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We thus have a basic contradiction in the Government's approach to local government. On the one hand, in line with their "smaller government" rhetoric, we have the diminution of the local state and its resources and, on the other hand, in line with decentralisation and localism we are placing the local state-local government -as the driver of some of the strategies which the Government hold dear. That is in relation to issues which have previously been more centralised, although they were in some cases regionalised. We now have local government, with diminished powers and resources, nevertheless being designated as responsible for the prosperity, well-being, planning and the environmental side of their localities. We also have ever more complex interventions, as other speakers in this debate have underlined, placing ever more complex requirements in the financial area.
I will fully accept, before the Minister makes the point, that this contradiction is not unique to this Administration. However, it has become much more acute, partly because of the large-scale reduction in resources-both those already seen and, more importantly, those impending-but also, if I may trespass on private territory, because this Government have an internal contradiction themselves. That contradiction is not only between the coalition partners but to some extent between the metropolitan leadership of the Conservative Party and the Conservative councillors in the country, who have a different view of local authorities.
I come from a different tradition entirely. I make no bones about it; I am an unashamed statist. However, I have always recognised that the nature of the state in Britain-in this particular context, in England-is hugely overcentralised. Compared with almost every other western democracy, the level of powers, resources and political importance of local government in England
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The Bill is not all that clear-it is not all that clear in Schedule 1-but in reality the Secretary of State has huge powers to determine what exactly each authority will in practice get out of the business rate. Apart from the 50% cream-off, we do not know how or how that will be distributed. I would hope that the Minister could at least give us an assurance that before we complete the passage of this Bill, we will have an indication, in outline and in principle, of what kind of redistribution the Government have in mind for the 50% of the business rate that is to be rechannelled through the centre.
In reality, the position is that local authorities will not know how much they will get from the business rate. That is surely completely non-conducive to the alleged aim of this: to allow local authorities to stimulate local business and prosperity. Unless they know what kind of income they are going to get over a relatively long period, that kind of economic planning role will not be achievable. We have a Bill here which is probably going to be an example of the tensions within this Government and within any central government's approach to local authorities. Yet the tensions are becoming more acute and the local authorities are going to find it much more difficult to deliver that.
I have three further points to make, one of which is in the Bill and I support, one of which is in the Bill and I oppose, and one of which is not in the Bill. I support the measures relating to the powers to tax empty homes and, to some extent, second homes. They are sensible and, apart from being a revenue-raiser to a limited degree, may actually be able to contribute to the housing role of local authorities. Like other noble Lords, though, I am strongly opposed to the localisation of council tax benefit. Because others have already made them, I will not go over the arguments that the burden of this change, particularly in the timescale proposed, will fall primarily on the working poor and the young unemployed, but the timescale will be impossible logistically if we insist on a start date of 2013.
My view is that housing benefit and council tax benefit should be dealt with in the same place and in the same way. Both are based on the same passport arrangements, relate to local costs and are administered and delivered locally. It could be argued that it would be sensible to decentralise both, but I argue that it would be better if both were dealt with in the present way and taken together into the universal credit system. What is entirely illogical is to treat them differently, and that is what the Bill provides for. Taking all those things into consideration, that I predict some chaos in local authority systems and some serious injustices for recipients of council tax benefit. Not only will local authorities and recipients be in trouble but central government will as well.
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My final point is not in the Bill. It relates to housing, and I declare an additional interest as chair of Housing Voice, the campaign for affordable housing. Noble Lords will recognise that housing is in crisis in all forms of tenure and in pretty much all parts of England. The Localism Bill in effect put local authorities in the driving seat with regard to housing but never gave them the resources that they would need. I support the central role of local authorities in this arena, recognising that it will mean differential outcomes in different local authority jurisdictions. Housing markets are different, as are the needs of different populations, and it is right that a lot of those decisions should be taken locally. To be a strategic authority in this area, however, local authorities need resources whether they are going to build social housing themselves, help housing associations to do so, go into partnership with the private sector to build affordable homes in their area or help first-time buyers to purchase in their area. This role is not covered in the present rate support grant calculations; it is inhibited by the restrictions on local authorities being able to devise their own systems of local taxation, or even to make marginal changes to the council tax provisions in relation to banding and designation, and, above all, by the Treasury-imposed restrictions on borrowing.
