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Lord Dixon-Smith moved Amendment No. 103:

Page 17, line 24, after ("applies") insert ("for the purpose of limiting the liabilities of billing authorities (including liability resulting from the limitation of council tax benefit subsidy)")

The noble Lord said: Amendment No. 103 is somewhat important. Anybody reading the Bill for the first time and coming to Clause 30 might well pause--unless he was a local government finance aficionado and immediately expert in all its intricacies--to wonder exactly what Clause 30 was all about. It certainly is not explained. It comes in Part II, "Regulation of Council Tax and Precepts", and in a sense it is part of that.

Clause 30 in fact deals with the council tax benefit subsidy limitation scheme. Without going into the detail of that scheme at this stage, as I shall do so in relation to subsequent amendments, it would help the Bill enormously if the reason for the presence of this clause in the Bill were explained. The amendment simply does that. It states that the section applies,

5.45 p.m.

Baroness Farrington of Ribbleton: Amendment No. 103 struck me as rather obscure, and I thank the noble Lord, Lord Dixon-Smith, for clarifying its intention to Members of the Committee. I assume that the amendment seeks to limit any liability that a major precepting authority may have to a billing authority to those abilities arising from the council tax benefit subsidy limitation scheme.

The Committee will be aware that this scheme is already in operation. Clause 30 is simply a technical provision to ensure that any major precepting authority which exceeds the guideline pays its contribution to the council tax benefit cost to its billing authority. The amendment as drafted applies to any liability of a billing authority and it is therefore doubtful whether it would have any effect. I therefore ask the noble Lord to withdraw the amendment.

Lord Dixon-Smith: I shall have to consider the Minister's reply. I agree that the purpose of this clause is to provide legal authority for precepting authorities to pay back to billing authorities deficits that might arise as a result of the billing authority not receiving subsidy from the DSS which it would have received before the limitation scheme was applied. The billing authority, which receives its subscription from the DSS, will receive back only that money which applies to its share of the deficit, while the part that is capped in relation to the major precepting authority will not come back to the authority. This Bill makes provision for that money to be paid by the major precepting authority.

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I may not have explained that very clearly but it is rather a difficult area, where the ratepayer is in effect required to provide a subsidy for what is otherwise a social security benefit. That is the reality of the position. It is in fact another cap. The DSS has an element of right on its side. It has said that if a local authority pushes up its rates in a way that it considers unreasonable, it will not pay the benefit that would otherwise be paid because that is the consequence of someone else's decision; namely that of the local authority.

It is very difficult to see how to rationalise this, but it is a completely new departure that council tax payers are being invited to support--indeed made to support--social security benefits. I tabled this amendment in an attempt to make clear the intention of this clause. I did not think that the amendment imposed any limits. I thought it was a straightforward explanation. My attempts at limitation, which I admit are likely to fail grossly, come in the next group of amendments.

Baroness Farrington of Ribbleton: I thank the noble Lord for giving way. I am sure the fault is entirely mine. I am not sure that I understand his clarification as much now as I did before he expanded it. Perhaps it would be for the benefit of the Committee if, between now and another stage of the Bill, we worked out what we are both referring to and understand, and whether the amendment would achieve what the noble Lord believes it would achieve.

Lord Dixon-Smith: It was my intention to withdraw the amendment, but I thought some explanation was needed as to why I tabled it, although the Minister has not quite understood the point I was trying to make.

Baroness Hamwee: Before the noble Lord withdraws the amendment, whatever the detail of the drafting, an attempt to provide a guide for the reader is entirely right. We regard council tax benefit limitation, as the noble Lord has said, as a matter of how welfare provision is dealt with: whether it is a matter for national support or whether it is dealt with at a local level. Many criticisms have been made of this scheme.

The point that I wish to make concerns the oddity of primary legislation dealing with what is a subsidiary issue. Anything that can help the reader to understand that this provision is required as a result of secondary legislation that has already been dealt with, is to be welcomed. I realise the matter is difficult. I congratulate the noble Lord on his valiant attempt.

Baroness Farrington of Ribbleton: If the correspondence is three-way, both the noble Lord, Lord Dixon-Smith, and I myself will benefit from the noble Baroness's knowledge.

Lord Dixon-Smith: I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

12 May 1999 : Column CWH101

Lord Dixon-Smith moved Amendment No. 104:

Page 17, line 26, at end insert--
("( ) No budget shall be judged excessive unless the amount calculated exceeds the authority's SSA and the authority's expenditure per head is in the upper quartile for that class of authority.")

The noble Lord said: I admit straightaway that these amendments are bound to fail; this scheme is in existence and we cannot have the billing authorities in technical deficit because there is no legal authority under which precepting authorities can pay back to them the funds that have caused that deficit.

We should recognise, however, that the impact of the scheme is pernicious. Areas which are relatively poor and which have a high proportion of housing problems, low-value houses and social problems will be much harder hit by this scheme than areas which are relatively well-off. The LGA has calculated what would happen if all authorities exceeded the threshold amount by 1 per cent in relation to their 1998-99 budget requirements.

In the worst-off authorities the average estimated percentage of their total council tax income coming from the benefit is 24 per cent. The impact on council tax of the limitation scheme--as a result of the rise which the LGA postulated at 1 per cent above the threshold--is again about 1 per cent. If, however, you make the same calculation in relation to the best authorities the increase in council tax is only 0.1 per cent. Therefore, those who can afford to have the limitation--if it applies to them--are least affected by it. That is somewhat hard and pernicious.

