Mr Clive Betts
MP for Sheffield South East · Labour · United Kingdom
“I wholeheartedly welcome the Foreign Secretary’s statement, both its content and its tone. I would like to ask about his discussions with our colleagues and allies in other countries who are looking to implement similar sanctions.”
“I offer two congratulations: first, to my right hon. Friend and constituency neighbour, the First Secretary, on her well-deserved promotion—I am sure she will do an excellent job. Secondly, I congratulate her and the Prime Minister for their real commitment to devolution, which I have wanted to see for an awfully long time.”
“I apologise for the fact that—as I have explained to you, Madam Deputy Speaker—I will have to leave straight after my question to chair Westminster Hall. I thank my right hon. Friend for doing this very challenging piece of work. I think that the theme of fairness, for the people who need benefits and for taxpayers, is right.”
“On the other hand, so many constituents with really serious conditions get turned down for PIP, and can get it only if they struggle through the appeal system, sometimes without any help at all. So the system is not fair to anyone at present.”
“When the previous Government let the contract, we were in a situation in which procurement could not properly take account of the past record of companies, and I understand that the Government have now changed that.”
“I will dive very deeply into the question, Madam Deputy Speaker. The Chair of the Committee sends his apologies for his absence; he is presently in a Committee meeting.”
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“I asked the Minister about this yesterday, because the Local Government Association has kindly put forward the information that about half those claiming the benefit are pensioners, which means that half are not pensioners. So if pensioners are protected, that means a reduction of about 20% for other claimants, does it not?”
“Local authorities can always find extra money to increase the cost of the scheme, but is the Minister really suggesting that it will be possible for any local authority in the current circumstances to find extra resources at a time when services all round are being cut for reasons we all know about? The 10% restriction or cut in the available Government funding comes in from day one in 2013. Pensioners are going to be protected, and no one in the Opposition is going to argue about protecting pensioners because we want to increase the number of pensioners taking up their entitlements, but that obviously means that the 10% reduction will fall on other people who claim the reduction. That is self-evident.”
“I could not have put it better myself; that is precisely right—there will be a perverse incentive. If a council gets the older people who are entitled to claim to do so in greater numbers, other council services will be cut, council tax might increase at some point or, if no more money is spent on the scheme, the benefits of people who are not pensioners will be affected. That is precisely the point. The problem is not with the Government’s attempt to rebadge the scheme or to localise it, but with the 10% reduction at the beginning, all in one go, and the way in which the Government have framed the restrictions on the extent to which local authorities can implement the reduction.”
“Absolutely. We are told that vulnerable people—perhaps people on very low incomes with children—are going to be protected, or have to be protected, by councils under the scheme, but are they going to be or not? Are the Government going to insist on that? We are not quite sure. We are told that local authorities have to take account of the tapers under universal credit, but what does that mean? Are they obliged to respect completely the 65% taper element within universal credit or not? If so, will that mean that a smaller and smaller number of people will have the totality of the cuts in benefits imposed on them? That is the reality. Will the Government explain what they think is going to happen?”
“It says that because of the exemptions for pensioners and others for whom the Government say local authorities cannot make reductions under the scheme, those who are left whose benefits can be reduced—the 1.3 million claimants out of the 5 million who currently claim—will lose, on average, £320 each a year. That is £6 a week being lost by people who are already on low incomes—that is why they are claiming benefits in the first place. That will be on top of any other benefit losses from any other benefit reductions the Government intend. Have the Government analysed whether that £320 figure is right? Do they contest it?”
“Of course it will, unless the Government are saying that those people should be exempt as well. To what extent will councils be obliged to take account of the tapers in universal credit in the system they devise? Will Ministers give a clear answer on that? If councils have to take account of it, full stop, that will really throw the onus back on attacking benefits and on reductions for the unemployed. Is that the situation? Is that what Ministers are trying to achieve? The LGA has done some calculations to the best of its knowledge and information.”
“There is also the issue of the technology that will come with it, and we know that the technology in new systems being brought in quickly has a habit of going wrong. So not only will many people be faced with the abrupt introduction of these changes affecting their income overnight, but there will be major failings in service delivery as systems do not deliver on time and people end up without any benefit at all.”
“They are getting a Government scheme with complications, in terms of the totality of the financial arrangements, of which most people will have no understanding. All that people will see is that their council’s scheme will impose cuts in their benefits. It will be councils that get the blame, and no doubt that is where Ministers will firmly put the blame, but it will be grossly and totally unfair. Another problem is the time scales involved, as my right hon. Friend the Member for Greenwich and Woolwich has pointed out. Local authorities will not be able to work at this over a period of time. They have just over 12 months in which to consult on a new scheme, introduce it and explain it to people in their area.”
