§ 5.49 p.m.
§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley) rose to move, That the draft regulations laid before the House on 11th February be approved [20th Report from the Joint Committee].
§ The noble Lord said: My Lords, I beg to move the first Motion standing in my name on the Order Paper. Perhaps I may also, with the leave of the House, speak to the second Motion standing in my name; namely, the Council Tax Benefit (Permitted Total) Order 1993.
§ The regulations amend in a minor, mostly beneficial, way the Council Tax Benefit (General) Regulations 1992 which came before this House last July. The Social Security Advisory Committee and the local authority associations have been fully consulted. I shall not trouble your Lordships with a blow by blow account of each and every change; many are simply to correct printing errors or are of a technical nature. Rather I shall deal with those changes of somewhat greater interest.860
§ We are protecting the incomes of foster parents. Foster payments are already fully ignored as an income in council tax benefit. However, certain payments are intended as a reward and could be taken into account as earnings with a consequent reduction in benefit. This amendment will ensure that this cannot happen.
§ Another beneficial change which I am sure that the House will welcome is the introduction of a new earnings disregard for carers. From April 1993, all carers who are entitled to the carer premium in any of the income-related benefits will be entitled to receive the higher £15 disregard on their earnings. It will help over 2,000 carers who are also currently working and will provide a further incentive to those who may be thinking about combining their caring commitment with employment. This help is in addition to the carer premium, worth £11.95 a week from next month.
§ These regulations will also remove the disregard of maintenance payments made by people on council tax benefit; a similar change is being made in housing benefit. The removal of the so-called outgoing maintenance disregard will bring council tax benefit and housing benefit into line with the other income-related benefits. I believe that the House will agree that it is very difficult to defend a concession, paid for by the taxpayer, which assists the maintenance recipient irrespective of that person's financial position. The change is timed to coincide with the introduction of the Child Support Agency which will gradually take over responsibility for assessing people's ability to support their children.
§ As the House will be aware, the assessment by the Child Support Agency will ensure that an adequate level of maintenance is provided, subject to the means and requirement of the absent parent and the family needing support. Until this involvement by the Child Support Agency, local authorities have been asked to write to every affected claimant to explain the change and to invite them to consider whether they wish to vary their maintenance payments after April and to inform the recipient. These arrangements ensure that claimants need not be worse off as a result of the change and that maintenance recipients can claim benefits should the need arise.
§ We are also amending the regulations to ensure a full disregard of payments made to non-dependants and second adults from the Macfarlane trusts and the special fund. These were set up to help haemophiliacs and other people who have tragically contracted the HIV virus through NHS infected blood products. We will also protect the confidentiality of beneficiaries by providing that payments do not have to be declared to the local authority.
§ Other changes which we are making include the complete disregard of £10.95 a week guardian's allowance. That will be warmly welcomed by those people on benefit who are bringing up an orphan.
§ I turn now to the Council Tax Benefit (Permitted Total) Order. The Council Tax Benefit Regulations provide local authorities with the power to make discretionary payments of council tax benefit where claimants' circumstances are exceptional. Under this provision local authorities are able to respond to 861 unusual circumstances by increasing the amount of benefit paid in particular cases but not so as to exceed the maximum benefit.
§ The Secretary of State is required to set a limit, or permitted total, on the amount of discretionary payments that an authority may make. This order sets the limit for discretionary payments at 0.1 per cent. of the total amount of council tax benefit that the authority pays out in a year. The same limit currently applies in community charge benefit. It has been agreed with local authority associations.
§ This order will enable local authorities to respond sensitively in special circumstances and is of course in addition to the discretion authorities have to ignore all or part of a person's war pension.
§ These regulations and the order make minor changes, most of which are entirely beneficial. They will assist thousands of people who will be liable to pay council tax. I commend them to the House.
§ Moved, That the draft regulations laid before the House on 11th February be approved [20th Report from the Joint Committee].—(Lord Henley.)
