Council Tax Benefit

– in the House of Commons at 1:29 pm on 28th April 1999.

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Photo of Mr Iain Coleman Mr Iain Coleman Labour, Hammersmith and Fulham 1:29 pm, 28th April 1999

The subject of this debate—which should have been titled on the Order Paper "Council tax benefit regulations" rather than "Council tax benefit regulation"—may appear rather dry and obscure to those unfamiliar with the issues, even by the standards of Back-Bench Adjournment debates. However, I am acutely conscious of the concerns and the financial problems caused to some of the poorest and most vulnerable of my constituents as a consequence of the introduction of these regulations. That is why I am pleased to have the opportunity today to highlight those matters and bring them to the Government's attention.

The nub of the problem lies in a Budget measure, originally proposed by the previous Conservative Government, which limits council tax benefit for properties in bands F, G and H to the maximum available for band E properties. In effect, the measure works as a cap on council tax benefit to householders living in properties that have been given a notional high market price. I acknowledge the significant concession made by the Labour Government in March 1998, in the announcement that, although the new regulations would be introduced from 1 April 1998, all existing council tax recipients were to be protected so that, in practice, there were no losers at the point of change as a consequence of the introduction of the new measures.

That was a source of very considerable relief to many of my poorest constituents, and the calculation made by the Department of Social Security at the time was that 65,000 people, who were then recipients of council tax benefit and would have been affected, were not affected at the point of change because of the Government's concession. In my judgment, that was a good example of our Labour Government listening to, and taking on board, the concerns of Members of Parliament and others who made representations to the Minister on our fears about the implications for those who were to be affected by the introduction of those measures. As a result of the concession, 2,159 council tax benefit recipients in Hammersmith and Fulham were, in effect, protected.

Council tax benefit is, of course, a means-tested benefit and is paid only if applicants meet a range of strict criteria. In practice, therefore, it is paid only to poor people living on low incomes with very few savings. The House will probably know the details of council tax band figures, but I remind hon. Members that the figures are as follows: to be in band F, a property must be valued at more than £120,000; to be in band G, a property must be valued at more than £160,000; and to be in band H, a property must be valued at more than £320,000. Hon. Members will, therefore, understand that, in reality, the new regulations will affect only poor people living in an area where property values are high.

In spring 1998, the local government information unit produced a report that showed that not a single property in Liverpool or the city of Birmingham would be affected by these measures, but I have already informed the House that, in one small London borough, more than 2,000 households were potentially affected by their introduction.

I am aware that the Government have recently commissioned an independent research agency —PS Martin Hamblin—to undertake a study of the effects of the introduction of the changes. I must confess that I am somewhat disappointed that that research was not carried out sooner, but I strongly welcome the fact that the contract for the new study has now been awarded.

Today, I am able to advise my hon. Friend the Minister that in Hammersmith and Fulham, since the introduction of the new regulations on 1 April 1998, 140 households have had their benefit capped at band E. In band F, 95 households were affected and, as a consequence, face an annual bill of £183.78, or £3.75 a week. In band G, 44 households were affected and face an annual bill of £367.57, or £7.06 a week. In band H, only one household was affected and now faces an annual bill of £623.24, or £11.98 per week. Those may not seem to be large amounts of money to some hon. Members, but they represent a serious financial crisis to households already struggling to live on highly restricted means-tested benefit.

I will give the House a flavour of real-life case studies that are only too real in my constituency today as a consequence of the introduction of the regulations. There is the case of a single disabled pensioner aged 77, living in Fulham in a band G property, who receives an occupational pension of £42 a week, disability living allowance and state retirement pension. Her total weekly income is £134.00. Because her council tax benefit is capped at band E, she faces a shortfall of over £7 a week that she must find from somewhere.

