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Mr. Tim Yeo (South Suffolk) (Con): On a point of order, Madam Deputy Speaker. Are you aware that an hon. Member said today that he had been gagged by Government Whips, who removed him from the Standing Committee that is considering the Higher Education Bill? As the defender of Back-Bench rights, do you share my view that it is scandalous that because the hon. Member for Wirral, West (Stephen Hesford) refused to give an undertaking about the way in which he would vote in Committee, he has been denied the chance to explain why he broke his election promises through voting for Second Reading?
Madam Deputy Speaker (Sylvia Heal): I remind hon. Members that last week Mr. Deputy Speaker said that "Erskine May" makes it clear that the Speaker cannot interfere in the work of the Committee of Selection, which is responsible for nominations to the Standing Committee. I can add nothing further to that ruling.
Mr. Andrew Mitchell (Sutton Coldfield) (Con): Further to that point of order, Madam Deputy Speaker.
Madam Deputy Speaker: Is it on the same point?
Mr. Mitchell: It is on a related point.
Madam Deputy Speaker: I have already ruled on that and there is nothing further that the occupant of the Chair can add.
Local Taxation
4.17 pm
Mr. Edward Davey (Kingston and Surbiton) (LD): I beg to move,
- That this House believes council tax is unfair, should not have been introduced and should be replaced by a system that reflects people's ability to pay.
The usual meaning of fairness in the context of taxation is progessivity. Simply put, that means that it is fair that a person's tax bill should increase at least in proportion with their income. It means people paying according to their means; taxpayers paying what they can afford, and tax related to ability to pay. That is not a difficult concept and I hope that it is not controversial. Yet when we apply the fairness test to council tax, what do we find? The poorest pay the most in proportion to their incomes. Whether they are pensioners, low-paid public sector staff or low-paid private sector employees, those on modest incomes pay more in council tax. It is the reverse of fairness and progressivity.
We are not considering a little unfairness, with the poorest paying a smidgen more, but gross, grotesque unfairness—unfairness not seen since the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) extolled the virtues of the council tax in the House.
Mr. David Borrow (South Ribble) (Lab): The hon. Gentleman said in his introduction that fairness must be perceived in terms of income. Does he accept that fairness in terms of ability to pay is not only a matter of income but of wealth and that both must be taken into account when judging whether a tax or a basket of taxes is fair?
Mr. Davey: The hon. Gentleman is right that we should consider all aspects of a person's wealth when considering overall tax policy, but I wonder whether he wants to force people out of their homes by taxing them through council tax. I would rather ensure that that part of property wealth is taxed through inheritance tax when people die, or through stamp duty when they move. That is the fair way of taxing property. It is much fairer for local taxation to be based on ability to pay—on income.
Dr. Julian Lewis (New Forest, East) (Con): There is a certain déjà vu to this debate—I am thinking back to the community charge, which was introduced before the hon. Gentleman and I were in this House. If we had a local income tax, what would happen where a household had three or four wage earners who all paid that tax, whereas previously just one householder had paid the council tax? How would the hon. Gentleman avoid the same sort of demonstrations and upsets that attended the community charge? Is not this the Liberals' version of the poll tax?
Mr. Davey: I am grateful to have a Conservative intervention so early because I will be asking every
Conservative MP who intervenes on me today two questions. First, do they think that the council tax is fair; and secondly, what is their policy on council tax? This House needs to know the Tory party policy.
Mr. Patrick McLoughlin (West Derbyshire) (Con): On a point of order, Madam Deputy Speaker. The hon. Gentleman has just said that he will ask every Conservative Member who intervenes two questions. Will it be in order for us to get up and answer those questions? If we are asked questions, it is only fair that we have the chance to answer them.
Madam Deputy Speaker (Sylvia Heal): The occupant of the Chair always tries to be fair to all hon. Members, so I think that we will wait and see as the debate progresses.
Mr. Davey: Madam Deputy Speaker, I can assure hon. Members that if some of them want to answer those questions, I shall allow them to intervene.
I can tell the hon. Member for New Forest, East (Dr. Lewis) that the difference between our proposal for a local income tax and the community charge is that one is related to ability to pay and the other is not. Under one scheme, millionaires paid the same as dustbin men; under the other, they would not. That is the difference, and that is why this party stands for fairness and his does not.
Mr. Lindsay Hoyle (Chorley) (Lab): I understand the point that the hon. Gentleman is trying to make, but I wonder whether he shares my worry that the wealthiest in this country usually have the best accountants, who ensure that they pay only a very limited amount of income tax. How would those wealthy people contribute to the hon. Gentleman's local scheme?
Mr. Davey: I am interested to hear Labour Members defend the very richest in the land. The hon. Gentleman should speak to his right hon. Friend the Chancellor, because if he is failing to administer the tax system properly, this House ought to know about it.
Mr. Mark Field (Cities of London and Westminster) (Con) rose—
Mr. Davey: I know that Conservative Members are desperate to answer my questions, and I promise that I will give them the chance to do so, but I want to make some progress.
I shall give the House some measure of the unfairness of council tax. Let us start with households. The richest households pay just 2 per cent. of their income in council tax, but the poorest pay 7 per cent., which is more than three times as much. That figure alone should worry the House, but I am afraid that there are worse examples. Let us look at pensioners. According to the Office for National Statistics, the poorest 20 per cent. of pensioners pay on average 7.1 per cent. of their income in council tax, taking into account council tax benefit and single person's discount. Hon. Members may have examples of pensioners who are paying far more—perhaps 20 or even 30 per cent. of their incomes. I have some such examples in my constituency, but on average,
the poorest 20 per cent. of pensioners pay 7.1 per cent. of their income in council tax, which is nearly six times more than the richest 20 per cent. of non-pensioners. They pay just 1.2 per cent. of their income in council tax.That is unfairness on an extraordinary scale, and it goes a long way towards explaining why there has been a revolt against council tax in this country.
Sir George Young (North-West Hampshire) (Con): Returning to the question that the hon. Gentleman did not answer, is it not the case that the millionaire to whom the hon. Member for Chorley (Mr. Hoyle) referred will pay nothing at all under the hon. Gentleman's proposals and that, by definition, the less well off will have to make good the difference?
Mr. Davey: The right hon. Gentleman ought to know better, as I believe he served in the Treasury in years gone by. Under this Government, and under the previous Conservative Government, the Inland Revenue has cracked down on people who evade tax. He ought to be ashamed, because he is saying that this House cannot implement the tax legislation that it passes. That is a very bad precedent to set, and Government figures in fact show that people on higher incomes pay more in income tax, but less in council tax.
Mr. Andrew Turner (Isle of Wight) (Con): Does the hon. Gentleman accept that he appears to be confusing those who are rich, which is a measure of capital, with those who have a high income? Somebody can be rich and still have nil income, and therefore pay nothing through a local income tax?
Mr. Davey: If the hon. Gentleman had been listening closely, he would know that I was not doing that. I said that those people with assets and property could be taxed through inheritance tax and stamp duty, and that that was the fair way to do it. I therefore answered that question.
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