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Local Taxation

Part of the debate – in the House of Commons at 4:53 pm on 4th July 2005.

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Photo of John Butterfill John Butterfill Conservative, Bournemouth West 4:53 pm, 4th July 2005

There we are. We revert to the point that the tax would be nationally based and subsequently redistributed. It would be a central tax. The hon. Gentleman is right that that is exactly what happens in Germany, where a national tax is distributed to local authorities. That gets rid of the independence of the local authority. Local authorities would need to know the income of people who lived locally; otherwise they could not set a rate. A huge administrative burden would be placed on local tax offices.

The biggest problem with local income tax, however, is that it creates ghettoes of the rich and poor. I shall explain how that works. If we take the two London boroughs of Lambeth and Wandsworth, we can already see the effect that has been created just through the council tax. Relatively poor Lambeth has relatively high rates of local taxation and substantial Government subvention, whereas relatively prosperous Wandsworth has become more prosperous because it has a very low rate of council tax.

If that is true in the case of council tax, how much more true would it be if a local income tax were introduced, and people were to have their money directly plundered by the Liberal Democrats? The rich would vote with their feet. They would move from areas of high local income tax into areas of low local income tax. They would be able to afford to do so, but the poor would be trapped in areas of high local income tax as they would not be able to afford to move.

The only way in which that problem could be overcome—I am anticipating what Mr. Davey is going to say about this—would be to have even larger Government grants to the areas with high rates of local income tax. That would create even more dependency, as well as taking away from the poor areas the very autonomy that the Liberal Democrats profess to want for them. This is a lunatic system that could only have been developed by the Liberal Democrats. Only they could be so silly as to propose something like this. In the ghettoes that they would create, there would be huge numbers of people who would vote for better and better local services in the certain knowledge that they would not have to pay for them, and that somebody else would.