Welfare Reform Bill

My Lords, my noble friend Lady Hollis and I go back a long way politically in local government terms, and throughout that long acquaintance I have always been impressed, as noble Lords have been since she came to this place, with the forensic mastery of figures that she has displayed today. She has produced a devastating analysis of the proposals and their impact in relation to council tax benefit. I have a reservation about the proposal she makes which I shall come to in due course, but fundamentally the problem is occasioned by the shift from, oddly enough in an era of universal tax credit—most of us wish to see it working and can see the logic of its applicability in general terms—to what will be a multifaceted and locally specific council tax benefit, one of the most significant benefits that are available. The noble Lord, Lord Kirkwood, asked where this has come from. In the bicentenary of Dickens’s birth, the answer is fairly obvious: it comes from 19th century poor laws with differential rates being determined locally, in those days by the squirearchy and nowadays by local councils, a burden that most local councils would not particularly wish to adopt. The impact will be very significant. The Local Government Association—I declare my interest as an honorary vice president, in the presence of the noble Lord, Lord Best, who is the president—has to my mind rather supinely accepted the underlying philosophy of the Government in deciding that council tax rates should be determined locally. I rather regret that, but the association at least points out some of the absurdities that stem from the actual implications of the proposal. Its analysis suggests that 80 per cent of local council tax benefit is paid to people receiving 100 per cent relief; that is, it is given to the poorest in our society, while some 35 per cent is paid to pensioners. If you take those two groups together as being likely to receive protection—pensioners will be protected under the Government’s proposals, and presumably there is a strong argument for extending it to people on 100 per cent benefit—the entire burden of the £500 million cut will fall on the rest. Apparently it means that 1.3 million claimants will share a loss of £500 million a year, which is an average of £330 each. That is a formidable figure. Of course it would be less if you did not protect people on 100 per cent benefits, but by the same token those people would be paying a higher proportion. There is a huge problem in terms of the impact of all this. There is also a potential problem with take-up. Even council tax benefit, although it reaches a significant number of people, fails to reach everyone who is entitled to it. Some £1.8 billion a year in council tax benefit goes unclaimed. Incidentally, and for the record, that figure is about 50 per cent more than is lost to the Treasury through fraud, not that anybody is for a moment defending fraud. It must be dealt with, but let us get these things in perspective: more money is unclaimed in council tax benefit than is lost through fraud by a minority of claimants. What would be the impact of a new system of the kind that we have heard about? The likelihood is that that benefit would be claimed less than hitherto and the amount unclaimed may well go up. That is one area of concern in my noble friend’s proposal, and it is a point made by the Local Government Association. Instead of receiving a council tax demand which is already rebated, people entitled to the benefit will simply receive a sum with which to pay their council tax at the ordinary rate—the universal rate in that particular locality. There is a significant risk that arrears problems will mount up substantially. Actually, council tax collection under the present system is pretty good in most if not all local authorities. I heard last night that the figure for collection in my own authority is 97.3 per cent, which is pretty high for any tax collection. There is a risk that that will fall, which will compound problems for local authorities. There is a concern about the proposition that in future council tax benefits would come in the form of a payment effectively made directly to the claimant, who then pays the local authority. Similar issues have arisen over housing benefit and whether it should be paid directly to tenants or landlords. These are somewhat difficult areas and possibly—I put it no higher than that—need to be considered in a different way from benefits that do not relate to a specific payment which has to be made. Another problem with the Government’s proposal is that there does not seem to be much incentive for local authorities to promote take-up of the claim. They have a fixed amount to distribute and I suspect that it is not of any great significance to them who takes it up. In particular, what if demand is greater than the amount the Government allocate? A perfectly legitimate question was asked by the noble Lord, Lord Newton, with whom I also go back a long way: how is the formula to be calculated? If there is a shortfall, I would suggest that councils will not be particularly incentivised, especially in the present circumstances, to pursue the interests of those who are not claiming; there would be no extra money to pay for that. This all makes the whole scheme extremely problematic. I turn finally to one other matter that goes beyond this clause, but in a sense relates to the take-up issue. In delivering benefits of this kind, local authorities have on the whole a pretty good record—although, as I have indicated, not one that is 100 per cent successful. However, they are experienced in dealing with claimants. There is a front-line system with a telephone line in almost all places, and often face-to-face contact so that people can be helped directly and conveniently with their problems. I repeat that all your Lordships support the principle of universal credit, but one problem is how in fact it is to be delivered. There is an assumption that everybody is online and it can all be done remotely. Frankly, that is an optimistic view. The possibility of delivering universal credit, whether or not it includes council tax benefit, through local authorities rather than the DWP or by some remote system should be experimented with. Leeds City Council has developed a good working relationship with the department in terms of delivering not only local authority benefits, but other benefits as well. I suggest that it might be worth the Government at least considering piloting the delivery of universal credit, in whatever form it finally emerges, through a number of local authorities to see whether that is more effective than simply relying on the current structures of the department and its agencies. We all wish to see those who are entitled to benefits receiving them. There is a real concern among advice agencies, voluntary groups and so on, particularly if council tax is shifted in this way, that the face-to-face, convenient approach may be lost, and with it benefits might also go adrift. I hope the Government will look at that in the broad context of their proposals alongside its particular relevance to council tax benefit.