Ministers and local government leaders clashed over limitations to the government’s localism agenda during a heated meeting covering housing, council tax benefit and funding reforms.
Housing and local government minister Grant Shapps was challenged repeatedly by council leaders from across the country about the government’s failure to give local government total discretion over which groups of residents should be eligible for council tax benefit.
During a 50 minute question and answer session with the LGA’s executive Mr Shapps was also asked to defend the decision not to allow councils to retain more than 50% of business rate growth and the cap on borrowing to fund house building.
Localisation of council tax benefit, and in particular the government’s decision not to allow councils to change discounts for pensioners and single people, was the policy which council leaders returned to again and again as they spelt out their frustrations to Mr Shapps.
Due to become a local government responsibility in April, the LGA has long argued that a planned 10% funding cut combined with the limitations on changing pensioner and single person discount will result in working age claimants being hardest hit, contradicting the government’s stated aim of making work pay.
LGA Liberal Democrat group leader Gerald Vernon-Jackson said the protection for “extremely rich people” would mean “targeting the very lowest paid” and that “cannot be right”.
In response, Mr Shapps said the deficit had to be reduced and argued pensioners couldn’t be expected to enter paid employment to fund a benefit cut. He also dismissed “this nonsense about millionaires”, said the government had taken two million of the lowest paid out of tax and insisted councils could design their schemes in order to ensure there was not a disincentive to work.
With Cllr Vernon-Jackson suggesting Mr Shapps’ “connection with reality seems limited”, a comment which was applauded by other councillors, LGA chairman and Kensington & Chelsea RBC leader Sir Merrick Cockell (Con) intervened to argue the sector’s case.
“Just to be clear, we’re in favour of localisation of council tax benefit, cross-party,” Sir Merrick said. “I think we can even cope with the 10% [cut], but we should be given the flexibility to work in our area to find that saving… and that is the problem, the constraint that you have put on us so that we have to go after the least able to pay.”
Government limits on the amount councils can borrow to build new housing was also raised more than once, with Hounslow LBC deputy leader Ruth Cadbury (Lab) telling Mr Shapps that “any help you can give us on borrowing to build affordable housing would really help because one of the biggest drivers of benefits is rising housing costs”.
Mr Shapps said he had “had this conversation with the chancellor and the Treasury on many occasions, but effectively what we’re asking for is more borrowing and unfortunately that won’t wash in this environment when everything we’re trying to do is reduce borrowing”. Instead he advised “getting into partnerships with a housing association because they’re not on the public books” and encouraged councils to sign up the government’s new ‘sell one, build one’ right-to-buy policy.
Mr Shapps also took issue with Cllr Cadbury’s claim that government limits on housing benefit payments had failed to bring down rents in London and the south-east because supply and demand was driving costs up.
In comments that caused consternation amongst many of the assembled councillors, Mr Shapps said there was “absolutely no evidence that rents are going up” arguing the English Housing Survey showed a 2.3% rise which, when compared to inflation rates of 3.7%, represented a real terms decrease.
However, following challenges from a number of quarters, Mr Shapps accepted “there will be regional variations…[and] it may be that in your area they are higher” and that council housing rents had risen by 7% last year.
Mr Shapps also responded to complaints about the decision not to allow councils to retain more than 50% of business rate growth in the new local government funding system due to be introduced in April and suggested the locally retained portion might increase with the first reset of the system in seven years’ time.
“I’m pretty certain…that in 2020 we will be moving further along the line in this direction that you’re together arguing for, which is more flexibility, more retention and so on and so forth.”
His comments echo those made by communities secretary Eric Pickles at last month’s LGA conference, although Mr Shapps’ boss appeared to suggest change could be linked to the start of the next spending review period which begins in 2015.
However, Mr Shapps was firm that the scheme would start in April with only 50% of rates growth retained locally. “For the moment this scheme is more than ambitious enough from everybody’s point of view, but for you guys in particular.”