§ Baroness Hollis of Heigham
My Lords, we on this side of the House broadly welcome these amendment regulations and the order and in particular, as the Minister has said, the gains to foster parents, the guardian's allowance and the payments disregard for carers and for HIV patients. We accept the need for some tidying up. We welcome the fact that consultation has taken place. But they raise issues of interrelation between the DSS and local authority benefits which were explored during the Local Government Finance Bill. They are issues which we feared then would be problematic and which evidence around the country suggests have indeed proved problematic.
Therefore, we wish to raise four issues. In part they are matters which have already been raised in another place in debates on these self-same changes. The first is to remind the. House yet again of the problems presented by the steep taper of the council tax benefits system. It is an important issue because perhaps 25 per cent. of all households will be receiving council tax benefit.
With the poll tax families paid first 20 per cent. and then they enjoyed a taper of only 15 per cent. We welcome the abolition of that 20 per cent. minimum contribution, but it has been in part offset by a much steeper taper of a withdrawal of benefit of 20p in the pound for each pound earned or acquired. What does that mean? It sounds very technical. But what it means is that for somebody in part-time work thinking of going on to full-time work, for every pound extra that they will earn, they will lose 20p of it in lost council tax benefit, 65p in lost housing benefit, 25p in income tax, 9p in national insurance and, quite likely, 7p in family credit. That means that they are facing a 97p in the pound marginal tax rate. What incentive is that for people to enter low-paid work or to move from part-time to full-time work if the opportunity presents itself? If 50 per cent. tax is thought too high on £50,000 per year, why is 97 per cent. tax not acceptable on £5,000 per year?
862 Secondly, the effect of the taper means that, although the very poorest households (for example, those on income support) are indeed better off than under the poll tax scheme, those who are only a little better off (for example, people enjoying occupational pensions or those in low-paid work) will actually be worse off because they will be hurt by the sharp taper. For example, a single parent in work with one child under 11 is better off under the council tax rebate scheme than under the poll tax if they earn less than £92 a week. If they earn a pound more than that they begin to be worse off. For them the situation has worsened as a result of the Government's new benefit scheme. In other words, the nearly poor are losing benefit to help the very poor or the rest of us are not paying our proper contribution in general taxation. It would have cost about £150 million to elongate the taper. We urge the Minister even now to reconsider if we are not now to continue to place people in the poverty trap.
Another issue which the Minister has raised is the 0.1 per cent. discretion. That must be welcome. Certainly we on this side of the House would support anything which adds to local authorities' discretion, ability and flexibility to respond to local need. Can the Minister describe situations in which that discretion is likely to be brought into play? Perhaps he can enlarge on the comments he made about the situation with war pensions. For example, will the change affect the position of the Ealing judgment and the additional payments for sheltered housing tenants? Will it be applicable to some of the more worrying difficulties that hang over from the Local Government Finance Act?
For example, will the discretion apply where under the operation of joint and several liability a wife is faced with unpaid council tax bills on the husband's death, with no means of paying the bills and not being eligible for rebate? Will the discretion apply, for example, where there is joint and several liability between a mother and a handicapped son who are co-tenants and where the mother deserts him and he is left with 100 per cent. of the bill but eligible for only 50 per cent. of the rebate?
The matter is particularly urgent because the Government rejected an Opposition amendment during the passage of the Local Government Finance Bill to allow local authorities to write off debts on grounds of hardship because they said that the benefit scheme was sufficiently comprehensive. Everything that we argued then and what we know now show that it is not. As some very vulnerable people will now be stranded, can local authorities use that discretion, welcome as it is, to apply to such hardship situations?
Thirdly, I turn to an issue that was discussed in the other place in connection with these regulations. I refer to second adult rebates. Given that the council tax assumes a two-person household, a rebate can be based on the income of the second person where it would be more generous than if it were based on the income of the liable person. That is fine and we accept the principle of what that is meant to do. But it will 863 often be unfair. The divorced millionaire father will get a 25 per cent. discount if his unemployed son is living with him; at least he can afford his bill.
