Welfare cuts mean a dramatic rise in council tax for the poorest

The decision to reduce the budget for council tax support by 10 per cent means low-income households face a tax increase of up to £600.

Accustomed to the inflated claims of successive governments, readers might be forgiven for rolling their eyes at the phrase "radical welfare reform". Yet for once the bold rhetoric might match reality. Council Tax Benefit, the most widely claimed benefit in the UK, which provides 5.9 million low-income families with help paying their council tax will soon be abolished. From 1 April, responsibility for council tax support will transfer from Whitehall to each of England’s 326 local authorities (and the Scottish and Welsh governments). Few have yet grasped the full implications.

To the reform’s cheerleaders, the change is ‘localism in action,’ and technically they’re right. But it’s localism of the most meagre and restricting kind. Councils must now provide council tax support but from a budget cut by 10 per cent cut. And they must also contend with centrally-set rules that mean that the amount of help pensioners receive is protected. This leaves them with a stark choice: either substantially increase the council tax bills of low income working families or find savings elsewhere to cover the funding shortfall.

Faced with these constraints and unable to make the required extra savings at a time of unprecedented financial challenge, three-quarters of English councils are set to introduce less generous systems of council tax support in just over two months’ time. Over a third are set to introduce schemes that severely reduce support. Only around a quarter of councils – along with both the Scottish and Welsh governments – feel they are able to absorb the funding shortfall and maintain current levels of support.

What does this mean for low income households? The answer is set out in a report released this morning from the Resolution Foundation. It shows that while the government talks up its decision to "freeze" council tax, millions of households – both in and out of work –in fact face swingeing increases.

Both the scale of the hit and the number of people likely to be affected are dramatic. Many of the 2.5 million out-of-work claimants who currently pay no council tax at all will now, often for the first time, face council tax bills of between £96 and £255 a year. Meanwhile, around 670,000 low-paid working families will see their council tax rise by anywhere up to 333 per cent – an increase of £577 for single working parents who look set to be the worst affected. Little wonder that the handful of prescient commentators alive to the possible implications of Council Tax Benefit reform have drawn parallels with the Community Charge, more commonly known as the poll tax.

It remains to be seen whether we see the emergence of the twenty-first century equivalent of anti-poll tax unions but councils are certainly braced for widespread non-payment. Many are setting aside large sums of money to compensate for unpaid bills while also preparing for more extensive use of bailiff powers and the courts.

Reform did not need to look like this. There was no intrinsic rationale to cutting funding at the same time as localising council tax support and experts have long warned of the dangers that a complex patchwork of local schemes poses to the government’s Universal Credit system. For savings of £410m it all seems unduly hazardous.

But the hazards for government are nothing compared to the very real suffering the changes will mean for many low income families. Already struggling to cope with stagnant wages, rising living costs, a series of cuts to the tax credits and – now – three years of below-inflation rises in support, a swingeing increase in council tax may mean the difference between staying afloat and going under.

As yet, there is no sign that ministers recognise the pain the reform is set to cause. Eric Pickles appears more concerned with the prospect of councils "cheating" their residents by planning across-the-board council tax rises of 1.99 per cent than with those soon to face increases of up to 333 per cent. Perhaps they expect a public inured to cuts to meekly accept the change. Yet there is all the difference in the world between stealth reductions in support over time and a large bill landing on your doormat. Revolt or not, the poor are unlikely to take this lying down. 

The Resolution Foundation's new report, No Clear Benefit, is published today

Communities Secretary Eric Pickles speaks at the Conservative conference in Birmingham last year. Photograph: Getty Images.

Matthew Pennycook is MP for Greenwich and Woolwich, and member of the Energy and Climate Change Committee. He is PPS to John Healey. 

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How a devolved immigration policy could work in Brexit Britain

London and Scotland could keep free movement, or something close to it. 

Just a few short months after the vote to Leave, Britain and the European Union appear to be hurtling towards confrontation – and mutual self-harm. At the Institute for Public Policy Research (IPPR), we believe that what we need is not “hard Brexit” or “soft Brexit” but “smart Brexit”.

