth and jobs, drive down fraud and error and hold down council tax. It gives local authorities control over how to design support schemes, taking into account the impact on local populations and council tax collection rates. It also ensures that funding for council tax support is paid directly to the authorities that provide vital services. All those are important considerations that the Government would want to take into account in any future review.

The Opposition’s amendments seek to ensure that such a review would apply only to England, but I believe that if the Secretary of State is required to review the operation of local schemes in England that are provided for under powers in this Bill, such a review should also take place in relation to schemes that are similarly provided for in Wales. Let me explain that further.

Such schemes will be provided for under regulations to be introduced by Welsh Ministers, so it is right for Welsh Ministers to lead on any review. In complying with the requirement of the Lords amendment, the Secretary of State will therefore seek to agree with Welsh Ministers the scope and format of the review in relation to Wales. It will also be for Welsh Ministers to consider the implications of the review’s recommendations for the framework for schemes provided for through their regulations, and the powers provided, at their request, in the current Bill.

In the light of these assurances, I do not think that the Opposition’s amendments are necessary.

Lords amendments 83, 84 and 86 would enable regulations made by the Secretary of State or Welsh Ministers about council tax reduction schemes of billing authorities in England or Wales to make provision equivalent to the provisions of, or the provisions that could be made under, sections 32 to 34 of the Welfare Reform Act 2007. The amendments would also give billing authorities in England power to make additional provision in their local scheme which replicates, or could be made under, those sections. The amendments would allow local authority schemes to provide for extended payments, which are an important way of supporting work incentives.

Lords amendment 85 is a technical amendment. It is intended to ensure that the power in new paragraph 6 of schedule 1A to the Local Government Finance Act 1992, which allows major precepting and billing authorities to reach an agreement to vary payments or instalments that are required to be made under regulations about funds, applies—as was intended—only to regulations in relation to council tax.

Lords amendments 87 to 90 would ensure that the expertise of members of the First-tier Tribunal could be used in the deciding of appeals against decisions made in relation to council tax reduction schemes. The amendment would enable First-tier Tribunal members to sit as members of the Valuation Tribunal for England at the request of the president of the tribunal, with the approval of the Senior President of Tribunals, and only in relation to appeals that relate in whole or in part to council tax reduction schemes.

I urge Members to agree to the Lords amendments and resist the Commons amendments, and invite the hon. Member for Warrington North to consider withdrawing amendment (a).