Again, in most other European countries, local authority borrowing to build houses, or indeed other infrastructure, would not be set against central government limits, as even the rather pitiful level of TIF in this Bill will be, and I see no logical reason relating to economic management why that should be the case in this country. I am not arguing for the complete relaxation of credit and borrowing controls for local authorities but, unless they have more flexibility to raise their own finance from the market, neither they nor the private sector nor registered social landlords will be investing sufficiently in housing when, as we all know, there is a massive unmet demand and severe dysfunction in the housing market. I fear that we will not see that in the Bill, but I register with the Minister that at some point in this Administration we have to make some radical changes in the resources and powers available to local authorities in the housing sector. If she cannot be forthcoming on that in the course of the Bill, I hope that she will at least persuade her colleagues to bring something forward later in this Parliament.
5.50 pm
Lord Wigley:My Lords, as a committed devolutionist, I have every sympathy with the objective of giving local government maximum freedom. However, in doing so, we must surely ensure that we are not undermining their ability to deliver services to vulnerable people who depend upon them or adding financial burdens to such people.
The Bill applies to Wales, but not to Scotland or Northern Ireland, so it is the Wales dimension that I will mainly be addressing tonight. I hope that in Committee there will be an opportunity to go after more detailed aspects relating to vulnerable people, particularly disabled people.
In terms of its effect on Wales, this Bill has greatly changed since it was first presented to the House of Commons. This is because of the introduction of new
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Criticism of the Bill is generally not related to the measures proposed in it but to how the Bill provides the framework for significant cuts to council tax benefits which will fall on vulnerable members of our society. I suggest that this is part of a localism and cuts agenda and will involve the devolution of administrative costs as well as the 10% other costs. According to the Welsh Minister responsible for communities and local government, Mr Carl Sargeant, the recent figures for funding transfer represent in total a cut of some 13%. I do not know whether the Minister agrees with that or whether she has discussed this with Welsh Ministers. The Welsh Minister also said in a recent response in the National Assembly that he would shortly be meeting Mr Iain Duncan Smith and the noble Lord, Lord Freud, to raise profound concerns about the financial implications. Is the Minister in a position to confirm whether that meeting has taken place and what was its outcome?
People in Wales who have kept up with the Bill are concerned about the effect of these proposals. As noted by the Minister in the House of Commons, the Welsh Government will be setting out their proposals for council tax reduction schemes in due course, but they propose to introduce a single national scheme set out in regulations and to include the reforms necessary to meet the 10% reduction. The fear is that the Government of Wales will be helping the UK Government to implement a scheme that may be detrimental to poor communities and, particularly, to vulnerable people in those poor communities. The Minister in the House of Commons seemed to believe that the Welsh Government intend local authorities to be given an amount of local flexibility in the new scheme's delivery and that deviation from the national scheme will be funded locally. Their proposals will be scrutinised by Members of the National Assembly for Wales when they are laid before them. In England, following consultation, support for vulnerable pensioners will be delivered through a national framework of criteria and allowances, so pensioner council tax support will not be reduced. We must suppose that this means that the burden will instead fall on all working-age claimants
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In Wales, around 330,000 households-nearly a quarter of all households-receive some form of council tax benefit. However, Welsh Ministers have already accepted that they will not be able to shelter Wales from these Westminster-inspired cuts. My party, Plaid Cymru, has called for the Welsh Government to follow the Scottish Government's example and protect vulnerable citizens from these cuts by using some of the recent £80 million Barnett consequential payment to prevent the cuts for 2013-14. This would at least allow enough time to work through the proposals and plan the way ahead.
I turn briefly to the non-domestic rating. Business rates raise some £940 million a year in Wales. This is an essential component of local government finance, which enables many vital local services to be delivered for communities. Therefore, any relief of business rates comes at a price and must be paid for. However, if we can use business rate relief as an economic lever to safeguard and create jobs, and to revitalise town centres, it is a price that may be worth paying.
In Wales, the business rates system is, uniquely, not devolved. There is a Welsh business rates pool at Westminster, which I believe will remain as a result of the Bill, even though the English system is being changed and despite local government and economic development being devolved responsibilities. Welsh Ministers are currently not empowered to design a Welsh business rates system that is substantially different from the present system in England. With business rates devolved in Scotland and Northern Ireland, and being localised in England, Wales will have a unique system of having its rates pooled at Westminster. If the UK Government insist on devolving council tax benefit, they should also give Welsh Ministers full control over the Welsh business rates pool. Leaving the system as it is would be an enormous anomaly.