There is the case of a pensioner couple who recently moved into a new housing association property in Fulham because their previous private sector rented flat had been condemned as unfit for habitation and had been demolished. The property is in band G and the couple face a bill of an extra £7 a week. They told me that they have never been in debt in their 50 years of married life. They have no idea how they will find the extra money and told me that, during the winter months, they kept the heating off in all but one room to make up the difference that they are obliged to pay. Their tiny life savings have been almost entirely whittled away. They were advised—correctly—by the local citizens advice bureau that there are no other benefits available to them to meet the difference. The reality is that if they had accepted an offer of a similar property in an outer London borough, away from their children, their grandchildren and their other local support mechanisms, they would not face that extra bill. They cannot understand why they should be penalised simply because they have lived in Fulham all their lives.

Photo of Andrew Dismore Andrew Dismore Labour, Hendon

In my constituency, I have come across another anomaly in the case of two asylum seekers who shared a flat. One was entitled to 90 per cent. income support and that was passported to 50 per cent. council tax rebate; the other was receiving national assistance and, therefore, entitled neither to money nor council tax benefit. Under council tax rules, the asylum seeker on income support has now found that he is required to pay the share of council tax due from the person on national assistance. He now has a liability order for the deduction of £2.50 a week from his 90 per cent. income support. That amount is to pay for the tax due from the person on national assistance, who never had the money to pay the council tax in the first place. Is not that a further anomaly resulting from the regulations?

Photo of Mr Iain Coleman Mr Iain Coleman Labour, Hammersmith and Fulham

My hon. Friend makes a good point. It is true that the introduction of the new measures has revealed a range of bizarre and peculiar anomalies, which I hope will be dealt with by the consultants in their review.

My local authority has a record that is second to none in London for developing new affordable housing in conjunction with housing association partners and other agencies and organisations. During the past six years, more than 1,000 new homes at affordable rents have been developed for local people who could never afford the astronomical cost of private property in Hammersmith and Fulham. I am looking forward to opening next month one such development of 35 new homes in Ackmar road near Parsons Green in my constituency. Earlier this week, I spoke to the chief executive of Shepherds Bush housing association, which was responsible for the development of that site. In that new development, 75.per cent. of the nomination rights will go to local authority nominations.

However, Parsons Green is one of the most expensive areas in which to purchase property in the borough—if not the whole of London. As a consequence, Shepherds Bush housing association's chief executive advises me that all 35 of the properties will almost certainly be placed in band H. Therefore, anyone eligible for council tax benefit, who moves into one of those properties, will immediately be faced with an extra weekly bill of £11.98. Even before anyone has moved into that new development, the housing association has received two refusals of offers because of the introduction of the regulations.

Local families whose members have dreamed of being given the opportunity to start a new life in a new home have had that dream dashed; they are frightened of the inevitable debt that they will face because their benefit has been capped at band E. I point out that that could not happen in Newcastle, Leeds or Cardiff. It could not happen in Barking or Hillingdon.

The London borough of Hammersmith and Fulham is currently involved in detailed negotiations with the country's largest urban property developer over the Imperial wharf site in Fulham, where it is hoped that the council will eventually, in partnership with housing associations, be able to develop well in excess of 500 new affordable homes for local people. That site is also located in an area of high property prices and we are again likely to face the same problems with refusals. In effect, therefore, the new council tax benefit regulations are paving the way for the development of areas in inner London, where the poorest and most vulnerable in our society will not be able to afford to live, despite the fact that major developments of affordable housing are being built—encouraged by the Government —in those areas.

On 11 March 1999, I received a written answer to a parliamentary question in which the Minister was kind enough to advise me that no information on savings as a consequence of the introduction of the regulations last year was yet available. However, I understand that the estimate of savings in the current financial year is £4 million, to the nearest million. I respectfully suggest that saving such a relatively small sum cannot be justified when measured against the misery that the regulations have already caused. I continue to receive letters and telephone calls from constituents who cannot understand why they have, in their view, been singled out for unfair treatment because they live in an area where their family has lived for generations. It has been pointed out to me that no one in the general election campaign mentioned that such a measure would be introduced. I am unable adequately to explain to my constituents why the Government decided to protect existing recipients of council tax benefit, but introduce such a regressive measure for new applicants.

