Lord Shipley
Main Page: Lord Shipley (Liberal Democrat - Life peer)Local Government Finance Bill
Lord Shipley Excerpts
Lord Shipley
My Lords, I rise to speak in support of this amendment. My reason is that we need to understand better than I believe the Government do the impact of various changes being implemented at the same time over coming months.
Next year, a large number of people will be taken out of income tax because of the rise in the threshold. At the same time, universal credit, and its housing elements in particular, will begin implementation. We should note that demand for housing benefit is now rising because rents are going up, as opposed to going down, as the Government expected would happen a few months ago. At the same time, council tax benefit will be devolved to councils, being renamed “council tax support”, and it is likely that demand will rise because of the name change alone. In addition, there is a 10% cut in the grant given to local authorities for council tax support, and in actuality, many think that that cut is nearer to 12.5% because of that rising demand.
The Government have said that councils can make up the cut by charging 100% on empty homes and second homes. We know that that can work for some councils because they have enough numbers of one or the other, or both, to do it. However, it will not work for all. Many councils do not have enough empty or second homes to enable an increase to 100% to deliver the 12.5% cut in the budget. Even the transitional relief announced last week, prior to Report, will not solve the problem for all, and in any case, that transitional relief is only for one year.
The Local Government Association—I declare my vice-presidency—thinks that the Government’s package substantially underfunds the 8.5% cap on what an individual household would pay and that councils will need to find another £100 million to make up their loss. Putting aside the problems of councils, the problems for individuals could be very severe in the face of so much change at once and the need, in particular, of many working-age households to start paying some council tax.
I agree that as a minimum the Government should commission an independent review to report as speedily as it can, but certainly within three years, on how all the changes are working. I realise that the Government keep things under review but the problem is that more than one Whitehall department is involved and the Government need the support of an independent body such as the Institute for Fiscal Studies or the Joseph Rowntree Foundation to assess the impact in an independent way.
I regard this amendment as modest and the Government could and should accept it. I hope that the Minister will accept it as a helpful contribution to our understanding across government of the impact of these substantial changes.
Lord Best
My Lords, I hope that the Minister is able to accept this amendment or something akin to it. I agree with the noble Baroness, Lady Hollis, that it will be important to review the effects of localising the council tax benefit system. Down the line we will need to ask whether this change has led to a chaotic situation of dozens of different schemes and whether this localist approach has produced variations in benefit schemes that reflect not what local financial circumstances force on councils but what genuinely fits local conditions. We also need to ask whether it would be better to return to a national scheme incorporated into the universal credit arrangements.
My own emphasis for a review, however, would be on analysing the consequences of the cuts to council tax benefit on the households affected and on those councils which find it necessary to start collecting council tax from the lowest-income families who did not previously have to pay. What has been the cost in extracting these new taxes? What has happened to those who could not pay? It is a very serious matter deliberately to reduce the income of those who are trying hard to get a job, are not able to work or are in work but on the very lowest earnings. No government would want to hurt those of our fellow citizens who are living on the breadline and finding life a considerable struggle.
As I noted in Committee, the Institute for Fiscal Studies, the Joseph Rowntree Foundation and others have shown that it is those of working age on the lowest incomes who have seen the least improvement to their living standards over the past decade. The gap between rich and poor has widened and income inequalities have increased. It is those in relative poverty who expend the highest proportion of their incomes on fuel and food, and so now face the greatest pressures in making ends meet.
The various welfare benefit cuts introduced since 2010—with the largest still to come—are bound to have a cumulative effect. The same households that are hit by one cut may well be affected by another. Thus, many of the 660,000 households affected by the forthcoming “bedroom tax” will also be caught by having to start paying council tax from the very same day—1 April 2013. What will be the knock-on effects of the council tax benefit measures when added to all the other benefit changes? What unforeseen consequences may emerge from these measures? Are there impacts on physical and mental health, with consequential costs to the NHS? Are there burdens for children’s services? Are mounting rent arrears leading to homelessness, with higher costs for central and local government? When do these cuts reach a point when any reasonable person would see them as punitive and unacceptably harsh?
In response to an amendment in my name to the Welfare Reform Bill, the noble Lord, Lord Freud, agreed to a thorough-going and high-quality review of the impact of housing benefit cuts. He has made the point that he wants government policy to be based on sound evidence, which good research should bring forward. That can enable in-flight corrections to policy. For example, the noble Lord, Lord Shipley, mentioned the hopes of the noble Lord, Lord Freud, that cuts to local housing allowances and housing benefit would lead to rent reductions but they have not materialised. If the researchers for the review of the noble Lord, Lord Freud, show clearly that rents have instead been rising, Ministers may be wise to think again about their approach. In the case of council tax benefit, the cuts, unusually, are outside the remit of the Department for Work and Pensions, and an evidence-based review will need to be undertaken by the noble Baroness the Minister’s Department for Communities and Local Government. A parallel exercise there to the DWP’s would seem essential if lessons are to be learnt in time to rectify deficiencies in the new system. For example, I have learnt from working on this Bill that the Secretary of State has had the power since 1992 to vary the 25% single person discount for households. A review of the kind proposed by this amendment could be the catalyst to persuade the Secretary of State to use that power and allow a different discount level where the local authority concerned needs this change. It is this kind of policy change that a review could stimulate.
