Clause 8 — Council tax reduction schemes

Bills Presented — Department for Environment, Food and Rural Affairs (Relocation to Bristol) Bill – in the House of Commons at 5:34 pm on 31st January 2012.

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Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich 5:34 pm, 31st January 2012

I beg to move amendment 79, page 4, line 35, at end insert—

‘(1) Each local authority in preparing its council tax reduction scheme should start on the basis that, all other factors being the same, the total cost should be no greater or less than in the previous financial year.’.

Photo of Dawn Primarolo Dawn Primarolo Second Deputy Chairman of Ways and Means

With this it will be convenient to discuss the following:

Amendment 85, page 5, line 19, at end insert—

‘(5A) Any grant payable to a local authority in England in support of a council tax reduction scheme for a financial year beginning with 1 April 2013 shall not be less than the amount paid in council tax benefit subsidy for the financial year beginning with 1 April 2012.

(5B) The total amount of any grant payable to a local authority in England will be assessed each year or financial year beginning with 1 April 2013 in line with the Government’s New Burdens Doctrine.’.

Amendment 80, line 31, at end insert—

‘(5A) The Secretary of State must ensure that local authorities receive no less in subsidies under the council tax reduction schemes than they would have expected to receive under the earlier scheme.’.

Amendment 78, in schedule 4, page 49, line 39, at end insert—

‘(2A) In circumstances where a deficit arises in the billing authority’s collection fund the authority shall be able to make an application to the Secretary of State for a payment to cover that deficit.’.

New clause 11—Payment of additional grant

The Secretary of State shall be required to pay an additional grant to a local authority if, at the end of any financial year, the total expenditure incurred by the authority under any scheme approved pursuant to Schedule 4 of this Act is greater than the amount of grant received from the Secretary of State to fund the scheme. The amount paid to the authority shall be the difference between the sum originally received and the total cost to the authority of the scheme.’.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

Amendment 79 and the linked amendments, 78 and 80, aim to put this part of the Bill, which devolves responsibility for council tax rebates to local authorities, on the same basis as the earlier parts of the Bill, which we have debated over the past two weeks. Those parts sought to localise business rate revenue. Hon. Members will recall that, during the debates on the business rate localisation, Ministers were emphatic in insisting that the baseline from which the new business rate arrangements would operate should not involve any local authority losing revenue. In other words, the scheme was designed to be revenue neutral in year 1. That is precisely what the amendments seek to achieve for the new local council tax reduction schemes.

My hon. Friend Mr Betts, the Chair of the Select Committee, seeks to achieve a similar result through his amendment 85, which is linked to this group. My hon. Friend Helen Jones has tabled new clause 11, also linked to this group, which seeks to protect local authorities from any additional costs that might fall on them during the course of a year. That might happen, for example, as a consequence of more people becoming eligible to claim benefits if a local factory were to close, or if more people were to lose their jobs for other reasons. Currently, local authorities are reimbursed for unforeseen expenditure, and Government grant meets the full cost of the benefit scheme, which is of course an integral part of the overall national scheme of welfare benefits, including housing benefits, that are the responsibility of the Department for Work and Pensions.

Some would query the logic of separating council tax benefit from the other benefits at a time when the Government are arguing for simplifying the whole benefit structure through the universal credit. However, I do not propose to pursue that argument today. There are good reasons for localising this aspect of benefits to local authorities, but there is no justification for doing it in a way that imposes harsh cuts in benefits from the outset and leaves local authorities, and therefore benefit recipients, vulnerable to further cuts because they have to take the downside risk of any increased expenditure caused by additional benefit claims in-year.

Photo of Andrew Gwynne Andrew Gwynne Shadow Minister (Health)

Do not the Government’s proposals introduce some quite substantial financial risks for local authorities, not least that there are no real needs-based criteria for authorities, as we discussed in earlier sittings of the Committee? Every local authority is different in its make-up and economic circumstances might change within financial years, so there needs to be a mechanism to reflect that need.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

My hon. Friend makes an important point about the assessment of need. The framework imposed by the Government will certainly require local authorities to make very deep cuts in benefit payments to certain categories of people. We will go on to explore some of the implications in later debates; suffice it to say for now that it really is a travesty of localism to say to local authorities, “We are giving you this new responsibility, but we are shackling your ability to do the job properly by imposing, first, an immediate 10% budget cut and, secondly, a total transfer of risk for any future increases in cost; and, thirdly, by requiring you to do this to a rushed timetable that does not allow you adequate time to consult local residents to test the impact of different models for the new scheme, posing a serious risk that the software will not be ready in time to allow orderly implementation.” I am afraid to say that this is a very sad example of a badly conceived scheme being rushed through by a Government who are not themselves going to face the consequences. Local authorities will face the consequences of a lot of very angry and very unhappy residents.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

On that point, does my right hon. Friend agree that the Government know exactly what they are doing and that they are doing it so that when people get angry locally, the Secretary of State can stand by and say that it is not his fault, but the local council’s fault?

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

My hon. Friend makes a very good point. Frankly, I am very surprised indeed that Lib Dem members of the coalition are going along with this—[Interruption.] I am pleased to hear Mr Hancock say what he does; I hope he will demonstrate that in the Division Lobby later.

I am surprised that Conservative Members who have experience of local government, and who must be well aware of the pressures that the Government’s measures will impose on their local government colleagues, are prepared to support such a draconian and ill-thought-out package. Cutting 10% of the cost of council tax benefits at the outset is bad enough, but obliging councils to take the downside risk of a further rise in costs in-year, and imposing conditions that will inevitably force heavier cuts on some categories of recipient, adds insult to injury.

To cap it all, imposing an unreasonably tight implementation timetable without allowing adequate time for local authorities to prepare demonstrates a cavalier disregard for the interests of those authorities, which, not surprisingly, are demonstrating growing alarm. The Government should pause to think about why local authorities, which ought to be welcoming a measure whose intention is localist, are expressing such grave reservations about the implications of this scheme.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

Let me first declare my interest as one who is still a member of a local authority.

Is the right hon. Gentleman, like me, aware that some authorities have expressed the fear that they will have to make cuts in this year’s expenditure to prepare the ground for the implementation of the measure? Once again, the Government are showing no semblance of care about what they are imposing on such authorities.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

The hon. Gentleman makes a very good point. Any prudent local authority treasurer who takes account of the element of risk that is being transferred will inevitably say that there must be cuts in addition to those required by the Government, to provide a cushion against possible circumstances that cannot yet be anticipated.

Amendment 79 requires local authorities, in planning their council tax rebate schemes, to start from the premise that, all other factors being equal, the overall cost of the new scheme should be no more and no less than the cost in the previous year. In other words, it requires a neutral baseline that avoids arbitrary cuts, but also protects Government against the risk that local largesse will increase their own costs. That arrangement is utterly fair, and will operate in just the same way as the arrangement that we all agreed was appropriate for the introduction of the localisation of the retention of business rates.

The system that I propose will not inhibit local authorities from making changes in the current rebate scheme to reflect their local circumstances or priorities. Provided that the overall effect is cost-neutral, they will be free to make as many changes as they wish. This is a truly localist approach, allowing local discretion without imposing unreasonable and arbitrary central diktats.

Amendment 80 refers to central Government support for local expenditure on council tax rebates. It requires the Secretary of State to ensure that local authorities receive no less subsidy than they would have expected under the previous scheme. Again there will be a neutral baseline: a starting point at which the Government will not be exposed to higher costs, but equally local authorities will not be exposed to the risks that are implicit in the Government’s proposals. Amendment 78 is designed to cover the risk of unforeseen increases in expenditure in-year if the number of claims increases by making clear that authorities may apply for reimbursement of those costs.

Photo of Bob Blackman Bob Blackman Conservative, Harrow East

Having read amendment 78, I assume that if it were passed any losses on collection of council tax would enable a local authority to apply to the Secretary of State for reimbursement. As the right hon. Gentleman will know from his long experience, the effect would be to cause virtually every local authority in the country to suffer losses on council tax collection. His amendment would open the door for every local authority to apply for reimbursement.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

If the hon. Gentleman looks carefully at the wording of the amendment, he will see that it allows local authorities to apply, but does not require the Secretary of State to pay. In new clause 11, my right hon. Friend Hilary Benn proposes to go further by requiring the Secretary of State to reimburse. I can see the logic of that, but it is open to the criticism that the hon. Gentleman has advanced. I hope he will accept that I have framed my amendment in an extremely moderate way, in order to make it clear that there should be a presumption that if costs are increased through no fault of the authority involved—not as a result of a failure to collect the money owed to it, but because of circumstances outside its control such as an increase in the number of unemployed people in the area—it should be able to seek reimbursement. The amendments are silent on the obligation of the Secretary of State to meet such applications. Some might say my proposals are rather too moderate, and that I should have shackled the Secretary of State, but I hope Members on the Government Benches will realise that I have tried to frame a very moderate series of amendments that simply seeks to create a neutral starting baseline and to avoid the draconian cuts that will otherwise be imposed on local authorities.

These are sensible amendments that should command the support of the Committee, and certainly of everyone who understands, and sympathises with, the needs of local government.

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee 5:45 pm, 31st January 2012

I support the amendments of my right hon. Friend Mr Raynsford, and I also agree with what he said. Amendment 85 stands in my name and seeks to achieve similar ends to my right hon. Friend’s amendment 79 and consequent amendments. My amendment seeks to localise council tax on the basis that local authorities will have the same amount of money in 2013 as in 2012-13, so that we have a consistent base from which to develop and implement the new scheme.

I am in favour of localising council benefits and of not incorporating the reduction scheme into the universal credit scheme. I know that there are differences of view on that even within parties, but linking council tax benefits with the term “benefit” has discouraged many people from applying for something to which they are entitled. In the previous Parliament, the Select Committee conducted an inquiry into the council tax benefit system and suggested that it should, perhaps, be renamed precisely because the word “benefit” discouraged some people—especially those who applied for nothing else and who were not entitled to anything else—from applying for it. After all, it has one of the lowest take-ups of any benefit, particularly among pensioners. Often, they are forgoing merely £2, £3 or £4 a week, but that can be a relatively important sum for people on relatively low incomes.

As I have said, I support the introduction of this reduction scheme and its both being clearly outside universal credit and being linked to council tax in such a way that people pay a reduced amount of that tax. I should point out that earlier today the Minister defended the imposition of an unwanted referendum for local mayors in Sheffield by his Lib Dem colleagues on the city’s council, yet he will now extol the benefits of council tax. That is a somewhat different position from the one he would have adopted only a few months ago.

Although there is general support for the Government’s proposed change, there is also a problem. If one of the aspirations of renaming the council tax benefit as the council tax reduction is to encourage more people to take it up, the consequences for local government are clear. Previously if councillors had gone out on a publicity drive to improve the take-up of what is currently known as this benefit, central Government would have paid for that. Furthermore, if more people take up the benefit—or reduction—there is a cost in that that also fully falls on local authorities. That is a perverse impact of the Government’s proposal.

Photo of Graham Stuart Graham Stuart Chair, Education Committee

Will the hon. Gentleman confirm my understanding that in a rural coastal area such as the one I represent, which has a high number of elderly people and quite a low take-up of this benefit, if there is a big increase in take-up and there is protection for the elderly, the impact on the council or on the other people entitled to the benefit would be rather large and profound?

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

I could not have put it better myself; that is precisely right—there will be a perverse incentive. If a council gets the older people who are entitled to claim to do so in greater numbers, other council services will be cut, council tax might increase at some point or, if no more money is spent on the scheme, the benefits of people who are not pensioners will be affected. That is precisely the point.

The problem is not with the Government’s attempt to rebadge the scheme or to localise it, but with the 10% reduction at the beginning, all in one go, and the way in which the Government have framed the restrictions on the extent to which local authorities can implement the reduction. Local authorities can always find extra money to increase the cost of the scheme, but is the Minister really suggesting that it will be possible for any local authority in the current circumstances to find extra resources at a time when services all round are being cut for reasons we all know about?

The 10% restriction or cut in the available Government funding comes in from day one in 2013. Pensioners are going to be protected, and no one in the Opposition is going to argue about protecting pensioners because we want to increase the number of pensioners taking up their entitlements, but that obviously means that the 10% reduction will fall on other people who claim the reduction. That is self-evident. I asked the Minister about this yesterday, because the Local Government Association has kindly put forward the information that about half those claiming the benefit are pensioners, which means that half are not pensioners. So if pensioners are protected, that means a reduction of about 20% for other claimants, does it not?

Photo of Andrew Gwynne Andrew Gwynne Shadow Minister (Health)

My hon. Friend makes an excellent point. Is it not worrying that if one section of society is to be prioritised, another, very needy, section is to be penalised, and does not that place councils in the very tough position of deciding who are the deserving poor and who are not?

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

Absolutely. We are told that vulnerable people—perhaps people on very low incomes with children—are going to be protected, or have to be protected, by councils under the scheme, but are they going to be or not? Are the Government going to insist on that? We are not quite sure. We are told that local authorities have to take account of the tapers under universal credit, but what does that mean? Are they obliged to respect completely the 65% taper element within universal credit or not? If so, will that mean that a smaller and smaller number of people will have the totality of the cuts in benefits imposed on them? That is the reality. Will the Government explain what they think is going to happen?

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Does my hon. Friend agree that one problem that the Government seem to ignore is that a lot of the people affected will not be on benefits but will be in low-paid work and that this will be a disincentive for them to work?

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

Of course it will, unless the Government are saying that those people should be exempt as well. To what extent will councils be obliged to take account of the tapers in universal credit in the system they devise? Will Ministers give a clear answer on that? If councils have to take account of it, full stop, that will really throw the onus back on attacking benefits and on reductions for the unemployed. Is that the situation? Is that what Ministers are trying to achieve?

The LGA has done some calculations to the best of its knowledge and information. It says that because of the exemptions for pensioners and others for whom the Government say local authorities cannot make reductions under the scheme, those who are left whose benefits can be reduced—the 1.3 million claimants out of the 5 million who currently claim—will lose, on average, £320 each a year. That is £6 a week being lost by people who are already on low incomes—that is why they are claiming benefits in the first place. That will be on top of any other benefit losses from any other benefit reductions the Government intend. Have the Government analysed whether that £320 figure is right? Do they contest it?

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

The information from the LGA is very helpful, but it is an average. In some areas, the cut will be far worse than £6 a week because the number of pensioners and others who are protected will be greater. In some local authority areas in my constituency, people could lose upwards of £10 a week.

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

The hon. Gentleman is absolutely right—the figure of £320 a year or £6 a week is an average, and there will be people who lose significantly more than that. Have the Government done any calculations to show whether the LGA figure is right or wrong? If it is wrong, will they tell us what they believe the correct figure to be? Have they done any analysis regarding the multiple withdrawal of benefits and situations when the council tax benefit reductions that come as a result of this scheme are laid on top of any other benefit reductions that hit the same families? Have they done any calculations of the total losses that such families may face?

My right hon. Friend John Healey was absolutely right the other day when he said that local authorities are getting a hospital pass here. They are getting a Government scheme with complications, in terms of the totality of the financial arrangements, of which most people will have no understanding. All that people will see is that their council’s scheme will impose cuts in their benefits. It will be councils that get the blame, and no doubt that is where Ministers will firmly put the blame, but it will be grossly and totally unfair.

Another problem is the time scales involved, as my right hon. Friend Mr Raynsford has pointed out. Local authorities will not be able to work at this over a period of time. They have just over 12 months in which to consult on a new scheme, introduce it and explain it to people in their area. There is also the issue of the technology that will come with it, and we know that the technology in new systems being brought in quickly has a habit of going wrong. So not only will many people be faced with the abrupt introduction of these changes affecting their income overnight, but there will be major failings in service delivery as systems do not deliver on time and people end up without any benefit at all.

Photo of Graham Stuart Graham Stuart Chair, Education Committee

I am grateful to the hon. Gentleman for giving way again, as I have to leave the Chamber in a moment to meet the chairman of the Commission for Rural Communities. People in rural areas earn on average less than people in urban areas, pay £100 a head more in council tax and see urban areas getting 50% more in central Government grant than rural areas. There is also a higher average age of population in rural areas, so the impact on the rural poor of further skewing could be particularly profound. Will the hon. Gentleman comment on that?

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

I do not want to get into a debate about whether people in rural areas or urban areas suffer most. The reality is that people throughout the country are likely to suffer and that it will be councils, whether they are Conservative councils in rural areas or Labour councils in metropolitan areas, that get the blame, but it will not be the fault of local councillors, whichever party they represent.

Coming back to my point about speed, I say to the Minister that this is an accident waiting to happen. Some of us have been through significant benefit changes before. When Sheffield outsourced its benefits administration to Capita a few years ago there was complete chaos for 18 months. Some of us have experienced elderly people coming into our surgeries and breaking down in tears because although they have always paid their bills on time they have been unable to do so owing to the fact that their benefit application had not been dealt with appropriately. That is what will happen in the rush that the Government are embarking on. Some councils will get it right but others’ systems will fail because of the speed at which this is being done.

Photo of Oliver Heald Oliver Heald Conservative, North East Hertfordshire

Will the hon. Gentleman amplify his comments about universal credit, because I understood that with universal credit as someone went into work the taper arrangements were such that they would always be considerably better off than they were on benefits? If that is the case and those taper arrangements are to be respected by councils, surely he is wrong to say that people who are just over the limit—those who are in work and on the lowest levels of income—will be worse off.

