RATE REBATES

HC Deb 17 January 1972 vol 829 cc161-75

10.15 p.m.

The Minister for Local Government and Development (Mr. Graham Page)

I beg to move, That the Rate Rebates (Limits of Income) Order 1972, a draft of which was laid before this House on 14th December, be approved.

Mr. Deputy Speaker (Mr. E. L. Mallalieu)

I think it will be for the convenience of the House, if, with this order we discuss the Scottish order.

Mr. Page

Thank you, Mr. Deputy Speaker, for your suggestion. It will be convenient to discuss the order which I have just moved and the other order; namely, That the Rate Rebates (Limits of Income) (Scotland) Order 1971, a draft of which was laid before this House on 14th December, be approved. The purpose of these draft orders is to preserve the right to a rebate of rates to those who are in receipt of an increase in the retirement pension, an increase in the similar social security benefits or of an equivalent income. The rebates are granted to those whose gross income falls within certain limits. The lower limit—that is to say, the figure at which one can say that if the ratepayer's income is not more than this he is entitled to the maximum relief—is about £4 above the retirement pension figure.

Incidentally, 80 per cent. of the 800,000 who receive rebates in England and Wales are indeed retirement pensioners. Last September the retirement pension went up by 20 per cent. Without the orders which we are now debating, the result of the increase in pension would be to put hundreds of thousands of pensioners into an income band in which they would be entitled to less rate relief than previously. In fact, they could lose about £20 a year rate rebate. To prevent that happening, the whole scale of the limits of gross income within which rate rebates are granted are by these orders moved up about 20 per cent.

Nobody has yet been the loser by the increase in the pension. The entitlement to rebate is based on the gross income for a previous half year. The rebate up to next April is based on the income for January to July, 1971, and the rebate for April to September this year will be based on the income from July to December last year.

Sir Harmar Nicholls (Peterborough)

I take it that it is not automatically £4 above the retirement pension? I presume that it means that every time the retirement pension goes up, if we want to maintain the difference, a new order will have to be introduced. Is that what it means?

Mr. Page

Yes, that is so. On each occasion when the pension has been increased there have been amendments to the Rate Rebates (Limits of Income) Orders. This occurred in 1968 and again in 1970. If both Houses approve these orders they will take effect in time for the April to September period of this year.

Perhaps an example is the best way to explain this. The present limits are £12.25 for a married couple and £2 per child. So a married couple with two children and an income not exceeding £16.25 a week would be entitled to the maximum rebate. Suppose their rate bill is £34.50 a year. The maximum rebate is two-thirds of the amount by which that figure exceeds £7.50. So in this case the ratepayer would get a rebate of £18 per annum, or £9 for the half year.

Suppose the ratepayer's income went up from £16.25 a week to £19.75 a week. In a half year he would be getting income of £91 above the limit. For every one of those £91 he drops 25p of his half-yearly rebate of £9. That completely swallows up the £9 rebate and he would get no rebate at all.

I chose a figure of £19.75 a week because that will be the limit for a married couple with two children under the orders in place of the £16.25 a week which I mentioned previously. In future it will be £14.75 for a married couple and £2.50 for each dependent child. So under the orders they will retain, in the example which I gave, the same rebate of £18 a year even if the income goes up a matter of £3.50 a week.

There is no entitlement to relief if the ratepayer is receiving supplementary benefit which takes the rate liability into account. Obviously, no rebate can be claimed if rates are being paid in full by the Supplementary Benefits Commission. This covers about 2 million householders. But I wish to put on record that the increases in the limits which will apply under the order, if the House approves it, may make it better for some ratepayers to choose the rebate rather than supplementary benefit.

I suggest that anyone in doubt on that question should consult the local office of the Department of Health and Social Security. That office is ready to advise on the choice which should be made. Perhaps it is this rule about choice between rebate and supplementary benefit which causes the misinterpretation of the nature of rate rebates. The system has an important social aspect, but a rate rebate is not intended to operate as a welfare benefit. It is a crude and simple form of tax relief.

