Government suffers defeat in Lords over ‘new poll tax’ changes to council tax benefits

The Government has suffered a defeat today on changes to the system of paying council tax benefit. As part of the Coalition’s existing welfare cuts, council tax relief is being reduced and local authorities are being given the power to set their own eligibility criteria from April 2013. As the Financial Times reported last week:

The coalition has earmarked £100m for councils that promise to limit the sums poorer people must pay to around 8.5 per cent of the full council tax rate – less than half what some local authorities are considering. … Lord Best, president of the Local Government Association, will on Tuesday propose an amendment suggesting that, rather than looking to poorer people to find the savings it seeks, councils should have discretion to reduce the discount for single people from 25 per cent to 20 per cent. He said: “People who are not currently paying council tax are, by definition, people on the lowest incomes . . . It is a pretty nasty business to go out there and try to extract taxes from people who just do not have the money to pay them.”

The government’s £100m fund, covering 2013-14, would cut by a quarter the sums the government had hoped to save in the first year of the scheme’s operation. … Half of councils are proposing to set the minimum payment at 20 per cent of the full council tax or more, while about another quarter plan to set it at between 10 and 20 per cent. More than half the councils examined are planning other changes to tighten the regime.

The measure’s been dubbed a ‘new poll tax’ by Lib Dem peer, Lord (Tony) Greaves. The Lords voted today — by a majority of 38 — for an independent review of the changes to be carried out within three years of them being introduced, as the Shropshire Star reports:

Labour, with support from the Liberal Democrat and independent benches, demanded an independent review of the changes to be carried out within three years of them being introduced. The amendment to the Local Government Finance Bill was carried by 203 votes to 165, majority 38, during third reading debate. … In a bid to appease critics of the new system, the Government last week announced an additional £100 million to support councils moving to it. But Liberal Democrat Lord Shipley said this transitional relief would not solve the problem for all and was only available for one year. Backing Lady Hollis’s amendment, he said politicians needed to better understand the impact of a number of changes being implemented in the coming months. Independent crossbencher Lord Best also backed the demand, warning about the possible impact on those “living on the breadline” at a time when the gap between rich and poor was widening.

I have no problems with the localisation of Council Tax benefit to councils: many more such tax-and-spend powers should be devolved to town halls to decide policies which suit their areas, and to be voted out by the electorate if they get it wrong. But to couple this with cuts to the overall budget, leaving councils with little option but to impose new charges on the poorest, is the wrong way of going about restoring local freedoms. It hits the vulnerable hardest and gives devolution a bad name.

* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.

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  • Too little too late from the government. They had been warned about this repeatedly. To move the goal posts at the last minute after councils had been working on this for many months and have been or are out to public consultation is just bad government. Share the money out fairly, maximise flexibility and let councils get on with it.

  • This is by far the worst and most stupid policy the Coalition government is introducing.

    It combines the problems of the poll tax (everyone pays something regardless of income), with the Poor Laws (support for the poor decided locally with poorer areas having bigger burdens and lower resources to tackle them).

    In terms of saving money it does bugger all. The biggest sum I’ve seen suggest that this would save is £450 million (though that figure comes from Grant Shapps!). The £100m sum referred to above will bring that down to £350m and then there will be additional recover costs of chasing people who can’t afford to pay for very small amounts

  • I agree with Hywel above. This policy, as it currently stands, has not been properly thought out. Specifically how it affects poorer Councils and poorer people. Are Benefits going to be significantly increased in order to compensate poorer adults of working age?? Are Councils going to be spending more time and money chasing people who owe relatively small amounts of Council Tax??

  • Philip Rolle 23rd Oct '12 - 4:15am

    Revenue could be increased by surcharging homes with more than two earners. There is also the discount mechanism for second and empty homes, which no doubt can be pared right back. Third, I would bring in a couple of extra bands.

  • James Sandbach 23rd Oct '12 - 11:22am

    A review would be welcome, and Government would be well advised to accept Lord Best’s (who really knows his stuff on this) amendment, as reviewing the implementation of a new policy is no more than what Government should be doing anyway. But it does not solve the problem of the bind that local authorities will be in next year – councils will be using bailiffs (a costly enforcement mechanism) to chase relatively small sums as it will be impossible for councils to offer full relief to the poorest households. Tony Greaves is right – there is risk of local tax collection going back to the bad old days of the poll tax. Worse still, the Government inserted a clause in the Bill to criminalise non-payment of CT, so some people could go to jail – this is just wrong, wrong, wrong. Localisation of Council Tax benefit looked like a nice sop to the the lib dems, but the policy has not been thought through – another second rate compromise from our Ministers! We need a proper review of local taxation, property banding etc, including the lib dems prefered option of Local Income Tax on the table.

  • Tony Dawson 23rd Oct '12 - 5:50pm

    @Hywel :

    “This is by far the worst and most stupid policy the Coalition government is introducing”

    It is an utter disgrace. A whole new set of bureaucratic costs in every council throughout the land for absolutely nothing as each Local Authority tries to re-invent the wheel. A gross pretence of ‘localism’ to hide a cut in income to some of the poorest people in the land. The stupid situation where even the people paid to advise ordinary folk about the benefits may get them confused; after all, in some areas there will be a different regime either side of a road. If this were the EU we might even be talking about non-tarif barriers to freedom of movement for employment. You might be better off in a job on a certain income if you live on one side of the road to the situation if you lived in a different Local Authority area on the other side of the road.

    Whoever dreamed up this lunatic policy for the Coalition will, doubtless, be revealed in years to come as a secret Labour ‘sleeper’ and be awarded the Miliband Order of Lenin-Engels (MOLE). 🙁

  • James Sandbach 23rd Oct '12 - 6:10pm

    Just read yesterday’s debate – Graham Tope did run with a rebel amendment jointly with crossbenchers which would allow councils to alter the single person’s discount (not a perfect solution by any means but gives some flexibility to take out the sting – Richard Best working with the LGA came up with the idea)- both labour and tory peers voted against, whilst most lib dem and cross bench peers voted for (with a few tory rebels)..unbelievable that Labour peers sided WITH the Tories to defeat this amendment in the Lords, when even their own group in the LGA backed it…

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