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Mr. Pickles: The hon. Gentleman is being courteous to the House, but can he reconcile what he has just said with the answers that he gave to the distinguished
Chairman of the Select Committee, when he said that incomes and expenditure of councils would rise? I would be grateful if he would tell the House how much the doubling of local income tax would cost.
Mr. Davey: To most taxpayers, nothing, because national income tax would be cut to offset it. It is, as we have said, a neutral tax policy. I was rather disappointed by what the hon. Member for Brentwood and Ongar (Mr. Pickles) had to say, and wonder whether the Tories have a different plan. If they want to tell us their plans for council tax, we should be very interested to hear them. Until then, we will continue to tell the public that the shadow Chancellor has said that the Tories want to double council tax.
There is some fresh thinking going on in the Conservative party. Last week, I stumbled across a paper written in 2002 by a certain Mark Nicholson, deputy chairman of the Ealing Southall Conservative association. It was entitled "No Representation without Taxation—"
Mrs. Browning: On a point of order, Madam Deputy Speaker. The Minister is a generous and understanding man. Would it not be appropriate for him to change places with my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles), so that my hon. Friend can answer the debate when the time comes? Clearly, Labour Members are not involved in the debate, and they could all have a cup of tea.
Madam Deputy Speaker: I shall leave hon. Members to make their own decisions about staying in the Chamber.
Mr. Davey: The paper in question was published by the Bow group. Its executive summary states that local government should raise a far higher proportion of its costs through local taxation. We agree. It goes on to say that a local income tax should supplement council tax to allow councils to become self-financing, and that the national rate of income tax should be reduced to compensate for the introduction of the local income tax, leaving the overall tax burden unaltered by the reforms. It is an interesting document, although not exactly Liberal Democrat policy, as it proposes an extra tax and would retain council tax. "Focus" editors would probably call it the "Tory two-tax solution", but it is at least coherent, and spelled out in detail over 46 pages.
I am grateful to that leading Conservative thinker for his explanation of how a local income tax would work and benefit people. This Conservative member of the Bow group says that a local income tax would improve accountability, protect less affluent areas, improve transparency and not require "any great additional administration". I have decided to send a copy of the pamphlet as a gift to the right hon. and learned Member for Folkestone and Hythe, so that he can get a few ideas. After all, he was chairman of the Bow group in days gone by.
Mr. Stringer: Will the hon. Gentleman give way?
Tim Loughton (East Worthing and Shoreham) (Con): Will the hon. Gentleman give way?
Mr. Davey: No. I hope that the Conservatives will come to their senses on this matter, and join our
campaign for fairer local taxation, even if that means that Opposition Front-Bench Members have to apologise for getting local taxation so badly wrong twice in one political generation.
Tim Loughton: Will the hon. Gentleman give way?
Mr. Davey: I will, as I am about to turn to the Government lot.
Tim Loughton: I am greatly relieved about that. Before the hon. Gentleman tells us what the mutual aid officer of the Little Piddling in the Marsh Conservative branch had to say on this subject some years ago, will he return to what he said about proposals for increasing the share of taxation that comes from local tax? Does he not realise that that has been happening in practice already? In West Sussex, the share of local spending met by national Government grant five years ago was about 75 per cent.—the average for shire counties—and is now 56 per cent. That has happened not because we have raised council tax by enormous amounts, but because the grants to counties such as West Sussex have been slashed and the money has gone elsewhere. That is another example of the equalisation of the rates that the hon. Gentleman is talking about. Will he also explain—
Madam Deputy Speaker: Order. That is a rather lengthy intervention.
Mr. Davey: I am grateful to the hon. Gentleman, as his was one of the first interventions this afternoon with which I could feel any agreement. There is no doubt that the Government have manipulated the grant system, and that their operation of local government finances has not been fair. It must be said that the Government learned most of their lessons from the previous, Conservative Government, but he is right to point out that there have been many examples of unfairness.
The Government should be most ashamed of their record on council tax. Before 1997, most people thought that a Labour Government would be committed to fairness, especially in taxation. However, the fact that the unfair council tax has survived for nearly seven years under Labour is hard evidence to the contrary. The problem for the Government is that retaining council tax undoes all their attempts to do good works elsewhere. Those attempts include winter fuel payments, free television licences for people over 75, tax credits—the Chancellor of the Exchequer can reel them off. They may all have been designed to help pensioners and the less well-off, but are the recipients truly grateful when their extra cash has to be set against the highly visible and rocketing council tax?
Last year, the basic pension went up by 2.6 per cent., but the average council tax rose by 12.9 per cent. Council tax takes a record share of the basic pension; on average, it is more than 20 per cent. That unfairness is felt by many erstwhile Labour voters.
Although the Government are like the Tories, in that they do not have an answer to council tax unfairness, they have at least set up the balance of funding review and the process has, so far, been relatively transparent. The only problem is that Ministers are busy ruling out
options before the review has even concluded. I very much regret that, as the review could turn out to be a real shambles.
Andrew Bennett: The hon. Gentleman is doing the House a disservice; he is spending his time making knock-about points, but there are serious issues in the balance of funding review. If he has confidence in a local income tax system, should he not spend most of his speech trying to explain it to the House so that we can see whether it has any validity and can make a contribution to the review?
Mr. Davey: The hon. Gentleman anticipates me—I was coming to the balance of funding review. As he knows, we have published full details of our policy; it is on a website and easily accessible, and we are receiving many favourable comments. He should have already seen it.
The Government's review is supposed to be looking into 12 new revenue sources—at the last count. On the ODPM website, we are told that the review is considering a reformed council tax, a localised non-domestic rate, a local income tax, a localised vehicle excise duty, a localised stamp duty on property transfers, a local sales tax, a local land tax, tourist taxes, new council charges, street works charges, local congestion charging and new, unspecified, environmental taxes.
Some of us felt that 12 new taxes were a bit over the top, but we were reassured by the Government's comments to The Guardian in October, after those proposals appeared on the website. Ministers were said to be looking at
- "a local income tax as an alternative to council tax and a means of allowing local councils to raise more of their own funds".
That was music to our ears, but unfortunately, that commitment lasted only 24 hours. That was how long it was before No. 10 Downing street barged in to close down the options and the Prime Minister made it clear that he opposed local income tax. He was at it again when he appeared before the Liaison Committee last week. He repeated his opposition to local income tax and went on, in words that were almost identical to those used by the leader of the Conservative party, to say that the trouble was that he himself did not know what the answer was. So the leader of the Conservative party does not know and the Prime Minister does not know. That is extremely worrying. The House should be very, very worried. The Prime Minister knows about weapons of mass destruction but he does not know how to reform council tax.
Mr. Stringer: I have been listening carefully as the hon. Gentleman has developed his arguments on funding for local services and I understood him to say that he wanted less dependence on and interference from the centre. In that case, how can he support a local income tax that would require more intervention and more redistribution from the centre than any tax that has been considered since the 1981 Green Paper?
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