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee 6:00 pm, 31st January 2012

I am sure the Minister is far better able than I am to explain, because it was his consultation and his response that I have been trying to read. I understand that the council tax reduction scheme is separate from universal credit. The Government do not want withdrawal of council tax reduction as people get into work to affect their income as they earn more to the extent that it increases the tapers by 65% in total and therefore undermines the principle of universal credit. The Government intend the council tax reduction scheme to have regard to that, so it is likely that it will not be possible for the changes to the scheme—the worsening of the scheme—to affect people in work. More of the change and reductions in the benefits available will therefore hit non-working people of non-pensionable age. That is the explanation of the Government’s position, I think, but it would be helpful if Ministers set out their understanding.

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence)

It was interesting to hear my hon. Friend mention Capita, which was at the wrong end of the car crash of IT failings in Sheffield. Capita has stated publicly that it has concerns about this proposal and the speed at which it is being pushed forward. I am sure my hon. Friend will reinforce those concerns in his questions to Ministers.

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

Absolutely. Anyone involved in developing a new system, consulting on it, explaining it and getting the technology right will have real concerns. I just hope that Ministers listen to local councils and the LGA and are prepared to say, even if they go ahead with this flawed scheme, that they will at least delay it by another year, to allow time for further thought to be given to producing a scheme that might deliver without the problems that I have identified arising.

Photo of John Healey John Healey Labour, Wentworth and Dearne

My hon. Friend talks about the tight time scale and the argument for the Government seriously considering putting implementation back for a year. Does he accept that although it is a year today that councils have to have an approved scheme in place—otherwise they will have to use the present scheme—we do not yet know when the Government will require schemes to be submitted for approval, or how quickly they undertake to turn those decisions round, or the principles by which they will require the schemes to operate and therefore be able to get approval—

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Commission

Order. We are in danger of straying into the next group. Please keep in order, Mr Betts.

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

My right hon. Friend is right to say that the time scale is incredibly tight and there are so many potential problems associated with the measure that Ministers really ought to think them through. In the end, the problems will be created not for councils, but for people on low incomes who need benefits simply to sustain themselves. They are the ones who will be damaged if this is got wrong.

Altering the responsibility for any future changes in the number of people claiming council tax reductions is a fundamental shift. Now, if more people claim the reductions, the Government pick up the bill; in future, councils will. The present arrangements, with the Government picking up the bill, make council tax revenue very stable for local authorities. One of my criticisms of previous Lib Dem proposals to scrap council tax and introduce local income tax was that it would make local councils’ revenue unstable, putting them at risk in times of recession, as we had in 2008, and undermining their financial base if unemployment rises. That is a real problem.

Some of us went on a parliamentary trip to the United States after the recession. We talked not to only local authorities, but to states whose budgets were cut to shreds by the recession and the associated decline in their income tax and sales tax revenues. They became unstable because they could not borrow for revenue, just as our local authorities cannot. The current compact between central and local government is that although local authorities cannot borrow for revenue, they know that their revenue will be stable. They set their council tax and they know they will receive the money—council tax has a very low rate of non-collection. That is why I understand the amendment tabled by Labour Front Benchers to compensate councils for changing revenue in-year. There is a real risk not only of longer-term instability for councils, especially those in areas that start to experience economic decline because of the collapse of a particular industry and more people therefore claiming reductions, but in the increased uncertainty for councils year on year. Councils will no longer have certainty. If they do not know whether unemployment will rise in their area and they do not know how successful a campaign to persuade more people to take up the reduction scheme will be, councils cannot forecast their revenue with the normal degree of accuracy.

Ministers do not appear to understand that. Until now, there has been a clear system in this country in which councils cannot borrow for revenue, but they can be sure that revenue will come in so they do not have to borrow. They can set their budget for the year with a good degree of certainty. Ministers appear not to have tackled that issue at all. Local government in this country has been absolutely sound and stable throughout all the recent economic difficulties. The proposed scheme introduces an element of doubt at a time of great turbulence in local authority revenues, when grants are being cut and there is great pressure on services. The Government should think carefully before adding this extra potential for loss of revenue—this extra risk—by pursuing the scheme in such a short time scale.

Photo of Robert Syms Robert Syms Chair, Regulatory Reform Committee

I do not support amendment 79, but think it a useful vehicle for debate on an important subject. In my experience, local government is good at adapting to change, provided that it is given sufficient time to do so. I am sure that local authorities will be able to adapt to the Government’s timetable, but there are many pressures in different areas. First, most authorities are cutting spending; secondly, they will have to grapple with the 10% reduction; and thirdly, the Government have stated clearly that that should not affect pensioners. In an area such as Poole, with a heavy preponderance of pensioners, the burden will fall on a small minority of those claiming that benefit. Fourthly, as most local authorities will have to freeze their council tax, or will freeze it anyway, and have limited balances, they may well err on the side of trying to ensure that they get their figures correct and that there is no cross-subsidy in terms of the benefit falling on the council tax payer. A perverse incentive may arise to make larger reductions in support for the vulnerable than the figures necessarily entail, because authorities do not want to take the risk.

The current system is predictable in the sense that it is running and the Department for Work and Pensions can transfer money equally on a monthly basis. The direction of travel in localisation is fine and I am sure that many local authorities can draw up good schemes, but in year one the new arrangements will not be as predictable. Some authorities will draw up schemes that turn out to be more generous than they thought, and others will draw up schemes that are less generous than expected. Ministers have to consider what will happen when a scheme is got wrong, because as sure as eggs are eggs, there will be one authority that gets its figures substantially wrong and has a problem.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

The problem for authorities such as mine in County Durham, where a large number of people receive council tax benefit, will perhaps be bigger than for some of the smaller authorities, where there are relatively few council tax benefit recipients.

Photo of Robert Syms Robert Syms Chair, Regulatory Reform Committee

I am certain that the measure will have a different effect on different authorities. We need a little bit more clarity from Ministers: will there be emergency funds that can be drawn on if there is a difficulty in the short term?

Of course, what makes it complicated is the fact that the Government are looking for savings because of the overall economic situation. We have to make savings; we are looking to make savings of £420 million, and that makes things much more difficult. Again, speaking from my experience of local government, it is sometimes in a position to deliver savings, given a chance, but as we have heard in this debate, if there is pressure on council tax and council tax benefits, something will have to give. I therefore have concerns about the Government’s direction of travel, and I hope that the Minister can reassure us that they have thought about what would happen in an emergency.

Clearly, if a local authority has to deal with a reduction and is given maximum flexibility to do so, sometimes it can deal with it, but if it is initially told, “You must protect pensioners,” the impact of the reductions may fall on a smaller number of people. We recently heard exchanges across the Chamber about universal credit; that credit may offset some of that, but that might mean that the non-working faced the worst situations. The issue needs careful thought. I am sure that the Government’s timetable can be kept to, but we have to think very carefully; if lots of new schemes are invented following consultation, some people will get them right, some will get them wrong, and some will over-egg the savings, and that may well have an impact on our communities.

The Library briefing says that the reduction might partly be an incentive for local authorities to create jobs, but I am not sure that local authorities can wave a magic wand and create jobs in six months, a year or two years. Over a period of time, if authorities have active economic development departments, build capacity on industrial estates and try to attract firms, they might be able to have some impact. However, from a practical point of view, when it comes to dealing with the problems that arise when the measures are implemented—and perhaps in the year or two after that, in what we all know will be quite difficult economic circumstances—I do not think that councils have the ability to change the number of people in or out of work in their area. That is a long-term thing, not a short-term change that can be made in months, so I have some concerns.

Poole borough council, my authority, is having to deal manfully with the need for a number of savings; dealing with the measure, on top of that, will be difficult. I hope that we get the scheme right in Poole, but if we do not, I hope that the Government have thought about how they will deal with the consequences.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

It is a great pleasure to be under your chairmanship, Mr Crausby. We have heard hon. Gentlemen on both sides of the House express real concerns about how the scheme will work in practice, and particularly about what will happen in authorities with a large number of pensioners. Hon. Friends have spoken about the need to start the scheme on the right basis—a neutral basis—and to ensure that councils are adequately funded for the scheme that they are being asked to bring in.

I want to speak about new clause 11 in particular, which seeks to address some of the real financial risks that are being transferred to local authorities. Many hon. Members will remember that last week we debated clause 3, which changed the requirement to pay a grant to a power to do so. In that debate, as in all our debates so far on the Bill, the Government refused to clarify how they would distribute money, fund local authorities and meet the costs of the duties that they seek to impose on them. That is exactly what the Government are trying to do with the localisation of council tax benefit. We are back to the old game of ensuring that the blame for their cuts is taken elsewhere. New clause 11 attempts to ensure that local authorities are reimbursed for expenses incurred as part of the council tax reduction scheme.

The 10% cut in funding that many hon. Members have referred to, along with protection for pensioners, which the Government rightly want to ensure, means that others will face much larger cuts in their benefit. We will debate many of those issues under the next group of amendments.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Does my hon. Friend agree that that includes the 1.9 million people in receipt of council tax benefit who do not have passported benefits?

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

Yes, I agree, and we will consider those people as we proceed with discussions this evening. That is the group most often forgotten about in these discussions, and the most at risk.

There is also a huge risk to local authorities; councils will find themselves bearing all the risks of the scheme, because there is to be a move from annually managed expenditure, whereby local authorities were reimbursed for correctly processed claims, to a grant—a grant, moreover, that has to come within the Government’s expenditure totals. Any rise in benefit claims—any unforeseen problems such as the closure of a major employer—will mean local councils bearing potentially large costs, with no guarantee of reimbursement from the Government.

If the Government move to multi-year settlements—it seems from the response to the consultation that they want to do so—that financial risk will simply increase. According to their response to the consultation, the Government believe that the problem can be tackled by billing and precepting authorities sharing risks, and that deficits can be tackled either by a general increase in council tax, which, as many hon. Members have said, is difficult in the current circumstances, or by allowing billing authorities to vary the amount of precept paid to precepting authorities to

“reflect any fluctuations in collection rates”,

as the Government put it. In other words, that transfers part of the financial risk not back to Government, but to another authority, thereby creating further instability in that authority’s system, and the result is likely to be cuts.

Although the Government have said that they will assess the transitional costs of the scheme—whether authorities will be reimbursed for all those costs remains to be seen, because there is not a great track record on this—that does nothing to tackle the inherent financial risks, and the built-in disincentive to encourage people to make claims. In the past, many local authorities have done excellent work encouraging people to claim the benefits to which they are entitled. I am sure that many of them will still do so, but now, if a council encourages more people to claim, it will have to bear the costs, and that is a ridiculous system.

Photo of John Healey John Healey Labour, Wentworth and Dearne 6:15 pm, 31st January 2012

My hon. Friend is making the clear and strong case that the new scheme will increase the financial risks to local authorities. Does she accept that local authorities will therefore have to increase their financial reserves, and to do that, they will have to increase the cuts that they make to expenditure, and possibly to services?

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

My right hon. Friend has got it exactly right. In fact, throughout the passage of the Bill, we have seen that much more instability will be built into the system, whether that is on business rates or council tax localisation. The inevitable consequence is local authorities building up bigger reserves, because no local authority finance officer would advise their authority to do anything else; it has to be prepared for the worst-case scenario.

Photo of John Healey John Healey Labour, Wentworth and Dearne

My hon. Friend is making the case very cogently that council treasurers will take a prudent view; does she agree that that runs completely counter to the advice that councillors are getting from the Secretary of State, who is talking about reserves being “piggy banks”, and who says:

“These untapped funds exist to ensure councils can respond to unexpected situations like the pressing need to tackle the nation’s unprecedented level of debt”?

That advice clearly runs contrary to the principles of good local government, and it simply will not and cannot be followed by councils.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

My right hon. Friend is again absolutely right. The Government are a little schizophrenic on this, saying to local authorities, “Don’t build up big reserves,” while at the same time building instability into the system, which will require local authorities to build up bigger reserves.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

I agree entirely with the point made by John Healey. The real problem is that local authorities that cut their reserves will be penalised by their district auditor, who will say that cutting reserves below a certain level is not stable local government. The right hon. Gentleman is right to suggest that the Government cannot have it both ways. This is putting pressure where it is simply not needed.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

That is a very fair point. The problem is that instability is being built into the system. My hon. Friend Mr Betts said that one of the things about local government finance in this country is that it has always been relatively stable and did not have those risks—

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

It is no good the Parliamentary Private Secretary chuntering away—it will have no effect. I spent years dealing with stroppy 15-year-olds on wet Friday afternoons, and he is no different.

Let us really look at this. If the Government are serious when they say, as the Housing Minister did when he spoke to the Communities and Local Government Committee, that councils should not avoid paying those who really need it, then they have to be prepared to meet the unforeseen costs. Why should a person living in a particular authority be penalised simply because a major employer in the area closes down or more pensioners claim? My hon. Friend the Member for Sheffield South East said that it is estimated that only between 57% and 66% of pensioners claim because council tax benefit is classed as a benefit. All those who are experienced in this area say that, once it is seen simply as a reduction in the bill, claims from pensioners are likely to rise. That is a good thing, but the costs have to be met, and it is unreasonable that entitlement for other people should depend on how many pensioners live in their area. They will be penalised because of an increase in council tax, cuts in other services or cuts in benefit to working-age people when the scheme is later revised. It makes no logical sense.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

Purely for the purposes of investigation, does the hon. Lady have any figures—I understand that there will be a wide variety across councils—for the percentage of spending power that is represented by the 10% cut?

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

I could give such figures to the hon. Gentleman, but I am afraid that I do not have them at the moment, and they vary greatly from council to council. He raises an important issue. Local authorities that have many council tax benefit claimants will see a bigger cut in their spending power, and that is part of the problem.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Although £55.1 million a year is paid out in council tax benefit in County Durham, less than £3 million is paid out in Hart district council in Hampshire.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

Does the hon. Lady agree that the spending power of each of those councils is incredibly different and that the percentage change in their spending power represented by a 10% cut in the council tax bill, despite the varying levels of council tax bills, might be roughly similar? We do not know.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

I do not think that is correct. We will debate that with the next group of amendments, but I will make a little progress now.

The point of a national scheme is that risk is spread. If we move to a localised scheme, we must have some way of dealing with risk, but there is no way of doing that in this scheme. The Government cannot seriously argue that the closure of a major employer, for example, is a council’s responsibility. I know that, according to the Government’s “not me, guv” approach, nothing is their responsibility, but even they must accept that they are responsible for the national economy, not Warrington borough council, Nottingham, Carlisle or anywhere else. If a major employer closes, the local authority must have some way of dealing with it.

Our new clause would ensure that the Government’s power to pay a grant is used to meet any shortfall if a scheme costs more in benefit than the Government had originally agreed to pay to a local authority. Ministers ought not to be too concerned about this, because after all they have to approve the schemes, and they are not being asked to make an open-ended commitment. They approve the scheme and how it works, but a cash-limited budget cannot cope with sudden surges in demand. In fact, the Government admit that in their own impact assessment, which states:

“If demographic changes or economic circumstances mean that eligibility for council tax support increases significantly then the consequence of switching”— from annually managed expenditure to departmental expenditure limits—

“will be that authorities bear more of the risk of a shortfall in funds.”

The risk of a shortfall or serious economic turbulence destabilising a local authority’s finances and, what is more, the poorest people in the area having to pay the price is not something that any Opposition Member, or I suspect a few Government Members, can accept. We have tabled new clause 11 because we believe that it would deal with the problem, and it might be helpful if I let you know, Mr Crausby, that we will seek to divide the Committee on that when the time comes.

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole

It is a pleasure to serve under your chairmanship, Mr Crausby.

On the first stream, we are focusing on the 10% cut, which leads to all the other problems identified in subsequent streams. I accept that in addition to the 10% cut there are unexpected changes in the number of claimants and that apparently there is no cushion for that situation. Although I do not support the amendments that have been put forward, it is important to flag up the problems, which must not be ignored.

Let us consider the situation for a council faced with setting up a new system. Any savings it will be able to make through localisation of council tax benefit will need to be offset against the administrative costs it will incur. I accept that there must be some savings, because otherwise there would not be the same need for external audit when money is sent to the council to cover payments, but will the Minister state explicitly where the money will come from for the inevitably large cost of setting up individual schemes, particularly in the first year. There is of course the possibility that councils will work together, which would reduce the administrative costs of setting up new schemes, but they would then lose the advantage of localisation, because even an adjoining local authority will have a different demographic make-up. As soon as we focus on the 10% cut, we think about the demographic make-up.

I share some of the concerns that have been raised across the House. Once we ring-fence pensioners—we probably all agree that they should be protected—we effectively put a gearing effect on everyone else. By the time we have picked out families with a disabled member and other vulnerable groups, the reduction in council tax benefit, which might have started as an average of £2 a week, will start escalating on the backs of just a few people to £6, then £10, all depending on the make-up of the local authority area.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

I am finding it a little difficult to reconcile most of the hon. Lady’s speech and, in particular, her point about the impact of the 10% cut, which she clearly sees as damaging, with her earlier statement that she cannot support the proposed changes. Amendment 79 would quite simply allow the scheme to start on a revenue-neutral basis without the 10% cut, so what objection can she possibly have to it?

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole 6:30 pm, 31st January 2012

At this point in time, it is easy to put such amendments forward, but one has to identify where the money is going to come from, and I shall touch on that in a moment, because there are two sides to the issue: first, what needs to be addressed, but, secondly, how we finance it. That is quite important.