Having talked to local authority treasurers around the country, I know that they are already experiencing, as we warned the Minister at the time they would, a real "better-off" problem. I refer, for example, to somebody in low-paid work living with a sister on invalidity benefit for whom the local authority is trying to make a daily calculation of what is the best buy—a rebate on the liable person or on the second adult in the household. That is particularly a problem if the person on invalidity benefit has additional income. Local authority treasurers said to me yesterday and today that the "better-off" scheme is very difficult for people to comprehend and very hard to administer, just as we forecast.
The final area of concern still remaining, which we had hoped might have been recognised in the changed regulations, is that of non-dependants' deductions. That is where the benefit that somebody would have enjoyed is reduced because another adult in the family is assumed to be contributing to the rent and household costs. We do not object to that in principle, but I hope that the Minister will recognise that as presently constructed under the Act those provisions will cause real hardship. A citizens advice bureau in north London has already reported the case of a 79 year-old client whose total income is income support plus the retirement pension out of which she has to pay some of her rent following a non-dependant deduction for her 51 year-old severely disabled daughter.
Does the Minister recognise that non-dependant deductions are especially punitive in non-white families? Whereas only 6 per cent. of non-white households have more than three adults and therefore come within the workings of the more extended scheme of non-dependant deductions, 17 per cent. of Caribbean families and 22 per cent. of Asian families come within that category? Multiple non-dependant deductions can produce real hardship in extended families on very low incomes, especially for those on income support, but over 25, who are expected to contribute. I have a question for the Minister. It is a question that was asked in the Commons but not answered. If someone is over 18, not in work, not in school, and without income, is that person too supposed to contribute to the council tax via a non-dependant deduction?
So there are four issues: first, the taper; secondly, the cases in which the 1 per cent. discretion will apply (especially those where otherwise debt would be incurred which the local authority has no power to write off); thirdly, the "better-off" problems associated with second adult rebates; and fourthly, the hardship generated by non-dependant deductions.
To conclude, what we are seeing already in evidence from local government is the emergence of precisely the problems that we feared when we debated the legislation a year ago and about which we warned the Minister. Every debate about grafting rebates on to discounts shows the problems of grafting a personal 864 tax on to a property tax. Having said that, however, we broadly welcome the amended regulations and hope the Minister will answer our questions. I hope also that the Minister will allow me to congratulate him on demonstrating the political will to cap Wandsworth's transitional relief. I hope that the Minister will in turn join me in congratulating Labour authorities on producing council tax bills for next year that will, on average, be £22 per household lower in Labour authorities than in Conservative authorities. Labour will represent better value for money.
§ 6 p.m.
§ Lord Boyd-Carpenter
My Lords, my noble friend has been given a whole string of complicated questions to answer by the noble Baroness, Lady Hollis. I am sure that your Lordships will listen to his answers with great attention. My questions, on the other hand, are perfectly simple. Can my noble friend state—as is normally done when discussing these matters—what will be the cost to public funds of the regulations and the order? In particular, can he distinguish in that cost between the elements which will fall on central funds and the elements which will fall on local funds? In other words, I should like four figures: the net increase in each case on public funds and the net increase, if there be one, on local authority funds.
§ Lord Henley
My Lords, I thank my noble friend for that intervention and I dare say that in due course I shall be able to answer him. I welcome, as always, the degree of gratitude from the noble Baroness for these orders. I was quite interested in her speech, most of which actually had very little to do with the regulations in front of me, but I shall answer the points—or those of them that I can—in due course.
First, turning to the question of the taper, I think that the noble Baroness will accept that there has to be a taper with any income-related benefit. I think that she will also accept that the taper should not be considered in isolation but in the context of other considerable changes to the benefit system which the Government have announced. First, the 100 per cent. maximum rebate will benefit all claimants including those with incomes above income support levels. In addition, all claimants will gain from the Government's decision not to claw back any of the amounts included in income support levels to help the 20 per cent. contribution under the community charge. That is worth £750 million at 1992–93 levels, and is despite the fact that there will be no minimum contribution under the council tax. Overall, benefit entitlement under the new tax will extend to claimants with broadly the same levels of income as those helped by community charge benefit.