At present, the Welsh Government are allowed only to fund varying levels of rate relief. They cannot alter rates in any other way or configure rate levels to meet policy objectives. Full powers over the business rates regime should surely be put in the hands of Welsh Ministers. In a recent speech to the Institute of Welsh Affairs at an economic conference in Cardiff, Professor Brian Morgan, who leads the Welsh Government's review of business rates, which was published today, said that an expert whom the review had consulted had described the business rates situation in Wales as "ridiculous".
In Scotland, local authorities retain 50% of any business rates income that they generate on top of a nationally agreed base. In Northern Ireland, Ministers use their control over the non-domestic rates to place an extra levy on large out-of-town retailers and redistribute the proceeds to town centres. Professor Brian Morgan's report on how the business rates system in Wales can be reformed to streamline and stimulate economic growth calls for full control over business rates in Wales to be transferred to the National Assembly.
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5.58 pm
Baroness Lister of Burtersett: My Lords, it is always a pleasure to follow the noble Lord, Lord Wigley. I rise to speak not as an expert on local government finance-perhaps I should also say that I have no links to the LGA-but as a survivor of the marathon that was the Welfare Reform Bill. Clause 9 of today's Bill, which provides for council tax reduction schemes, forms a coda to the Welfare Reform Act but it is a discordant one. As my noble friend Lord McKenzie of Luton has eloquently argued, it threatens to undermine some of the key objectives of that Act in the name of localism, although whether this represents genuine localism is disputed. I will focus my remarks on this issue but will also briefly mention another legacy of the Welfare Reform Act that has implications for local government finance-the localisation of key elements of the discretionary Social Fund.
During the passage of the Welfare Reform Bill, my noble friend Lady Hollis of Heigham, who unfortunately could not be here early enough to take part in this debate, delivered what the late and much missed Lord Newton of Braintree described as a "devastating critique" which demolished the rationale for localisation of council tax support set out in the original consultation paper. I am tempted to provide noble Lords with the Hansard references and say, "I rest my case". But in the role of understudy I will make some of the arguments that my noble friend might have made.
First and most fundamentally, for those below pension age we are turning a nationally determined social security entitlement, paid out of a demand-led budget, into a local game of roulette, the rules of which will be shaped by the effects of a shift to a cash-limited budget that, as we have heard, incorporates a 10% cut on current expenditure. Instead of a clear entitlement which changes only in response to changes in a claimant's circumstances, which will be the same regardless of where the claimant lives, there will be a patchwork of schemes in which the help for which a person qualifies will depend on the demographic make-up of the local population. As we have heard, the greater the number of pensioners whose entitlement is protected, the less there will be for other groups. The support available will be vulnerable to economic shocks, such as a factory closure, and the scheme could change from year to year. Instead of forming part of the overall structure of social security, council tax reduction schemes could spell financial insecurity. Low-income households will be the main losers, as many noble Lords have already pointed out.
As has already been noted, the Institute for Fiscal Studies calculates that unless councils find additional money from elsewhere, which seems unlikely given the pressures that they are under already, the requirement to protect pensioners in England will imply an average 19% cut in support for working-age claimants, which could be as much as 25% in some areas.
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Citizens Advice has warned its bureaux that this means that the poorest non-pensioner claimants, who would have received full council tax benefit under the present system, will probably have to find about one-fifth of their council tax from their weekly income-a point made by the noble Lord, Lord Best. It reminds bureaux of the trouble that paying a 20% minimum caused in the days of the poll tax or the community charge. It said:
"Many claimants could not make up the shortfall and were pursued for arrears. We expect a similar scenario to develop".
"The poll tax experience showed how difficult it can be to collect small amounts of tax from low-income households that are not used to paying it".
That point was made very well by my noble friend Lady Donaghy.
The Explanatory Notes assure us that:
"The Government is committed to ensuring that local authorities continue to provide support for council tax for the most vulnerable in society".
But that is not being enforced for groups other than pensioners and there is some ambiguity as to who exactly counts as vulnerable. The impact assessment gives the example of disabled people or carers. The DCLG document Vulnerable People-Key Local Authority Duties refers local authorities to the public sector equality duty, including specifically relating to disabled people; to their duties under the Child Poverty Act and homelessness legislation; and to the Armed Forces covenant. That is quite a range of duties which local authorities must bear in mind when drawing up their schemes. Perhaps the Minister could tell us what the consequences will be if they do not meet those duties.