At the moment, too much of the debate is characterised by clinging on to obsessively ideological positions, or attempting to relitigate the referendum because you didn’t like the result. There is far too little serious policy thinking taking place.  

Firstly, we should demand that politicians think again on immigration policy. Recent polling has shown that the country is split on whether to prioritise the economy or immigration control in the negotiations. Given this, it would be reasonable to expect politicians to attempt to accomplish both. Yet politicians on both left and right have marched off to the extremes.

Theresa May has indicated that we are heading towards a one-size-fits-all closed borders system; Jeremy Corbyn has made an absolute commitment to freedom of movement, defining immigration as a problem of austerity economics. Both positions are overly simplistic, unoriginal, and show little regard for our democracy or national interest. We should begin by disentangling the different strands of the immigration debate. 

The referendum exposed three broad contours to the immigration question. The first is that different parts of the country have different interests; the benefits and costs of immigration are not evenly distributed, particularly with regard to jobs. Second, there is an important cultural dimension about consent – expressed as "nobody asked us" – and the pace of change in specific communities. It was striking that the areas with the highest levels of immigration strongly voted Remain; but those with the fastest pace of change voted strongly Leave. Third, that there are public concerns about the impact of immigration on public services and housing.

A devolved immigration system would allow different parts of the country to act according to their (divergent) interests. It could work by using certificates of sponsorship to require employers to specify the place of work and residence of the employees they sponsor; and by setting region-specific quotas for these certificates by sector (and possibly pay level).

Such an approach would better secure our national interest by recognising our regional differences, boost democratic decision-making and so address consent, and go some way to address the impact on public services and housing. It would work for both EU and non-EU migrants. There are international precedents, such as Canada. 

A regional solution

Under this option, different regions would determine their interests and then either set quotas for specific sectors or determine that some or all sectors should have no restrictions, differentiated by EU and non-EU migrants. In sectors which required work permits, employers would need to draw down against agreed quotas. Employers would be required to register a place of work for migrant employees, and ensure that their home address was in a commutable distance from their place of work. For those sectors without restrictions, registration would take place but would not be subject to quotas. It would mean some additional rigidity in the labour force - migrants workers would not be able to be redeployed from one part of the country to another without affecting each region’s quotas. 

The key to such an approach is London. The capital is a huge draw for people from overseas - it would have to decide to sustain free movement for a devolved system to have any chance of being effective. There would simply be too much risk of backdoor entry to London if it were to set quotas. Londoners, like the rest of the country, are split on immigration. Nonetheless, they elected a Mayor who openly supports free movement, London’s globally-orientated services sector benefits strongly from immigration, and voted strongly for Remain. There is every reason to believe that London would decide to continue free movement for EU citizens. 

The crucial step for such an approach to have legitimacy would be to have democratic control of setting work permit quotas. For Scotland, Wales, Northern Ireland, and London, the devolved democratic structures are already in place to make decisions on immigration. Not only did Scotland vote strongly to Remain, when Scottish First Minister Nicola Sturgeon gave her first major post-Brexit speech at IPPR in July, she described the importance of free movement for Scotland. The Welsh and Northern Irish Assemblies are clearly well-placed to make decisions for their parts of the Union. 

Democratic solutions for other parts of the country would need to be bespoke. One approach might be to form “Grand Committees” of existing elected representatives in different regions. These would bring together elected council leaders, the newly-elected Metro Mayors, and Members of Parliament, with voting in an electoral college, determined by population size. They would then consult with the public and employers, examine the evidence, and make the decisions for which the public could hold them to account.   

Goodbye, net migration target

Elected politicians would need to be able to make informed decisions, based on analysis of the skills base and the workforce requirements for sectors in each region. It would be vital to have proper consultation processes with employers and with citizens and communities. 

Such an approach would also require the devolution of the education and skills systems. If employers cannot seek skilled labour from overseas, they will need to be able to secure skilled workers at home. The entity responsible for immigration policy would need to make skills policy, too. 