The noble Baroness argued that this would lead to higher marginal deduction rates of some 97 per cent. I would accept that, but I have to say to the noble Baroness that even under community charge benefit—where we have a taper of 15 per cent.—the highest marginal deduction rate can also rise to some 96 per cent. I have to say to the noble Baroness that to reduce the absolute maximum possible at the top marginal deduction rate from 97 per cent. to 96 per cent. would 865 cost some £85 million a year—and not, I think, the £150 million a year that the noble Baroness quoted—but even so, an amount of money that really is excessive.
Referring to the second order, the noble Baroness asked just when local authorities can exercise their discretion. I have to say that they do have a complete discretion on how to exercise their judgment—and I emphasise the word "complete". They may, for example, pay higher benefits in recognition of urgent expenditure; such as travelling costs to visit a sick relative, to give just one example.
The noble Baroness also asked me to expand a little on the disregards available for war pensions. What happens is that all war pensions are statutorily disregarded up to a maximum of £10, which local authorities have to recognise. Thereafter, it is a matter for the individual local authority, and although I cannot remember off-hand the exact figures I think that about three-quarters of all local authorities operate either a total or partial disregard in respect of war pensions, war widows' pensions, and the special payment to war widows.
I do not accept what the noble Baroness had to say about second adult rebates being too complicated to cope with, but I shall certainly take note of what she said about representations from local authorities. I am sure that my right honourable and honourable friends in other departments will be looking at that. We are determined to keep the benefit scheme—and in particular the second adult rebate —as straightforward as possible. The system of second adult rebates will work on a similar basis to the non-dependant deductions which local authorities have operated for many years in both housing benefit and rate rebate schemes. To put these matters into context we estimate that, based on the published assumptions of council tax levels, some 190,000 tax payers in Great Britain will receive a second adult rebate—nearly half of them will be pensioners. We also estimate that, based on the 1.991–92 benefit levels and prices, expenditure on second adult rebates will be about £10 million.
The noble Baroness also argued that non-dependant deductions would cause hardship. There have been arguments that there should be no non-dependant deductions in council tax benefits. I think that I should say that they have been part of the benefit scheme for a very long time and they reflect the principle that adult non-dependants, sharing a liable person's dwelling, should contribute to the council tax.
Similar rules apply in the other income-related benefits, including housing benefit, and applied in the rate rebate scheme. There are no deductions for non-dependants in the community charge benefit scheme since the charge is of course a personal liability. I should add that the level of non-dependant deduction in council tax benefit will be modest. It is surely reasonable to expect a contribution of a mere £1 a week from non-dependants with incomes of up to £105 a week, and £2 per week from non-dependants in full-time work with higher incomes. No non-dependant deductions will be made in respect of 866 people on income support or certain other people such as full-time students. It also has to be remembered that non-dependants will, of course, no longer be liable for the community charge. They will be likely to be better off and able to afford such a contribution.
The noble Baroness also raised the position of the wife with the unpaid council tax bills when her husband deserts.
§ Lord Henley
My Lords, I presume that the same advice would apply whether he died or deserted. If it is the death of a husband, I think that I should prefer to write to the noble Baroness on that issue as the answer I have is in the case of a desertion.
Lastly, my noble friend Lord Boyd-Carpenter asked about costs to public funds of these orders and are they from local funds or central funds. The amending regulations are not expected to cost in excess of £1 million. The cost of the permitted total order (the second order) falls entirely upon the local authorities to bear, and in 1991–92 local authorities expended around £200,000 on discretionary payments. I imagine that the figure will remain much the same. I hope that I have dealt with all the points made by the noble Baroness and my noble friend. With that, I commend the order to the House.
On Question, Motion agreed to.