Before its introduction, rates were a local tax which had nothing comparable with the personal allowances, marriage allowances and child allowance applicable to the national income tax. But the rate rebate system, with its varying limits for married couples, for single persons and for children, and its provisions concerning reckonable rates calculated on the number of occupiers in a house, makes some effort to relate the local tax to means to pay, certainly in relation to very low incomes.

With relief of payment of rates by payment through supplementary benefits to which I referred, covering about 2 million people, about 3 million households, or 18 per cent. of the total in Britain, are receiving rate rebates. Nevertheless, I readily admit that this instrument of relief is too blunt. The limited scope of the system, the low incomes at which the rebate ceases, the sharp rate of taper, the treatment of income from disablement pensions and the like, of the income of relatives, of housekeepers and so on, and the gross income basis of the rate rebate system itself are all open to such criticism as leads one to feel that an entirely new system of rate rebate is required. But this is not the order in which to make that root and-branch change. If it is to come, it will come in the legislation which, no doubt, will be necessary when conclu- sions are reached on the Green Paper on the future shape of local government finance, which was issued some months ago.

In the meantime, we must put right the situation which arises as a result of the increase in pensions. As I said, on previous occasions when pensions were increased there were amendment orders of this nature. Those came in 1968 and 1970. On this occasion we have gone a little further than the 1970 amendment made by the previous Administration. In the 1970 order no increase was made in respect of the child limit. On this occasion we are proposing to increase the child limit by 25 per cent. from £2 to £2.50.

What is the cost of rebates to both the local authorities and the central Government? The average rate bill in 1970–71 was £46.16. The average individual rebate in that year was £18.39. So it was quite a substantial amount of rebate that was allowed to the 795,301 people who received it during 1970–71. For the year 1971–72 the average rate bill was £53.30, and it is estimated that the rebates for that year will cost £16.7 million, of which the central Government pay 75 per cent., £12.50 million.

I am extremely anxious that those entitled to rebate under the order should know of that entitlement and should claim accordingly. The Department put in hand a publicity effort in 1970, when we issued advertisements which appeared in the Daily Mirror, the Daily Sketch. the Sun, the News of the World, the People and the Sunday Mirror. We issued posters and some 2 million leaflets to local authorities, voluntary organisations and societies and post offices and to 20,000 sub-post offices. We also issued two Press notices during that year which attracted good coverage. We had a television filler film shown by the B.B.C. 150 times over that first year, and it is still being shown.

We shall repeat that publicity this year, by issuing over 2 million leaflets to local authorities, organisations and post offices, including 20,000 sub-post offices. Posters will be issued to local authorities, and I shall send out a circular to them encouraging them to give the scheme publicity. By that means we shall reach as many people as we can who are entitled to claim a rebate.

I commend the order to the House.

10.27 p.m.

Mr. Reginald Freeson (Willesden, East)

I agree with the Minister that the system is in need of improvement. I listened with care to his observations on that score and to what sounded to me to be at least a three-quarters promise—I hope that it can be a 100 per cent. promise—that when we have legislation on local government finance in the fairly near future there will be further refinements and improvements to the present system of rate relief. I hope that the hon. Gentleman can give the House a somewhat clearer assurance before the end of the debate that that is a Government intention rather than an idea which has "ifs" and "buts" and is being thought about by him because of references in previous debates in which he and his colleagues took part when in opposition.

I should like to raise one or two points on what the hon. Gentleman said which are very germane to the general position with regard to rate rebate help under the 1966 Act, as consolidated one or two years later. The Minister gave us a figure of fewer than 800.000 people in 1971 taking up the rate rebates which were available to them on application. If I remember correctly, that is a yet further reduction on a situation which was already emerging when the last order was before the House in May, 1970. When the rate rebate system was introduced under the last Government in 1966, in its first year of operation-1966–67—I believe that the figure of take-up was about 900,000. When the Act was before the House, the wish and expectation of the Labour Government was that there was scope for a take-up by about 2 milion households throughout the country. One understands that that projected figure was based on inexperience in this matter, and one does not expect such a projection to be folowed through in precise detail, but there is a marked difference between the 900,000 take-up in the first year of the scheme and the fewer than 800,000 in 1971. This is particularly relevant to the right hon. Gentleman s remarks about publicity.