I have a case of one constituent who, as a council tax benefit recipient prior to the introduction of the new regulations on 1 April 1998, was protected, but who was desperate to return to work after being made redundant by a local engineering company after 30 years of loyal service. He was unable to find a job as a skilled worker, but took a job as a labourer in a local building company. After four months, he injured his back and had to give up that job. Now, he finds himself trapped by the regulations in a band G property with an additional bill of almost £400 per year. He points out that if he had not returned to work he would not be in that position. He believes that the regulations act as a disincentive to those who have been protected from the regulations and who are now worried about what will happen if they become unemployed again in future.

It has been suggested that housing association or local authority tenants caught in bands higher than E should, in effect, trade down to lower-banded properties. That suggestion reveals a complete lack of understanding of the way in which social landlords now work in inner London. Almost all housing associations and local authorities operate a strict one-offer policy. Even if it were possible—which it is not—for families to move from one geographical location to another, the implications in terms of disruption to their children's education and to family support mechanisms are horrendous.

In recent weeks, we have heard a lot of nonsense and whingeing from the Opposition Treasury team about the introduction of so-called new stealth taxes. In practice, in my judgment, these regulations represent the only real stealth tax and, regrettably, they punish some of the poorest of my constituents. I welcome the fact that the Labour Government have honoured their commitment, made last year, to commission independent research into the effects of the changes to council tax benefit. I urge the Government to ensure that the review is conducted swiftly.

I am convinced by the evidence that I have gathered locally that the review will demonstrate beyond doubt that the new regulations should be abolished and that we should return to the previous practice, whereby claimants are able to receive their full benefit, whatever band their property is allocated to. At the end of the day, the regulations are iniquitous and offensive. They are clearly contrary to the Government's overall social policy objective of social inclusion, and I look forward eagerly and with anticipation to their removal, as soon as possible.

Photo of Angela Eagle Angela Eagle Parliamentary Under-Secretary (Department of Social Security) 1:43 pm, 28th April 1999

I thank my hon. Friend the Member for Hammersmith and Fulham (Mr. Coleman) for raising this subject. I welcome the opportunity to put the record straight on a very important issue and to bring the House up to date on the current position.

Our debate today is about a change to the council tax benefit regulations that resulted from a measure announced by the previous Administration. It involved restricting council tax benefit for claimants in the most expensive properties to that of band E from April 1998. As the previous Administration gave no indication that any claimants would be protected, I can conclude only that the change was intended to affect all council tax benefit claimants in bands F, G and H properties. Therefore, people in receipt of council tax benefit on 1 April 1998—an elderly widow or a jobseeker supporting a large family on benefits—found themselves faced with a drop in income if their home was in one of the higher council tax bands. I welcome my hon. Friend's acknowledgement of the beneficial effects of the transitional arrangements that were introduced alongside the change.

Whether to implement such a change was one of many hard choices that we had to face when we came to power. Council tax benefit costs were rising: the benefit currently costs £2.3 billion a year and there are 5.3 million recipients. There was an obvious inconsistency in the way in which assistance with housing costs was provided via the council tax benefit system, compared with other benefits such as mortgage interest relief, as there were restrictions on help with high rents through housing benefit and on help with mortgage interest payments through income support.

We need to get the issue in proportion, as I believe my hon. Friend has. We knew that the vast majority of council tax benefit recipients lived in lower-banded properties and would not be affected by the change, but we had been made aware by representatives of local government and other interested organisations of the likely effects of the change that would disadvantage several groups, including pensioners, large families and those living in relatively modest properties in London and the south-east, where property values are higher than those in the rest of the country.

The concerns expressed focused on the ability of people to meet any shortfall from their own resources and the ability of large families to stay together. Those were specific examples of a more general concern that the measure unfairly penalised those in London and south-east England, where property values are comparatively high and where higher-banded properties can be quite modest. We listened carefully to those concerns, and acted on them by introducing the transitional arrangements.

