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

As I said, second homes would fall under the business rate regime and taxpayers would have to opt for which of their various homes was their main residence.

Dr. Whitehead raised a good point about business rates. One important point that he did not seem to take on board was that if business rates are relocalised, the ratio between national and local tax-raising is automatically changed, and our proposal is to relocalise business rates.

Mr. Allen, who I am sorry to see is not in his place, and who did not have an opportunity to speak, raised an extremely important point about the connection between financial settlements and the constitutional settlement. I agree entirely that there needs to be a new constitutional settlement between national and local government, as well as a new financial settlement. The two must go together.

The hon. Member for Bournemouth, West asked a simple question—who would pay under local income tax? The answer is people who pay national income tax. It is not true to say, as various hon. Members have tried to argue, that there would be no redistribution under the local income tax proposal. There is redistribution under all local taxation systems. The various questions about tax bases are misplaced.

I was somewhat surprised at the contribution of Mr. Dunne who at one stage in his remarks said that under the local income tax proposal, there would be a massive increase in tax in his area, assuming that there would be no redistribution. He followed that with his second criticism, that the redistribution under local income tax would be too great. He cannot have it both ways. He must make one criticism or the other.

No taxation system is perfect, and none is likely to be popular, but our local income tax proposal is fair, efficient and cheap to administer. It uses an existing system, it reduces local bureaucracy—there is no need for a local valuation or benefits bureaucracy—it makes decentralisation more possible in the future, it increases accountability and it works elsewhere.

The only opponents of local income tax are those with a vested interest in protecting those on very high incomes. Traditionally in this House they have been members of the Conservative party. I hope that they are not joined in that position by new Labour.