The Minister gave as the only reason for altering the income limit the change in pension levels at the end of last year, but there are other reasons which are also relevant to those who are not retired as well as to the pensioners who have applied, or should be persuaded to apply, for rate rebate. The first reason is the sharp rise in the cost of living during the last 12 to 18 months. There is nothing new about inflation or rises in the cost of living, but it is decades since we have seen such a sharp rise as in the last year or so. That is the general background to the orders.

Secondly, there is the failure in the take-up by people entitled to rebate over the past year and more. There has been a reduction in take-up during a period when the cost of rates has risen as expansion of services has increased rate expenditure. There has been, therefore, no decline in need. Indeed, it has become even greater as a result of Government policy in altering the domestic element in the rate support grant last year. There is a heavier burden on the domestic ratepayers now because there has been a reduction in the benefit of the rate support grant to local authorities. The hon. Gentleman has quoted an average likely rebate of about £18. Even with this increase, some people will be carrying a heavier burden on their personal budgets because of increased rates—an increase which could have been ameliorated much more had the Government maintained the previous levels of domestic element in the rate support grant. As long ago as 1968 the then Minister of Housing and Local Government indicated that the average rebate was about £16. There has been a considerable increase in the cost of living since that time and an increase in rate expenditure. Indeed, since 1968 there has been a rise in costs amounting to some 25 per cent. If my figures are correct, this represents a good deal more than an expected rebate of £18 in the forthcoming year.

Mr. Graham Page

If I may put the record straight, the figure of £18.39 was for 1970.71, and I am unable to give a reasonable estimate for 1971.72 or for 1972.73. It will obviously be a larger figure because the average rate bill in England and Wales will be about £7 more than it was in 1970.71.

Mr. Freeson

I suggest that in a year from now it will not be unreasonable, if we are to maintain a fair level of assistance which is necessary to those on low incomes, to expect a figure of £22 or £23 average at least—and possibly more taking into account rises in rates. After all, the rating system is a regressive form of taxation: the smaller the income, the heavier the burden. Therefore, in operating the scheme a greater measure of assistance is needed to maintain the position of these people, particularly since the Minister suggests that the scheme is not good enough as it stands. We should seek better and more effective ways of helping people.

On the question of take-up, new and fresh methods must be found to intensify publicity. One of the regrettable features of the rent rebate scheme has been the failure in take-up by people in need. This failure is reflected in the number of those who fail to apply for rebate. I have asked various constituents why they have not taken the opportunity to apply for rate rebate, and I have found that they have not known they are entitled to claim simply because they have not been aware of the rate element contained in their rent, even though they have seen their rents increasing.

It is important to identify this area of furnished tenants who are, generally speaking, those with lower incomes, particularly in the Inner London area. The same may be true in other parts of the country but Inner London comprises about half the furnished dwellings in the country. Those are the people generally with the lowest incomes, usually paying the highest rents for the most unsatisfactory type of accommodation in many instances. These are the kind of families to whom it should be made clear, by publicity and personal contact, that they are entitled, as much as anyone else, to establish the rate element in the rent they pay and to apply to the local authority for assistance.

Without wanting to sound unkind, I must ask what fresh ideas if any—and I realise the difficulties, if not as a politician then as an ex-journalist—there have been in publicising this service to those in need.

I turn to a narrow but important point. The Minister referred to the period over which income shall be taken as a basis for application for rate rebates. This is in line with what has been past practice under the system, the six-monthly period. Why are the Government proposing to make no change in the periods over which income is measured for rent rebate purposes? I ask this for two reasons. First, experience with the original Rating Act of 1966, consolidated by a later Act, shows that the six-monthly income basis for such rebates has caused much difficulty in a number of cases with regard to verification of earnings, especially where applicants change jobs. I am speaking not of retirement pensioners but of that 20 per cent. to which the Minister by implication referred, who are not retirement pensioners but who apply for rate rebates and are entitled to receive them. There have been quite a number of cases over the years where there have been difficulties in verification of earnings, particularly where jobs are changed.