Returning to the point I was making, I wish to emphasise that we all have constituents who come to us with a breakdown of their weekly expenditure, and we all know how little there is to spare in some of those budgets, so the possibility of losing £6 to £10 of benefit is truly frightening.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

The hon. Lady talks about constituents going to her surgery. When they start going in 2013, after their benefits have been reduced, will she tell them not just that she voted in support of the measure, but that it was brought in only because the Liberal Democrats supported the Secretary of State?

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole

At this stage, we are debating, and I hope all trying to be constructive about, the direction in which we would like the Bill to go, and it is important to be constructive, rather than to look for an immediate political hit.

Returning to the point I was making—

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole

I have given way several times, and I shall proceed in order to retain the flow of my speech. There are concerns, and it is right that we discuss how we address them.

A further concern is how the burden of the proposal is to be shared between the billing authority and any other authority that might be involved, such as a district or county council. I give the example of East Dorset district council, which last year had a revenue support grant of just £29 per head, meaning that it has very little flexibility with which to pick up any extra costs. So this is a matter not only of working with other councils, but of coming up with a clear solution to the issue.

I share the concern about whether the scheme can be introduced within the proposed time frame, which looks tight. The major software companies say that it cannot be done, but we know the timetable we are on: July for the Bill, October for the regulations and then the consultation on schemes. Can it be done? I want Ministers to address those questions and to give more thought to how the issue is going to be handled.

Photo of Robert Syms Robert Syms Chair, Regulatory Reform Committee

There also needs to be consultation between local authorities. The hon. Lady represents two or three districts, and we in Dorset know that somebody can move from a home in Poole to one in Bournemouth or in east Dorset, but, if there are totally different housing benefit and council tax schemes in those areas, that too could have a perverse effect, so local authorities next door to each other will have to talk as well.

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole

Yes, indeed. Such local authorities will need to talk to one another, and it will be difficult to get the right balance between a truly local scheme and work with adjoining authorities—I suppose I am talking about working across, horizontally and vertically. It is not clear from the Bill how a district council will cope with the issue

The string of amendments under discussion is about funding, and the concern all comes from the 10% cut. There are potential extra revenue streams, however, and they need to be addressed. I appreciate that point, given the modifications to the second homes and empty homes premiums, but it is unlikely that we will get an absolute match between the money that is lost and any money that might be gained, so we need to look at that aspect.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

Does the hon. Lady accept, however, that the second homes premium and, even, the empty homes premium do not apply in many local authorities? There are very few second homes in Warrington, so there will be no extra revenue going to the local authority from that premium.

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole

The very point I was making is that there are variations throughout the whole country, so there needs to be some sort of stabilisation, contingency, transition—whatever we want to call it—because of the differences throughout the country and the possibility that the measure in the Bill will hit some very vulnerable people very hard. I make a plea to the Minister, even if he cannot give me the answers that I might want to hear today, to go away and look at all those issues, which have been raised on both sides of the House.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

It is a pleasure to serve under your chairmanship, Mr Crausby.

What we have seen from the hon. Member for Mid Dorset and North Poole is a classic Liberal Democrat tactic: sit on the fence, give an impression—obviously with a leaflet out this weekend—of how she opposes and spoke against the proposal, and then go along and vote with the Government. I remind her, however, that if she and her Liberal Democrat colleagues choose to vote against the Bill, this Government will not get it through. Although she raises articulately the issues that will affect her local council, she cannot get away from the fact that, when these draconian proposals come in and affect many councils, including her own, there will only be one person whom they have to blame, and that will be her for voting for them.

I hope that, come the general election, people reflect on that point, because this is not about the Conservatives doing nasty things to Dorset, but about the Conservatives and Liberal Democrats doing nasty things to local government, and the hon. Lady is taking part in it. I am sorry, but I am not prepared to see her shed crocodile tears for the proposals and then troop through the Division Lobby. If she believed in what she was saying, she would vote against the measures and stand up for local government, a sector that I understand she comes from herself.

It was said last week that what local government requires is stability, and it does, but this is another example—we had one last week with the localisation of the business rate—of massive instability being introduced to local government. My hon. Friend the Member for Sheffield South East said that there was nothing wrong in principle with devolving council tax benefits to local councils, and I totally agree, but if it is brought in with a 10% cut, as the Bill proposes, and on the current time scale, it will have a massive effect on many local councils and individual recipients of council tax benefit.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

I do not agree with the benefits being devolved to local authorities, so what does the hon. Gentleman, who is arguing against localising the benefits under discussion, see as the real benefit of doing so?

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

I would have no problem with a national scheme that was administered locally. The current system with the DWP is cumbersome, but I agree with the hon. Gentleman, because the Bill is going to create an absolute technicolour dreamcoat of schemes throughout the country, including some next door to one another, as we have just heard, in Poole, where two local authorities could have two completely different schemes because of their local circumstances.

However, this is a cleverly construed proposal, and we have to keep exposing what the Secretary of State is up to, because he talks about the devolution of decision making, which is what the measure is, but it is the devolution of decision making—with blame. He is instigating a cut of 10% in council tax benefits and saying to local councils, “Right, you decide how it will actually be administered.” Then, when they take those tough decisions, he will stand back and say, “It’s not my fault, it’s the local council’s fault.” I remind Government Members that that will include Liberal Democrat and Conservative councils. They will have to make tough decisions. The Secretary of State is prepared to hide behind those councils. I accept that he has written off most Liberal Democrats and does not care about them, but the effect will also be felt by local Conservatives.

Amendment 79 is actually quite modest. It states that if we are going to introduce the new scheme, we should start on a neutral basis. It asks for a level playing field so that everybody knows where they are, with no 10% cut. We will talk later about time limits. The fact that this all has to be done by 31 January 2013 will scare many local authority treasurers to death. They are having to second-guess what contingency they will need to bring the scheme in.

The Bill makes no assessment of the differences between councils. Councils with a large number of council tax benefit recipients, which are mainly in the north of England, will not only have the problem of administering such large numbers of people, but will be disproportionately affected. I will give some examples. County Durham has 63,494 council tax benefit claimants, which is 15% of the population. That costs £55.1 million. In comparison, Hart in Hampshire has only 3,029 council tax benefit claimants, which is 4.2% of the population. That costs a mere 3% of expenditure. Likewise, the famous Wokingham, which we cited last week, has only 5,159 claimants, which is 3.9% of the population. That makes up 5.3% of the council’s total expenditure. The 10% cut and the administrative nightmare of bringing it in will be a lot easier to manage for councils with a small number of council tax benefit recipients.

The Secretary of State talks about localism and devolving matters to local councils, but if we read the Bill carefully, we see that he has kept back powers for himself. If he is not happy with the scheme or a council does not implement it by 31 January 2013, he has the power, by order, to implement it. It is not clear whether he will intervene in that way if he is not happy with how a council implements the scheme.

The hon. Member for Mid Dorset and North Poole is correct that the problem with the scheme is that it comes with the 10% cut. It is important to look at the people who are in receipt of council tax benefit. The myth peddled in the media and by the Conservative party is that they are largely people on benefits. The statistics to September 2011 show that 5.9 million people are in receipt of council tax benefit in Great Britain. Of those people, 2.2 million are pensioners, who will not be affected by the scheme. Of the people who will be affected, 1.9 million or 33% are in receipt of standard non-passported benefits—that is, they are not claiming benefits—and the remaining 3.9 million or 67% are on various benefits. Of the people on benefits, 1.3 million receive income support, 600,000 receive jobseeker’s allowance, 300,000 receive employment and support allowance, and 1.7 million receive pension credit. A large number of people, through no fault of their own, will see their incomes squeezed.

Once the 10% is cut and the pensioners are taken out, if the number of recipients in an area grows through unemployment, for example, the local council will have two choices: it could cut benefits further, which is what some will do, or it could raise council tax to plug the gap. As we saw last week, the problem is that the ability of councils to raise council tax differs. In north-east England, where 50% of properties are in band A, the option for councils to raise council tax is limited, compared with Surrey, where the figure is 2%.

Will the scheme disproportionately affect councils with a large number of council tax benefit recipients? Yes it will. The 10% cut will lead to a lot of uncertainty over the next 12 months, because council treasurers do not know what income they will get. It will be difficult to bring the scheme in within the time scale set by the Government. As my hon. Friend Helen Jones said, if there are large numbers of job losses in certain areas, will the councils be compensated? They will not be, under the proposed scheme. The burden will fall on deprived areas, causing them a double whammy.

When we discussed business rates last week, we talked about Alcan, a large employer in Northumberland that employs 500 people. If we lost that one employer, most of those people—most of whom live locally in Northumberland—would apply for council tax benefit. That would add a burden to the council, which is Liberal Democrat-controlled at the moment, but will not be for much longer if the proposals are passed.

The amendment is modest and asks only for a level playing field at the start. Having seen previous Governments mess around with local government finance, I warn the Minister that when things are done in haste, they always come to be regretted. I think that the Government will come to regret this proposal. When this mess happens, we need to say from day one that it is the fault not of hard-working local councillors, but of the Minister, the Government and the Conservative and Liberal Democrat Members who voted for it.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley 6:45 pm, 31st January 2012

Some persuasive points have been made in the debate so far and I urge the Government to take them on board. However, I also find the Minister persuasive and I look forward to hearing what he has to say.

I wish to speak briefly about a funding issue that is not strictly related to the amendments. I hope that you will allow me to stray slightly off the selection list, Mr Crausby, on the basis that we are unlikely to have a stand part debate. I wish to talk briefly about parish councils. Annette Brooke talked about horizontal and vertical integration, but I want to go downwards to look at parish councils and where their funding comes from.

At the moment, certainly in my constituency of Meon Valley, several parish councils take in council tax—or rather in precept—pretty much the same as the district council. As far as I can see from the Bill and the consultation on the Bill, there is no provision to pay any of the grant for reducing council tax to parish councils. There is mention of district councils, first-tier councils and precepting authorities such as fire authorities and the police, but as far as I can see there are no arrangements to compensate councils at parish council level for moneys they might forgo because people require council tax benefit. It seems to me that this issue needs to be dealt with.

In my area, Bishop’s Waltham and Denmead parish councils would rely entirely on the beneficence and good nature of the city council to fund their activities if they were not directly grant-aided. I would love to hear the Minister’s thoughts.

Photo of John Healey John Healey Labour, Wentworth and Dearne

It is a real pleasure to serve under your chairmanship, Mr Crausby.

I rise to support the amendments and new clause in the names of my right hon. Friend Mr Raynsford and my hon. Friends the Members for Sheffield South East (Mr Betts) and for Warrington North (Helen Jones). The problem, which my right hon. Friend the Member for Greenwich and Woolwich hits on directly in his amendment 79, is that council tax reduction schemes will be undermined from the start by the 10% funding cut and the constraints that the Government are putting in place to compensate for the problem that it will create.

Throughout the part of the Bill dealing with council tax, we consistently see hallmarks of the scheme that run contrary to the Government’s declared aims. It shows a lack of true localism and a transfer of considerable financial risk from central Government to local government, which promises to have a severe impact on support for many current recipients of council tax benefit. The Bill also sets out an unrealistically and unfeasibly tight time scale.

The Secretary of State is more sophisticated than the image and manner that he often cultivates would suggest, but his politics on this matter are brutal and brutish. In my view, the intention is simply to transfer to local authorities the financial risk of the increasing cost of support for council tax costs. The Government want to get local authorities to take the blame for the cuts being imposed by central Government.

Financial risk is crucial for any local authority when it considers the future. Authorities are being asked to take on the new risk without the flexibility to allow them to discharge the responsibilities that they are taking on fairly, effectively or appropriately for their area. Whether the 10% cut leads to pressure on councils’ funding, pressure for them to find cash from other sources or greater cuts for those who are not protected will depend on how the cut is distributed across local authorities, local decisions on the design of the scheme, the make-up of the population within an authority’s area, the proportion of people who are protected by central Government and the degree to which the move from a council tax benefit to a council tax discount encourages take-up among people who are already entitled to support but do not claim it.

Central Government would not make this move if it affected themselves. As my hon. Friend the Member for Warrington North said, they are transferring what is currently annually managed expenditure—the current costs of the council tax benefit scheme are driven by factors that are not under the control of councils—to funding that is covered by the local government departmental expenditure limit. That will put an unrealistic and unfair funding noose around the neck of local government, because the year one base level will involve a 10% cut. My fear is that what could and should be a good move for local government and the people it serves—a locally designed council tax support scheme—is damaged and discredited before it starts by the design of the scheme.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

May I say how nice it is to see you in the Chair, Mr Crausby?

I wish to raise my concern about the fact that we are approaching 7 o’clock and will hardly get halfway down the selection list. The time available is totally inadequate. Goodness knows what the Government were thinking about, giving us just three days in Committee. It is an absolute travesty. I only hope that they will give us at least one whole day, and possibly two, on Report to allow debate on many of the matters that have not been discussed in Committee.

If the House is to do justice to the Bill, we should at least get a chance to discuss some of the very important amendments that have been tabled. I see them not as wrecking amendments but as helpful, creative amendments that would show the Government the strength of feeling in the House. Legitimate concerns have been raised from both sides of the House on this group of amendments alone, and if I were the Minister leading the Bill I would like to give the House more time to discuss them properly. If we are not careful, we will end up with a dog’s dinner, which cannot be right or fair to local authorities.

The most important issue in this group of amendments is raised in new clause 11, with which I agree entirely. It gets to the very essence of what the Committee has discussed on previous days. It is about the stability and sustainability of local government and its ability to stay clearly focused on its task. Support for new clause 11 is essential to give local authorities a fair chance of implementing the scheme.

The Government have expressed no clear and positive view about what they can do to help local authorities. I ask Ministers what is wrong with new clause 11 if they believe in fairness and in giving local authorities a proper opportunity to get the scheme right. Who will benefit if it is got wrong? No one, least of all the people who claim benefits. Most of the blame will fall on local authorities, and once again we are going down the well trodden path whereby the Government decide to disrobe themselves of their responsibilities and pass them off to local government, but forget to put the resources in place to help things happen.

I do not suppose that at the end of this debate the Minister will dish out to Members a scheme that has already been concocted, so that they can take it back to their local authorities and say, “This is the scheme we want you to use. We’ve paid for it, we’ve got it in place, and all you’ve got to do is tweak it a little. It’s tried and tested, and we’re prepared to give it to you.” That is not going to happen, is it?

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Does the hon. Gentleman not understand that the Secretary of State is a highly political individual who knows exactly what he is doing? He knows that he is going to save money by making this change, and he will give constituents in Portsmouth and Durham the impression that it is nothing to do with him but is down to the nasty councillors who are making the tough decisions.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

The Secretary of State will be making a grave error of judgment if he thinks he is going to get away with that in Portsmouth, because I will be telling people there loud and clear where the responsibility for the change lies. Above all, I am disappointed that a Secretary of State who was groomed in politics in local authorities and who, having led one, has a fundamental understanding of their problems is not being more responsible towards something that I thought he cherished and cared for. Like the hon. Gentleman, I am disappointed, but I can assure him that people in Portsmouth will not have any illusions about where the blame lies.

Portsmouth is a local authority that is making reductions, and many hon. Members’ local authorities are in the same position. People are losing their jobs, and here we are contemplating another burden that will be placed on them with not even an indication of what it will cost to put in place. I know from bitter personal experience, having led a local authority, how much money can be lost when authorities get the wrong advice on a system. Hampshire county council squandered literally tens of millions of pounds over a 20-year period on schemes that failed in one way or another, and I do not want that to happen again.

Where is the inspiration that we ought to be getting from the Minister about how we can resolve the problem easily? Where is the offer to meet the House halfway on this issue? Nowhere. That is disappointing. If there are to be localised benefit systems, I want us to find a way to get a scheme in place in good time, but in proper time. That cannot happen in the time scale before us. If we are to have a change in the system, it must be seen to be fair and properly implementable. The scheme cannot punish those who desperately try to get into work but are on low pay.

The proposal is nothing other than a disincentive. How many of us would like to cope with losing £20 a week out of the minimum wage? How many of us would still believe that it was worth trying to continue to work? There is a disincentive, for which it is hard to find an excuse. I cannot. I hope the Minister can because I look to him to offer some wisdom about why people on a very low income, who will lose possibly as much as £20 a week, will not see the provision as specifically targeted at hurting them. I thought that we were elected to prevent that.

Photo of Robert Syms Robert Syms Chair, Regulatory Reform Committee 7:00 pm, 31st January 2012

I am listening carefully to the hon. Gentleman’s passionate speech. Clearly, apart from potential costs for software and computers, a scheme will have to be drawn up and publicised. All the schemes will be different, which means that there will have to be a lot of publicity locally to ascertain what people are entitled to. We need some answers.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

I agree entirely. Some hon. Members like me, have close-knit communities that are right next to communities in other local authorities. People on one side of the road will have a different scheme from those on the other side. It will be horrendously difficult to explain why one scheme prevails in Fareham and another in Portsmouth. Indeed, George Hollingbery will have great problems, given the different districts that his constituency abuts. I therefore ask Ministers to consider seriously coming back on Report with something that shows they have heard the cry from local authorities. It is heartfelt and not just for effect. The Local Government Association has not done all that work to sustain its arguments without a great deal of effort.

