Examination of Witnesses (Questions 100-119)
MR RAY
SHOSTAK, MR
ANDREW LEWIS,
MS LINDSAY
BELL, MR
ANDREW ALLBERRY
AND MR
ROBERT DAVIES
27 APRIL 2004
Q100 Mr Clelland: So the answer is yes
there would be a pound-for-pound reduction.
Ms Bell: That is an answer but,
as I say, there are separate streams of work on what the government
thinks overall public spending should be, and they would be in
the spending review, so there are two different streams coming
together.
Q101 Mr Clelland: In all of the discussions
which are going on in this is no change at all a viable option?
Ms Bell: I think it is. Anywhere
on the spectrum is still up for grabs.
Q102 Mr Clelland: So it has not been
ruled out? We have not decided that there has to be some change
and the present system could just continue as it is?
Ms Bell: The thing the Government
has said is that it is definitely going to revalue, so the revaluation
of council tax is definitely going to happen and thus there are
components of this that will change anyway even if the overall
system stays the same.
Q103 Christine Russell: Can I ask both
sets of you what is under consideration as far as council tax
benefit reform is concerned, especially to tackle this thorny
issue of those people in our community who are asset rich and
income poor, ie mainly the older sector?
Ms Bell: Proposals to look at
things to change the way of looking at it not as benefits but
entitlements or whatever is certainly something that can be looked
at in the Balance of Funding Review and is the sort of thing you
have already heard about from the New Policy Institute. That is
certainly something we would be very happy to look at. Meanwhile
there is a lot of work going on to increase the take-up to make
sure that the people who are entitled to it are getting it. We
know take-up, particularly among homeowners is very low, so there
is a lot of work going on with DWP about that. I think DWP separately
either have or were going to put in some further advice to the
Committee on this.
Q104 Christine Russell: What about the
Treasury? Are the Treasury looking at different ideas like permitting
older people perhaps to put a charge on their property?
Mr Shostak: I do not think that
is currently part of the Balance of Funding Review, is it?
Mr Allberry: No.
Mr Shostak: I am not aware of
it. That is not to say it is not happening, I am just not aware
of what DWP is doing on these issues.
Q105 Chairman: Nick Raynsford told the
Committee that if you had a fairer system of benefits then many
of the regressive aspects of the council tax would disappear,
so surely it must be one of the key elements to a review that
you look at having a fairer system of benefits which would then
solve some of the problems which are now pressing people to look
at the balance of funding?
Mr Shostak: Certainly it is the
case that benefits do play a part in all of this. As Lindsay said
a second ago, a great deal of work is currently going on in terms
of increasing—
Q106 Christine Russell: Where is that
work going on, in the Department of Work and Pensions; is that
what you are saying?
Ms Bell: Primarily.
Q107 Chairman: How much would it cost
the government if we had everybody who was entitled to claim benefits
claiming them as far as the council tax was concerned?
Mr Allberry: I do not know that,
no, I am sorry.
Q108 Chairman: But it is a significant
amount, is it not?
Mr Allberry: There are many hundreds
of millions of pounds not claimed at the moment, as I understand
it, but I do not have an exact figure.
Q109 Chairman: And yet the Treasury does
not seem to have a view about it?
Mr Shostak: Our view is that we
would want to increase the number of people who actually are claiming
the benefits to which they are entitled. As I indicated, our government
is working to actually achieve that objective because, as you
rightly said, it matters.
Q110 Christine Russell: How happy would
the Treasury be if whoever is doing this research came up with
the solution that perhaps raising the threshold of savings that
a person can have in order to be entitled to benefit should be
raised? Would the Treasury be very happy if that recommendation
came forward so that instead of the present threshold which is
stuck at £60,000 for 10 years that was raised or even scrapped
completely?
Mr Lewis: I do not cover these
issues directly but I would draw a distinction between changes
to liability and entitlement for council tax benefit and changes
to take-up. It is very important and clearly one of the main things
the government can do to address some of the problems at the lower
end of the distribution with council tax is to improve take-up
of council tax benefit and that is where the emphasis is placed.
