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David Howarth: The Revenue would change the address at the end of the year.
Mr. Dunne: The hon. Gentleman says that the Inland Revenue could be notified once a year, but it would surely have to change the tax coding during the year if a person moved more than once. That point is not taken into account.
The Liberals claim that the Chartered Institute of Public Finance and Accountancy has come to their aid on the point about administration, but it said on 4 March 2004 in its review of the case for a local income tax that
"to be £100 million, based on additional time devoted to administering a large number of annual coding variations".
CIPFA also noted that it would take as long as five years for employers to introduce the necessary changes to their own coding structures and to be ready for the introduction of such a tax. I do not think that CIPFA has helped the Liberal Democrats' case unless they want to impose further administrative costs on business. That may well be the case.
CIPFA has also considered the issue of equalisation and the same report says:
"LIT would . . . place greater demands on the need for resources equalisation between areas . . . As a consequence, there is a possibility that although the perverse effect of high gearing on the overall average tax rises would be reduced, the ratios for a number of individual authorities could grow wider."
In effect, there would be increasing demands in different authorities for more central Government intervention. That is precisely what many of us are trying to avoid in the existing council tax scheme.
For those reasons, a local income tax would be exceptionally difficult and would not achieve the laudable aims that the Liberal Democrats might originally have set for it.
5.43 pm
Jo Swinson (East Dunbartonshire) (LD):
I welcome this debate on a subject that is of great concern to many of my constituents in East Dunbartonshire. The Conservative Members who have spoken are certainly right in one respect—the current system of council tax places an unfair burden on many people, particularly those on low incomes such as pensioners. Across the country, council tax bills have risen faster than inflation as local authorities have struggled to cope with additional responsibilities handed down by central Government, but often without the additional resources
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to deliver. Thus the council tax has essentially been used as a stealth tax, often penalising those who can afford it least.
It is a shocking state of affairs that the poorest people pay 6 per cent. of their income in council tax but the richest pay just 1.5 per cent. That surely cannot be right and it shows just how regressive and unjust this tax is. It is only due to get worse with the proposed rebanding exercise. We have already seen what has happened in Wales, where many people are now paying much more. For example, in Cardiff, two thirds of houses went up at least a band. Scotland, thanks to the Liberal Democrats, has a reprieve from the council tax revaluation while the independent review looks into the issue of local government finance.
Mr. Ben Wallace (Lancaster and Wyre) (Con): When I was a Member of the Scottish Parliament, I distinctly remember that the Lib Dems supported a rise in business rates with the Labour Administration. At no time under both coalition agreements—first in 1999 and then again in 2003—was local income tax, or indeed the regressive rate of council tax, raised by the Liberal Democrats at all. Is that not completely contrary to your position here today?
Mr. Deputy Speaker: Order. Before the hon. Lady replies, I remind the hon. Gentleman that he must refer to another hon. Member in the third person.
Jo Swinson: I welcome the hon. Gentleman to the House. He will recall that the Liberal Democrats in Scotland consistently argued that the council tax was unfair. Through the many negotiations in which the Liberal Democrats have taken part, we have secured many policy commitments that the people of England and Wales do not enjoy, such as free personal care for the elderly and the abolition of tuition fees. We are campaigning on council tax and I have put forward a submission to the independent review that argues strongly for getting rid of the council tax and introducing a local income tax.
The main problem with the current system is that it bears no relation whatsoever to people's ability to pay. Many of the people who have complained to me about the unfairness of council tax are elderly, which is not surprising because it is an especially unfair tax for pensioners. They might be living in a fairly sizeable family home, but they have a much smaller income than they did in the days when they were out working and paying the mortgage. We have now reached the point at which no amount of tinkering around the edges will solve the problem. The pre-election bribe to pensioners of a one-off payment to help with their council tax did not fool anyone. The problem is the unfairness of the system, which will not be solved by further complicating the council tax through handouts and making special cases. Instead, the best solution is a local income tax.
During the recent election campaign, I found strong support in East Dunbartonshire for the policy of replacing council tax with a local income tax. In fact, I was moved to speak in the debate following an experience that I had last Friday night. I was knocking
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on doors in Bishopbriggs—what better activity could there be for a Friday evening—and met a gentleman and his wife to whom I spoke about a range of issues. He said that council tax was the most important issue to him and made a plea to me to keep pushing for a local income tax because the council tax was so unfair. He explained the problems that it was causing him and his wife as a pensioner couple who had bought their semi-detached home many years ago. They did not want to feel forced to move out of their home as a result of council tax bills. I promised him that I certainly would continue to argue for an end to the unfair council tax and its replacement with a fair alternative, so that is what I am doing.
In debates such as this, I often find, as I have today, that incorrect assumptions are made. I represent what has been described as the most middle-class constituency in Scotland, so some might assume that advocating a local income tax would be a vote loser in the affluent area of Bearsden and Milngavie—quite the contrary. Amidst the leafy suburbs, there is hidden poverty, often pensioner poverty. While we in the House might be privileged to earn salaries that are far above the norm, let us not forget the reality in our constituencies. Even in my middle-class constituency, the average household income is less than £25,000. Quite frankly, bandying about figures suggesting that an average household in Britain has two full-time wage earners bringing in more than £50,000 a year just helps to reaffirm in people's minds the feeling that politicians are out of touch. Let us not fall into that trap, because I am sure that no hon. Member here wants to be seen as out of touch.
David Taylor (North-West Leicestershire) (Lab/Co-op): I intend to go directly to the Commons Library to check the hon. Lady's two assertions that she represents the most middle-class constituency in Scotland and yet its average household income is less than £25,000 a year. Those two facts seem to be utterly irreconcilable.
Jo Swinson: That demonstrates my point. If you check the figures, you will find that in Richmond, which many people see as affluent—
Mr. Deputy Speaker: Order. Perhaps the hon. Lady would remember what I said to the hon. Member for Lancaster and Wyre (Mr. Wallace).
Jo Swinson: I apologise, Mr. Deputy Speaker.
If the hon. Gentleman checks the Library figures for Richmond, which many people would agree is an affluent area, he will see that it has an average household income of £27,000 a year. People tend to forget that most households do not have two full-time wage earners. Many households are made up of pensioners, one person earning a wage or people working part-time. That adequately demonstrates my point that politicians are often out of touch with what is happening on the ground.
Finally, I cannot resist noting the irony of the Conservatives calling for this debate. Perhaps that is because I am from Scotland, where the lasting image of the Conservatives is one of Thatcher imposing the poll tax. She used Scotland as the guinea pig, and of course the protests went unheeded until England complained. During the recent election campaign, the Conservative leader said:
Such disregard for people's huge concerns about the council tax system, coupled with the memory of the imposition of the poll tax and the blatant lack of substance of policy, means that the Tories have no credibility on this matter.
5.50 pm
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