In the spirit of trying to be constructive, I hope that if we are to have a day—or even two—on Report, creative thinking in the Department will soften some of the provision’s effects. Otherwise, I shall vote against it not only tonight but on Third Reading.

Photo of George Howarth George Howarth Labour, Knowsley

George—not only a different party, but an entirely different politics, Miss McIntosh.

It is a pleasure to follow Mr Hancock. Both he and Annette Brooke made a plea for constructive suggestions. I tried to intervene on the hon. Lady’s contribution with a constructive suggestion, but I think she thought that I was going to be disagreeable, and she refused to accept my intervention.

Many hon. Members have mentioned the consequences of protecting pensioners in the overall scheme, and I will not labour the point. It is important to say at the outset that nobody on the Opposition Benches and, I am sure, elsewhere, disagrees with the principle that pensioners should be protected. It is an important principle, to which we all subscribe. The difficulty that we are trying to address is not the Government’s decree that pensioners should be protected but their failure to deal with the consequences of that in the context of a 10% overall cut.

Some contributions have referred to the impact. For example, Mr Syms wanted more information about how the proposal would work in practice. I would like to rely on a briefing that the special interest group of municipal authorities—SIGOMA—has given me. It is a local government representative group, but of a particular set of local authorities. It concludes that, to protect pensioners’ council tax credit, the rest of council tax payers nationally will face a reduction of 17% rather than 10%. We are talking about averages, and we discussed the problem of averages earlier. The range means that, at the bottom end, the figure will be 13.4%, and at the high end, it will be 25.2%. Those who have concerns should take those figures into account.

I will talk about Knowsley shortly. It is a Knowsley problem—there is a distinct flavour of Knowsley to it—but every hon. Member will be confronted with it if the scheme is implemented in its current form.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Does my right hon. Friend agree that the scheme will disproportionately affect constituencies such as his and mine in Durham, which not only have many people in receipt of council tax benefit, but a growing elderly population?

Photo of George Howarth George Howarth Labour, Knowsley

Yes. There might occasionally be disputes about the scale, but every demographer recognises that people are living longer and that there are therefore many more elderly people in the system.

Photo of Robert Syms Robert Syms Chair, Regulatory Reform Committee

The right hon. Gentleman is making a powerful point, but is it not more likely that, rather than having a cut of 15% or 17% across the board, the numbers will be more limited, so some people will have a cut of 100% because not as many will qualify?

Photo of George Howarth George Howarth Labour, Knowsley

The hon. Gentleman is right. That underscores the point that he and others made earlier: to some extent, we are taking a leap in the dark. Several hon. Members have said that one of the difficulties with local government finance is that, when you change it, the impact is unpredictable. I do not need to rehearse the history of the poll tax to show that. The position that we are considering is exactly the same in that it is unpredictable and volatile.

Photo of John Healey John Healey Labour, Wentworth and Dearne

The effect is uncertain, but it is possible to make some projections. In my authority of Rotherham—a member of the SIGOMA group—if the pensioners are protected in the way in which the Government clearly believe that they will be, everyone else who is currently entitled to support, including many who work but get low wages, and therefore require and have a right to that support, will take a cut of not 10% but 19.5%.

Photo of George Howarth George Howarth Labour, Knowsley

My right hon. Friend makes a strong point, which I hope to tackle shortly.

Currently, many people, especially young people, have to accept jobs, often well below the level of their qualifications, on a minimum wage, at the same time as having to forge an independent existence from their families. I fear that they, or young couples with families, in which the principal earner is on a low wage, will be most affected and put in an impossible position, unless the discretionary powers that the Bill describes are spelled out clearly so that the outcomes cannot be arbitrary. We deserve to know at least what the Government are planning, and that should appear on the face of the Bill. Who are the classes of people? There are vague descriptions in schedule 4, but nothing is spelled out clearly.

I said I wanted to talk about Knowsley and the Liverpool city region. I am indebted to the director of finance in Knowsley for the impartial briefing he has given to me—it is a Labour authority, but he has provided advice on the basis of his financial experience and qualifications. His view is that the 10% cut combined with pensioner protection means that the benefit of other claimants will have to be cut by 18%. If there is provision for others in a local scheme—they could be singled out or ring-fenced—that 18% cut could increase to as much as a 100%, because people could be excluded altogether, as the hon. Member for Poole said.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Does my right hon. Friend agree that those same people will also be affected by the Welfare Reform Bill? For example, some will lose money under the under-occupancy rule in addition to their losing their council tax reduction. Many such people are in work.

Photo of George Howarth George Howarth Labour, Knowsley

I am grateful to my hon. Friend. If he bears with me, I will cover precisely that point shortly in the context of the Liverpool city region, but I am sure the same trend applies in his constituency.

Photo of Robert Syms Robert Syms Chair, Regulatory Reform Committee

Another question is whether we can differentiate council tax payers from non-council tax payers. What happens when there is a split household, in which one person is a pensioner and one is not? What happens when someone becomes a pensioner in-year? There will be so many months when they are not a pensioner and so many when they are. That also needs to be explained.

Photo of George Howarth George Howarth Labour, Knowsley

The hon. Gentleman, who is always fair and reasonable, makes a fair and reasonable point. I hope that the Ministers, who represent the two parties in the coalition, will at least take notice of the concerns that have been expressed from the Government Back Benches, even if they do not take notice of what Opposition Members say.

The Office for National Statistics estimates that pensioner take-up of Knowsley council tax benefit could be as low as 53%, but there could be a significant increase in take-up as a result of a localised scheme, which would place a disproportionate burden on other categories of people. If a greater number of pensioners take up the scheme, which is perfectly possible, the 18% I mentioned could be still higher.

My hon. Friend Mr Jones has been patient, so I shall speak about the effects of other measures. It is important that the changes are not taken entirely in isolation. We will talk about welfare reforms tomorrow, but a series of measures will combine to hit some of the poorest in society.

When Labour was in government, I remember the Opposition hammering us by saying, “Well, the Institute for Fiscal Studies says something different from what the Government say.” If that is good for Conservatives and Liberal Democrats when they are in opposition, it is good for Labour Members. “The Impact of Austerity Measures on Households with Children”—an IFS report published this month and produced on behalf of the Family and Parenting Institute—found that the planned changes in the tax and benefit system, including those to council tax benefit, will hit the incomes of families with children the hardest. The IFS estimates that the measures will increase child poverty by 2014-15, with the poorest families being around 10% worse off.

Photo of George Howarth George Howarth Labour, Knowsley

I will give way in a minute. I just want to finish my point. The measure in the Bill combined with other measures will have a devastating effect on some of the poorest families in our communities.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

This morning at the Select Committee on Education, I asked the Secretary of State for Education whether his Department had done an impact assessment of the benefit changes on children’s welfare and educational prospects. He said that as far as he was concerned, that had not been done but it should be done. Is that a good idea?

Photo of George Howarth George Howarth Labour, Knowsley 7:15 pm, 31st January 2012

My hon. Friend makes his point well with his experience of that Committee sitting. I absolutely agree with the sentiment behind his question.

I want to return to what the hon. Member for Mid Dorset and North Poole said on that point. She is respected on both sides of the Committee for her long and distinguished record of campaigning on behalf of children. I hope she reflects on the fact that child poverty is likely to increase because of the combined effects of the Bill and the other measures that are currently trundling their way unevenly through the benefits system.

Liberal Democrats who have spoken in the debate, and the hon. Member for Poole, made sensible suggestions to get around that problem. The problem, as many Opposition Members and others have highlighted, is that we are being asked to support a measure that contains massive uncertainty. If we get it wrong, some of the poorest in our communities will suffer the most.

My intention in speaking to the amendments is to support amendment 79, which is in the name of my right hon. Friend Mr Raynsford, amendment 85, which is in the name of my hon. Friend Mr Betts, and new clause 11, which is in the name of my hon. Friend Helen Jones, but I have a serious suggestion that I believe would command support on both sides of the Committee. I suggest that the provisions should be delayed until they can be aligned with the universal credit system. At that point, a realistic estimate can be made of the impact of the combined changes on those poorest families. That is the only way in which we can ensure that there is fairness in the system, and that those who stand to lose the most are not the most penalised.

I should tell Ministers, one of whom will respond to the debate shortly, that all the evidence from reputable sources suggests that the poorest people in our communities will suffer the most, and that child poverty will increase. I am sure they do not want that to happen. My suggestion is therefore reasonable. I doubt they are briefed to accept it today, but I hope they will reflect on it.

Photo of David Ward David Ward Liberal Democrat, Bradford East

We are in the same position as we were in last week, in that we are discussing a measure to which most Members agree in principle. Perhaps not all Members agreed on business rates, but we are discussing consequences.

My understanding—we have been told—is that the sums show that the measure balances itself out nationally, whether at £420 million or £500 million.

Photo of David Ward David Ward Liberal Democrat, Bradford East

Whether the hon. Gentleman believes it or not, that is what we are told. The real issue is the local ramifications—winners and losers area by area.

Photo of David Ward David Ward Liberal Democrat, Bradford East

Let me just get on. I want to develop my thoughts if I may.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

But that statement was wrong!

Photo of David Ward David Ward Liberal Democrat, Bradford East

It does not really matter because we are talking about local ramifications—how the measure affects each area and what each area will be required to do to make up for lost council tax benefit.

The question is where the money will come from to make up the gap, and there are a couple of answers. First, there are the new freedoms that will be extended to local authorities, and locally determined schemes will generate a lot of additional funding. Members have raised the issue of pensioners being protected, and that will pass the burden on to other people.

Photo of David Ward David Ward Liberal Democrat, Bradford East

I sincerely doubt it, but thank you, Miss McIntosh.

Members have noted that if pensioners are protected, the burden will have to be picked up by others, who may be on low incomes. [ Interruption. ] That is not necessarily the case, because we do not know what the new freedoms will generate, and they may generate sufficient funds to make up the gap.

As a result of the proposals, Bradford faces a £4 million loss in council tax. The figure for the funding that will be generated from the new-found freedoms, if they are extended to new areas, is actually very substantial, and it is not far off that £4 million figure.

Photo of David Ward David Ward Liberal Democrat, Bradford East

No.

However, that is not really the point. It does not really matter whether those two figures equate. If they do, it will be pure fluke and pure coincidence. If a local authority can generate sufficient funding from the new freedoms to cover the loss in council tax, it will be sheer fluke, and a policy cannot be based on fluke. The certainty of loss will be there, without the certainty of gain. The certainty of the Government withdrawing the 10% will be there; the uncertainty of what can be generated at this time is clear for all to see.

In addition, the collection costs for the alternative sources of funding for the exemptions on classes A, C and L could be enormous. We must take account of the cost of the arrears and the cost of collecting those additional sources of funding. The Government’s position is, “Don’t worry. You may be losing council tax, but your new-found freedoms will easily generate the funds required to balance that.” However, that is simply not guaranteed authority by authority, and it is based on sources of funds that it will be difficult to collect in some cases. There are huge differences when it comes to residents telling their council, “I’ve got an empty property. Give me a discount” and residents saying, “I’ve got a second home. Please tax me.”

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

There are a lot of second homes in Bradford.

Photo of David Ward David Ward Liberal Democrat, Bradford East

There are, actually, several hundred second homes in Bradford.

If authorities cannot generate funding from the new-found freedoms, the other answer is for them to find it somewhere else in their budget. They have this wonderful freedom to find other areas where they can balance the books. The problem is that council tax is likely to be high in areas of high need. Areas of high need will have high formula grant, and areas of high formula grant will have suffered a large cut in the local government settlement. All those things together mean that the risk, or the uncertainty people have talked about, is disproportionately likely to hit more deprived communities.

I think it was George Hollingbery who said that 10% is 10%. There may be a lot more council tax in monetary terms in Durham or Bradford than in Meon Valley, but 10% is 10%. However, that is not really the issue, because more deprived, less affluent areas will be disproportionately harmed, given that they have disproportionately more council tax recipients. That is not fair, but the issue of fairness cannot be assessed until the thing has run its course, and we have developed all the possible ways that an authority may have of generating funds.

Of course, there is the issue of whether the software can be introduced, but there are also the unanswered questions. How will the future growth in claimant numbers affect the 90% base in terms of eligibility? Opposition Members talked about the low level of claims by certain groups, such as pensioners, where 65% of those who are eligible actually claim. What will the scheme do to protect authorities from the growth in claimant numbers as a result of increased take-up or deteriorating economic circumstances? What is the situation with the administration grant for council tax support? When will authorities know about that? Where is the evidence that has been collected about the relative difficulty of collecting some of the income from the new potential sources of income? Where is the evidence that that will be done?

Finally, the proposals are clearly Treasury driven. Most people here have at heart local government and the local government system. That is why we have a generally positive response to localisation measures as they affect local authorities, although we understand that local government must make a contribution to tackling the deficit, as it has through the local government settlement. However, instead of treating local authorities as cash cows, why could we not have treated them as partners in deficit reduction? Why could we not have gone go them and said, “We will keep the council tax, and we intend to reduce council tax benefit over a period of time. In the first year, having given you that warning, we will extend new powers and freedoms to you to collect tax and remove some exemptions. You will yield the money that is generated from them to the Exchequer, so you will keep your council tax, and there will be no 10% cut, but it is on its way. In the meantime, you should generate additional funds from the new freedoms you will be given and yield those funds to the Exchequer in the first year. You will then be weaned off that over a period of time.” In the spirit of the business rates, why do we not do that, with some reward to those authorities that take up the challenge of extending the council tax base by generating money from new sources?

There was a different way to tackle this issue.

Photo of David Ward David Ward Liberal Democrat, Bradford East

I am going to. Unlike the hon. Gentleman, I am not a party lackey. Sometimes, we have to vote the right way, not simply the way the party tells us.

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government 7:30 pm, 31st January 2012

We have had a wide-ranging debate, and I shall do my best to respond to the key arguments made, quite a few of which spilt over into subsequent groups of amendments, if I may say so. If, as a result, I miss out some of the points, I hope that hon. Members will return to them later. I look forward to it.

The amendments have one fundamental problem: they make it impossible to secure a reduction in Government expenditure on council tax support. Even the Opposition have conceded that those savings must be made in order to tackle the deficit. Spending on council tax benefit has risen from £2 billion in 1997 to £4 billion, and it is essential to bring that back under control. The savings from localisation are a vital contribution to deficit reduction, and it is essential that we have a credible deficit reduction plan. I understand the points of view expressed. It would be much easier to have this scheme without deficit reduction, but it is an unavoidable part of the scheme.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

First, does the Minister accept that the increases in council tax benefit have been driven not by an increase in claims but by increases in council tax? Secondly, will he explain why he believes that the burden of deficit reduction should fall on the poorest people?

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

On the first point, I agree that it was due to the fact that council tax doubled while Labour was in government. On the second point, as I shall demonstrate—I hope that this expands on the point that my hon. Friend Mr Ward made—the Bill not only deals with deficit reduction but creates opportunities for local authorities to collect more council tax in other areas. I will come to that in a minute or two.

Taken overall, our reforms will give local authorities a stake in providing support for council tax, which they have not had before, and will strengthen the incentive for local authorities to support residents back into employment, which in turn will reduce demand for support. Localisation gives local authorities significant control over how that reduction in funding is achieved, and it enables councils to design schemes reflecting local priorities.

I want to pick up on a point made a couple of times about whether the Secretary of State would approve schemes. The Secretary of State is not required to approve schemes, and local authorities do not have to submit schemes for approval. The important points are that the schemes should be transparent and that local authorities should be accountable to the law and local areas but not to the Secretary of State.

Amendments 79, 80 and 85 would, in effect, guarantee that there would be no reduction in funding to local authorities and leave authorities with no plan to reduce that funding. In the context of the wider deficit reduction programme, that is neither affordable nor sustainable.

Photo of George Howarth George Howarth Labour, Knowsley

The Minister just asserted that the Secretary of State does not have any locus in this system. Will he explain, therefore, why paragraph 2(8) of schedule 4 reads:

The Secretary of State may by regulations prescribe other requirements for schemes”?

What is that if not the power to intervene?

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

It is a power to intervene but the Secretary of State does not propose to intervene on schemes. [Hon. Members: “Why’s it in there then?] The Secretary of State always has reserve powers. Right hon. and hon. Members have asked what is the system of checking, of feedback and of amendment to the scheme, and that is always provided for in regulations. That is the basis on which we are proceeding.

Several hon. Members:

rose —

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

I want to make some progress.

It is essential that local authorities plan their schemes carefully and take account of possible changes in demand, as pointed out in the debate. As we have set out previously, we believe that those in-year pressures that hon. Members have mentioned can be managed by enabling any deficit in the collection fund to be shared between billing and major precepting authorities. Our scheme will do that. We are taking powers in the Bill to allow billing authorities to make arrangements with major precepting authorities and to vary the amount of precept to be paid to the major precepting authorities in-year to rectify any shortfall in council tax receipts. That could help to protect billing authorities, which could include small district councils—my hon. Friends mentioned that some district councils are indeed small organisations.

Amendment 85 would require the Government to carry out a new burdens assessment on their allocation of grant, but the Government have already committed to consult on their proposals for distributing the grant. We must be clear that local authorities have to make choices, but they will be able to choose whether to pass on the reduction to council tax payers, to use the flexibility over council tax, which my hon. Friend the Member for Bradford East mentioned, or to manage the reductions within their budgets.

