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Mr. Cameron: As well as being a lecturer on the subject, the hon. Gentleman is a detective. The hunting of the snark is over; he has found out what happened to the £100. However, I warn him not to spend too much time looking at Liberal Democrat websites. All sorts of things could follow from that.

Let me deal with some of the arguments that the Liberal Democrats are not considering in enough detail. The first point relates to the effect that a local income tax would have on working families. We all know such people. We meet them while canvassing and in our surgeries. They work hard while not earning more than average incomes and are struggling to get on to the housing ladder and to build a better future for themselves. A couple with someone on male average earnings and another on female average earnings would have to pay £630 more than the average council tax—an increase of 65 per cent.

I know that the hon. Member for Kingston and Surbiton will ask about a house that contains just one average earner. Just as I do in Witney, he will find many couples in Kingston in their 20s and 30s who are struggling to get on to the housing ladder or who are making big mortgage payments because of house prices. If they were at or just below or above average income levels, they would be hit very hard. He simply has not thought that through. I predict that, in the local election campaign that is under way, the Liberal Democrats will not talk about that at all.

Mr. Edward Davey: What would be the gross income of a household with two adults on average earnings?

Mr. Cameron: Of course, it is well over £40,000. However, the hon. Gentleman has not published his figures showing the breakdown district by district for local income tax. We have done the work for him and, if one takes the current council tax rate, one finds that the rate in Kingston would be 5.2 per cent.

Mr. Davey: Nonsense.

Mr. Cameron: The hon. Gentleman thinks it is nonsense, but I expect that our leaflets will be going out shortly in Kingston and we want to get the figure right. If he does not think that our figure is right, he should publish his own. If he does not, we will be forced to use the figure of 5.2 per cent. and I offer it to Labour Members, too. They should make a note.

Dr. Evan Harris (Oxford, West and Abingdon) (LD): Will the hon. Gentleman give way?

Mr. Cameron: No, I am going to make progress because many Back Benchers want to speak.
 
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The second point about local income tax is that it would mean a return to high marginal rates of tax. To raise the same amount as council tax this year would mean a local income tax rate of nearly 4 per cent. It would be higher in some areas, Kingston being one of them. We know—in a rare outbreak of candour a Liberal spokesman told us so—that in time there would be a regional income tax as well. So the basic rate of tax would soon be pushing 30 per cent. in some areas. The marginal rate for someone on the current top rate of tax—41 per cent. now, not 40 per cent.—would soon be pushing 50 per cent. A person does not have to be rich to pay the current top rate. It is paid by some school teachers, police officers, health workers, taxi drivers and many others. Are the Liberals really saying that those people should pay getting on for 50p in every £1 through income tax? Almost every hon. Member has come round to the view that high marginal rates of tax are bad for incentives and bad for the economy. Someone once said that the Liberals are the party for a better yesterday. On the evidence of their plan for a local income tax, that person was only half right: there would be nothing better about it.

My third point about local income tax is the complexities that it would involve for councils. The tax year of many people would not marry up with the council's revenue year. Some 3 million people are self-employed and pay in arrears. There are also all the disputed income tax revenues. What would happen when the country as a whole, or a particular part of it, had a bad year and revenues fell? How on earth would councils plan their expenditure? You can bet your bottom dollar that the Liberals will not talk about that in the local election campaign.

My fourth point is that we must consider the complexities that such a tax would mean for everyone else. Imagine a small business in London or any other big city that employs lots of different people from lots of different local authorities. Each would have a main local income tax rate—all different. Each would have a precepted rate from their fire authority and town council—all different. There would be more rates from their parish, police force and, in time, their regional assembly—again, all different.

Companies complain to me, as they probably do to other hon. Members, that with all the tax credits and other complications, the Government have turned businesses into tax and benefit offices, but that would be a picnic compared with the complication of the local income tax. We can bet that when the hon. Member for Kingston and Surbiton goes around Kingston and talks to businesses, he does not tell them about that either.

My fifth point is that the local income tax does nothing to address the grant system or the problem of gearing. As other hon. Members said, it could, and will, make them far worse because some areas have higher tax bases than others. There would have to be much more equalisation and even more grants from central Government to make up for the inconsistency. That means that it could not be called a local tax.

My final point—I can give a copper-bottomed guarantee that the Liberals will not talk about this in the local elections—is that local income tax will be paid by millions of people who are not well off. The student nurse, earning just about £10,000, who is barely able to pay rent, who perhaps lives at home or with friends,
 
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would pay the local income tax. The school leaver, starting to earn good money, but still living with parents and trying to save for a deposit for a flat, would pay local income tax. The pensioner grandmother, with some income from savings, who is living in the main family home so that she can be looked after, would pay local income tax. So there we are: it is not simple; it is complex. It is not good for the economy; it is bad for incentives. It is not local; it is just a new national tax, backed by an ever-more interfering national grant system. Above all, it is not fair.

Dr. Harris: As a neighbouring MP, I wish the hon. Gentleman well in his new Front-Bench role. I want to ask him about pensioners in Oxfordshire, including those in his constituency. He talked about the two people on average earnings of more than £40,000. There will, of course, be winners and losers. We have always said that there would be, but the winners will in many cases be those on fixed incomes who earn less than £40,000. So the winners will be people in Oxfordshire and the rest of the country who are less well off. The losers will be people who are best able to afford to lose. What is the Conservative position on fairness like that?

Mr. Cameron: As a neighbouring MP, I shall look carefully at the leaflets that the hon. Gentleman puts out in Oxfordshire, and I hope that they draw as much attention to the losers as they do to the winners. An economy like Oxfordshire's cannot go back to the high marginal rates of tax that did so much damage.

It is clear that we need to get to grips with the situation that we face. We need a recognition that the current crisis has been caused above all by the rises in the council tax and its level, rather than its inherent nature. We need a recognition that we should strip away centrally imposed bureaucracy from local authorities.

We need a recognition that we cannot go on asking local authorities to do more things without giving them the money. We need a recognition that the issue of gearing, and the percentage of spending that is paid for and performed locally, must be addressed. Those are the issues that we will be looking at.

In this debate we have heard many figures. There is one, above all, that counts for Conservative Members, and that is the average band D council tax. If one looks at that, one finds that Conservative councils cost £57 less than either Labour or Liberal Democrat councils, yet they have a better record on waste collection and disposal. All the audits that the Minister has produced show Conservative councils in an excellent light. I say to Labour Members that the Labour Government caused this crisis and the Liberal Democrats have come up with entirely the wrong answer, so it falls to the Conservatives to get it right.

8.45 pm

Mr. Neil Turner (Wigan) (Lab): I welcome the hon. Member for Witney (Mr. Cameron) to his position. In grappling with his new-found role, he might like to go back in history a little and remember exactly what the Conservative party did to local councils when it was in government. When I was a councillor in Wigan in the 1990s, we faced cuts in the Government grant of £10 million a year, and still we were having more and more
 
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policies imposed on us by central Government. The hon. Gentleman might like to consider that before he criticises this Government. They have undoubtedly given local government more to do, but they have given it extra money to carry out those duties.

It would be nice if we were lectured on local government by experts, but that is certainly not true of the contribution from the Liberal Democrat Front Bench. I was reminded of fifth-form debates, although the content was usually better at school. We should not really be surprised because the Liberal Democrat record in local government is dreadful. Of the excellent councils in the country, Labour controls Wigan plus 11 others, the Conservatives have nine and the Liberal Democrats have nul points.


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