This is a modest amendment with minimal financial implications. It could prove of immense value to the Government and to those who could be hugely disadvantaged by the benefit cuts in the Bill. I heartily commend it.
Lord Smith of Leigh
My Lords, last week, I reluctantly supported a similar amendment and, within a week, I have not changed my mind thoroughly—although I preferred the previous amendment because it was more localist than this one, which is more restrictive. I need to declare an interest as a vice-president at the LGA, but that is not why I support the amendment. I support it because I am a leader of a council and will have to make the kind of decisions that noble Lords have described. This may be the least-worst option for some of us. I do not quite agree with the noble Lord, Lord Best. The amendment will not save the day. As I said last week, it will be a help, but it will not save the day, because the gap between what my authority needs to raise to meet the shortfall in the council tax benefit scheme could not be raised under this particular text. However, it will help to mitigate some of the worst impacts that would be felt by other members of my community who are poor and cannot afford to pay the large amounts that they will have to pay if the council tax benefit scheme is introduced in the manner proposed. While I am reluctant to support the amendment, it is much better than having to do some of other things that, without it, I would have to do.
Lord Shipley
My Lords, I agree entirely with the noble Lord, Lord Smith, that this is the best of the options that we have available. Crucially—and it is the reason why I thought that the Government might be willing to accept it—the amendment would cost them nothing.
In her Written Statement last week announcing a £100 million transitional grant, the Minister said that it was,
“to help those councils who choose to do the right thing”.—[Official Report, 15/10/12; col. WS164.]
The problem with that is that it does not recognise that many councils cannot do that. There are several reasons why this is the case. We have heard reference to the council tax freeze—last year, this year and now next year. Last year was fine, because the Government built into the baseline of all local authorities the amount that they had lost through the tax being frozen, but, in this financial year and the next financial year, no money has been or will be built into the baseline. That means in practice that councils will have to absorb inflation and rising costs.
There was an expectation that councils, in being able to tax at 100% empty or second homes, would be able to make up the gap in their finances. The problem is that many councils do not have many empty homes or second homes and therefore cannot use that means to make up the gap in their finances.
We should also note, as I reminded the House on Report, that according to figures from the Institute for Fiscal Studies, councils in poorer parts of England have had budget cuts since 2010 at almost three times the rate of councils in the south of England. That is partly a result of the loss of working neighbourhoods funding.
The consequence of all these factors is that many councils have no flexibility or room for manoeuvre. This amendment would give them some extra flexibility. It would mean a small extra weekly sum from a large number of working-age, single person households, most of which have had a freeze in council tax for the past two years and would otherwise have a freeze next year. It would be enough in most cases to take poor working-age households out of paying council tax, thereby preventing a regressive tax being implemented.
Last week, at Report, I reminded the House of a statement made by the Deputy Prime Minister a few days ago. I shall repeat his words because I think they are hugely relevant. He said:
“As we have to tighten our belts … as we have to make more savings as a country … you start at the top and work your way down, not the other way round”.
I agree that those who are poor should be protected. The reason why I give my full support to the amendment is that it does just that: it protects the poor better than the Bill. Given that it has the full support of all political groups on the Local Government Association, I hope that your Lordships’ House will feel able to support it.
Lord Palmer of Childs Hill
At this stage, we get down to essentials, as we did in the previous amendment. That amendment addressed the crux of the problem. I appreciated what the noble Baroness, Lady Hollis, said about this being in the universal credit. That has come through from various noble Lords. However, we are where we are, as my noble friend Lord Tope said, and we must deal with that.
The important thing about the amendment is that it gives discretion to local authorities. That discretion is important. Speaking as a councillor in the London Borough of Barnet, I believe that that would help my council, although it would not help all councils. It is an extension of the localism which we debated previously. This amendment and the previous amendment tabled by the noble Baroness, Lady Hollis, support the poorest in society. That is why, contrary to my normal beliefs, I voted for the previous amendment and will certainly vote for this one.
My noble friend Lord True spoke about the difficulties that it would impose on local authorities to have the change at this late stage and asked how it would help. As I said, local authorities have discretion whether to do this or not, and that discretion does not have to be applied this year—it could be applied next year. Many local authorities may decide to use their part of the £100 million in transitional relief this year to ease the pain but, as I pointed out on Report, it will help only this year. By next year, the amendment, building on the review suggested by the noble Baroness, Lady Hollis, will mean that local authorities can achieve my aim and, I hope, that of many noble Lords: to help the poorest in society.
My noble friend Lord True said that that was swallowing a spider to catch a fly. Without the amendment and the previous amendment, the Bill is a particularly dangerous fly and I think that it is worth swallowing the spider.