Local Government Finance
7:16 pm
Mr Edward Davey (Shadow Secretary of State for the Office of the Deputy Prime Minister, Office of the Deputy Prime Minister Local Government & the Regions; Kingston and Surbiton, Liberal Democrat)
The hon. Gentleman is wrong on both points. On the first point, CIPFA assumed that the central Government grant would remain the same as a portion of the council's budget on average. However, local income tax creates a foundation for decentralising power to cut national income tax and reduce some central Government subventions. It enables national income tax to be cut penny for penny as local income tax increases. That reduces the gearing effect—that is the experience in many other countries.
Let me deal with the second point about the end-of-year collection mechanism, which is only one of two possible mechanisms for administering local income tax. That would enhance local accountability as people could see rebates or extra charges at the end of they year, before the local elections. The hon. Gentleman is therefore wrong on both counts.