To the best of my reckoning, 12 local authorities come within the constituencies of Members who have spoken in this debate, and 10 of those local authorities are in a position whereby if they were to take advantage of the new flexibilities over second homes and empty homes, they would achieve an income increase exceeding the 10% reduction in their council tax benefit grant. I am not saying that it is right for local authorities simply to gobble up all that money, but I want to make the point—

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

In a moment. I realise that I failed to give way to the right hon. Gentleman earlier. I will do so in a moment.

As the impact assessment makes clear, the reduction in the council tax benefit fund to local authorities in England is in the order of £420 million. Furthermore, as is also set out clearly in the impact assessment, the total of both the discounts and the other arrangements recoverable from the local tax changes also equal about £420 million. My hon. Friend the Member for Bradford East is right that there is not an exact match between the increase and the decrease, but it remains the case that three quarters of local authorities find themselves in a position whereby should they go down that route, they would have the funding.

It is also open to local authorities, however, to look elsewhere and to put additional money into their council tax reduction funding, and of course they can change the basis on which they allocate that funding.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

I thank the Minister for finally giving way. He previously said that the Secretary of State did not intend to use his powers to define schemes. That extraordinary claim was the reason I wanted to intervene. We will shortly come to a group of amendments dealing with the Secretary of State’s default powers and his power to impose a scheme if a local authority does not have one in place. Will the Minister tell us whether the Secretary of State does not intend to use those powers either? If so, why on earth are they in the Bill?

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

Of course, it would be sensible to debate that matter when we come to the next group of amendments, and I look forward to it. I want to make it clear, however, that the Bill states that if a local authority has failed by 31 January next year to put in place a scheme, by default the existing scheme will continue, and that is what the Secretary of State has the power to ensure happens.

Amendment 85 would require the Government to carry out the new burdens assessment, but we are already committed to doing that. We must be clear that local authorities do the job that they have been set. They have the opportunities to raise money in alternative ways and to devise a scheme that is suitable to their circumstances. As for the administrative cost, we have already made it clear that we will be fully following the new burdens doctrine that this Government have set out. The Government will therefore be working with local authorities to assess the net impact of housing benefit centralisation and the localisation of support for council tax, including the transitional costs, which will be covered, where necessary, by the new burdens doctrine.

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

The Minister talks about working with local authorities. Presumably the Government have a view about that, despite what they say local authorities might be able to achieve by way of extra revenue generation. He has already admitted that at least a quarter of authorities cannot raise enough money to offset what they have lost under the scheme that we are discussing. Does he therefore accept that non-pensioners in those authorities—which are likely to be the poor authorities, with the highest percentage of people claiming council tax benefit—are going to suffer what the Local Government Association predicts will be cuts of around £6 a week?

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

No, I absolutely do not accept that. The average reduction if local authorities do not put any extra funding into the pot, from any source at all, is £2.64 per household per week. Every local authority—even those that do not have complete recompense of the one pot of money from the other—will still get significant inputs from the discount scheme, which local authorities can, if they choose, take into account. I therefore ask Mr Raynsford to withdraw his amendment, and I ask my hon. Friends to vote against it if he does not.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

We have just heard an absolutely lamentable performance from a Minister who is trying to wash his hands of responsibility for an outrageous scheme that has been designed in a way that reflects very poorly indeed on the members of the parties that comprise the coalition. This is a crude scheme which is seriously cutting the benefits that, at the moment, go to literally millions of poorer people—some in work, some over pension age, some not in work but under pension age. All those people—about 6 million nationally—are dependent on the existing scheme. The Government, in their wisdom, have suddenly imposed the idea that the scheme can be cut immediately, from year one, by 10%. They are then imposing further rules that involve a much larger cut on all those people who will not be protected by the Government’s diktat.

The Minister tries to weasel away from all that by using the figure of £2.40 or so for the average loss. He knows very well that, in proportion to the average claim that people receive at the moment, that means an average cut of 16.7% in benefits to poor people. On top of that, there are the other appalling features: all the risk being transferred to local authorities, which will have to cope with unexpected increases in cost without any Government support whatever; the possibility of an increased number of claims, because, perfectly rightly, people who currently do not claim the benefit may do so when it is no longer called a benefit and they can feel more comfortable about making a claim. Who bears the cost? Not the Government: once again, it is the local authority that has to bear the cost.

On top of that, we have the appalling timetable for implementation. The Government have not got their regulations ready. They will not have them ready, we are told, until late summer; and yet local authorities will be expected to implement this—a whole new scheme, requiring new software, new application forms and new procedures—in a matter of months. All the experts are telling the Government that it will not work and that it will be a catastrophe. Against all that advice, coming from authorities all over the country and here in the Chamber—virtually every Member who has spoken has expressed serious reservations and called on the Government to think again, delay and allow time for this scheme to be got right—the Minister just tries to dismiss it. This is a lamentable performance, and I intend to press amendment 79 to a vote, so that we can say that to the Government.

Question put, That the amendment be made.

The Committee divided:

Ayes 233, Noes 291.

Division number 446

See full list of votes (From The Public Whip)

Question accordingly negatived.

Photo of Anne McIntosh Anne McIntosh Chair, Environment, Food and Rural Affairs Committee

In view of the debate that we have just had, and the nature of the next two groups of amendments, I inform the Committee that I am unlikely to allow a separate debate on clause 8 stand part.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

I beg to move amendment 66, page 5, line 6, at end insert—

‘(1A) In exercising its powers under section 1(b) the authority must have regard to the impact of the scheme on—

(a) those persons in the area who are in employment or actively seeking employment, and

(b) the levels of poverty in the area, including the levels of child poverty.’.

Photo of Anne McIntosh Anne McIntosh Chair, Environment, Food and Rural Affairs Committee

With this it will be convenient to discuss the following:

Amendment 49, page 5, line 17, at end insert—

‘(4A) In exercising its powers under subsection (1)(b), each authority must have regard to the impact of its scheme on the living standards of those persons in its area who, prior to the introduction of the scheme, were receiving council tax benefit.

(4B) In exercising its powers under subsection (1)(b), each authority must have regard to the impact of its scheme on the living standards of those persons in its area, below pensionable age, who are in employment or are actively seeking employment.’.

Amendment 59, page 5, line 28, leave out ‘2013’ and insert ‘2014’.

Amendment 60, page 5, line 29, leave out ‘2013’ and insert ‘2014’.

Amendment 67, in schedule 4, page 47, line 6, at end insert ‘and set out the steps which the local authority will take to ensure that—

(a) persons entitled to a reduction will be made aware of their entitlement, and

(b) assistance is available to such persons who wish to make an application.’.

Amendment 56, in schedule 4, page 48, line 7, at end insert—

(e) require authorities to have regard to the impact of its scheme on—

(i) the numbers of persons in its area expected to receive a greater or lesser reduction in council tax than that which they had been entitled to receive under council tax benefit, and the amounts by which their entitlement are likely to increase or reduce,

(ii) the living standards of such persons,

(iii) the financial incentive on persons below pensionable age to seek or maintain employment.’.

Amendment 68, in schedule 4, page 48, line 15, at end insert—

‘including local charities, organisations providing advice on benefits and organisations representing older people.’.

Amendment 54, in schedule 4, page 48, line 39, at end insert—

(f) include estimates of the likely impact of its scheme on the living standards of those persons in its area who have been receiving council tax benefit.’.

Amendment 57, in schedule 4, page 48, line 44, leave out ‘2013’ and insert ‘2014’.

Amendment 58, in schedule 4, page 49, line 5, leave out ‘2013’ and insert ‘2014’.

Amendment 70, in schedule 4, page 49, line 13, at end insert—

‘In considering the need for replacement or revision of the scheme the authority must have regard to the impact of any such revision or replacement on the living standards of people in the area including—

(a) those of working age in employment and actively seeking work,

(b) those in receipt of benefits including disability benefits, and

(c) persons of pensionable age.’.

Amendment 71, in schedule 4, page 50, line 23, at end insert—

‘Before issuing such guidance the Secretary of State must have regard to the impact on—

(a) those of working age in employment and actively seeking work,

(b) those in receipt of benefits including disability benefits, and

(c) persons of pensionable age.’.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

This group of amendments deals with the impact of the proposed changes in council tax benefit on some of the poorest people in the country. One of the keys to this issue is something that we started to debate when discussing the previous group of amendments—the fact that people in the same circumstances will no longer receive the same type of benefit. Entitlement will depend on where a person lives and on the population of that area. That is a major change to the way that we treat people in this country. The circumstances of someone who lives in Birmingham could be exactly the same as those of someone living in Bradford, but their benefit could now be different. Someone who lives in Chichester could be treated differently from someone who lives in Carlisle.

The basic unfairness is staggering, especially when combined with a 10% cut in the funding available to local authorities. As we heard in respect of the previous group of amendments, there has been a switch from annually managed expenditure, whereby local councils were reimbursed for correctly processed claims, to grants that will have to come within the departmental expenditure limits. The impact is clear: far from achieving the Government’s stated grand aim in the consultation—to

“give councils increased financial autonomy and a greater stake in the economic future of their area”— the measure simply transfers the financial risks to local councils and hits the poorest people hardest, especially the working poor. What is frequently forgotten in this debate, not least by the Government, is that many people receiving council tax benefit are in work.

The Government say that they want to protect pensioners—and rightly so—but the consequence of the decision, coupled with a 10% reduction in funding, means that those in local authorities with a high proportion of pensioners will suffer more than those in an area with fewer pensioners. How can that system be fair? As we heard from my hon. Friends earlier, the reductions for those of working age will range from 13.4% to 25.2%—a national average of almost 17%. Of course, that situation could get worse. The Government have said that they are minded—only minded—to base their funding on previous expenditure. As a result of that, spending will no longer rise to meet changes in demand. It is, in effect, a cash-limited system. If unemployment rises and more people need to claim, and if more pensioners claim—quite rightly under this system, as we heard earlier—that must be paid for.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence) 8:00 pm, 31st January 2012

Does my hon. Friend agree that, contrary to the impression given by the Minister in his winding-up speech on the previous group of amendments—that use of the flexibility on second homes, and growing the economy, could make up the difference—the only option available to most councils is to raise council tax and that councils with a high proportion of band A properties will be at a severe disadvantage when it comes to the amount of money they will be able to raise?

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

My hon. Friend is, of course, right. In trying to remedy the problem, the most disadvantaged councils will be those with the lowest tax bases. That has been true throughout all our discussions on the Bill. If demand goes up, councils will be faced under this scheme with either bearing the extra cost or, more likely, redesigning their schemes to restrict the number of those eligible. The Chartered Institute of Housing said it very clearly: council tax benefit awards will be

“squeezed precisely at the point at which there is the most need for help amongst low income households.”

London Councils estimated that if this scheme had been in place earlier, a shortfall of £400 million would have been faced in the five years to 2009-10.

The Government say that councils can do something about this. The Minister for Housing and Local Government says in what I have to say reads like a rather garbled piece of evidence to the Select Committee that considering whether to pass on the 10% reduction to claimants or to find the money elsewhere was “old-school thinking”—or what the rest of us might call “doing your sums”. I am sure that councils facing these cuts will have been relieved to hear that they could reduce the bill

“not by unfairly not paying people who are vulnerable and need it”,

which seems to me to be the precise effect of this scheme; no, he said, councils should be ensuring that there is

“a definite interest in starting up that new industrial estate, business park and getting economic activity going so there are jobs.”

Let me say this slowly, so that Ministers can understand it. If a firm closes down or lays off staff, a new business park does not open up the next day. People are out of work; they claim benefit; and if there is not enough money to pay that benefit, councils either have to cut what is available or find the money somewhere else from budgets already facing massive cuts. It is staggering to hear a Government who have presided over a rise in unemployment to 2.6 million and who have seen the economy flatline lecturing local councils about the need to open business parks. Only the Minister for Housing and Local Government, whose overwhelming self-confidence is matched only by the staggering depths of his ignorance, could come out with such nonsense.

It is not surprising that the Select Committee was unimpressed, saying:

“We have seen little evidence to support the hope that the new and better-paying jobs for individuals, immediately sufficient to offset the 10% reduction in the benefit budget will inevitably follow from these incentives.”

It continued to stress what we have talked about throughout this Committee stage—that

“the means of economic growth are never solely in the gift of individual local authorities.”

It is, of course, precisely the authorities that have already borne the brunt of the Government’s cuts that will find themselves in most difficulty with this council tax scheme.

The New Policy Institute estimated that five out of the 10 hardest-hit local authorities are among the top 10 most deprived areas in the country: Hackney, Newham, Liverpool, Islington and Knowsley. In the Liverpool city region, for example, the current proposals would result in cuts of between 17% and 23% for people of working age—those who are not pensioners. Let me give one example. A single person in Halton in a band A property would have to find £179.92 a year extra. In Sefton, which has a higher than average number of pensioners, a minimum reduction of 23% will be required for people of working age. A couple living in a band A property would have to find an extra £226.72 a year.

Those might not seem large sums to Government Members, but to people who have to count every penny, who sometimes run out of money before the end of the week, they are simply impossible to find. That is why we have tabled these amendments—to ensure that the needs of people of working age and those in poverty are taken into account. Where is this extra money going to come from? Do Government Members believe that it can be somehow magicked out of thin air? This does not even provide incentives to work, even if there were jobs to go to. The Government are not clear about the vulnerable households that should be protected. They have made it clear that they want to protect pensioners, but they are singularly unclear about other vulnerable groups. If, as is likely, local authorities will have to protect those on employment and support allowance, jobseeker’s allowance and income support, there will have to be an even bigger cut for the unprotected group—overwhelmingly the working poor. We have a Government who claim that they are freezing council tax, but they are actually increasing it for those least able to pay.

Photo of Heidi Alexander Heidi Alexander Labour, Lewisham East

Some people who pay no council tax at present may find themselves paying it for the first time, while others who pay some at present may find themselves paying more. It is hugely, and sadly, ironic that, while claiming that they are enabling councils to freeze tax, the Government are increasing it for the poorest members of our communities.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

I could not have put it better myself. An especially ridiculous aspect of the proposals is that the extent to which a council is hit will depend largely on the number of pensioners who live in the area. It is essentially a matter of chance. Moreover, if people on passported benefits are protected, it is possible that those in work will face a cut of up to 40%, which would wipe out any gains from the raising of personal allowances. The Government have absolutely no right to boast about a tax cut when they give with one hand and take with the other.

We are attempting to ensure that at least the needs of those of working age are not forgotten when councils draw up the scheme. I fully accept that Labour councils will try to do that anyway, although they have been hamstrung by the Government, but I do not believe that Government Members have demonstrated during our debates on the Bill that they understand how much these sums mean to the very poorest people. If I may use the Prime Minister’s words, they do not get it. They do not understand what it is like to run out of money before the next wage packet or benefit payment. They do not understand what it is like to have to choose between paying a bill and buying the children a new pair of shoes.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Did the Minister not make it clear earlier that he “did not get it” when he dismissed a 16% decrease in council tax benefit as though it were loose change?

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

My hon. Friend has hit the nail on the head. The problem is a lack of understanding of the fact that trying to find even an extra couple of pounds a week is simply impossible for those on such tight budgets.

This ill-thought-out scheme, which even Government Members agree is being rushed through, is full of holes. First, the Government have failed to align it with their much-hyped universal credit. Most of us would assume that a universal credit would be—well—universal, but that is not the case in this instance. Council tax benefit is to be split from universal credit: there will be one national scheme, another local scheme, two sets of administrative costs, and a huge scope for anomalies. Secondly, the Government are introducing a 10% cut while protecting pensioners. Thirdly, they want schemes that will not create work disincentives.

In a parliamentary answer to my right hon. Friend Hilary Benn on 17 June, the Under-Secretary of State for Communities and Local Government, Robert Neill said:

“The Government intend that the general principles of supporting work incentives will be set out in guidance”

—guidance that the Secretary of State will provide, although the Minister tells us that he did not want to interfere in the schemes—

“which will help local authorities to design support.”—[Hansard, 17 January 2012; Vol. 538, c. 629W.]

How on earth can that work? Families will face two means tests, one for universal credit and one for council tax benefit, along with one set of national rules and goodness knows how many local rules. There will be one taper for universal credit; if councils fix a different taper for council tax, how can there be an integrated benefits system? If the taper is fixed at the same rate, when will it be calculated, before or after the calculation for universal credit? It simply will not work, and the people who will pay the price are the most vulnerable members of society: people who have lost their jobs, and families who are trying to do the right thing by going out to work for poverty wages. They will find themselves in an absolute mire.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence) 8:15 pm, 31st January 2012

As was pointed out earlier, different councils may operate myriad different schemes. Would that not make people’s search for work more difficult? In central London, for example, some schemes might be advantageous while others would make it hard for people to move around to find work.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

My hon. Friend is right; indeed, Government Members expressed similar reservations during our earlier debate. Such a disincentive is precisely the opposite of what the Government say they want.

Photo of Mark Tami Mark Tami Opposition Whip (Commons), Opposition Pairing Whip (Commons)

It is the people my hon. Friend has mentioned—those who are on the poverty line and do not have any spare cash—who will be in arrears with their council tax. Every day in our surgeries we see people who tell us that the bailiffs are about to arrive. How can the Government’s proposals possibly help?