The second reason is that we are to have a national rent rebate and rent allowance scheme supported by all sides of the House, whatever detailed views there may be about its application. This is to be administered by the same local authorities who administer the rent rebate scheme. In this scheme the rent rebates and allowances are to be based on five weeks or two months of income. It is surely absurd to administer the two schemes which are ultimately similar in their objectives on quite different periods of income. It seems to be wrong in principle and somewhat inept in practice to continue this rather than take this opportunity of bringing the practices into line.

For the sake of those in greatest need as well as for the sake of more sensible and simple administration, the Government should accept this point and act upon it as soon as possible. If it is not possible to give that kind of undertaking tonight I shall understand, since the point may be fresh, but I would hope that an undertaking can be given that it will be taken on board as a small but nevertheless important point in the application of the scheme in the context of other activities that local authorities will be engaged in with the rate rebate and rent allowance scheme.

10.44 p.m.

Mr. Martin Maddan (Hove)

We have been treated to an important speech by the hon. Member for Willesden, East (Mr. Freeson). It was important in that it paid tribute to at least the principle behind the Bill now being discussed in Committee, presented by the Minister for Housing and Construction.

When I became the Member for Hove —nearly seven years ago—rates were a burning question. They are not a burning question now, as we can see from the occupancy of the benches opposite.

The extraordinary thing about the hon. Gentleman's speech is that, after a parliamentary recess lasting three weeks or more, he should raise so many points on which he has done little homework. We all know that during the stress of a busy parliamentary session one may not have the opportunity to do what one would like in preparation for a speech on an important topic. The hon. Gentleman raised suppositions on which he could have checked and made calculations, but on which he merely asked my hon. Friend to comment and give figures.

The hon. Gentleman mentioned the position of the domestic ratepayer. He said that the comparative burden on the domestic ratepayer had been rising. But there is a misunderstanding abroad, which I hope my hon. Friend will dispel when he replies, that the Conservatives have not been increasing the domestic element. This is relevant to the order, because we are talking about rebates on rates which would or might otherwise be relieved by that domestic element.

Other matters have been raised. It has been said that the rate rebates system is not very well graded, that it is rather crude, and that it is too blunt. I agree, though it is worth emphasising that those who have income £4 a week above the retirement pension can benefit under the order. Crude and unsatisfactory though it is, it is quite substantial.

I should like to ask about the cost of publicity, which my hon. Friend mentioned in opening. The publicity is welcome, but the cost cannot be counted in pennies.

That leads me to my final point. We are, of course, as the right hon. Member for Coventry, East (Mr. Crossman) has often stated, patching up an unsatisfactory system. We have had a Green Paper on local government finance. It has been assumed that legislation fol- lowing discussion of the Green Paper will be introduced in the next Session of Parliament before the new system of local government in England and Wales —I do not know about Scotland—comes into force in the spring of 1974. It would help me, it would help many in local government, and it would help ratepayers up and down the country to know that that legislation will definitely be introduced in the next Session of Parliament in time to be effective before the new system of local government comes into force in 1974. I hope that my hon. Friend in reply will tell us something about that.

10.50 p.m.

Sir Harmar Nicholls (Peterborough)

Unlike my hon. Friend the Member for Hove (Mr. Maddan), I do not find a lot of fault with the speech of the hon. Member for Willesden, East (Mr. Freeson) on this occasion. I often do; he is often bitter and, I think, unfair, but he was not tonight.