Of course any future decisions on the structure of council tax
benefit is a matter for ministers and DWP. I would add that of
course the Chancellor did take an additional measure in this year's
Budget to provide an extra £100 for the over 70s which he
explained was an integral part of our support to help elderly
people with council tax bills this year.
Q111 Mr O'Brien: Can you explain if the
new formula, the grant system that was introduced in 2003-04 has
made the system more simple in terms of payment of grants?
Ms Bell: Discussions with the
Local Government Association showed that local government collectively
was most concerned about the fairness of the system rather than
simplicity and we took that message on board I think the system
is still undeniably complex but in the presentation of it we have
tried to make it more transparent by having a unit element and
then a top-up element which incorporates other elements of the
cost so I think the answer is it still is not simple but we have
tried to make it clearer in the presentation of it.
Q112 Mr O'Brien: Do the Department take
into consideration the increased cost that is faced by local authorities
for on-going services and the fact that the replacement cost to
local authorities is much greater than what the Department considers
it is? Do you take these into consideration?
Ms Bell: Yes, the totals are negotiated
as part of the spending reviews Individual departments look at
the costs that they think will fall as a result of policies to
local government, and inflation and pay and things are one element
of what we look at for that. In terms of the distribution there
is some distributional difference that is also taken into account
between local authorities about different costs.
Q113 Mr O'Brien: The Department do not
take into account the inflationary costs to local government,
do they? They have an assumed inflationary cost but the actual
cost is much greater?
Ms Bell: The quantum that eventually
is decided on takes account of those things. The issue about whether
the quantum is considered big enough is one I could not comment
on.
Q114 Mr O'Brien: This is not new, it
has been with us for a long while but local government have yet
to identify where in the quantum costs the actual cost as against
the assumed cost does apply. All I am asking is do you take into
consideration the actual cost as against the assumed cost?
Mr Davies: I am not sure that
I can take that much further. The aggregate figures published
in the spending review obviously reflect a view reached by government
collectively about spending pressures and about any improvements
in cost effectiveness that might be expected from local government
but those are not identified separately to reach an overall view
on what the aggregate should be.
Q115 Mr O'Brien: Do you review services
separately?
Mr Davies: In terms of the individual
services there are blocks in the distribution formula for some
services which are re-run each year using updated data so if the
costs we have modelled for an individual local authority had gone
up faster than another, those would come through in the formula.
Q116 Sir Paul Beresford: Before the formula
grant system changed I think I am correct that the government
announced that they believed the council tax system was an acceptable
system, accepted generally by the public. We then had the new
formula grant system, we then had the outcry, we have had two
years of concern, and it is quite clear that at least the size
of the taxation through system is unacceptable. Do you think it
is linked to the formula grant system changes?
Ms Bell: There is quite a lot
in that question. I do not necessarily accept the analysis in
the first bit of the question If it was meant to be an explanation
of why we have got a Balance of Funding Review I do not think
I would necessarily accept that. I think the Balance of Funding
Review is looking at exactly what it says and it is the issues
that have come up about that balance between central and local
government, and the operation of the council tax is one factor
in that. The changes we have made in the formula have all been
widely welcomed by local government, they were all done in agreement
with local government, and these were not considered to be disruptive
to the tax system.
Q117 Chairman: But they upset a lot of
voters or their consequences upset a lot of voters?
Ms Bell: Any change in distribution
always has losers.
Mr Davies: It is not possible
to get a generally agreeable set of distributional changes, no.
Q118 Mr Sanders: What is the importance
of ring-fenced grants to local authorities and why have they increased?
Ms Bell: The Government's policy
on ring-fencing has been that there is recognised that there is
a need for ring-fencing, for example to embed something new that
you want done, that everyone wants done, but the Government is
also clear that its overall policy is to restrict ring-fencing,
only use it where necessary and keep it constantly under review
so that as soon as we do not need it we remove it. Certainly the
direction of travel on ring-fencing is that the amount of money
that is ring-fenced is being reduced.
Q119 Sir Paul Beresford: The impression
the Committee gained last year on this was that the proportion
of ring-fenced grant was going down but there was a name change
and it became "passported" or it became "targeted
funds", and if you aggregate them all together under the
same sort of bracket they would have gone up.
Ms Bell: I do not think we would
accept that passporting is ring-fencing.
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