National immigration policy would be reserved for those areas that are properly national, such as refugee resettlement and asylum policy for those fleeing persecution. By focusing national political choices on matters of principle, it would enable us to have a more moral conversation about our obligations in the world. It would stop us from conflating the people fleeing the terrible destruction in Syria with those looking for a boost to their pay from higher wages in Britain than in Eastern Europe. It might just enable us to begin to act like responsible members of the international community again. We should also embrace what could be termed “cultural free movement”: allowing all EU citizens to visit and to study across the UK visa-free. This would tap into the nobler – and popular – aspects of the European project, and might be used to secured our continuing participation in pan-European scientific research and the Erasmus programme. Immigration controls on the citizens of European countries should be reserved for employment, through work permits.    

It would also require the net migration target to be abandoned, as it is completely inconsistent to have a national net target with devolved controls. This would be a good thing: it would provide political cover to abandon a particularly stupid piece of policy. As IPPR has argued for many years, it makes absolutely no sense to lump together American bankers, Polish builders, and Syrian refugees and count them all as the same. Furthermore, a recent IPPR report concluded that the numbers are probably shoddy anyhow. They simply don't stand up to serious scrutiny. If you believe the official figures, tens of thousands of people get university degrees and then disappear into black economy jobs earning cash-in-hand every year. It’s just not plausible.

So, how can a devolved immigration system help?

Professors and fruitpickers

A devolved immigration system would recognise that different parts of the country have different interests. Strong majorities in London and Scotland have voted for political leaders that openly support free movement of people. In other parts of the country, there appears to be a stronger consensus that free movement is not in their interests. 

The East of England, for example, might conclude that it needed migrants to work in the fields of the fens and to work in research laboratories in Cambridge’s world leading institutions, and place no restrictions on fruit pickers and professors. But it might also decide to set quotas for skilled jobs in light manufacturing, and to direct the skills system to train local workers for those roles instead of opening those opportunities up to migrants. This would mean that the immigration system could be optimised to the interests of different parts of the UK. 

Moreover, a devolved approach would humanise the debate on immigration. It would require practical choices determined by regional needs. It would remind us that migrants are people who do essential jobs like work in our hospitals (I imagine every part of the UK will want to keep the NHS functioning). It would demand that local employers make the case to local politicians. It might just take us away from high level statistics and low level instincts. It would take us from the politics of the gut being fought in the gutter to a more responsible discussion. 

Critics will say that this will end up with free movement in a complex and bureaucratic way. Even if this was the case – it is not clear that it would be – it would mean that people would have decided for themselves that migration was beneficial. Some degree of messiness is inherent in any compromise solution; and the incremental complexities of a devolved rather than national system are marginal. If Britain found its way to free movement by democratic consent rather than by Whitehall diktat, that would surely be preferable. Then, the question, “what have the immigrants ever done for us?” might well receive a Monty Pythonesque response. 

Tackling the pressures

Proper management of immigration means addressing its consequences. In a world where public sector budgets are being cut, services have struggled to cope with demand. Most studies have demonstrated that migrants, in the aggregate, are net contributors to the public purse but that does not take away from the pressures felt locally. Politicians on the left and right have alighted on some common ground in their approach - all major parties support a migration impact fund. Yet a migration impact fund, whilst necessary and useful, is ultimately marginal.  

The real solution must be to address the underlying allocation formulae that create these distributional problems. In addition to his pointless, destructive, and unnecessary reorganisation of the NHS, Andrew Lansley also tampered with the allocation formula that distributes NHS budgets across the country. It was reweighted to increase the significance of age, meaning that areas with more older people received disproportionately more money, while resources were moved away from younger, poorer areas. 

This was an act of grotesque political cynicism. It had the effect of redistributing from poorer typically Labour-voting areas to older, wealthier Tory-voting areas. But the other affect was to shift resources away from places with high immigration, since migrants are typically young themselves and have higher fertility rates. It was a far more significant – and cynical – decision than the abolition of the pitiful migrant impact fund. And so reinventing the migrant impact fund is merely tinkering at the edges.  

