My right hon. Friend is entirely right. [Interruption.] The Under-Secretary says that it is because they think the measures are right. Well, if I cannot appeal to their moral sense, let me try appealing to their economic sense. The poorest areas will have the biggest hit to their local economies. The 2010-11 figures show that a 10% cut will mean £10 million being taken out of Birmingham, £6.1 million out of Liverpool, £3 million out of Newham, £2.7 million out of Newcastle and £2.9 million out of Gateshead. By contrast, the prosperous local economies lose less. Runnymede will lose £454,000; Wokingham £518,000; Melton more than £246,000; and Hart £293,000; but—as we might expect with this Government, this is a big “but”—that is not the whole story.
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The figures I gave were calculated on payments made in 2010-11, as given in a parliamentary answer by the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate. The total paid to councils in Great Britain in that year in council tax benefit was £4.8 billion. In their consultation on funding, the Government promised to give 90% of the forecast council tax expenditure for 2013-14, but they expect council tax benefit to have miraculously decreased by then to a total of £4.2 billion.
How did the Government arrive at that assumption? Considering unemployment levels and what is happening to the economy, we might expect council tax claims to
go up rather than down. Perhaps that figure was calculated on the earlier optimistic forecasts that the Government gave us, but they have had to be adjusted. Councils should be warned, however, that they might face more than the cut they are expecting. Even with the so-called minor adjustments the Government want to introduce to the distribution of funding, and the creation of ceilings and floors, we do not expect too much difference. We have heard those promises before in local government finance settlements, and the measures still ended up hitting the poorest most.
Moreover, if vulnerable people ought to have more protection, as the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove appeared to suggest—I assume he was referring to those on passported benefits—the working poor could face cuts of up to 40% in their benefits, which wipes out any gains from the increase in personal allowances he trumpets. In fact, those gains have been wiped out already by rising VAT, the loss of tax credit, changes to housing benefits and so on.
I know the Minister is anxious for good news—if the Labour party had lost to Professor Pingu the penguin, I would be looking for some good news—but his proposal will not run, because like most Lib Dem policies it is little more than a headline for the latest hocus-pocus. Indeed, far from councils being given more freedom, they will bear all the financial risks and most of the public anger for the policy. The Government have carefully ensured that the increased bills dropping through doors will bear the imprint of the local council, not that of the Secretary of State. Councils will pay the price if it goes wrong. The Select Committee on Communities and Local Government called it
“an illusion of delegation with a minimum of real discretion”.
We know, for instance, that only between 57% and 66% of pensioners claim their benefit. The likelihood is that the number claiming the benefit will increase when it is shown as a discount on a bill rather than as a benefit. That is a good thing, but councils must bear the burden of the extra cost. Increased unemployment in a council area, especially from the closure of a large company, will mean that council tax benefit claims increase. What will happen then?
The Government want to include council tax support in their business rate retention scheme, but what is the consequence of that? According to the Government’s consultation, a local authority will come into the safety net category only if its revenues fall by between 7.5% and 10% below the baseline, which is a massive fall before getting any support.
This is the crux of the matter. The Government have said that the measure will inspire councils to create employment and get more people into jobs, but how do councils do that in a double-dip recession? The Government have an in-built belief that local authorities do not want to encourage economic growth, but I challenge the Minister to name one, as I have throughout debates on the Bill. I am willing to give way to him if he wants to name one, but he cannot do so. Local councils have not caused the double-dip recession; the Government have. It is not local authorities that are causing firms to go into administration, but the economic failure of the Chancellor, who seems to have been too busy entertaining Rebekah Brooks at Dorneywood to notice what is happening to the economy.
The poorest areas are likely to face the greatest rise in claims and have already had their budgets cut. There is no slack in the system and no money to be transferred from elsewhere. The Opposition’s greatest fear is that some local authorities will try to manage the system by driving down claims and deterring people from claiming. I have confidence that Labour authorities will not do that—thankfully, there are many more Labour authorities than there were when debates on the Bill began—but I have little confidence in Tory and Lib Dem authorities. Equally, setting up an appeals system and dealing with what is likely to be a higher level of default will incur costs for local authorities.
New clause 5 is designed to ensure that the Government cannot ignore those impacts. It is no good the Minister telling us that there will be reviews, because those reviews do not include people in work and in poverty or those looking for work and in poverty.