We need your support to keep TheyWorkForYou running and make sure people across the UK can continue to hold their elected representatives to account.

Donate to our crowdfunder

Local Taxation

Part of the debate – in the House of Commons at 6:09 pm on 4th July 2005.

Alert me about debates like this

Photo of David Howarth David Howarth Shadow Minister, Office of the Deputy Prime Minister 6:09 pm, 4th July 2005

I shall deal with some of the points raised in the debate, starting with the assumption by 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 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 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, 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.