Similarly, blaming immigration for the housing crisis is easy but wrong. A large number of new arrivals certainly adds to the pressure. But it pales in significance when compared to our abject failure to build enough houses. Britain has roughly double the population of Canada and yet builds just one-third of the new homes every year. The solution to the lack of affordable housing is to build more homes. No immigration policy is going to solve the housing crisis. 

What are the drawbacks?

A devolved immigration system certainly has some drawbacks, both in substance and implementation. As with any sector-based approach to immigration, there is a risk of getting the numbers wrong resulting in skills shortages for employers, or putting firms off from investment by creating uncertainty about the labour supply. Those areas that had decided to introduce particularly draconian controls might find that employers decided to move elsewhere. This is no more true than at a national level, as reports from international firms reconsidering their investments illustrate.  

Operationally, it could become complex and bureaucratic. The foolish dismantling of the Government Digital Service has seriously eroded central government’s capacity and capability to do things in an efficient, modern way. As with all immigration systems, people will be tempted to abuse it, and it would need to be robustly policed. Moreover, this system would place greater responsibilities on employers - they would have to face stiffer penalties if they abused – or permitted abuse to take place – the system. Part of the price would be the inevitable steady drumbeat of stories in the xenophobic parts of the press finding people working where they were not registered. But these drawbacks – whilst important – are massively outweighed by the benefits. 

Immigration and the Brexit deal

The international response to the government’s strident signals about immigration control has been fiercely negative. The hostility of tone – verging on xenophobia – was regarded with shock and disgust in many European capitals. The political dynamic between British politicians and their European counterparts has quickly become toxic. We are heading down the path of "Mutually Assured Destruction" (MAD). 

For the most part, European leaders see the EU as an inextricable part of their national interests, which is precisely why its preservation is top of their agenda. Right now, their judgement seems to be that Britain must be seen to be worse off because of Brexit in order to prevent the Exit contagion catching, just as they were determined to punish Greece so that the debt crisis would not spread to Italy, Spain, Portugal and Ireland. After all, as Nigel Farage himself pointed out, there are somethings that are more important that GDP, and most European leaders believe preservation of the EU falls into that category. 

Speaking privately, one European cabinet minister recently told me that his country would be pushing for the “worst possible deal” for the UK because “a good deal for you would cause chaos for us, and even if you were seen to be treated fairly, that would push us towards the exit door”. At present, the mindset is that Britain must be seen to pay a price, and there is a very real risk that the EU forces us to choose between our car industry and our financial services sector. This is yet another reason that we need to be seeking common ground, not pursuing a divisive approach in the country or internationally.  

A devolved immigration system might enable EU leaders to say that free movement had been secured because it would continue in London and Scotland (and possibly in other regions too) along with nationwide “cultural free movement”. Given their fidelity to the principle of free movement, it would still require them to make quite a departure from their existing position. But in a devolved immigration system, we might just find our common ground. That, perhaps combined with paying a hefty fee, might be just about enough to secure our access to the single market and participation in some of its key institutions – vital if we are to be regulation makers rather than takers – or at the very least tariff-free trade for tradable goods and passporting for the City of London. It would certainly be a more attractive offer than us pulling up the drawbridge or being "pro having our cake and pro eating it".

Finally, there is a wider issue at stake here. As we enter into the negotiations, we will need much more smart thinking about nuanced solutions. At the present, our political leaders – on left and right – appear to be spending more time posturing and swaggering than thinking. Our Conservative Prime Minister and recently re-elected opposition leader are sacrificing the national interest on the altar of party management, the perpetual problem in British politics. We should demand Smart Brexit, and we should demand more creative thinking from our government, its leaders, advisers and officials. In this period of turmoil, the British people deserve nothing less.    

Tom Kibasi is the Director of the Institute for Public Policy Research.