Before the changes took effect, we reassured all existing council tax benefit recipients by providing transitional protection so that not a single council tax benefit recipient lost out at the point of change. We also introduced a set of amending regulations that ensured that all existing claimants on 31 March 1998, who would have been affected by the change, were protected from day one. In fact, those regulations went further than simply protecting existing claimants. In cases where the main claimant leaves home, or dies, we have allowed the remaining partner to continue to receive council tax benefit without restriction, as long as he or she was also living in the home on 31 March 1998. We have also allowed transitional protection to continue if there is a break in a claim. By introducing that protection, we have been able to help the most vulnerable groups. Elderly people are far less likely to experience changes in income and so tend to remain on council tax benefit throughout. They are also likely to be more settled than people of working age and therefore less likely to move home, so they will have been considerably helped by the change. The introduction of transitional protection also ensures that large families are able to remain in accommodation of a suitable size, and that those with a short break in their claim are not unfairly penalised.

We have been consistent with our overall plans for welfare reform in respect of those seeking and moving into work. Overall, the restrictions have provoked little complaint, although I recognise that my hon. Friend has a strong interest in the matter. He has given the House evidence of how the regulations have affected some of his constituents. I have noted all of his points and will pass them on as part of the review. We have, by bringing in these regulations, ensured that vulnerable groups such as the elderly are protected. The scheme has provoked little actual complaint, although I recognise that my hon. Friend has retained a strong interest in the matter.

At the time we introduced protection for existing council tax benefit recipients, we accepted that we should monitor the effects of the policy on those affected by the restrictions, for example, people claiming council tax benefit for the first time and those returning to benefit to whom transitional protection no longer applies. In a way, today's debate is part of that monitoring process. Our decision to conduct research was supported by the representative bodies of local government in Great Britain.

Following a competitive tender, which is one of the reasons why the process has taken so long, we commissioned PS Martin Hamblin to carry out a research project that will monitor the effects of the restriction by reference to the types of person affected, the effect on claimants payment of council tax and comparisons with the cases affected by transitional protection. Another reason for the delay has been finding people and cases to compare. Such studies cannot be set up quickly, but I assure my hon. Friend that we are getting on with the job.

In order to protect the integrity and independence of the research, I cannot say which authorities are involved in the study. However, I can tell the House that a carefully selected sample of authorities has been invited to take part in the research to ensure that we get a proper picture of what is happening. The research will cover the first year of the restriction, and we expect it to be completed by the end of the year. That should give us an idea of what is happening nationally. As usual, a report of the study will be published by the Department, and I assure my hon. Friend that we will examine its findings very carefully.

My hon. Friend the Member for Hendon (Mr. Dismore) raised a complex technical issue to do with the interaction of asylum seekers and council tax benefits. I think the best way of dealing with that issue is to ask my hon. Friend to write to me and I will get back to him about it.

Our record in this area—including the study and the transitional protection that we have introduced—is a good example of how this Government listen to local government, Members of Parliament and others and work in partnership with them. My hon. Friend the Member for Hammersmith and Fulham expressed specific concerns about the effect of the restriction on the choices that his constituents can make if they are given the chance of being rehoused in the new or higher-quality properties that the local authority offers to larger families. We must also consider the impact of the restriction on housing for homeless families in the borough.

I appreciate the force of my hon. Friend's concerns and I do not make light of any difficulties relating to the fact that property values are generally higher in London and the south-east. We shall take that factor on board in our research. In the light of what I have said, I hope that my hon. Friend agrees that it is sensible to wait for the results of the research that we have commissioned and to gauge the impact of the restriction nationally before proceeding further.

I assure my hon. Friend and all right hon. and hon. Members who have raised this matter that I do not take their concerns lightly. As soon as the results of the research are known, we will consider carefully the effects of the regulations. I welcome any other evidence that hon. Members may wish to include as part of our deliberations so that we can take account of it in our work.

It being before Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.