“The hon. Gentleman is absolutely right—the figure of £320 a year or £6 a week is an average, and there will be people who lose significantly more than that. Have the Government done any calculations to show whether the LGA figure is right or wrong? If it is wrong, will they tell us what they believe the correct figure to be? Have they done any analysis regarding the multiple withdrawal of benefits and situations when the council tax benefit reductions that come as a result of this scheme are laid on top of any other benefit reductions that hit the same families? Have they done any calculations of the total losses that such families may face? My right hon. Friend the Member for Wentworth and Dearne (John Healey) was absolutely right the other day when he said that local authorities are getting a hospital pass here.”
“Some of us have experienced elderly people coming into our surgeries and breaking down in tears because although they have always paid their bills on time they have been unable to do so owing to the fact that their benefit application had not been dealt with appropriately. That is what will happen in the rush that the Government are embarking on. Some councils will get it right but others’ systems will fail because of the speed at which this is being done.”
“I do not want to get into a debate about whether people in rural areas or urban areas suffer most. The reality is that people throughout the country are likely to suffer and that it will be councils, whether they are Conservative councils in rural areas or Labour councils in metropolitan areas, that get the blame, but it will not be the fault of local councillors, whichever party they represent. Coming back to my point about speed, I say to the Minister that this is an accident waiting to happen. Some of us have been through significant benefit changes before. When Sheffield outsourced its benefits administration to Capita a few years ago there was complete chaos for 18 months.”
“That is the explanation of the Government’s position, I think, but it would be helpful if Ministers set out their understanding.”
“I am sure the Minister is far better able than I am to explain, because it was his consultation and his response that I have been trying to read. I understand that the council tax reduction scheme is separate from universal credit. The Government do not want withdrawal of council tax reduction as people get into work to affect their income as they earn more to the extent that it increases the tapers by 65% in total and therefore undermines the principle of universal credit. The Government intend the council tax reduction scheme to have regard to that, so it is likely that it will not be possible for the changes to the scheme—the worsening of the scheme—to affect people in work. More of the change and reductions in the benefits available will therefore hit non-working people of non-pensionable age.”
“Absolutely. Anyone involved in developing a new system, consulting on it, explaining it and getting the technology right will have real concerns. I just hope that Ministers listen to local councils and the LGA and are prepared to say, even if they go ahead with this flawed scheme, that they will at least delay it by another year, to allow time for further thought to be given to producing a scheme that might deliver without the problems that I have identified arising.”
“Ministers do not appear to understand that. Until now, there has been a clear system in this country in which councils cannot borrow for revenue, but they can be sure that revenue will come in so they do not have to borrow. They can set their budget for the year with a good degree of certainty. Ministers appear not to have tackled that issue at all. Local government in this country has been absolutely sound and stable throughout all the recent economic difficulties. The proposed scheme introduces an element of doubt at a time of great turbulence in local authority revenues, when grants are being cut and there is great pressure on services. The Government should think carefully before adding this extra potential for loss of revenue—this extra risk—by pursuing the scheme in such a short time scale.”
“They set their council tax and they know they will receive the money—council tax has a very low rate of non-collection. That is why I understand the amendment tabled by Labour Front Benchers to compensate councils for changing revenue in-year. There is a real risk not only of longer-term instability for councils, especially those in areas that start to experience economic decline because of the collapse of a particular industry and more people therefore claiming reductions, but in the increased uncertainty for councils year on year. Councils will no longer have certainty. If they do not know whether unemployment will rise in their area and they do not know how successful a campaign to persuade more people to take up the reduction scheme will be, councils cannot forecast their revenue with the normal degree of accuracy.”
“One of my criticisms of previous Lib Dem proposals to scrap council tax and introduce local income tax was that it would make local councils’ revenue unstable, putting them at risk in times of recession, as we had in 2008, and undermining their financial base if unemployment rises. That is a real problem. Some of us went on a parliamentary trip to the United States after the recession. We talked not only to local authorities, but to states whose budgets were cut to shreds by the recession and the associated decline in their income tax and sales tax revenues. They became unstable because they could not borrow for revenue, just as our local authorities cannot. The current compact between central and local government is that although local authorities cannot borrow for revenue, they know that their revenue will be stable.”
“My right hon. Friend is right to say that the time scale is incredibly tight and there are so many potential problems associated with the measure that Ministers really ought to think them through. In the end, the problems will be created not for councils, but for people on low incomes who need benefits simply to sustain themselves. They are the ones who will be damaged if this is got wrong. Altering the responsibility for any future changes in the number of people claiming council tax reductions is a fundamental shift. Now, if more people claim the reductions, the Government pick up the bill; in future, councils will. The present arrangements, with the Government picking up the bill, make council tax revenue very stable for local authorities.”