I want to reiterate two of the points made by the hon. Gentleman and one made by my hon. Friend. It is essential that as soon as possible—I know that it is not easy because it covers such a wide front and there are so many intricate parts to it—we should have the tidying up which my hon. Friend said he had in mind. I do not think that it is fair to ask for any greater details than that at this stage. The fact that it was made clear that it was under consideration and was being looked at with a view to something coming out at the end of the sausage machine should leave us reasonably satisfied at this stage, provided we can he assured that it will be dealt with as speedily as the bureaucracy behind it will allow.

We must let people know that this rebate is available to them. We were given a list of the newspapers in which adverisements had been put, and we were told that on about 150 occasions the B.B.C. had used its important facilities for letting this be known. I think that the B.B.C. one was the best. A newspaper adverisement is fleeting, and it is such an expensive business to advertise sufficiently in newspapers for this to have the impact that it should have.

Mr. Graham Page

We found on the last occasion that the most fruitful source was the voluntary associations, who undertook to put the pamphlets through letter boxes. We got a vast response from that, and we thank the voluntary associations for the great help they gave us.

Sir Harmar Nicholls

That is interesting, because it is rather in line with one suggestion that I was going to make. Pension books have to be renewed every year. If it were possible for an insert to be put in pension books when they were renewed or issued for the first time it would bring to the notice of new pensioners and others who had forgotten about it what is a substantial help to people who need it.

One thing more than anything else that disturbs people who come on to the retirement list if they own property is whether they will be able to continue to live in a house for which they pay rates directly, knowing what the half-yearly rate payment has to be. It is all right when people have an income coming in, but we know that it worries them when they feel that the money has to come out of their retirement pension and any supplementary benefit they may get.

If the insert to which I have referred were put in the pension book, old-age pensioners would act rather like the voluntary associations to which my hon. Friend has paid tribute. They would talk to other people and spread the knowledge that is necessary if people are to take advantage of this provision.

I had not realised that in the first year about 900,000 people had taken advantage of this scheme. My hon. Friend said that the figure was down to 780,000. That is a considerable drop at a time when I should have expected the figure to increase. The decrease is not due to any lack of urgency on the part of the Government. I am certain that it is because of the difficulty of being able to communicate matters which are intricate and technical to people who do not find it easy to understand them.

I congratulate my hon. Friend on facing the problem and bringing in this order tonight. If it could be done in a way which would avoid even the slight delay caused by bringing in an order—it may not be possible—it would be helpful. The need is to see that this benefit is publicised so that those who ought to be taking advantage of it do so.

10.54 p.m.

The Under-Secretary of State for Development, Scottish Office (Mr. George Younger)

I agree with what was said by my hon. Friend the Member for Peterborough (Sir Harmar Nicholls) and the hon. Member for Willesden, East (Mr. Freeson) about the need to bring home to people the fact that these rebates are available for them. I, too, have found in my constituency work that there are many people who might benefit but who do not understand that these rebates are available, and we shall continue to do do all that we can to bring this information home to them.

I noted with interest the suggestion made by my hon. Friend, and I assure him that we shall consider it as we shall any others that are brought to us to bring this information home to individuals who might benefit from it.

The hon. Member for Willesden, East, who mentioned England and Wales, would want me to mention the Scottish position, which is basically the same but for one point which is helpful to the Scots —that our local government financial year starts somewhat later than the English one. This gives us an even greater advantage in bringing this forward exactly in time, so that those pensioners who have had the increase which was brought in in September will find the new increase in pensions beginning to affect their entitlement to rate rebate.

So, as the local government financial year begins on 16th May in Scotland, with one or two exceptions, we shall find, when these new rates become payable, that this order will already be in effect, and no one in Scotland will lose entitlement.

I agree with the hon. Member for Willesden, East, that the initial take-up was the highest; it has gone down a little since then, certainly in Scotland, and, I think, in England and Wales as well. There were various reasons for this. One was the increase in benefits of other sorts —supplementary benefits, old-age pensions and so on. Another was the fact that, in the normal course of events, many incomes tend to rise, which has an effect on the number of people who qualify.

