Welfare Reform Bill

My Lords, I am grateful to the noble Lord, Lord Kirkwood, for his efforts to bring this on and for the support for a similar amendment which seeks to deal with the same issue from the noble Baroness, Lady Meacher. Council tax benefit is a social security benefit and in my view should be within universal credit. DCLG, in another turf war, disagrees and stays out. The effect of this will be very damaging. I remind your Lordships that council tax benefit is paid to 5.8 million people at a cost of £4.8 billion, the average benefit being about £16 a week. At the moment local authorities are reimbursed by the DWP for their actual expenditure. In other words, it is demand led: or, to be technical, it comes within annually managed expenditure headings. In future, by going over to DCLG, local authorities will be awarded a fixed-rate grant to fund a local scheme which is also expected to carry a 10 per cent cut to their usual expenditure. Given that that will now come within the departmental expenditure limit, the level each and every year will have to be negotiated with the Financial Secretary to the Treasury. It will not be demand led. Before the Minister says—I do not know whether he will—that local authorities are in a position to top this up, I am sure that he will be aware of the situation that local authorities find themselves in, which we can perhaps go into later. In August the DCLG sent out a consultation paper, Localising Support for Council Tax in England. This consultation closes on 14 October. DCLG proposes to localise council tax benefit. Every local authority and every shire district within every county will have its own scheme. If that is not administratively complex enough, they will be required to make 10 per cent cuts in it. On whom will the cuts fall? Pensioners—we are not sure yet whether it will be the over-60s or the over-65s—are 42 per cent of the recipients and will be protected. So the 10 per cent cuts rise to 20 per cent for everybody else. Thereafter, protecting other vulnerable groups is discretionary. If the local authority protects disabled people and families with children as well—a further 25 per cent of the client group—cuts of 40 per cent will fall on the rest. Finally, if a local authority went further and sought to protect those on 100 per cent council benefit, on IS or on JSA, cuts of 10 per cent would fall on the residual 9 per cent: the working poor, the working population. My Lords, do the maths. They will get no CTB whatever. If that does not impede the move into work, I do not know what does. So low-income families, encouraged into low-paid work by universal credit, which I strongly support, will find that the cuts from HB, which we will come to, and these huge cuts, given the protected groups in CTB, may wipe out any gain from work. What is the point of universal credit if it does not do what it says on the tin and make it worth working? Is this cut in CTB necessary? Why is it fine for DCLG to find £800 million to freeze council tax for all of us around this table today, while cutting £490 million from the poorest, who depend on council tax benefit? I think that it is disgraceful. As for the consultation, if noble Lords have a chance to look at it, I think that, like me, they will find it particularly interesting. I have never seen one like it. It is some 40 pages long, with bits front and back. Only one page, page 10, offers five principles—well, at any rate, five claims—for localising CTB. The other 39 pages are spent trying to overcome the difficulties that will result. I can only think that this was a civil servant’s revenge. To put it another way, the Government’s own document has one page in favour and 39 pages against. As I said—interesting. I will deal with the five points in favour, which take up one page. First, they exclude pensioners—a protected group, they say—as they could not be expected, "““to seek paid employment to increase their income””." Such a rule, they say, will encourage other claimants to work harder. On those grounds, of course, we should remove all benefits entirely from all people. It is absurd. The second point of principle—allegedly—is that it will allow local authorities to simplify their administration. Wrong. Complexity will come as each shire district will have its own scheme, even though 80 per cent of the precept, for example, may come from the shire county. The claim is fallacious. Point three is that it will increase local control over council tax. First of all, it will not. Because there is a fixed-rate grant, councils will be entirely dependent on either a factory opening—good, because that will reduce CTB demands—or closing, as is more likely at the moment, which will be bad, because it will increase demand for CTB, out of a fixed-rate grant. Or they will be dependent on demography, because an increased number of pensioners, who are a protected group, will increase the burden on everyone else. The fourth principle is that it will allow councils to control their budget, and—the document states naively—to contribute a further £500 million to deficit reduction. Adding to the 30 per cent cuts already facing local authorities, it argues, is an increase in local autonomy. This is sophistry, my Lords. In the case of cuts, we apparently have local autonomy to make them and be blamed for them. In the case of increased funding, we can count on central government telling us how it should be spent. Finally, the fifth principle is a reiteration that this, "““will create stronger incentives for councils to get people back into work””," and thus will support the universal credit. It is worse than that: it encourages local authorities to cut council tax benefit even further than necessary, because the council is allowed to keep any surplus. This, says DCLG, will ensure that councils will support the universal credit by getting more people into work. Of its five claims—I cannot really call them principles—on one page of a 40-page document, the first is absurd, the second is fallacious, the third is false, the fourth is sophistry and the fifth is cruel. That is before we get to the 39 pages of problems that the DCLG itself identifies. As the officials appreciate the speciousness of all this, they then take 39 pages, as I say, to overcome the alleged difficulties. The first of these—and I would be surprised if the DCLG is not worried by these difficulties, because I am—is the problem of running two separate tapers, one for