“The Minister talks about working with local authorities. Presumably the Government have a view about that, despite what they say local authorities might be able to achieve by way of extra revenue generation. He has already admitted that at least a quarter of authorities cannot raise enough money to offset what they have lost under the scheme that we are discussing. Does he therefore accept that non-pensioners in those authorities—which are likely to be the poor authorities, with the highest percentage of people claiming council tax benefit—are going to suffer what the Local Government Association predicts will be cuts of around £6 a week?”
“Will the Minister confirm that localising council tax benefits in 2013 and cutting Government support by 10% will mean that if authorities that are strapped for cash cannot put extra money into the benefits scheme, if pensioners cannot have their benefits altered, and if councils have to take account of the tapers for people in work, those on council tax benefit who are out of work will see those benefits effectively cut by over 20%?”
“It is very easy to talk about resets here and now as an academic exercise, but when the time comes to do something that fundamentally alters the tax take of different authorities up and down the country, Governments of any persuasion might think twice. We should perhaps think of the history of council tax revaluations. They are not easy, but they have an impact on individual councils, and they are sometimes dismissed.”
“There is a danger that we will get locked into a discussion in which we simply assume that the current system has always been in place. Prior to the poll tax local authorities kept all their business rates, yet since 1945 and probably before, the difference and disparities in deprivation have continued to grow. Local economies in different parts of the country have performed very differently, despite local authorities having had the incentive of business rate retention prior to the poll tax. The hon. Gentleman’s argument therefore lacks a little if it is taken beyond the particular complications of the current system.”
“I intervene briefly on a factual point about what happened prior to the poll tax. Probably one of the reasons why it was brought in was the very large rate increases made by some authorities, such as the one in Sheffield of which I was a member at the time. It is not true that authorities sought to pile all the pain on businesses and keep their other taxes low. Actually, the domestic and non-domestic rates were linked and could be increased only in line with each other. It was not possible to increase one without increasing the other. Domestic ratepayers had a vote, of course, and in many cases were prepared to vote for large increases to protect services.”
“I want to speak about set-aside—the principle and the calculations—and, in particular, to draw attention to my amendments 44 and 45. This is the first opportunity that I have had during the Committee stage to talk about the new, simplified system of local government finance that the Government are proposing. [ Interruption. ] Is that a smile from the Minister? We have to have a laugh about the terminology, but it was the terminology that the Secretary of State used when introducing the consultation proposals. He called it a simplified system, but I do not think that anybody, even—”
“At the same time as local authorities are being asked to make profound cuts to front-line services—it is happening to authorities of all persuasions up and down the country—the Government are saying, “By the way, we are now going to take away from local government resources that could be spent on local services, by means of the set-aside.” All this explains why I tabled the amendments. Amendment 44, for example, is an attempt to make the point that something must be wrong when a Government say that they are going to take the set-aside away—irrespective of the real needs of local authorities, which they are clearly unable to meet in the current financial situation.”
“The problem is that when I wave my magic wand, what you get might not be what you thought you were going to get, because the money is going to be spent on things for which you would previously have had a grant.” This is the delusion being created. The reaction on the part of local government is obvious. It says, “You are asking us to accept 28% cuts to Government funding over a four-year period and to cut our fundamental services.” Despite what the Minister said to the Select Committee today, there is not a local authority in the country that is not having to cut social services and social care. That is what is happening.”
“We generally see the Secretary of State coming along to join the Minister for these debates, with the Secretary of State doing the broad sweep and the Minister knowing the detail. Perhaps they will go along to the Local Government Association in future when the pantomime season is in bloom. The Minister will go along as the wicked uncle, describing how much the set-aside is going to be worth in that year and how much is going to be taken away, while the Secretary of State will come along as the fairy godmother to say, “Look at all the goodies I’m going to give you back when I spend the set-aside.”
“Now the debate is going to be about finance from local government, as local government will be contributing to national Government and the national Treasury. We will no longer talk about a business rate that is collected locally and distributed nationally, but a business rate that is collected locally and spent nationally. That does not strike me as a terribly localist move. The Government have created a fundamental problem for themselves with set-aside. One can see the Secretary of State sat in his office, snaffling local government resources and getting into the Chancellor’s good books by passing those resources over and saying, “Look, I’ve done it again, Chancellor. I’m the good guy in all this; I’m giving you lots more money to spend.” Perhaps it is more like good cop, bad cop.”