To take just the duties under the Child Poverty Act, a recent survey by 4Children found that fewer than half of English local authorities have a child poverty strategy in place and that 35 of those without a strategy do not even have a needs assessment in place, as required under the Child Poverty Act. If they do not have a needs assessment, it will be difficult to take proper account of these needs in any local council tax reduction scheme that is devised. The evidence from a JRF survey of local authority spending cuts states:
"It cannot be assumed that the needs of disadvantaged residents and communities will inevitably be to the fore as councils manage budget reductions".
While there is evidence that strategies are being devised to try to ensure that the needs of disadvantaged places and people can continue to be met, there is also evidence of tensions emerging around the degree to which such needs should be protected and prioritised. Then it says that only half of the sample of authorities had adopted,
as a principle guiding budgetary decision-making. In other words, this does not augur well for government assurances that protection of the most vulnerable will be safeguarded when council tax support is localised. The study highlights the potentially divisive consequences of the policy-divisive as between different vulnerable groups and low-income council tax payers and the rest.
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There is also a tension between the supposed commitment to protecting the most vulnerable, vaguely defined as they are, and the policy objectives set out in the impact assessment to support the improved work incentives to be delivered through universal credit. The repeated assertion of this objective takes on a Lewis Carroll-like quality in the face of the widespread view that the opposite will be the case. This is policy-making through the looking glass. It is widely believed that if local authorities are to observe the various duties relating to vulnerability, low-income working council tax payers are likely to be the losers. In other words, this policy change has the potential to create a significant work disincentive and, as the IFS points out, to the extent that local authorities try to protect those on the lowest income through the use of aggressive means-testing, the greater a disincentive it will create to the extent that some people could be worse off with a pay rise, recreating the very worst excesses of the old poverty trap.
Moreover, the overlap with the universal credit taper, mitigated but not removed by a more generous income disregard for the latter, undermines universal credit's policy objective of rationalising overlapping means tests and, again, improving work incentives. To quote IFS again, separate means tests for council tax support has,
- "the potential to reintroduce some of the extremely weak work incentives that universal credit was supposed to eliminate".
It also points out that the policy "severely undermines" the simplification that universal credit was intended to achieve.
The noble Lord, Lord Freud, was quoted in the Financial Times earlier in the year as saying that the Government were,
But with a 10% cut built in, we are talking about £500,000 of tar, and the consensus is that it will undermine universal credit.
Having worsened the work incentives within the benefit system, the Government then turn round and tell local authorities that the reform will create stronger incentives for them to get people back to work. That argument was given pretty short shrift by the CLG Select Committee report, Localisation Issues in Welfare Reform. It commented:
"We have seen little evidence to support the hope that new and better-paying jobs for individuals, immediately sufficient to off-set the 10% reduction in the benefit budget, will inevitably follow from these incentives".
Or as was argued in the House of Commons:
"I am not sure that local authorities can wave a magic wand and create jobs in six months, a year or two years".-[Official Report, Commons, 31/1/12; col. 726.]
That was a Conservative Member, by the way.
Localising council tax support in this way could create some new perverse incentives, as the IFS has pointed out-an incentive to discourage low-income families from living in the area, with shades of the Poor Law, and a disincentive to take up the support. In addition to the principled arguments against the policy, in the interests of good policy implementation-as a number of noble Lords from all over the House have
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The more I look at this policy, the more it seems fraught with pitfalls. A big hole is being torn in the social security safety net, all in the name of localism, yet the CLG committee disputed whether this can,
Those points were made by the noble Lord, Lord Jenkin, and the noble Baroness, Lady Eaton.
Personally, I am not opposed to local authorities continuing to administer a national council tax reduction scheme because there are dangers in lumping all financial support together in one universal credit payment, which may not be paid into the account of the person responsible for making the payment and which is highly vulnerable should anything go wrong with that universal credit payment. However, it needs to be a national scheme, dovetailed with universal credit.
Finally, and very briefly, not only are local authorities having to take over responsibility for implementing their own local council tax reduction schemes, they are also being made responsible for elements of the discretionary Social Fund. Again in the name of localism, another hole is being torn in the social security safety net, threatening the well-being of some of the most vulnerable members of our community, who currently can turn to community care grants and crisis loans for assistance in times of emergency or acute need. The money currently spent on this assistance is being devolved to local authorities but without any duty being placed upon them to use it for the intended purposes. When this was debated during the passage of the Welfare Reform Bill, there was considerable disquiet on all sides of your Lordships' House as to the likely consequences. I hope that we will be able to return to this issue during the passage of this Bill as it is very much an issue of local government finance and is part of the localism agenda-an agenda which, as currently framed with reference to social security matters, spells insecurity and unfairness for many people living in poverty.
