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

by Stephen Tall on October 22, 2012

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 Tall is Co-Editor of Liberal Democrat Voice, a Research Associate for the liberal think-tank CentreForum, and also writes at his own site, The Collected Stephen Tall.