“What the Secretary of State and this Government have managed to do this time, however, is to unite the whole of local government on one fundamental issue—a feat that I do not think has been achieved before by any Government or any Secretary of State in relation to local authority finance. Every local authority association and every local authority in the country has united against the principle of set-aside. They all view this as central Government putting their hands into the local authority pot and taking money out of it for themselves. When we used to debate local government finance, as we still do, most people rightly assumed that it was a debate about finance for local government.”
“There would be a business rate that was an incentive and a Government grant for redistribution. The fact is that we do not have the second of those; complications thus arise. Some of us can remember the GREAs—the grant related expenditure assessments—the SSAs or standard spending assessments and other complicated arrangements like regression analysis that used to be done on all these matters. On every consultation, local authorities in various parts of the country would have different views about the allocation of resources and the finance system—of course they did, and the same applies on this occasion.”
“They are trying to use the business rate as a mechanism to encourage growth and development, rewarding authorities by allowing them to keep the business rates that are raised from development and growth, but they are also trying to use it as a method of redistribution to help authorities that cannot achieve development and growth easily, and that have problems of deprivation. The Government are trying to do two things with one tax, which is a problem. That is why we have such a complicated arrangement. If there was a separate element of Government grant that could be used for redistribution and if authorities were then allowed to keep their business rates, separately—as was the case with the old system, which we have just discussed with the hon. Member for Harrow East (Bob Blackman)—that would be relatively easy.”
“The difficulty, which is reflected in the responses to the consultation on the legislation that we are considering today, is that the authorities with a relatively high business rate base, or the potential to develop one and grow their business rate relatively easily, are obviously all arguing for lower tariffs and top-ups, whereas those that have lower business rate bases and more difficulty in attracting growth to their areas, perhaps including those with the greatest need, are arguing for more top-ups and tariffs. As I said on Second Reading, the Government have a fundamental problem. Because of the effective removal of Government grant to local authorities from 2013-14, they are now trying to use the business rate to do two potentially contradictory things.”
“It will be very difficult for local authority treasurers to explain to their members collectively what the implications of the new legislation are, let alone for a local councillor to tell residents looking at a planning application, “These are the financial consequences of accepting this proposal.” I have no problem with the principle behind the Bill; indeed, I think there is a shared principle across the Committee. We all realise that there must be more incentives in the system to reward local authorities for encouraging and promoting growth in their areas. There is no problem with that principle at all.”
“It is very nice of the Minister to say so, so I will smile in return. However, even he could not rise now and say that this is a simplified system. It is a new system—it is a radical departure—but it is certainly no less complicated than what went before it; rather, it is complicated in a different way. Let us talk about transparency. By that I mean the possibility that when a development is put forward in part of a local authority area, it is possible to say to residents, “If that development is granted, these will be the financial consequences.” There is no chance of that happening with this piece of legislation.”
“He should look at what is happening to proper protection for private sector tenants from rogue landlords, which authorities will probably not be able to fund, or at the diminishing possibility of providing weekly bin collections across the country—something close to the Secretary of State’s heart. Before looking at set-aside, surely the Secretary of State ought to consider how far local authorities have been able to meet such needs.”
“My hon. Friend is absolutely right that we should look at the totality of the effects of the cuts on local authority budgets. Before the Secretary of State takes this set-aside from local authorities, he should look at what is happening to social care and with council tax increases, which authorities will have to impose after the freeze or deferment comes to an end. He should look at what is happening to concessionary travel for young people, which gives them their independence and mobility, and to care for the elderly and to road safety schemes, which cannot now go ahead.”
“From a Minister’s point of view, however, it is a neat way of linking two parts of the Bill together.”
“I am not sure, because how the set-aside ends up being used is fundamental. Will it simply go to the Treasury, and we never see it again? Alternatively, will Department for Communities and Local Government or other Ministers say, “We used to fund certain council services, and now we will use set-aside for that.” It will save central Government money. A classic example is the requirement on local authorities to fund 10% of the cost of council tax benefits in the first year—that will almost certainly rise if unemployment rises. What will stop Ministers saying in future, “We have already established 10%, so next year it will be 20%, 30% or 40%”? That will bring no benefit in council services or to local taxpayers or councils; it is just a saving to the Treasury.”
“It could be; we are not sure where that funding is coming from. In future, a whole variety of things, such as police grant, could be paid for out of set-aside. Things that Government would have paid for through another source could be paid for out of set-aside, saving the Treasury money. We do not know, because the Bill does not contain the detail. All that we can say is that there will be no power at local level, or among local government collectively, to decide such things. Will there be any power in the Chamber to decide such things, or will it all be up to Ministers?”
