Council Tax Benefit Localisation

Lord Johnson of Marylebone Excerpts

Wednesday 27th June 2012 Westminster Hall

[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.

--- Later in debate ---

[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.

[Joseph Johnson]

Will the hon. Lady give way?

[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.