6.12 pm
Lord Beecham: My Lords, like other noble Lords I have to declare an interest as a vice-president of the Local Government Association, although whether I will be able to do so in future depends on the reaction to some rather critical remarks which I may make later. Along with other noble Lords, I also have to declare an interest as a member of a city council-in my case, Newcastle city council. Like the noble Lord, Lord Shipley, I suspect, I am grateful for the extensive briefing we received from the very respected treasurer of that authority.
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I suppose that local government finance is the political equivalent of the Schleswig-Holstein question, which perhaps accounts for the fact that there are only 17 speakers in this debate. The paucity of numbers, however, does not reflect the quality of the contributions from all sides of the House. Indeed, I echo the compliments paid to the Minister for the way in which she introduced it. Whether I will be able to compliment her on her reply remains to be seen, but I am sure that she will endeavour to meet the various points that have been raised.
The Government claim that the Bill decentralises control over finance, gives local authorities a strong financial incentive to promote local economic growth and, with the localisation of council tax benefit, gives councils increased financial autonomy while providing continued council tax support for the most vulnerable, including pensioners. Taken together, this prospectus is about as inflated as that which saw Facebook's shares tumble on the closer inspection which followed that celebrated flotation a few weeks ago. To begin with, as the noble Lord, Lord Shipley, pointed out, it completely ignores the savage cuts in financial support for local councils willingly proferred to the Treasury by the Secretary of State, on which the funding baseline which will govern the progress of implementation of the Bill depends, and the full effects of which have still to be seen. For example, I cite the apparent recent decision of the Department for Education to cut children's social care needs assessment by a third, or about £1.3 billion, plus funding for youth and community services, while, incidentally, protecting its own central departmental budget. There was also the Department for Transport's decision to cut its contribution to concessionary travel by a fifth. Both those decisions will impact further on local council expenditure and require money to be found elsewhere, and there is much more to come-even without taking into account the consequences of demographic change and the rising tide of adult social care, which, as my noble friend Lord Warner reminded us, threatens within a decade to swamp the entire territory of local government services. Costs are not likely simply to reflect increases in the RPI, to which the business rate will be linked.
As my noble friend Lord McKenzie and others have pointed out, the proposals for business rates do not match the Government's claims. What they actually mean is that government grant is effectively to be wholly replaced by business rates, localised only to the extent that part of what is raised locally will be retained locally but with a complex system of tariffs and top-ups. Moreover, the basis on which business rates will be distributed, as we have heard, will be fixed initially for seven years, and eventually for 10 years, with little flexibility for adjustment if circumstances should change in the mean time, save that the Secretary of State-and this particular Secretary of State is not known for his flexibility-can make changes, but with no apparent requirement for any objective assessment or review. I agree with the views of the noble Lord, Lord Shipley, on this; there should be more regular reviews to reflect changing circumstances.
There is also an issue around the relationship of enterprise zones and the new business rate provisions. Businesses in enterprise zones will not initially have to
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Further, the assumption that economic growth can be incentivised simply by local councils is flawed. In the 1980s the converse argument was put-that business rates were impeding economic growth and development. The Cambridge studies of that era demonstrated that that was not the case. I do not know on what basis it can be said that local councils in particular can be made responsible for economic growth. Most local councils, as we have heard, already do their best to work with and promote local business. Under this scheme, however, there might be a temptation to enhance business rate income by encouraging retail or service sector development, because that sector produces eight times as much in the way of rates as manufacturing does, whereas manufacturing is the very sector that we as a nation need to encourage most. The whole thrust of the new system pays little attention to needs-the needs basis for formula grant effectively disappears-as opposed simply to crude numbers, and it builds on a substantial shift of resources away from the less well-off areas to the better-off areas over the past two years.
However, it is in the area of council tax benefit that the crudity of the Government's approach is best seen. It is some 45 years since, as a newly selected young candidate in the council election in Newcastle, in the ward that I continue to represent, I put out a leaflet promoting the then Wilson Government's rate rebate scheme. It was the ancestor of council tax benefit and to a degree, therefore, of the council tax support that the Bill adumbrates. The rate rebate scheme was an innovation and brought considerable help to many people. As we have heard, that help has grown over the years. The take-up is far from complete but, nevertheless, in recent years in particular, the amounts paid out have been considerable. However, the Government are now not only slashing central government funding in this area by £500 million or 10%, they are confining that expenditure within a cash limit. Hitherto, if claims increased-legitimate claims-then the Government paid up. No longer will that be the case because the cap limit will be brought into effect.