“We could, but I am not sure that Ministers will be able to give such an assurance. I say to the hon. Gentleman that it is his Government who are taking these measures, so he may have more influence over Ministers than those of us on the Opposition Benches do.”
“In future, the Government could make an assessment of the likely increases in business rates on the basis of their new system and accommodate that within the spending control totals, thus removing the need for set-aside altogether. I understand the difficulties that the Government have got themselves into in the current spending round, but why continue the principle after that? In amendment 45, I have tried at least to raise the possibility of not allowing the set-aside to become an ongoing, potentially increasing amount of money that is decided by Ministers for ever and a day.”
“Absolutely. We just do not know. All the power and the decision making are going to Ministers in a completely opaque way. We have a right to ask certain questions. The Government initially introduced the principle because the comprehensive spending review, in placing limits on local government spending as a whole, created a problem for them. It was and is quite possible, with the rise in business rate linked to inflation, for the business rate and council tax collection after 2013-14 to amount to more than the spending control totals. The Government had to find a way of dealing with that problem, but there is no reason why it need continue after the current comprehensive spending review round.”
“What the Government are doing is twofold, because two problems are being exacerbated by the set-aside. By limiting the amount of money in the local government system, they are reducing not only the incentives for councils but their own ability to do some redistribution. If they did not use the set-aside and allowed more money to remain in the local government system, they might be able to resolve the conflict caused by their attempt to do two things with one tax. The less tax that they have in the system and the more restrictions they impose, the more that conflict will come into play—the conflict between the retention of money to encourage investment and more growth, and the need for redistribution and the mechanism enabling it to take place.”
“Finally, will we have assurances that this will not be simply a Government matter? This is the House of Commons of a sovereign Parliament. The annual decisions about set-aside and how it will be spent must be subject to discussion, debate and a vote in this House. We must have assurances that the ultimate power will remain with Members of Parliament, not Ministers.”
“May we have an assurance that the set-aside will not be used as a mechanism enabling the Secretary of State to say, “Look what I am giving you: more ring-fenced grants and more specific grants”—thus providing a photo-opportunity for a Minister to draw attention to what good things are being done with them by every council in the country? May we also have some assurances that the Local Government Association and local government in general will be properly consulted on this each year? They should be consulted about the criteria, the proposals and the arrangements by which set-aside will be used and the amounts will be determined. Will there be transparency about where set-aside funding comes from and how it is spent across the country and which local authorities will benefit?”
“Will there be some understanding that if it is transferred back to councils to do certain things, they will be given power to do them? It may well be that there are things to be done by local government in the future that are not being done now. We have seen no evidence that any of that will happen. Will we be given an assurance that the set-aside will not mean a further dispensation of largesse from the Secretary of State and the Minister in the shape of more specific and ring-fenced grants? The Government have almost completely abandoned ring-fenced grants, and I support that as a principle.”
“Will business rates grow according to the level of the RPI, and will the difference between them constitute the set-aside? Will no more thought be given to it than that? Will there be any criteria on the basis of which the Government may review the system annually, or will the Secretary of State simply say, “I am not giving enough to the Chancellor this year, so we will have to amend the set-aside arrangements”? I return to the question asked the hon. Member for Mid Dorset and North Poole (Annette Brooke). Will there be any criteria governing what the money can be used for? Will it be possible for it simply to go to the Treasury, or will there be some understanding that it will be spent on local initiatives?”
“I think it would be considered so by a localist who wants it to be possible for money that is raised at local level to be spent at local level. The complicating factor is that there must still be some element of redistribution. In the past that would have been dealt with by means of a Government grant, but it is now being dealt with through business rates. If central Government take away any element of that business rate growth, by definition they are reducing the incentives to encourage development and reducing the amount of money available for redistribution, thus worsening the problems that they are creating for themselves. Let me issue a challenge to the Minister. Will there be any limits to, or criteria for, the determination of set-aside in a future comprehensive spending review, or will the Chancellor simply come up with a figure?”
“I thank the Minister for the slight reassurances about his thinking on the future of the set-aside, but will he reflect on the fact that many countries manage a different relationship between central and local government with more flexibility for local government? Can he think of any other advanced western democracy where local government taxes are used by central Government for their own purposes, rather than for those of local authorities?”
“The Secretary of State’s announcement will be warmly welcomed in the Sheffield city region, particularly the fact that consultation on the route north of Birmingham will begin this autumn. However, at that time blight will begin for households and businesses. Will she therefore give an assurance that the decision on the route will be made as quickly as possible afterwards? When will compensation arrangements be in place for those affected?”