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Local Taxation

Part of the debate – in the House of Commons at 5:34 pm on 4th July 2005.

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Photo of Philip Dunne Philip Dunne Conservative, Ludlow 5:34 pm, 4th July 2005

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 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 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 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, 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.