I do not intend to press these amendments because I admit that they are bound to be inadequate. I have put them down with the quite deliberate intent of provoking a discussion on the machinations of this particular scheme. I beg to move.

Baroness Hamwee: I am not sure that this is a contribution to the debate on the machinations of the scheme. However, the amendments give me the opportunity to ask about the drafting. Clause 30(2) states,

    "Whether an amount is excessive shall be determined by reference to criteria specified and published by the Secretary of State." New Section 52B(2) states,

    "The question whether the amount so calculated is excessive must be decided in accordance with a set of principles determined by the Secretary of State." Why is it that in one part of the Bill we talk about a set of principles and in another criteria? Is there some significance in the different phraseology?

Lord Whitty: The noble Lord, Lord Dixon-Smith, has indicated the difficulty of this matter in that there is already a scheme in place resulting from orders in the previous legislation. This amendment deals simply with the precepting side. Therefore questions which go to the basis of the scheme are difficult if not impossible to deal with in the way the noble Lord intends.

Perhaps I may record the principle behind the scheme; namely, that when there is an excessively large increase in council tax we do not believe that the national

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taxpayer should pay the costs arising from local decisions. That is the aim of the scheme. But it is the increase in council tax that matters here rather than whether the council is in a certain quartile or is budgeting above or below the SSA, or whether that expenditure per head is in the upper quartile in absolute terms. It is the rate of increase in council tax which triggers this provision and it is a fairly straightforward trigger. There is of course a limitation in that no local authority, including the poorest, can be worse hit than the average would be in the same situation.

The clause relating to the precepting authorities provides for regulation that will require major precepting authorities which exceed the guideline to make payments to the billing authorities. The noble Lord has explained this matter. It does not affect the establishment of the scheme as a whole. The regulations are relevant to billing authorities but have a knock-on consequence for precepting authorities. Councils have already taken this scheme into account in setting their council tax for 1999 to 2000. If we were to adopt the amendments of the noble Lord we would prevent some major preceptors from paying their contribution to benefit costs to the relevant billing authorities despite having picked up the contribution from their taxpayers. It will therefore result in a shortfall which would have to be met by both the preceptor and its billing authorities. And of course no billing authority would be excluded from the scheme by the amendment; it would solely affect some major preceptors. There would therefore be a somewhat perverse effect from the combination of Amendments Nos. 104 and 105, which the noble Lord recognises.

The noble Baroness referred to Clause 30(2). The two schemes are separate. There is no difference in intention between the two terms, but I am advised that it is helpful to have different terms to distinguish the two schemes. If the noble Baroness requires further clarification, I will of course let her have it.

Amendment No. 106 deals with consultation before setting the criteria of a scheme. On that, of course, we consulted local authorities at the same time as we consulted on the 1999-2000 local government finance settlement, and there is ongoing consultation with LGA officers to discuss the practical details of implementation. I do not see great benefit in setting out a requirement in a legal instrument in the way that Amendment No. 106 would provide.

Amendment No. 107 would bring forward the date at which the Secretary of State would need to make an announcement on the criteria which are to apply under the council tax benefit subsidy limitation scheme.

Provisional details of the criteria for council tax benefit subsidy limitation are announced as part of the provisional local government finance settlement at around the beginning of December. These are then subject to full consultation and a final announcement is made as part of the final settlement normally announced during February. There does not seem to be any practical reason to move away from this timetable. Most local authorities are familiar with the settlement system,

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and it provides time for any modification of criteria in the light of any changes between the provisional and final settlement.

I do not see any benefit of writing an additional consultation period into this Bill as I understand Amendment No. 107 is designed to do. I can understand the frustration of the noble Lord, Lord Dixon-Smith, about the first of these amendments not being able to achieve what he intends. The other two amendments, I would suggest, are not necessary. I therefore ask the noble Lord to withdraw.

6 p.m.

Lord Dixon-Smith: I am grateful to the Minister for his explanation. I am somewhat concerned as to one aspect of it. I accept that we have a scheme which is in existence and I accept that we have to deal with the situation which that creates. Therefore I cannot complain about what there is in this Bill because it puts right a situation which requires to be put right.

One difficulty which I have is that we are dealing with a situation where the limitation applies on the rate of increase of council tax, and consistently over the years, the biggest variable in a local authority in making its budget has been the amount of money it will receive from central government. Although the council tax increase may be said to be at the initiative of the individual authority, very often it is as a result of a force majeure situation because the subscription that is received from central government has varied. Not only is that a direct monetary effect, but of course it usually has a multiplier effect when it is then applied to council tax because of the domination of local authorities' money.

The scheme will need to be administered with great care because it is not generally experienced that the moneys that local authorities receive from the centre simply go up in a straight line in relation to inflation. There are all kinds of factors which are taken into account for all kinds of very good reasons. At any one time, individual authorities are benefiting and keeping quiet, while other authorities are being squeezed and are complaining like mad. This will need to be looked at carefully, because it will be a situation where individual authorities' requirements will be paramount. The idea of getting broad principles will be quite tricky. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 105 to 107 not moved.]

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