It is already far from clear that the amount currently estimated for expenditure on council tax benefit will prove accurate-the 10% cut could indeed be greater than the £500 million that the Government will be providing. That £500 million sits a little oddly with the £250 million that the Secretary of State was willing to spend on weekly waste collection or the £450 million which, he announced yesterday, will be devoted to his new initiative on problem families, as he describes them, with £150 million over three years. As others of your Lordships have pointed out, including the noble
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The fact is, as my noble friend Lord Smith pointed out, that none of this recognises that much benefit goes unclaimed, even though the total paid out has been rising. I think that the estimate is that around £1.8 billion of entitlement is not claimed, much of it by owner-occupying pensioners. It may be that as a result of these changes more such pensioners will be induced to claim but, in answer to a question that I raised some time ago, the Government have made it clear that they have no intention of promoting take-up by either pensioners or anybody else.
Further, as the grant is not ring-fenced, councils which receive more than they need will be free to retain the surplus, while others which receive less grant will themselves have to meet any claims that they receive, funding the gap by cutting other services or increasing council tax, or by cutting even more benefits from non-protected groups. As we have already heard, roughly speaking, if you take just the amount relative to pensioners-approximately 50% of claims-a 10% overall cut translates roughly into a 20% cut for other claimants, but that is without taking into account other vulnerable people.
The Government ever so helpfully remind councils of their duties in relation to child poverty, the disabled, the Armed Forces covenant and equalities issues generally, implying that those groups should also receive protection. Of course, councils would be anxious to extend that protection, if at all possible. However, the corollary is that the even greater cuts in benefit would then be inflicted on those not counted among those groups, and in particular by people of working age on low incomes-in other words, the working poor.
The depths of intellectual understanding underpinning these proposals is revealed in some remarks by no less than the Housing Minister, Mr Grant Shapps-or "Grant Stops", as he is known pretty universally in local government. He puts it in this way:
- "if somebody is in work they will not be receiving the [council tax] benefit because they will not need to ... The culture of 'Let them rot in the houses while we pay them benefit' must come to an end".
I have two slight differences of opinion on that statement. The first is that people in work on low wages can and do receive council tax benefit, and so they should. The second is that the implication that councils of any political persuasion simply allow people to rot in their houses while we pay them benefit is, frankly, a disgraceful slur for any Minister to make on local government.
The position in which we are left is that, unlike with the business rate, which the Government will fix, councils will be free to devise their own schemes for the new council tax support with the default mechanism which has been referred to. Therefore, we are likely to see a rash of different schemes producing a pattern of different local benefit levels, effectively emulating the Poor Law regime of the 19th century, and here is where I take issue with the Local Government Association. I find it astonishing that the LGA should approve of this deeply divisive approach, which, as my noble
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There is another aspect to this lottery that is worth bearing in mind. Most noble Lords who have spoken hail from London boroughs or metropolitan authorities, but of course, in the shire counties, we have a two-tier arrangement. It will fall not to the county council, which is responsible for something like 80% of the expenditure, to devise the council tax support scheme for its area; it will be for each individual district council to devise a scheme. In some cases, they may come to an agreement and there may be a scheme common across the county, but that cannot be guaranteed. We could therefore have a significant difference just across a district boundary when most of the money that has been paid by the council tax payer goes not even to that district but to the county council. There is a question not only of fairness but of accountability.
In fairness to the LGA, the association has never directly involved itself in distributional issues because of different interests in different groups. The association facilitates the presentation of a case by a particular authority or groups of authorities, but that is all that it does. That is quite reasonable. However, I was a little surprised that the briefings do not set out the differential impact of the changes either to the flow from the business rate change or in relation to council tax benefit. The average loss per head of population is £8.31 in England, with a range of £11.71 for the north-east to £6.65 in the south-east. Of course, the average loss for claimants is significantly higher. Inner London, northern and West Midlands authorities do particularly badly. Their local economies will suffer as a result of reduced spending power in those areas and it is in those local authorities that the constant strain on council services is likely to rise. The same is true of the function of the pattern of business rates, to which the noble Lord, Lord True, referred.
