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Alison Seabeck (Plymouth, Devonport) (Lab): I have listened to the debate with great interest but with sadness, because it is depressing that after eight years in opposition the Conservatives have failed to come up with any detailed proposals for a replacement for the tax they introduced in such haste to replace the deeply unpopular poll tax. This Government understand the need for a detailed and thoughtful approach to this complex subject.

For the Opposition to give an open-ended commitment, which would have to be met by the general taxpayer and central taxation, to support pensioners, whether well-off or not, is rash. Their sweeping commitment takes no account of the annually changing local government tax-raising level. The Chancellor of the Exchequer of course fully understands that position, which is why he has ensured that this year pensioners were protected from the excessive pressures put on them by council tax increases.

The Conservative proposals—I say that generously, as we have heard only one idea—do nothing to assist hard-working families or students. If additional payments to pensioners are to be made, the funding would have to be found from other taxpayers. Surely, it is better to work towards a fairer system of local taxation, so it is right that Sir Michael Lyons be given time before reporting to consider fully the implications of all the issues, such as rebanding, revaluation, council tax benefit, and how any changes will affect all groups in our society. He, too, understands that we cannot have a property-based tax without a revaluation process. Just about everyone understands that, apart from Her Majesty's Opposition.

The Opposition fail to understand the complexity of the local taxation system, but the Liberal Democrat proposals are seriously problematic, too. The hon. Member for Bournemouth, West (Sir John Butterfill), who is not in the Chamber at present, made an effective demolition of the Liberal Democrat local income tax proposals. Have the Liberal Democrats considered the impact of those proposals, especially on the accounts departments of small and medium-sized businesses? Those businesses would have to cope with individual workers living in different local authority areas, all with different levels of tax, and who might, when they moved house, be required to have a complete reassessment of their tax position. That is a recipe for complexity, delay and error.

Mr. Davey: Has the hon. Lady read the Chartered Institute of Public Finance and Accountancy report, in 2004, on local income tax? It shows that pay-as-you-earn coding could be altered so that the employer had all the details of each employee, so no change would be needed and the system could operate exactly as it does now at no extra cost.

Alison Seabeck: I have read elements of the report and I do not agree with the hon. Gentleman's assessment or indeed some of CIPFA's comments.
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I will not revisit the problems of local income tax as they were extremely well highlighted in the contribution of my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford).

Mr. Kevan Jones: Is not one of the complexities of this crazy local income tax scheme that the tax could vary in different parts of the country? The situation could be complex for the accounts department of a local employer with employees who lived in a variety of places.

Alison Seabeck: My hon. Friend is right.

I close by saying to my hon. Friend the Minister for Local Government that I look forward to the review and report of Sir Michael Lyons and to the detailed consultation and debate that will, I am sure, take place in the House.


Mr. Deputy Speaker: Hon. Members who are desirous of catching the eye of the occupant of the Chair should signify that by rising in their place.

5.34 pm

Mr. Philip Dunne (Ludlow) (Con): Thank you, Mr.   Deputy Speaker. I had not appreciated that the hon. Lady would conclude her remarks so rapidly.

I am interested in the debate because council tax was the issue above all others that was raised with me on the doorstep during the election. That may have been due to the accident of council tax bills arriving shortly before the election was called, but the issue is alive and well.

It is important for Labour Members to hear the experience of those of us who represent rural seats, because in the Ludlow constituency, which I am honoured to represent, there are no longer any Labour elected representatives, except for one on Bridgnorth district council who gamely bears the flag. However, there are no Labour candidates standing in South Shropshire district council. Consequently, it is very hard for those who are interested in supporting the Government to do so in my constituency, I am pleased to say.

We in the Ludlow constituency have a regrettably low average income. I will return to that in a moment, but it colours my remarks. Council tax is a severe burden on many people in my constituency—especially for those on fixed incomes, and pensioners, as other hon. Members have remarked—but we are fortunate in that we can compare and contrast the approach that at least two Opposition parties adopt to the levying of local authority bills. We have two district councils in the Ludlow constituency—South Shropshire, which is dominated by the Liberal Democrats, and Bridgnorth, which is led by a Conservative and independent administration—and I should like to share with hon. Members the contrasting approach to council tax of those two authorities.

Eighteen months ago, the Liberal Democrats proposed a medium-term financial strategy, with a staggering 9.5 per cent. a year increase in council tax proposed for each of the following three years. They
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were only prevented from introducing such a high increase thanks to the Deputy Prime Minister choosing to reintroduce the capping of local authorities and their fear that that might happen both last year and this year ahead of the general election.

By contrast, I, who happened to be leader of the Conservative group on South Shropshire district council, proposed a zero per cent. increase in council tax, without any cuts in services. Another contrast is provided in our neighbouring authority—Bridgnorth—where the district council rate for a band D property is almost exactly half of that levied by the Liberal Democrat administration in South Shrophshire.

I am pleased to see the hon. Member for Telford (David Wright), who is a neighbouring Shropshire MP, joining us in the Chamber. I have been explaining how difficult it is for members of the Labour party to get representation, but they obviously have a representative in the House.

It may be of interest to hon. Members—certainly to Ministers—to know that, since the Liberal Democrats took control of the local authority in Stockport in 1999, band D council tax has increased by £335, to £1,252, which is significantly above the national average and an increase of nearly 37 per cent. over five years. Stockport has some relevance to the electors of Cheadle at the moment. My prediction is that if we were to go down a local income tax route, those of us who are unfortunate enough to be represented by Liberal Democrat authorities would face considerably larger increases each year than those of us who live in Conservative authorities.

One of the specific problems that I should like to highlight—my hon. Friend the Member for Isle of Wight (Mr. Turner) has referred to this—relates to the balance of funding and equalisation issue and the redistribution of funds raised locally from those areas, such as my constituency, with lower than average incomes. Where incomes are lower than the national average, there are clearly two ways that the amount of revenue could be found: either by substantially increasing the average local income tax levied by that authority, or by increasing further the amount of equalisation funding that would come from central Government.

It is hard to understand how either way would benefit the authority's residents, such as those in my constituency, who would either have to rely on central Government handouts even more than they do at present or suffer a substantial increase in local income tax. The Liberals have estimated a 3.75 per cent. average local income tax if their proposals were introduced throughout the country. We estimate that they would need to raise between 6 and 7 per cent. in our area—roughly double their estimate—to secure the same local authority revenue, because incomes are substantially lower than the national average.

The next point that I wish to touch on briefly is the question of administrative complexity. The Liberals have placed great faith in the Inland Revenue's ability to see through the coding structure and the huge potential complexity of individuals being charged different precepts in different areas. Many of my constituents,
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particularly in the east of the constituency around Bridgnorth, work outside the local authority area in which they live. The Inland Revenue would have to find out in which county, district, region—God forbid that the regional income tax that the Liberals want is introduced—town and parish those people live, because each authority would have the potential to levy a variable rate. Each individual may move in the course of a year. I accept that, at present, the Inland Revenue has an address, but it would have to be notified each time someone moved.

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