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

They will not help those people, and they will not help councils. We discussed the financial risks for councils earlier, but one of the main financial risks is an increase in the number of defaults because people are simply unable to pay—and, indeed, there is no evenness in that situation. In North-East Derbyshire 49.4% of recipients of council tax benefit are pensioners, while in North Kesteven the proportion is 53.2%. People living there face a bigger cut than people living in, say, Luton, where the proportion is only 28.2%. The scheme will subject people to cuts that are entirely arbitrary and unfair, while transferring the risk to local authorities. Many people will find themselves in real financial difficulty, while councils’ collection rates will fall.

Amendment 67 would require local authorities to make people aware of their entitlement to council tax benefit, and to give the necessary assistance to those who wish to make an application. I believe that good councils will do that anyway, but the Bill puts such pressure on local authorities that some—albeit, I believe, very few—will be deterred from seeking out claimants and informing them of their rights. Authorities are currently reimbursed monthly for expenditure that they actually incur, but the Government intend to pay grants, and we do not know what methodology they will use to set the level of those grants. Although they have promised to set allocations annually for the first two years, there is no certainty about what will happen after that.

The Government have already said, in their response to the consultation, that

“multi-year allocations would provide greater certainty and better allow local authorities to benefit financially where demand for support was reduced over several years.”

I think my hon. Friends will see immediately where that is going, because we have seen it before. I am talking about the creation of incentives for councils to reduce claims. In a time of economic uncertainty, and when the economy is flatlining, we cannot reduce those claims by bringing in lots of jobs, because the jobs are simply not there for people to get. Not only will local authorities that are experiencing increasing unemployment or falling wages leading to new claims be penalised, but the Government are already considering how to build in incentives to reduce claims.

There will clearly be pressures on local authorities. They will take all the financial risks associated with the possibility of demand exceeding supply, and they will also have to deal with the extra costs of setting up the scheme—which may or may not be fully reimbursed—as well as the costs of revising it regularly, of notifying people about it and of appeals. That final subject has hardly been mentioned so far in our debate, but appeals could well be considerable when people find that their entitlement is being cut. If we add in the Government’s desire to move to multi-year settlements, we can all see that there is a genuine risk of the number of claims being driven down.

That is why we have tabled the amendment. We want to ensure that local authorities must take proper steps to publicise their schemes, and also that they assist those facing difficulties in applying, perhaps because of disability or because they are not sufficiently literate or numerate and do not understand the forms. We have all come across such constituency cases. Having rights is of no use if people are ignorant of them or cannot exercise them, so it is only fair and reasonable that these safeguards should be built into the Bill from the start. Through them, we hope to counter the Government’s incentives to reduce the number of claims from people who have an entitlement to benefit.

Amendment 68 seeks to ensure that before a scheme is drawn up there is consultation not only with precepting authorities and what the Bill vaguely refers to as “others” with an interest, but with organisations that assist and represent people on the receiving end of this Government’s cuts. In respect of this Bill, it is fair to say that so far such organisations have been largely ignored. The big society clearly does not include those who give up their time to assist some of our most vulnerable citizens, and who deal every day with the impact of job losses and the consequences of child poverty and try to help those for whom every day is a struggle. Any redesign of the scheme ought to take account of the views of those who will be dealing with its impact.

As has been said, the impact will be extremely severe because it will come on top of the Government’s other changes to welfare benefits. Let me give an example of a one-parent family living in a three-bedroom house in Knowsley. Assuming that they can stay in their home even though they will be more than £800 a year worse off under the Government’s changes, they will then be hit again by this scheme because in Knowsley there is likely to be a 20% council tax benefit cut. They will therefore have to find a further £170 per year. Those who deal with people in our welfare system and who give advice to people in poverty should be consulted on the design of these schemes.

We often forget the great number of children who will be forced further into poverty by this scheme. In the Liverpool city region, 14.8% of children in poverty are in working families—those claiming working family tax credit or child tax credit. Those families will also be reliant on council tax benefit. What will happen to them when this scheme comes into force is very clear. More people will be unable to pay, so there will be more pressure, more debt and quite possibly more people falling into the hands of loan sharks. Anyone who does not think that will happen has never walked around a big estate and seen how these people operate. They often wait outside the place where people collect their benefit, and take the money straight off them. That is the reality of life on the edge. That is what many of our charitable organisations and benefit advice agencies deal with every day. It is only right that they should be consulted.

Amendments 70 and 71 seek to ensure—[Interruption.] Yes, it is the same story, I say to Gordon Birtwistle, and it will be the same story for many of my constituents, and his, when this scheme comes into effect. I am terribly sorry the hon. Gentleman does not want to hear about the reality of the impact this scheme will have. That is hard luck for him, but it is even worse luck for the people who will be on the receiving end.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Does my hon. Friend also agree that the Bill’s provisions will hit a lot of northern cities—including Burnley, perhaps—much harder than some of the leafier suburbs of the south?

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

My hon. Friend is right, but many different authorities will be affected. We heard earlier from Members on the Government Benches who represent south coast constituencies where there are lots of elderly people. They and their colleagues will be very surprised when they begin to realise the impact in their own constituencies of what they have voted for.

Amendments 70 and 71 seek to ensure that in any revision of the scheme by the Secretary of State the impact on all those who may receive, or be entitled to, benefit is considered. We therefore state that it is not only those of pensionable age who need to be considered, but those in employment or seeking work and people in receipt of other benefits, such as disability benefit. We do so because although under the current scheme 5.9 million people receive council tax benefit and 38% of them are over 65, 62%—3.7 million people—are under 65. These amendments seek to put their needs on the agenda, as they appear to have been forgotten by the Government. Also, 67% of claims are passported claims—they are from people receiving income support, jobseeker’s allowance or employment support allowance, for instance. Only 1.7 million of the 3.9 million on passported benefits are receiving pension credit, so most of these people are also of working age.

Other claims—the standard claims—are decided following a means test. Crucially, people who are working may get council tax benefit, subject to an income taper. Claimants lose 20p in council tax benefit for each additional pound they earn over the applicable amount. No one knows what the position will be for those people under localised schemes. The Government may issue guidance but, as usual in respect of this Bill, we are debating this topic without knowing what the guidance will say or even if the Government’s preferred options will be affordable for local councils. All local councils will be forced to cut the benefits available to non-pensioners and, as my hon. Friend Heidi Alexander said, they could cease payment entirely to certain groups.

We believe it is right to protect pensioners but, as we are making clear in the amendments, we also believe that others’ needs have to be considered. The Government seem to want to ignore those people as they have done with every other measure they have introduced. They strive to paint a picture of people on benefits as feckless and workshy. They talk about the price paid by hard-working taxpayers as though they were somehow a different species from those receiving benefits. I have to say, as someone who would clamp down ruthlessly on benefit fraud, that the vast majority of people on benefit receive it legitimately, and that most unemployed people receiving council tax benefit have paid taxes and would like nothing better than to be in work paying them again, as would all the disabled people I meet. Those in employment who receive council tax benefit are precisely the hard-working taxpayers—people who go out every day to work in low-paid jobs—whom the Government will penalise for doing the right thing by going out to work for poverty wages.

I have had people tell me that they are not well paid in work, and I am sure other hon. Members have had the same. They know that they are on a poor wage but they go out to work because they believe it is the right thing to do and they want to set an example to their children and show what hard work means. Those people are going to be hit over and over again. It is time that the Government stopped trying to demonise people. It is time that they faced up to their responsibilities to create growth instead of trying to stigmatise people who are desperate for a job. It is time they ensured that the needs of people who are struggling either to stay in work or to get a job are properly recognised. That is why we have moved these amendments to the scheme that the Government are attempting to bring in. We want to ensure that people of working age and people in poverty, because these people are in poverty, are properly considered when schemes are drawn up or revised. I hope that the Government will accept the amendments, because if they are serious about not wanting to hit those people there is nothing to prevent them from accepting the amendments. If they do not, we will seek at least to press amendment 66 to a vote.

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole 8:30 pm, 31st January 2012

I wish to make some brief comments and refer to the impact assessment on the localisation of council tax benefit, which looks at many of the issues raised by Helen Jones. I note in particular that the impact assessment flags up some local authority responsibilities. The Child Poverty Act 2010 imposes a duty on local authorities to have regard to and address child poverty and, with their partners, to reduce and mitigate the effects of child poverty in their local area. The Disabled Persons (Services, Consultation and Representation) Act 1986 and the Chronically Sick and Disabled Persons Act 1970 include a range of duties relating to the welfare needs of disabled people. The Housing Act 1996 places on local authorities a duty to prevent homelessness, with special regard to vulnerable groups.

Given that local authorities have those duties on them, is there any need to propose the amendments? These issues are important for the very reasons that have been identified—the 10% cut, the different numbers and proportions of pensioners in different authorities and the different balances that mean that some authorities could get more money through the changes to discounts for second homes and empty homes. Some authorities will have great difficulty in protecting vulnerable people. The number could be quite small, but that possibility is there because of the different demographics of different areas.

I understand that local authorities might have to go through an equality needs assessment and I should like to know from the Minister how they should address these issues, which are in the impact assessment on the localisation of council tax benefit. Will there be any question of councils having to go through judicial review? It seems to me that there are going to be protections in the detail of the schemes to be introduced, but also some challenges for local authorities given the difficulties that we are outlining over and over again—the 10% cut, the different proportions of pensioners, and authorities’ different abilities to raise money with the new freedoms and flexibilities. With all those differences across areas, could some areas be faced with judicial review if they cannot address the duties placed on them by existing legislation?

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

I support the amendments on the impact of the scheme. This debate is about people’s lives, about families and people who live on the edge financially, but it is also about local authorities’ ability to deliver services at the standards we have come to expect in our communities. It is a debacle: the Government’s proposals on council tax benefit will simply heap greater burdens on the most vulnerable households and families at a time when the Secretary of State for Work and Pensions is already making life tougher for them. I would have hoped that the Secretary of State for Communities and Local Government had at least talked to his counterpart at the Department for Work and Pensions to ensure that their policies did not conflict in the way they clearly do. The amendments would help to deal with some of that conflict.

“Make work pay.” That is what the Prime Minister has said over and over again, and he is determined to make that happen. No one could or should argue with that statement, but it is vital to create incentives so that it is always better to be in employment than on benefits. The Government’s proposals on council tax benefits will totally undermine that objective. They are simply yet another attack on hard-working families.

I know that council tax benefit is available to those on low incomes who need financial help to pay their council tax bill, but I am shocked that Ministers appear to believe that a 10% cut to the benefit will somehow—perhaps magically; we talked about magic earlier on—reduce the number of people who need it. In these harsh economic times, with high and rising unemployment as well as rising energy and food bills, this tax relief is to be squeezed precisely at the point when there is the greatest need for help among low-income households. As others have said, pensioners and vulnerable households are to be protected, and rightly so, from the cuts, but that means that the whole of the 10% saving that local authorities must make will fall on the unprotected group—mainly the working poor.

m

i am one of the many many affected by the changes especially the dla changes and mr cunninham is totally correct when he says it is about peoples lives-please mr cunningham keep up the pressure
mike gargett

Submitted by mike gargett

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

In his response to the previous debate, the Minister suggested that gap could be filled by councils being able to levy extra tax on second homes, and his hon. Friend Mr Ward said there were plenty of those in Bradford. How many does my hon. Friend think there are in Stockton?

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

That is an interesting question, which I wish I could answer. I do not see many empty homes, never mind second homes, in our area, so I think it might be a challenge for us to find some. I am sure we have a few, but I doubt they would fill the gap as the Minister suggests they could. In an authority such as Stockton, with high numbers of older people, the burden on the people the measure hits will be tremendous.

The burden will get higher and higher on ever fewer people. In many cases, the gains made by the working poor from the recent £1,000 increase in the income tax personal allowance will be completely wiped out by the reduction in council tax benefit and the knock-on effects. Surely that is exactly the opposite of what the DWP says it is trying to do? Are the Secretaries of State talking to each other? I wonder. Alongside the rise in VAT and other benefit changes, we are faced with these regressive policies that will hit some people extremely hard—people who already work hard for little reward. These proposals are simply a slap in the face for their efforts to improve their lives.

The Local Government Association has calculated that councils are being asked to share the £500 million cut among 1.3 million claimants, which works out at an average loss of £320 each. That is a significant sum for low earners, especially when the Government claim they are trying to protect work incentives for them. It has been estimated that council tax support for pensioners makes up 50% of the total funding, and roughly a further 25% recipients would also be exempt from the reductions in support because of councils’ duties to support vulnerable groups and tackle child poverty. Such people should of course be exempt, but that could lead to the 10% budget cut falling on the remaining 25% of recipients—on the support provided to low-paid people in work. Those people are working hard for their families, trying to do their best. They have pride in what they are doing, yet this Government are just kicking them.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

I have just had a brainwave about where an awful lot of these second homes that will fill the gap will come from. When the housing benefit changes kick in, and people are evicted from their properties because they can no longer afford the rent as the property was under-occupied, those empty properties that belong to private sector landlords will be empty second homes. Of course we can raise the revenue from them. Does my hon. Friend think that is a possibility?

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

I have known my hon. Friend for many years, and I am used to his brainwaves, which normally apply to education. Of course, he is perfectly right.

The people who will be affected already face higher food and energy bills. Sadly, however hard they work, they are unlikely to get any of the fancy bonuses that will be pouring into the coffers of bankers and everybody else over the next few weeks and months. Quite simply, the proposals merely transfer one of the national costs of rising unemployment to councils and local taxpayers, creating a serious risk that every resident will see further service cuts beyond those already threatened.

In my constituency of Stockton North, the theoretical 10% reduction in council tax benefit will equate to around £1.2 million; within the Stockton borough, the figure is £1.7 million. In reality, as pensioners are excluded from the change, those affected are likely to suffer a 20%, rather than a 10%, reduction. I must add that Stockton-on-Tees borough council’s revenue budget, along with that of every other council across the country, already faces tremendous reductions. In Stockton, there is to be a reduction of £26.5 million. Where will it find the extra money to bolster this budget, when it will need to pay out to an increasing number of people who will have to claim council tax benefit? The cuts that the council is suffering are in addition to cuts of £12.3 million to specific grants; the early intervention grant was cut by £3 million, and of course there was the future jobs fund, which the Government do not appreciate.

Frankly, the Government are giving to those on low incomes with one hand, and taking away with the other. There is no regard at all for the implications for people’s standard of living, and people are living on the edge. I know; I see these people at my surgeries. They do not have that extra £2, £3, £4, £5 or £6 a week to spend on council tax. They need to spend that money on feeding their children. The money to pay extra council tax is not there.

The amendments would save the Government from themselves. They would help the Government to fulfil their commitment to joined-up government—that is if the Secretaries of State bother to talk to each other. The amendments would also ensure that the huge hit to the working poor did not happen. If the Government accept the amendments, they will be recognising the real need, and will have the opportunity to do something about it. Without the amendments, many more people will be plunged into poverty, undoing much of the good work that the Labour party did in government to improve the living standards of the poorest in society. The Government may well find that they have not made work pay; instead, some families will find themselves better off back on benefits and out of work. Where is the pride in that?

Furthermore, the Institute for Fiscal Studies predicts that as a result of the changes in council tax benefit, individual councils could reduce the benefits to such an extent that it would encourage low-income people to move out of the area. The think-tank also points out that the changes would create a complex, two-tier benefit system, with both local and central Government setting policy. That runs counter to the idea of the streamlined universal credit to which my hon. Friend Helen Jones referred, which is being introduced by the Work and Pensions Secretary.

The incentive that changes to council tax benefit will give local authorities to encourage low-income people to move elsewhere is totally undesirable and unacceptable, yet the Government seem intent on banishing the poorest in our society from our towns and cities. Let me give one example of the chaos that could result from the council tax changes and other changes: it is estimated that 20,000 families could move out of central London to find accommodation elsewhere. What an effect that could have on jobs, children and services. If several thousand children move out of central London, inner-city schools may no longer be viable, and other areas may not have the capacity to take them in. We know that the plans of the Secretary of State for Work and Pensions will have that effect, but surely the Secretary of State for Communities and Local Government does not need to help him.

Removing council tax benefit from vulnerable people is not the answer. In-work poverty is getting worse as wages are frozen and the cost of living rises sharply. Around 61% of children living in poverty live in working households with parents who are working hard to feed them, clothe them and send them to school. The figure in 2005-06 was 50%, so more people are now working to support their families, but they are doing so on paltry incomes. Surely no one in this Committee believes that that number should go any higher. That is why the Government must think again about these damaging changes to council tax benefit and adopt the amendments that will protect, if no one else, the working poor.

Photo of David Ward David Ward Liberal Democrat, Bradford East 8:45 pm, 31st January 2012

Those Members who sat on the Localism Bill Committee will not be too surprised by what I have to say. Before us is a series of amendments that seek to impose on local authorities an obligation to have regard to different categories and groups when coming up with their new schemes. The Opposition seem to be oscillating between complete outrage that the Secretary of State is using powers to impose various things on local authorities and seeking to impose through legislation requirements that local authorities do certain things before introducing their schemes.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

Is the hon. Gentleman seriously arguing that local authorities should not have regard to people employed on low wages, people actively seeking work or levels of poverty in their areas? What is the reason for that?

Photo of David Ward David Ward Liberal Democrat, Bradford East

Not at all. I anticipate that any local authority worth its salt would have regard to all the things proposed in the amendments. In fact, that will differentiate good local authorities from bad ones, but it is not for the Secretary of State to specify those things, or indeed for us to do so through legislation, which frankly would be patronising and very centralist. As we said many times in relation to the Localism Bill, people have a right to judge at the ballot box whether their authorities are doing what they should be doing—it is not for this House to tell them.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

I was going to say that it was a pleasure to follow the hon. Gentleman, but his contribution kept getting worse.

