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Mr. Crabb: My hon. Friend has made an excellent point. It is worth bearing it in mind that, behind the numbers, real people are suffering, including pensioners whose only mistake was to work hard and buy their own home. In March, I met a D-day veteran who, within the space of a few short days, received two lettersone from the Pension Service, the other from the county council. One letter informed him of his weekly pension increase this year, the other of his council tax bill for the coming year. Calculated on a weekly basis, his council tax increase more than wiped out any increase in his pension. What was given with one hand was taken away with the other.
That pensioner is not an isolated example. This spring, across Wales, people experienced a serious cut in their income and quality of life as a result of council tax. People in Wales are therefore angry about the council tax revaluation. They are also bewildered and confused about what rebanding means and how it works in practice. Earlier this year, Pembrokeshire householders woke up to a local front-page headline, "5 per cent. council tax rise likely". The report said:
In fact, the council's demand on the council tax payer for the coming year was almost £28 million compared with £24.5 million last yearan increase of 13 per cent. Many people would like to know how the council can raise 13 per cent. more money from a mere 5 per cent. increase in band D tax. The answer, of course, is to be found in the revaluation exercise, as the tax base of band D properties has swollen from 45,000 to almost 49,000an 8 per cent. increase. Making comparisons between this year's band D rate and the rate for last year is like comparing apples and pears. The headline figure of 5 per cent. was a gross underestimation of the actual increase.
Looking at the way in which revaluation was conducted in Wales, it said that rebanding was not carried out in line with Welsh house price inflation. It warned that, if the Welsh model were adopted in England, a disproportionate number of houses would move up into higher bands in southern regions, where house prices have risen above the national average since 1991.
In conclusion, taxation must be simple, understandable and transparent, and it must not place disproportionate burdens on the people who pay it. In contrast, the council tax revaluation in Wales was complex, opaque and placed burdens on people. Under the Labour Government, householders in England have
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every reason to fear revaluation. This tax-hungry Government are running out of options for raising new money, so council tax payers in England should beware.
Mr. David Jones (Clwyd, West) (Con): As the second Welsh Conservative Member to contribute to our debate, may I say that it is a great shame that there are not any Labour or Liberal Democrat Back Benchers in the Chamber? This is an important debate, and the House has much to learn from the experience in Wales. Wales has shown us the future, and it does not work.
Wales has suffered far more pain as a result of council tax in the past few years than virtually any other part of the country. In Denbighshire and Conwy, whose councils cover my constituency, the average band D tax has almost doubled over the past eight years. The position has been made infinitely worse by the revaluation exercise that has just been implemented in Wales. We were told that the exercise would be fiscally neutral, but, in Denbighshire, 29 per cent. of households have been rebanded upwards, while only 8.5 per cent. have been rebanded downwards. In Conwy, 32 per cent. went up, while only 6.5 per cent. went down. In the ward of Llandrillo-yn-Rhos in my constituency, more than 40 per cent. of homes have been rebanded upwards.
The rebanding exercise is wholly unfair and amounts to a tax on house price inflation. Across Wales, there have been dramatic council tax increases. Some householders in my constituency have experienced increases this year of over 22 per cent, but the rises caused by rebanding are not simply reflected in comparisons between past and present band D figures. In Conwy, the average council tax has increased by 121 per cent. since 1997, while in Denbighshire the average increase is 105 per cent.
Those increases have not been accompanied by an improvement in servicesquite the reverse. Rebanding generates additional local revenue, but a sum in excess of that revenue is withheld by the Welsh Assembly from the local authority, whose general budget is therefore affected. Consequently, many thousands of Welsh council tax payers are paying substantially more tax for unimproved services. As my hon. Friend the Member for Meriden (Mrs. Spelman) said, that additional tax is an unashamed wealth tax. In fact, it is a stealth wealth tax, because it does not even have the decency to declare itself as a wealth tax.
The council tax system certainly needs to be amended and revised, but I caution the House against going down the route of rebanding and revaluation. The Welsh experience is a bitter one and, if it is writ large across England, the Government will be in severe trouble with taxpayers. As for the Liberal Democrat proposals for a local income tax, most average earnersthe people on £35,000 or so a year cited by the hon. Member for Twickenham (Dr. Cable)would think that something was terribly amiss if they had to pay an extra £600 a year for unimproved services. I urge the House to accept a warning from Wales, and beware the future.
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David Howarth (Cambridge) (LD): I shall deal with some of the points raised in the debate, starting with the assumption by the hon. Member for Clwyd, West (Mr. Jones) that average incomes in this country are £35,000. That shows how out of touch he must be with ordinary lives. Average household income in the United Kingdom is about £26,000. The idea, as the hon. Member for Meriden (Mrs. Spelman) suggested, that under local income tax an average couple would find their bills rising by £650 seems to assume that the average couple in her constituency, or at least in her head, receive an income of around £50,000. That is extraordinary. Hon. Members should realise that people on salaries such as ours are in the top few per cent. of the population by income.
Hon. Members, including the hon. Member for North Durham (Mr. Jones), who is no longer in his seat, have been concerned about two-earner couples. Figures from the Institute for Fiscal Studies show that half of two-earner couples would be better off under local income tax. Of course, it depends which band they are in at present, but in any case only one in 10 households has two full-time earners.
The question of beneficiaries from local income tax was raised. Contrary to what the hon. Member for Meriden said, the main beneficiaries would be pensioners and the low paid. During the election I met people in my constituency who were paying £1,000 in council tax on an income of £10,000. In one extraordinary case, someone was paying £1,300 on an income of not much more than £10,000. I challenge the other two parties to tell those people face to face that they think a tax system that does that is in any way fair. The council tax is an extraordinarily regressive tax. The local income tax provides a permanent solution to the regressive nature of that tax, not just a one-off that might work for a few people for a short time.
The idea has constantly been repeated that under local income tax, each local authority would collect the tax. That is not how it works in any other country in which it works properly. The system is administered by the national tax authorities and the same rules apply to local income tax. There is no requirement at all for a separate administration in separate local authorities.
Various hon. Members, including the hon. Members for Guildford (Anne Milton) and for Bournemouth, West (Sir John Butterfill) and, very surprisingly, the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), confused setting the rate and collecting the tax. It is quite possible for local authorities to set different rates, yet for the tax to be collected through the national revenue system. The right hon. Member for Greenwich and Woolwich tried to make out that only PAYE payers of income tax would be caught by local income tax. That is not the case.
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