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Mrs. Spelman: I am about to come on to the Liberal Democrats. A great deal can be said on the subject, but I was hoping that the hon. Lady might use her intervention to tackle the question of her party's stance—voting three times with the Government for rebanding and revaluation, which we opposed.
Sarah Teather: Will the hon. Lady give way?
Mrs. Spelman: No, the hon. Lady has an opportunity to reply, and I have a series of questions that I want to ask about Liberal Democrat policy. She might wish to cover those points when she makes her speech.
Daniel Kawczynski (Shrewsbury and Atcham) (Con): Will my hon. Friend give way?
Mrs. Spelman: I would like to make a little progress.
The Liberal Democrats voted in favour of revaluation and rebanding, despite telling people on the doorsteps that they were opposed to both. There is nothing like saying that one is a principled party of opposition—because, let's us face it, such actions are nothing like those of a principled party of opposition. As for the local income tax plan, it was certainly interesting, not least because of the rancour that it has created within the
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Liberal Democrats. As the Liberal Democrats' president, the hon. Member for North Southwark and Bermondsey (Simon Hughes), said:
What local income tax has in its favour is that it is easy to market, but it is often the case that the devil is in the detail. The campaign pitch is simple enough—the amount of tax that one pays locally is determined by one's level of income. But I think the Liberal Democrats should be had up by the Advertising Standards Authority for their slogan, "Axe the Tax". The Liberal Democrat Treasury spokesman—the hon. Member for Twickenham (Dr. Cable)—himself admitted that two full-time earners in a house would pay more tax, and said that the tax would bite when a combined salary was between £30,000 and £40,000 a year. A pensioner with savings or investments would be taxed on them, so it is rather disingenuous to suggest, as the Liberal Democrats have, that local income tax is a panacea for pensioners. It certainly is not.
Daniel Kawczynski: The biggest pressure on councils such as Shrewsbury is caused by the Labour Government's targets for affordable housing. The council must provide 500 affordable housing units in the foreseeable future. Yet in 2003, the Government took away Shrewsbury's local authority social housing grant. That has placed a tremendous financial burden on my council, which must provide for a target set by the Government.
Mrs. Spelman: That is a very good point, which illustrates what I was trying to say. The Government, in a sense, set up well-run councils to fail through their system of targets and fiddle-funding of the central grant.
The local income tax would also ratchet up bills for hard-working families, especially those with dual incomes. A typical working family in England would pay an extra £692 a year, an increase of two thirds. Not only would the tax apply to people who have hitherto been exempt from council tax; students with part-time jobs are a particularly striking example of people who could ill afford being heavily taxed under the Liberal Democrats.
Simon Hughes (North Southwark and Bermondsey) (LD): So that the hon. Lady does not keep repeating things that are not true, I should tell her that every member of our party stood on the basis of abolishing the council tax and agreed with that, and every member of our party stood on the basis of replacing it with a local income tax, and agreed with that as well. Yes, there were criticisms of some of the presentation—I criticised it myself—but the substance is clear. The policy of the hon. Lady's party is "Council tax: we want to keep it". We had a clear alternative, although we can argue about whether it was right. The hon. Lady never had one.
Mrs. Spelman:
I am not sure that the hon. Gentleman's intervention has really helped his party. He does not deny that his policy has not worked very well. The local income tax would not be a win-win; it would be a win-lose. Pensioners with savings would lose out, hard-working families would lose out and young people,
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typically sharing accommodation, would certainly lose out. As for the councils that would have to administer the tax, their ability to plan would be hampered in the medium term because revenue derived from income is by nature less predictable than revenue derived from house values.
Councils would also become slaves to Whitehall funding. The tax would necessitate more equalisation. A local income tax offers limited redistribution of the tax burden, but disregards the feelings of many pensioners who instinctively dislike the idea of their tax liability being transferred to their children and grandchildren. As I said earlier, pensioners are proud people and are prepared to pay their way. It stands to reason that they would be distinctly uneasy about their families picking up the bill for them. Let us take a practical example. A typical working family in Cheadle would see their average tax bill rocket by over £1,000 under the Liberal Democrats' income tax.
Dr. Whitehead : Perhaps the hon. Lady could explain how the Conservative proposals in the motion to give pensioners a permanent rebate on their council tax—which would presumably have to be replaced by central taxation to provide a Government grant—differs fundamentally from the Liberal Democrat proposals as she has described them.
Mrs. Spelman: The hon. Gentleman misses the point, in terms of what his Government have done to pensioners by abusing the council tax. One third of the increase in the basic state pension has been snatched back because they are having to pay council taxes that have been increased by more than the rate of inflation.
Sir John Butterfill (Bournemouth, West) (Con): Before we leave the question of revaluation, which was supported so avidly by the Liberal Democrats, may I ask whether my hon. Friend agrees that it would be absolutely wrong if it led to areas with large increases in property values being at a disadvantage in comparison with areas with smaller increases? Services would cost approximately the same, but areas with higher property values would receive less money from the Government.
Mrs. Spelman: I thank my hon. Friend for that intervention. He accurately points out that such a measure is redistributive. It is very attractive to a party that calls itself new Labour, but which is at its heart still socialist. I understand where it is coming from.
Permit me to give an overview of the impact of local income tax on a typical community. A pensioner with savings and investments would be taxed. A young person who is sharing a flat or in part-time work as a student would be taxed. A young family with a dual income and a mortgage, trying to make their way, would be taxed to the hilt. On top of all that, a local income tax would co-exist with a whole raft of other taxes, including regional income taxes to fund the network of unelected and undemocratic regional assemblies that have leached power away from local communities.
Presumably, the Liberal Democrats support London Mayor Ken Livingstone in his quest to introduce a London-wide regional income tax. As the Association
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of London Government has recently observed, this could mean up to 6 per cent. on the basic rate of income tax for Londoners.
Alison Seabeck (Plymouth, Devonport) (Lab): The hon. Lady says that she is opposed to rebanding, to revaluation, to local income tax and to the Lyons review. She says that she would give £500—or was it £50?—to all pensioners, be they Margaret Thatcher or my granny, who was pretty poor. What about the other groups about which she has been talking? What are the measures that she is going to promote?
Mrs. Spelman: Before making an intervention that is an attack on my party's policy, the hon. Lady should acquaint herself with its detail. In addressing her very real concerns, I remind her that the sum in question is not £50. We are talking about a 50 per cent. increase, which is a significant increase, as I am glad she acknowledges. I further remind her that the figure is capped at a maximum of £500 in order to address the very point she makes. So we did take into account those two important details.
Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): Earlier, the hon. Lady kindly offered to give away some glasses. Perhaps she might repeat that offer, because if she looks at the small print of her party's proposal, for which one might well need glasses, she will see that—unlike the Chancellor's offer, which will help 19 out of 20 pensioners—it would help only one in four pensioners.
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