Clause 8 of the Bill, headed “Council tax reduction schemes”, sets out the provisions for local councils to draw up their local council tax schemes. Proposed new subsection (2) states:

“Each billing authority in England must make a scheme specifying the reductions which are to apply to amounts of council tax payable, in respect of dwellings situated in its area, by—

(a) persons whom the authority considers to be in financial need, or

(b) persons in classes consisting of persons whom the authority considers to be, in general, in financial need.”

However, the Bill gives no guidance on what local authorities should take into consideration when drawing up their schemes. We could have a plethora of different schemes up and down the country and, as was referred to earlier by Government Members, neighbouring authorities could have completely different schemes and criteria for how people apply for council tax benefit. We know that the Secretary of State will exclude pensioners, but the amendments tabled by my right hon. and hon. Friends would add some criteria or at least set out what the baseline should be.

I am sorry that Mr Ward does not seem to care and trusts that every local authority, good or bad, will consider every single thing, including child poverty. If he had any experience of the Secretary of State’s time in charge of Bradford council, for example—clearly he had—he would know that he had little concern for the poor and the needy.

Photo of David Ward David Ward Liberal Democrat, Bradford East

I wonder whether the hon. Gentleman carried out a full impact assessment before voting to get rid of the 10p rate of income tax, which affected the most deprived people in the country.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. That intervention is not relevant to the amendments.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Interventions have to be relevant, as Mr Hood points out, but I would not stand for election, as the hon. Member for Bradford East and other Liberal Democrats did, on the idea of supporting the poor by increasing income tax thresholds, and then support the Conservatives in pushing through this Bill, which is going to affect some of the poorest and neediest in our society—and somehow turn a blind eye to that. As I said earlier in response to his hon. Friend Annette Brooke, none of this legislation could go through without the Liberal Democrats, and I am sure that in Bradford at the next general election the Labour party and others will remind the hon. Gentleman’s electorate that he and his party were the ones who put through this Bill, which takes away council tax benefits from the poorest and most vulnerable in our society. So he cannot have it both ways.

The amendment would take unemployment into consideration, and it is important to look at unemployment and how it affects local councils’ claimants for council tax benefit. As you will know, Mr Hood, unemployment in the north-east stands at 11.7%, 3.4 percentage points higher than the national average, while unemployment rates in the south-east are just 6.3%. If we look across the constituencies, we find that the most recent claimant count in my constituency was 2,674 people, or 5% of the population; in Beaconsfield, it was 903 people, or 1.5% of the population; in Aldershot, it was 1,749 people, or 2.6%; and in Wokingham—I have to say to the people of Wokingham that I have nothing against their town, but it is always a good example to cite in such debates—it was just 936 people, or 1.3%.

That shows the disproportionate effect of council tax benefit in different areas, and if there is nothing in the Bill to say that unemployment needs to be taken into consideration, it prompts the question, will those councils where unemployment is relatively low take it into consideration when fixing their council tax scheme? The Minister said that the Secretary of State will not need to intervene, but that is not the case, because as my right hon. Friend Mr Raynsford points out, the right hon. Gentleman will intervene if he does not agree with a scheme. He has the power to do so, and to change the financial year of a scheme, so what the Minister has said is not the case.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

In the light of the Minister’s reflection that the Secretary of State is highly unlikely to use his powers of intervention, on what date does my hon. Friend think the right hon. Gentleman became such a shrinking violet that he would not use the powers that were open to him?

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

The Secretary of State’s track record is there to see. On his edicts, he talks very much about localism, but in this Bill we already see that he has kept for himself swingeing powers to intervene. Over the past 18 months, we have had diktats to councils on weekly elections, including the idea that to save money they should have fewer pot plants, and lectures on the size of their balances, so I do not accept that he is a born-again devolutionist who is giving powers to local authorities. He will quite clearly intervene when he needs to.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

Does my hon. Friend also agree that the Secretary of State’s attitude to poorer people in our communities can be seen clearly from when he ran Bradford city council? We do not have to look into the crystal ball when we can read the book.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Exactly. But the Secretary of State is also highly political, and the Bill does not take into account unemployment and other things because, again, that is part of its general sweep. It is about giving local councils not only responsibilities, but blame, because if a local council comes up with a certain scheme, the right hon. Gentleman can say, “It’s not my problem, it’s your local authority dealing with it,” even though he has poisoned the pill that he has given them with a 10% cut in the grant for council tax benefit.

The Secretary of State is also political in saying that councils are free to not put up council tax because they will get grant for three years, but that he can give no guarantee for the year before the next general election. That is because he wants to shift the blame for the decisions that this Government are taking—both Liberal Democrats and Conservatives—on to local councils. Slowly but surely, local councils and councillors of all persuasions are waking up to the fact that they will have to make tough decisions. They will have to not only divide the smaller cake after the 10% reduction in council tax benefit, but invent a scheme that is seen to be fair.

My hon. Friend Helen Jones spoke about people who are in receipt of council tax benefit. There is a misnomer that is repeated on a number of occasions. Reading the press, one would think that every single person who gets housing benefit or council tax benefit is in receipt of unemployment benefit. They are not. Some of the poorest people in society are working very hard to keep a roof over their head. These changes will affect their ability to keep that roof over their head.

Another concern is that if there are no criteria for the various schemes, there will be a plethora of different schemes up and down the country.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

The hon. Gentleman says that that is localism, but it will lead to real issues, especially if the Secretary of State is of the Norman Tebbit variety and thinks that people should get on their bike and work. If there are disincentives because of the different schemes in different parts of the country, it will be difficult for people to do that.

The chaos that will ensue in London will be something to behold. Potentially, there will be 33 different schemes for the administration of council tax benefit in London. From talking to colleagues in London, I know that people move across the council boundaries freely. They do not take into consideration the fact that they are moving from one council to another. Some colleagues tell me that 25% or more of their local electoral register churns over every single year. How will people be clear about what the scheme is in one borough as opposed to another? If we add to this the changes in the Welfare Reform Bill, which will have a disproportionate effect in London and drive people out of higher-cost rental areas, there will be administrative chaos.

Individuals will not be clear about which scheme applies to them and some people will get into arrears with their council tax, as my hon. Friend Mark Tami said when he intervened on my hon. Friend the Member for Warrington North. We will get to a situation where the number of evictions increases and where people and their children face insecurity about their homes. It will be very difficult for councils that have a large turnover of individuals to collect council tax. There is nothing to compensate authorities that have a large turnover for that effect. There will be a double whammy for those councils: they will face the 10% cut and it will be difficult for them to collect council tax.

We must also consider the difference in the number of people who claim council tax benefit in different authorities. As I said earlier, County Durham has 63,494 claimants, which is 15% of people aged 16 and above. Last year, that cost £55.1 million. The situation will be the same in other large councils in the north-east, and in other areas such as the constituency of my right hon. Friend Mr Howarth. There are a large number of people on either unemployment benefits or low wages who receive council tax benefits. We can compare that with some southern councils, and I will give a few examples. Wokingham—

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

You’re going to buy a house there, aren’t you?

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

I am hoping to be made a freeman. I have given it enough plugs in these debates.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. I am sure second home preferences are a matter for some other debate, but not for this one.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence) 9:00 pm, 31st January 2012

In the 2010-11 financial year, Wokingham had 5,159 people claiming council tax benefit, which was 3.9% of the population and cost £5.3 million. That authority covers the constituencies of Wokingham, Maidenhead, Reading East and Bracknell. Hart, in Hampshire, had 3,029 claimants, which was 4.2% of the population and cost £3 million. It covers the Aldershot and North East Hampshire constituencies.

South Buckinghamshire council had 3,024 claimants for the year 2010-11, which equated to 5.6% of the population aged over 16 and led to expenditure of £3.4 million. South Oxfordshire had 5,848 claimants, which represented 5.6% of the population aged over 16 and cost £6.1 million. That area covers the constituencies of Henley and Wantage. Finally, Vale of White Horse council in Oxfordshire had 5,578 claimants, which was 5.8% of the over-16 population and cost £5.7 million. It covers the constituencies of Wantage and Oxford West and Abingdon.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

My hon. Friend emphasises the differences between local authority areas, and he has compared Durham and Wokingham. A prime indicator of levels of deprivation is the number of looked-after children per 10,000 population, and I just happen to have that statistic for Wokingham. The number there is 22 per 10,000 population, whereas in Middlesbrough it is 104 per 10,000 population. That illustrates the contrast between the levels of deprivation and need in different areas, and I hope he will bear it in mind.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

I will, and that is why it is important to have in the Bill the criteria by which authorities will draw up their local schemes.

The reason why I give the differences between areas is that it is quite clear that Durham will have to draw up its scheme very differently from the other authorities that I have mentioned. They also indicate that, as I said in last week’s debate, the Bill will favour southern councils over northern ones such as Durham. It is not a coincidence that all the constituencies that I read out happen to be Conservative.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

Does my hon. Friend agree that councils will face a further penalty through the cost of appeals once the scheme comes in, which again will be worse for councils with more claimants? I suspect that there will be a lot of appeals, and there will be a cost in both staff time and legal representation. Councils will also face the cost of chasing up unpaid council tax, which will increase hugely.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

I agree, and that will have a disproportionate effect on northern councils such as County Durham. It will also be a complete nightmare for local authorities in London. I know that the Bill allows for data sharing between local councils and the Department for Work and Pensions, but given the movement of people in London it will be very difficult indeed for councils to chase people up.

What are the options open to councils such as Durham, given the 10% cut, to make up the difference? The Minister and the hon. Member for Bradford East said that it would be made up by charging a different rate on second homes.

Photo of George Howarth George Howarth Labour, Knowsley

My hon. Friend Helen Jones just made the point that councils could be bogged down in appeals. Does my hon. Friend Mr Jones believe that it is also conceivable that the Bill could be deemed discriminatory under the Human Rights Act 1998? The Bill contains a declaration—as do all Bills, for purposes of the Human Rights Act—that the Secretary of State says that

“the provisions of the Local Government Finance Bill are compatible with the Convention rights.”

Does my hon. Friend think that that might slightly overstate the case?

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

My right hon. Friend raises a very good point, because we will have different schemes in different areas. I wonder whether there will be challenges to the criteria that are used to draw them up. The hon. Member for Mid Dorset and North Poole said that various equality Acts applied to the measure. They may well do, but that is not stated on the face of the Bill. If people who find that they are not in receipt of council tax benefit after the measure is introduced feel that their local authority has discriminated against them, that will doubtless lead to court cases. Again, the costs will fall on local authorities, and again, no doubt the Secretary of State will be nowhere to be seen and will blame councils for not implementing the scheme properly.

The hole could be plugged by further cutting benefits for those who are in work and others. Second homes give another method—obviously, there are a plethora of second homes in Bradford.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

There are loads in Gateshead.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Obviously, and in other places. They will fill the black hole. We could also increase council tax. However, that is no good for councils in the north-east, where 50% of properties are in band A.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

Fifty-six per cent.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

My hon. Friend says that the figure is 56%. Only 2% of properties in Surrey are in band A. The ability of councils in the north-east to raise additional funds is severely limited.

Photo of John Healey John Healey Labour, Wentworth and Dearne

My hon. Friend is talking about plugging the hole caused by the 10% cut and highlighting the feeble arguments from Ministers about the flexibility around the second home discount. Has he asked himself why the Government have not considered the single person’s discount, which is worth £2.4 billion in total—more than five times the 10% cut?

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

My right hon. Friend makes a good point. The Bill is being rushed through. If we were considering a root and branch, proper review of local government finance, we could examine my right hon. Friend’s suggestion. I suspect that the Government do not want to do that because it affects a lot of pensioners and they think that pensioners may be more interested in voting Conservative than not. For the same reason, they will not go anywhere near revaluation of domestic properties.

My hon. Friend the Member for Warrington North made a very good point about the comments of the Minister for Housing and Local Government, who seems to think that people can somehow magic up economic development in local areas to increase revenues. That is supposedly the entire basis of the Bill: that councils will be free to create extra demand instantly through economic development. It is a damn sight harder to attract businesses to the north-east than it is to the south-east of England.

There is a problem with who is consulted about the scheme. My hon. Friend the Member for Warrington North made a good point about the mess caused by the system having to be tackled by the charitable sector, local credit unions, which will have to sort people out when they get into debt, local branches of Age Concern, citizens advice bureaux and others. It is only right that they are statutorily consulted on the drawing up of the scheme. If they are not, at the end of the process they will have further burdens because they will have to try to sort out the mess created by the Bill—many are having their grants cut already.

I am sure the Minister, in his feeble way, will refuse to accept the amendments because the Bill is part of a strategy. He is part of that strategy, even if he does not understand it. In effect, the Secretary of State wants to give as many freedoms as possible to local government so that he can wash his hands of it and stand up to the electorate and say, “It’s your local council’s fault.” I hope local councillors of all political persuasions are waking up to what the Secretary of State is up to. He is blaming them for his decisions. Until they wake up to that fact and start protesting—some Liberal Democrats bravely voted against the Bill tonight—we will end up with confusion and mess in local government and blame, and some of the poorest and weakest in our society will be affected.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

Once again, I am concerned about the lack of time, because I would have loved to have had a proper debate on amendments 59 and 60, which go to the heart of the problems we face. The amendments, which were tabled by Mr Raynsford, would defer the scheme for a year. Unfortunately, he is not in the Chamber to move the amendments, so it looks like we will not have the chance to pursue the matter. The need to give local authorities more time was one of the things about which Members spoke most eloquently when we debated the previous group of amendments.

It is disappointing that the Minister did not give even a hint that the problems exposed by hon. Members would be given consideration. I have a lot of sympathy for Alex Cunningham, who spoke of the problems of “outsourcing” 20,000 people from London. He said that that would have an effect on London’s infrastructure and mean impending problems for receiving authorities. Any authority that has received large numbers of people after population movements will know only too well of the struggle to put in place the infrastructure needed to absorb them. Suggesting that 20,000 people leaving London will be easy is an easy soundbite, but I simply do not believe it. The Government need to think again if they are suggesting that that is a ground for supporting the Bill, because it cannot be right.

Helen Jones mentioned the cost of appeals and how long they will take. When do they kick in? For how long must people appeal? What would the regime be? Would it be a simple paper exercise or could people appear and give details of their circumstances in front of, say, a group of councillors or officials? We need to know. How will they be resolved?

Why should local authorities take into account the impact of the scheme on the aspects outlined in amendment 66? That is a key question. The hon. Member for Stockton North made the point that we cannot ask local authorities to exclude so many people and not ask them to consider the effects on the poorest groups of working people. If they do not consider that, they would be doing a great disservice to the people. The Secretary of State for Work and Pensions was in the Chamber just now, but it is sad that he has not heard more of the debate, because the points being made are relevant for his Department.

However, if the Bill goes through without the amendment, it will cause local authorities serious problems. Any local authority worth its salt would want to take the issues I mentioned into consideration and would like to have some flexibility to help the groups affected. Why not say that in the Bill? Is anyone seriously saying that that would be an unreasonable expectation for local people to have? [ Interruption. ] I am getting a signal that my hon. Friend Mr Ward might be of a different opinion from me. I happen to think that setting out those matters in the Bill is the right thing to do, and I have yet to hear a coherent argument to suggest that we should not take that into consideration. Once again, that is why, when we vote tonight, I will vote to support the amendment.

I must finish, however, where I started. I am disappointed that we will not have the opportunity to vote on the deferments. I do not know whether somebody else can move the amendments I mentioned, in the absence of the right hon. Member for Greenwich and Woolwich, but I hope so.

I should tell Mr Jones that if I was a betting man, I would be in Ladbrokes tomorrow to see who had made a wager about how many times Wokingham was mentioned in the House of Commons. His speech reminded me of a Pakistani bowler bowling no balls, and there seemed to be a premeditated effort on his part to secure the most mentions possible of Wokingham.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence) 9:15 pm, 31st January 2012

Does the hon. Gentleman think I should get a sponsorship deal with the borough of Wokingham?

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

I honestly believe that the hon. Gentleman is in the market for a property in Wokingham, or if not Wokingham, Hart.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

I am sure the hon. Gentleman could; he is being far too modest.

On the hon. Gentleman’s point about income tax and higher income tax payers, I am disappointed that we will not get anywhere near the amendments that I and others tabled on excluding higher income tax payers from the 25% discount. I would hope that the Government would give local authorities the ability totally to restrict people on higher income tax from having the 25% discount.

Once again, I am disappointed that we will not have the opportunity to pursue many of these issues, and I implore the Minister to try to secure the maximum amount of time on Report to allow us properly to discuss the amendments that we have not reached.

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

Again, we have had an interesting and wide-ranging debate. I have to say that the amendments we have discussed cut across the approach we set out for reforming support for the council tax and the whole localisation agenda. In the first debate, there seemed to be broad support for the view that the localisation part of the proposals was the right way forward, and I particularly welcomed the words of Mr Betts, the Select Committee Chairman, who made it clear that that was his view. In the event, that turned out to be rather a contrast with the views of the hon. Member for Warrington North, who argued strongly against localisation. Then, rather puzzlingly, she said that some of us did not know what was going on in the real world. Perhaps that is not a puzzling thing to say, but I have to say that it is not the reality. With my wife, I brought up five children on family income supplement for two years, so I think I do know what it means when there is not enough money to buy things.