The Government suggest that the gap may be closed by removing second home discounts and all reliefs for empty properties. As an illustration, the former of those moves would save Newcastle all of £54,000. Contrast that with Westminster's gain of £750,000, or that of Kensington and Chelsea, which is presumably dear to the Minister's heart, of £1.125 million. The latter-relief on empty properties-on the face of it looks more tempting and more useful, but as has been pointed out by the noble Lord, Lord True, and my noble friend Lady Donaghy, it is somewhat unpredictable in what it will yield. Others, including the noble Lord, Lord Shipley, referred to collection costs, which is certainly a factor. There are problems and in referring, I suspect, to the briefing that he and I received, the noble Lord, Lord Shipley, spoke of the potential impact on housing revenue accounts. It is not only local authority housing revenue accounts. We must think of registered social landlords who might have properties that are empty for a time or which are being
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In any event, a study carried out by UNISON shows that many councils will remain substantial losers even if they sought to remove all the reliefs. The warnings from Members on the government Benches, such as the noble Lords, Lord Shipley, Lord Palmer and Lord True, should be taken into careful consideration by the Government.
Another area to which the noble Lord, Lord Shipley, referred, was the question of funding of student council tax exemptions, which are estimated to be underfunded by some 25%, as he rightly said. This affects a large number of towns and cities, as well as county areas where universities are outside metropolitan areas and student housing is a significant issue. This matter was not touched on in consultation and I join the noble Lord, Lord Shipley, in inviting the Minister not to make any definitive announcement tonight but to look into this as we go into Committee.
Finally, there is the issue of process. At this stage the Bill is unlikely to reach the statute book until October at the earliest. How can there be effective consultation with a range of interested parties over local schemes for benefits and changes to reliefs in a way that still leaves time to gear up IT, train staff and deliver a fully fledged system by the start of the new financial year? It would be sensible for implementation to be deferred for a year.
The Bill is not about localism per se. It is about localising blame for painful decisions affecting household incomes and local services. The Government are intent on passing the buck without passing the bucks. This House must seek to improve the Bill, and in particular to mitigate the hardship it portends for hard-pressed communities and householders.
6.32 pm
Baroness Hanham: My Lords, I thank all noble Lords who took part in the debate. As I expected at the outset, it covered not just principles but details, and I will not be able to answer every point made. I think that some speakers recognised that as we went through. However, all the points raised will be noted, and I have not the slightest doubt that we will return to them in Committee.
One of the first criticisms made was of the timetable. Perhaps it is worth dealing with that first. We recognise that because of the time taken for the Bill to get through the other House and this, the process will be challenging-but we are quite clear that it will be achievable. Local authorities have already received statements of intent and impact assessments. They are well apprised of what will be involved. We have published guidance to all local authorities for them to understand what their responsibilities are and are likely to be, particularly in relation to vulnerable groups and the setting out of general principles of incentives. Therefore, they can start consulting, forming schemes and thinking about discount schemes. The noble Lord, Lord Beecham, shakes his head, but the information is there. Local authorities know the purpose of the Bill; they were
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I hope and expect that we will be able to discuss the issues that have been raised. I will make an offer immediately: anybody who wishes to discuss points with me and my noble friend Lord Attlee, who will deal with some sections of council tax benefit, may do so. We are open to discussion. We may not entirely like or agree with what you say, and we may not conclude that what you say is right, but it is important that Members of the Committee should know that we are available if that is what is required.
I cannot cover all the points, but there were one or two that I cannot overlook. The retention of business rates is something for which local government has asked for ages. When I was a local government leader, I thought it would be a very good idea if we were able to retain local business rates. The process we have started does that. It makes it clear that local government collects the business rate and, instead of passing it all on to central government, can keep some. That is fine. The 50% Treasury requirement will absorb some of it, but the 50% will come back to local government in the form of grants. So it is not lost to local government. I totally accept that it is not within the power of local government to alter it, but it is not lost. It is not going into the Treasury coffers and staying there; it is coming back.
As to the points that were made about Kensington and Chelsea and the north, no Member has commented today on the fact that there is a levy system. That levy system will work on councils which raise what is called "disproportionate" sums of money. It will affect councils such as Kensington and Chelsea and Westminster, whose contributions will be top-sliced off because they are deemed to be too high. By any other name it is an equalisation scheme, and noble Lords will want to recognise that.
There has been a great deal of discussion on the relationship between universal credit and the welfare reform process and how council tax benefit is aligned up with that. I know that we will have those discussions at length in Committee but I will confirm immediately to the noble Lord, Lord McKenzie, that the implementation of universal credit is not slipping from 2013. The expected date for implementation is 2013 as it has always has been. There has been no change to that.