Mr. Freeson

The Minister says that he understands that the take-up is rising again, which is welcome if it is so. But I find that a little at odds with the figure quoted by his hon. Friend, and with the figure which I quoted, I believe correctly, for 1969, which was about 830,000. It is now down to just under 800,000. Is he suggesting that we are now coming out of a drop which has been going on since then?

Mr. Younger

It varies a bit between the two countries, for one thing. The number in Scotland is going up slightly more strongly than the number for England and Wales. But the trend is positive at the moment, taking the country as a whole. We welcome that and hope that it will continue.

The hon. Gentleman asked for an assurance that there will be improvements in the rate rebate scheme when the changes come. This is not the time to discuss any improvements which will come with the new legislation altering local government finance, but I can assure the hon. Gentleman that there will be some improvements then in the rate rebate scheme. But it would not be right—or possible—for me to specify them at this stage.

The hon. Gentleman suggested that the Government have given no thought to using a shorter period than six months to assess the rate rebates. I am sure that he would know this anyway, but I draw his attention to Appendix 3 of the White Paper, which, in paragraph 3.20, poses the possibility of quarterly periods instead, for the precise reasons he mentioned. We are much alive to the need to find a way of shortening this period to make it more flexible, and thus able to meet people's needs.

Mr. Freeson

I was aware of that suggestion. I had in mind the need to act as quickly as possible to bring the administration of the scheme into line with what is proposed and what some local authorities are presumably already doing with rent rebate schemes, before it becomes nationally mandatory to have such schemes on a model basis, rather than wait until the whole complexity of local government finance is reformed and then put this proposal into effect. Why not bring it directly into line with the five-weekly or two-monthly basis which will operate under the national rent rebate and allowance scheme?

Mr. Younger

I thank the hon. Gentleman. I was coming to that point. We are very sensible of the desirability of marrying these schemes as closely as possible. I canot say tonight whether it will be possible totally to marry them up, but in principle we consider it right that we should try to get the administration of the two schemes as similar as possible so as to minimise the difficulty of form-filling and so on.

My hon. Friend the Member for Hove (Mr. Maddan) asked about the cost of the publicity which we are giving to the rate rebate scheme. I must ask him to be patient. The cost varies because this is a continuing programme. My hon. Friend will look into the matter and write to him with the details.

Mr. Maddan

I wish to make it clear that I am not against this expenditure. I simply hope that when changes are being made the possibility will be borne in mind of ending the expenditure completely, adding it to the credit balance, as it were, against the cost of other improvements.

Mr. Younger

I appreciate what my hon. Friend has in mind.

The hon. Member for Willesden, East spoke of the cost of living. While this is a factor which must be taken into account all the time, it is particularly relevant to this debate in two respects. In other words, there are two factors which are taken into account in assessing rate rebate. One is the level of income at which it ceases to operate and the other is the percentage or fraction of income below that which qualifies people for rate rebate.

The hon. Gentleman will agree that the percentage factor is self-cancelling from the point of view of rises in the cost of living because such rises are reflected in the percentage. The level of income is affected by rises in the cost of living, which is why there have been under successive Governments successive rises in the threshold above which this does not operate. The threshold has been increased well in tune with cost of living increases. The present level is 20 per cent., with an additional 5 per cent., making 25 per cent. in all with the children's portion, and this is the position only one year after the last increase. We can fairly say, therefore, that we are aware of the effect of the cost of living and have taken steps in good time to reflect the position in the rate rebate scheme.

I am sure that the whole House will welcome the scheme and the increases in limits, which will particularly benefit those in the low income groups, the people who, particularly at a time like this, must receive our close attention.

Question put and agreed to.

Resolved, That the Rate Rebates (Limits of Income) Order 1972, a draft of which was laid before this House on 14th December, be approved.

Resolved, That the Rate Rebates (Limits of Income) (Scotland) Order 1971, a draft of which was laid before this House on 14th December, be approved.—[Mr. Younger.]

Motion made, and Question proposed, That this House do now adjourn.—[Mr. John Stradling Thomas.]

1. ADJOURNMENT