universal credit and one for CTB, each possibly different in each district authority, which could produce such high and overlapping reduction rates as to sabotage universal credit. The Government say honestly that they do not know what to do about this, so they have invited views. That is great. I hope they have asked the DWP what it thinks. A second associated problem identified by DCLG is that each local authority may have different rules for capital, income, family size, taper rates and benefit run-ons. Realising that this produces 300 to 400 different schemes across the country, DCLG proposes to reinvent the wheel by asking local authorities, which now have this localised system in place, to collaborate with each other in joint schemes that are no longer local. In other words, DCLG, having destroyed a mandatory joint national scheme, having balkanised it, is now pleading with local authorities to invent voluntary joint schemes to avoid confusion, disincentives for people to move and the additional admin costs, as though it is politically feasible to expect voluntary joint schemes between Labour and Conservative authorities or between urban and rural authorities, because the better-off CTB authorities will up their gains and cut their council tax while deprived cities or coastal districts with a high number of pensioners will find that they can no longer put up the battered shield for their most deprived citizens. My city—Norwich—recently attended a conference in Peterborough for the east of England precisely to see whether such collaboration was possible. It found little consensus for a common policy. I understand that Wales may go for a common CTB structure. England certainly will not. There is also a contradiction in terms. DCLG cannot pray localism in aid to argue that each district council needs its own distinctive scheme because it knows best and then ask them to forego that distinctiveness and join regional schemes to save costs, which will obliterate that very distinctiveness that DCLG has announced as its prize. The consultation paper then turns to risk. With a fixed-rate grant, many small schemes will be highly vulnerable to a sudden factory closure or demographic change. If one district faced a Corus closure, for example, what should it do? The Government suggest that the other adjacent local authorities might voluntarily help out. My Lords, as if. Having smashed the national scheme that pooled such risk, DCLG suggests hopefully that local authorities might like to pool risk among themselves voluntarily. That is absurd. The Government then belatedly recognise the real difficulty for those claimants who move between authorities as they seek work and the possible deterrent effect of different CTB rates—this is on page 28. Again, DCLG asks local authorities to be consistent with each other to overcome the balkanisation urged in the five principles in the first place. Appeals will remain national—even though every CAB in the country will be trying to help claimants through a balkanised, localised process—and so will the investigation of fraud. How investigators are likely to know, when there are no national rules but 300 or 400 separate schemes, baffles me, and I am certain it will baffle them. The balkanisation of CTB carries so many difficulties that DCLG is reduced to begging local authorities to submerge their localism in countrywide, regionwide or nationwide schemes to overcome the very difficulties that DCLG has put them under. As my own local authority said, the whole proposal is fraught with risk and will be extremely difficult to administer. I have never seen a consultation paper like this in 20 years in local government and in your Lordships' House. UC, which I strongly support, was designed to increase the reward and reduce the risk of working, in ways that are clear, simple and rational for each family and fair between families, so that two families in similar circumstances, wherever they live, have the same financial support. Balkanisation does exactly the opposite. It is no accident that five of the worst affected boroughs—Hackney, Newham, Liverpool, Islington and Moseley—are among the 10 most deprived in the country. Bull’s-eye, Mr Pickles. This introduces a double lottery: a lottery for the local authority, which is at the mercy of a factory opening or closing for its CTB bill; and a lottery for individuals because what they get will depend not on their own circumstances, as with the demand-led national scheme under DWP, but on the circumstances of everyone else who lives in their locality. If they live with a lot of other deprived people, they may get less; if their area is affluent, they may get more. If their local authority has lots of pensioners receiving CTB, they will get less; a few may over the years get more. If their local authority decently seeks to protect additional vulnerable groups, those remaining, usually low-paid workers, will pay more. If it does not, the most vulnerable, including disabled people and families with children on 100 per cent benefit, will face additional cuts to their already fragile finances. Individual is set against individual; family is set against family; lobby group is set against lobby group: Mencap, if you like, is set against CPAG. It is an unpleasant, unnecessary and ugly scenario. CTB has increased by 10 per cent this year due to the recession. Crucially, benefits have always been demand-led. To talk in technical language, they are under AME rather than DEL. If you wish to change the conditions, you do it by generalised changes to eligibility. No longer. The cake will be cut, allocated and carved up with each person’s CTB depending on how many other people in the locality are claiming CTB as well. Think about extending the same principle to JSA, so that whenever the factory closes and the claimant count goes up, individual JSA benefit would fall—and then say, as DCLG does, with breathtaking hypocrisy, that this level will support you because people on JSA will now be encouraged to seek work. That is what this does to CTB. Hence, I believe that CTB is not safe in the hands of DCLG. It will utterly destabilise universal credit. I am asking that it be brought within universal credit and therefore within DWP so that there will be a nationwide, predictable benefit taper that does what it says on the tin—rewards work and reduces risks—rather than undermining both, as this document does. Otherwise, why bother with this Bill? I beg to move.