Lord McKenzie of Luton: Can the Minister confirm whether the implementation in October 2013 is in respect of all new claimants or only some new claimants?
Baroness Hanham: There is a nod from the Box. I shall have to let the noble Lord know. I said the scheme would be implemented in 2013. My noble friend Lord Attlee will retrieve that information and I will pass it on.
The noble Lord, Lord Tope, who I thank for his basically supportive speech, asked when the draft regulations for the council tax support would be published and whether we would have an opportunity to see
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Indeed, I know of at least one local authority which has already constructed its scheme on council tax discounts on the basis of what it knows already and it is ready to announce it. So it can be done. It is not something that anyone needs to hide behind.
I am grateful that practically everyone has supported the principle of TIF. There is no doubt that with TIF 1 councils are free to put up projects and take them forward. TIF 2 is limited because of the general financial situation at the moment; we will not be able to spend a huge amount of money on it at present. However, it is there and, if it goes well, further consideration will be given to it. As noble Lords know, TIF 2 is confined basically to the core cities putting forward good projects. That is already happening and we know that there are projects which can be developed quite quickly.
My friend the noble Earl, Lord Lytton-I call him my friend because he was very nice last time and I hope that we will get the same this time-has raised with me the question of parish councils, the contributions that they make and the fact that they do not get support from the business rate. I will come back to that because I am sure it will come up in Committee. With regard to valuations and the revaluation, as the noble Earl knows, there is no intention to re-evaluate the council tax base at the moment. On the appeals process for current appeals, we are working with the Valuation Tribunal and the Ministry of Justice to establish the mix of expertise that may be necessary to hear these appeals and ensure that they are not held up.
On impact assessments, as I said earlier, we have published a statement of intent so that there is enough information available, particularly on the equality impact assessment. We are satisfied that the work is now well under way. The amendments made on Report in the Commons are intended to make it clear that there are no legal barriers to preparing for and carrying out consultation prior to Royal Assent. A number of noble Lords referred to the complexity of the scheme. It is only fair to say that the current scheme is blindingly complex, but it is anticipated that the new one will be less so once the situation is understood and we get through the legislation.
I touched on the 100% of business rate not being held by local government, and I am sure that it is something we will discuss.
I was asked about places that struggle to attract economic growth; it was a point made by the noble Lord, Lord Smith of Leigh. Part of that will be addressed by the system of tariffs and top-ups. The base, as noble Lords have said, will be that of 2010, but it will be supported by tariffs that take funding away from local
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The noble Lord, Lord Best, asked whether local authorities will be able get guidance on how to support the universal credit taper. I am pleased to confirm that the department has already published guidance on the key considerations that local authorities will need to take into account in designing a scheme that supports work incentives and the objectives of universal credit, so that is under way.
I turn now to the noble Lord, Lord Wigley, with regard to the Welsh clauses. The amendments to the Bill moved in the other place were tabled at the request of the Welsh Assembly. As we understand the process-the noble Lord may differ from me on this-the legislative consent Motion can be tabled only after the amendments have been passed and the new clauses have been laid, and they must be considered by the Assembly before the Bill completes its passage through the House. I think that the procedural arrangements sound all right but if, having thought about it, the noble Lord still does not feel they do, perhaps he will let me know as soon as possible.
The noble Lord, Lord Warner, raised the question of adult social care. I cannot answer that specifically, but as he and the House knows, adult social care is at the front of everyone's mind. The issue is not confined to local government because it covers a number of departments. A White Paper is being completed at the moment. I think that there will be other venues in which to discuss adult social care, and in a way I hope that it does not trip up in this Bill because, while it is part of local government finance, it is not the major financial implication for local government.
Lord Warner: I think the Minister is trying to avoid dealing with the issue that I was trying to raise. I do not expect this Bill to solve the problems of social care funding. What I was asking for was some modelling to be done to see whether this Bill would actually make the situation worse, before the Government come forward with their plans. We do not know when they are going to come forward with their plans. What I wanted to pursue-and indeed will pursue in Committee-is whether the Government know if implementing the provisions in this Bill will actually make the funding of social care worse. That is my point, and I think we need an answer to it.
Baroness Hanham: We will come back to that issue in Committee, I have no doubt. My noble friend Lord Attlee and I are looking forward very much to the next stages, and I thank all noble Lords for their contributions today.
Bill read a second time and committed to a Grand Committee.
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