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

No, I will not give way. I am just going to make a little progress.

The hon. Lady said that we did not understand the leeches on the estate who collected the money on payday, but at the same time she seems to be in favour of channelling money through universal benefit, rather than localising it through a council tax reduction scheme. As the Select Committee Chairman rightly said, that is not only localist, but helpful in securing income for local authorities. The hon. Lady reinforced the point with her story of the leeches on the estate.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

I am sorry, but the Minister cannot have it both ways either. The Secretary of State is taking the power to give guidance on what should be included in the scheme, and the Government have already said that pensioners must be protected under the scheme—we agree with that—so the Minister cannot then argue that he wants everything left to local councils, because that is exactly what he is not doing.

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

Unfortunately, the hon. Lady has partly misread the scheme. Paragraph 2(8) of schedule 4 provides the Secretary of State with the power to make regulations in relation to the requirements of schemes, and he intends to use this power to require authorities to provide support for pensioners. The purpose of that provision is precisely to safeguard pensioners—a point on which, it would appear, there is cross-party support. It does not require the Secretary of State to approve schemes, and it is not a power to intervene in schemes. I think that I have made that point clear to the House, and if I have not, I repeat it now to make it so.

Several rather whacky points have been made. The hon. Gentleman for Stockport North said—[Hon. Members: “Stockton North”] Sorry, I should know better. The hon. Member for Stockton North said that Labour had worked hard to close the gap between the rich and poor. Well, I do not know how hard it worked, but it certainly did not work, because the gap between the rich and the poor widened in that time. It did not narrow. He seemed extremely sceptical about whether it was possible for authorities such as Stockton to generate the additional income from discounts and exemptions to compensate them for the loss of council tax benefit grant.

By my count, 18 local authorities have been drawn into the debate in one way or another—all of them by Opposition Members praying in aid councils that they believed would be at a disadvantage. Of those 18, 14 could in fact generate from the discounts and exemptions in their areas more money than they would lose from the loss of council tax benefit grant. Among those authorities is Stockton, which would have a surplus, if it extinguished all the discounts. The hon. Member for Stockton North referred to second homes, but an important part of the new flexibility—and part of the reason Stockton could have a surplus—relates to empty homes. Empty homes discounts provide another potential source of revenue.

When one considers the generality of local authorities, one discovers that were all those discounts and exemptions to be extinguished—as I said in the previous debate, I am not arguing that they should be, but I want the House to understand that the flexibility is there—it would result in an additional income to local authorities in England of £420 million. By what my hon. Friend Mr Ward called a fluke, that happens to be the same amount as the 10% reduction. The Government are not arguing that every local authority should simply extinguish those discounts and exemptions. We are simply pointing out that that provides for a significant flexibility, and I would be surprised if a large majority of councils did not choose to make that flexibility a part of the mix when devising a scheme.

Local authorities need to plan carefully to ensure that they can meet demand through the funding that they make available to local schemes. As the hon. Member for Warrington North acknowledged, however, funding for the first two years of localised schemes is derived from the Office for Budget Responsibility forecast for spending on council tax benefit, which reflects existing spending and, therefore, assumptions about underlying demographic changes, including growth in the pensioner population, and council tax increases. Thereafter, of course, the spending review process will provide further opportunities to consider cost pressures.

Local authorities are already well accustomed to using these powers to determine in what circumstances council tax liability should be reduced, whether in individual cases or a class of cases. Local authorities are best placed to understand local needs, including those of low-income families. Paragraph 2(5) of proposed new schedule 1A to the Local Government Finance Act 1992, which is inserted by schedule 4, already requires local authorities to set out the procedures for making an application for a reduction under the scheme.

Amendments 56 and 70 would require local authorities to take into account the impact of their schemes on the living standards and work incentives of taxpayers, and on poverty levels when designing or revising their schemes. However, local authorities already have clearly defined responsibilities in relation to, and for their awareness of, the most vulnerable groups and individuals in their areas. My hon. Friend Annette Brooke made the point that there are statutory responsibilities on local government when drawing up such schemes, or indeed taking any of its functions forward. An important example is the public sector equality duty in section 149 of the Equality Act 2010, which requires authorities in the exercise of their functions to have due regard to the promotion of equality between persons who share a protected characteristic, while the Child Poverty Act 2010 imposes a duty on local authorities to have regard to, and to address, child poverty. She referred, quite properly, to the Disabled Persons (Services, Consultation and Representation) Act 1986 and the Chronically Sick and Disabled Persons Act 1970, both of which include a range of duties relating to the welfare needs of disabled people. She also referred to the Housing Act 1996, which gives local authorities a duty to prevent homelessness.

Putting all that together, it is quite clear that every local authority is familiar with the need to ensure that any scheme it draws up complies with existing statutory guidelines. That is a continuous process that requires all the relevant decision makers to consider equality, disability and other issues, in forming policy and making decisions. We expect to continue with that sensible approach. There is no reason for unnecessary additional bureaucracy to be imposed on local authorities.

Photo of Heidi Alexander Heidi Alexander Labour, Lewisham East

With the best will in the world, is not the problem that, with £490 million less to administer in council tax benefit—a reduction that will come about as a result of the proposals in the Bill—councils will be simply unable to meet the needs of the rising numbers of people who will be unemployed in future?

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

If I can correct just one small point, the figure is £420 million for England, although the sum for the United Kingdom as a whole is larger. The hon. Lady is quite right that there is to be a reduction in the funding of council tax benefit support. That is not in dispute. My point—and the point the Government are making—is that local authorities have additional income streams open to them in later parts of the Bill. They also have the opportunity to tailor their schemes to suit their local circumstances, and if they choose to draw resources from other parts of their income streams, it is open to them to do that.

Let me turn to amendments 49 and 56. It is unclear how a local authority could take into account the impact of claimants who were receiving council tax benefit before the introduction of a local scheme. For example, that would require a local authority to know, several years after the implementation of the reform, whether a person would have been entitled to claim council tax benefit under the old system and whether a change in circumstances meant that a person would no longer be eligible at all. The Bill already provides for local authorities to make transitional provision as they see fit, following changes to their schemes or the introduction of a new scheme. That seems a far better way of proceeding.

Amendment 67 would require authorities to publish, as part of the scheme, the steps that they would take to ensure that people were informed of their entitlement and what assistance they would be offered. That is a sensible requirement, but paragraphs 2(1) and 2(5) of new schedule 1A to the Local Government Finance Act 1992, inserted by schedule 4 to the Bill, already require the authority to set out the classes of persons who are entitled to a reduction, and the procedure for making an application. The provision that the amendment seeks to introduce is therefore already part of the legislation.

Local authorities will want to publicise the scheme in a manner that ensures that those eligible for support claim what they need to in order to avoid going into arrears with their council tax. Points have been made about the cost of publicity and of introduction. The Government do not think it right to stipulate how local authorities should publicise the scheme; it is for them to decide, and a one-size-fits-all set of regulations would certainly place unnecessary requirements on them. Local authorities are best placed to decide how to publicise information about their own schemes.

Amendment 68 would require a local authority to consult charities and organisations that provide advice on benefits or represent older people. However, local authorities already have a duty to consult other persons who are

“likely to have an interest in the scheme”.

The Government’s intention to protect pensioners from any reduction in support as a result of the reform, using the powers in the Bill, has already been made clear. It has been welcomed by the shadow Secretary of State for Communities and Local Government and by the hon. Member for Warrington North, who spoke on behalf of the Opposition in today’s debate. As the system for pensioners will be prescribed at national level, it is unclear what the benefit would be of prescribing further consultation at local level with groups representing pensioners. To prescribe the categories of organisations to be consulted would be restrictive and unnecessary. Many local authorities already have good consultative schemes and, in any case, people are not backward in coming forward to put their point across.

Amendment 71 states that the Secretary of State should have regard to the impact of any guidance on those of pensionable and working ages, and those on benefits, particularly disability benefit. Again, however, the Government have already made clear their intention to use this guidance to set out the importance of supporting work incentives through the design of local schemes. We will consider how best to ensure that local authorities are aware of their duties in relation to vulnerable groups.

It is unclear what the amendment would add to the clear commitment that the Government have already made.

Taken together, amendments 57, 58, 59 and 60 would delay the start for localising council tax reductions. My hon. Friend Mr Hancock asked me why I thought that should be resisted. I believe it should be resisted because it is right to get the scheme in place quickly, to ensure that our programme of deficit reduction proceeds unhindered. It is an essential part of the Government’s programme that that saving should be made. Any hon. Friends or other colleagues around the House who might wish to unravel that programme of deficit reduction need only look a little way across the channels—Irish or French—to see the consequences of so doing.

The Government are clear that this reform needs to be implemented in 2013, to secure the agreed savings. The savings from the localisation of council tax benefit will make an important contribution to our deficit reduction plan. I have already made the point as clearly as I can that that deficit reduction plan is essential, and that the Bill provides powers for local authorities to create other income streams by tackling discounts and exemptions. There will be a possibility for them to do that, if they so choose.

As for ensuring that the timetable is adhered to—Mr Raynsford raised some issues in this regard—we are already working with local authorities and IT suppliers to identify how we can ensure that any new processes and systems are in place for April next year. We are committed to ensuring a steady flow of information to local government on our plans for delivery and the framework in which local authorities will operate. We will also look at what tools we can provide for local authorities to help them in their planning.

Photo of John Healey John Healey Labour, Wentworth and Dearne 9:30 pm, 31st January 2012

The Minister talked about the IT suppliers and working to ensure that their new systems are in place by April next year, but they are going to need to be ready, fully designed, tested and operational well before the end of this year during the period when local authorities will be consulting on and designing their schemes and reassuring themselves that they can be put in place. Is not the reality more likely to be that the options on schemes will be restricted by the designs that the software suppliers will have ready to go?

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

That is an important consideration for local authorities when they look at the speed and pace of change in the schemes they devise, but I have to say that practically everything that Labour Members have contributed to the debate has been on the basis of trying to preserve the existing scheme and associated costs. [Interruption.] I think that local authorities will probably take a cautious approach to changing their local schemes in the first year. I have to say, however, that we believe it is absolutely the case that those that wish to make a more radical change will be able to do so. I am encouraged to hear that IT suppliers are considering the possible changes to existing software and are working with local authorities to—[Interruption.]

Photo of Dawn Primarolo Dawn Primarolo Second Deputy Chairman of Ways and Means

Order. It is getting very noisy. If Members wish to speak to each other, it would be a good idea to go outside and do it.

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

Thank you, Ms Primarolo.

As I was saying, IT suppliers are considering possible changes to existing software and they are working with local authorities. I recognise, of course, that local authorities and suppliers need as much information as possible as soon as possible. For that reason, we intend to publish draft regulations while the Bill is still before the House. We shall shortly make available a design tool to make it easier for local authorities to model their case load and the impacts of any changes to the framework, which should also clarify the extent of any IT changes that the design of their scheme might require.

Photo of John Healey John Healey Labour, Wentworth and Dearne

I must say that it is welcome to hear the Minister say that the Government are committing themselves to draft regulations published while the Bill is before the House. Will he make it clear whether that means this House or the other House?

Photo of Andrew Stunell Andrew Stunell The Parliamentary Under-Secretary for Communities and Local Government

I am looking for a nod somewhere, but let us stick with this House.

Amendment 71 states that the Secretary of State should have regard to the impact of any guidance on those of pensionable and working ages and those on benefits, particularly disability benefits. However, the Government have already made clear their intention to use the guidance to set out the importance of supporting work incentives through the design of local schemes and will consider how to ensure that local authorities are aware of their duties in respect of vulnerable groups. It is unclear whether amendment 71 would add to the Government’s commitment in this regard.

There are things that councils can begin to do now to help in their preparation—in understanding the circumstances of those in their area who currently claim support, in ensuring that elected members are aware of the decisions they need to take and in engaging with precepting authorities such as police and fire authorities. The Government have been clear that local authorities must ensure that they are on the front foot in preparing for this reform.

In summary, I must recommend that the Committee reject the Opposition amendment on this occasion.

Photo of Helen Jones Helen Jones Shadow Minister (Communities and Local Government)

Yet again we have heard a reply of the most astonishing complacency from the Minister, which appears to have been prepared so long before the debate that he did not realise that he was responding to amendments that my right hon. Friend the Member for Leeds Central was not even present to speak to. Yet again we have heard him dismiss the concerns of local authorities and Members, dismiss our concerns about the poorest people in the poorest communities, and, in particular, dismiss concerns about those who work for low wages and the effects that this scheme will have on them.

Let me warn the Minister that he has been put up to respond to the amendments in order to provide a human shield for the Tories in the Government, and that it will come back to haunt him. I wish to press amendment 66 to a vote, and I urge my colleagues to support it.

Question put, That the amendment be made.

The Committee divided:

Ayes 233, Noes 294.

Division number 447

See full list of votes (From The Public Whip)

Question accordingly negatived.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

I beg to move amendment 72, page 5, line 26, at end insert—

‘(3A) Local authorities will have the right to pool schemes for council tax refund purposes both in terms of administrative arrangements and the pooling of funds.’.

Photo of Dawn Primarolo Dawn Primarolo Second Deputy Chairman of Ways and Means

With this it will be convenient to discuss the following:

Amendment 52, in schedule 4, page 47, line 16, at end insert—

(f) the number of persons estimated to be eligible to make an application, and estimated to be entitled to a reduction under the scheme.’.

Amendment 74, line 43, at end insert—

‘(8A) Before making regulations under sub-paragraph (8), the Secretary of State must consult with local authorities regarding any proposed requirements for schemes.’.

Amendment 55, page 48, line 15, at end insert—

(d) notify all persons within their area receiving council tax benefit on or immediately following 1 April 2012, of the implications of the draft scheme, including the estimated impact of that scheme on their living standards.’.

Amendment 75, line 22, leave out sub-paragraphs (4) and (5).

Amendment 53, line 37, leave out ‘about the making of reasonable charges’.

Amendment 76, page 49, line 14, leave out sub-paragraphs (2) and (3).

Amendment 77, line 28, leave out section (6).

Government amendments 86 and 87.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

It is a great pleasure finally to be able to speak to amendment 72. I have missed a Select Committee visit to the Netherlands to do so—my furthest trip so far has been to Manchester.

It is a pleasure to serve under your chairmanship today, Ms Primarolo. Let me make it clear to the Committee at the outset that the amendment is probing. I do not intend to press it to a vote. My aim is to give the Government an opportunity to clarify their thinking on administrative arrangements for distribution of council tax reduction schemes. There is clearly some sense in local authorities being able to pool their sovereignty—[ Interruption . ]

Photo of Dawn Primarolo Dawn Primarolo Second Deputy Chairman of Ways and Means

Order. The Committee needs to be a little quieter, so that we can hear Mr Hollingbery moving his amendment.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

I am grateful, Ms Primarolo. As I was saying, there is clearly some sense in local authorities being able to pool their sovereignty in relation to their schemes to administer council tax rebates, especially in two-tier areas such as mine in Meon Valley. If one accepts that local conditions in, say, Hampshire will be at least somewhat similar, it makes sense for a uniform scheme to be adopted by all councils in the county. That may well allow schemes to be run more cost-effectively: for example, not only could one processing centre rather than many be used, but it would create one point of contact with other agencies that need to be consulted. Furthermore, assuming that fraud investigation is to be run locally, such an arrangement would allow the accumulation of expertise and critical mass that would otherwise be diffused between many offices.

That type of arrangement would also greatly assist the achievement of a commonality of expectation and understanding of a scheme across a wider area. Several right hon. and hon. Members this evening have talked about the potential for confusion in very localised council tax schemes.

Photo of John Healey John Healey Labour, Wentworth and Dearne

The hon. Gentleman is making a persuasive case, which is consistent with pooling principles elsewhere in the Bill, and I hope he makes some headway with Ministers. Does he not agree that, with only four minutes left when we started this group of amendments, only the third of 10 on the selection paper, there are some important issues that we have not reached, and that if they are to be aired we will have to return to them on Report?

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

I am grateful to the right hon. Gentleman for his intervention, in which he makes a reasonable point. However, if I may, I shall continue to develop my theme a little further.

I believe we would achieve a commonality of expectation across a pooled area, such that people could begin to understand what they would get from a council tax rebate scheme. Simply put, we would avoid the strange situations where streets are split in such a way that there is one expectation of the scheme on one side of the street and a different expectation on the other. The Bill makes no mention of such schemes, but chapter 3 of the Government’s response to the consultation on localising support covers the issue, and it makes the case that such schemes are possible under existing powers. It would be useful if the Minister briefly outlined his thoughts on how that would work, and which existing powers might allow local authorities to draw up schemes—assuming, of course, that he will have the time to do so, which is unlikely.

Even if legislation allows such schemes to be put together, it might be useful for there to be a standard, approved scheme, produced by Government, to reduce cost still further.

Proceedings interrupted (Programme Order, 10 January).

The Chair put forthwith the Question s necessary for the disposal of the business to be concluded at that time (Standing Order No. 83D) .

Question put, That the clause stand part of the Bill.

The Committee divided:

Ayes 305, Noes 227.

Division number 448

See full list of votes (From The Public Whip)

Question accordingly agreed to.

Clause 8 ordered to stand part of the Bill.