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Local Taxation

Part of the debate – in the House of Commons at 6:05 pm on 4th July 2005.

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Photo of David Jones David Jones Conservative, Clwyd West 6:05 pm, 4th July 2005

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 services—quite 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 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 earners—the people on £35,000 or so a year cited by 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.