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Local Taxation

Part of the debate – in the House of Commons at 6:20 pm on 4th July 2005.

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Photo of Ben Wallace Ben Wallace Conservative, Lancaster and Wyre 6:20 pm, 4th July 2005

It is interesting to consider what we would be saying to the boundary committee. In future, it would have to redraft boundaries to take into account redundancies for the year before or the year before that. We would all find ourselves within peculiar district or county boundaries, which would be redrawn not on the basis of geography but on that of income. That has to be noted.

As for students, I take the hon. Gentleman's point that bursaries would not be taxed. However, there is a range of students who do not receive bursaries but who earn income. There are some who perhaps pay tuition fees. They go out and earn during all their holidays or during term time. If their earnings are above the threshold, do they suddenly become liable for local income tax? All students who currently have a de facto exemption would be brought into the tax bracket.

Another example is cadets. Armed forces personnel sponsored by the Ministry of Defence as cadets are paid a salary. Every cadetship officer or cadet in any of the armed forces will immediately—I think they get about £7,000 a year—come within the scope of taxation. That means that another group of people will be brought into the system.

I have mentioned the footprint but there is another word of which I am rather suspicious, and that is "affordable". We have heard quite a lot from the Liberal Democrats that the tax will be affordable and that people could pay it. I could live in a large house and have no income, or a low income, or I could choose to sell my house and live in a small house, putting my money into dividends so as to get an income in that way. Affordable is a subjective concept that creeps into the conversation or into policy. What exactly is affordable? That issue must not be overlooked in the long run.

The contrast between rhetoric and reality is interesting. We must consider the record of a party that has set the highest rates of council tax throughout the United Kingdom. Why could we trust it to run a local income tax system? It is interesting that, according to its current policy, it wants to repatriate business rates on a local level. The income generated by Aberdeenshire has funded a large part of Scotland. On the basis of localisation, however, the constituency of the hon. Member for East Dunbartonshire would lose out and Aberdeenshire would be very rich, thank you very much. That is a peculiar way in which to manage local government finance.

I think that everyone agrees that we are dealing with a difficult issue. However, I agree with those on the Opposition Front Bench that people did not complain about council tax until the level of that tax became higher and higher. There are people who say to me that they quite like the idea of a local income tax. I then go through it, explain it and ask them questions. For example, I ask them, "Would you be upset if your council tax was half the price?" They then say that that is not really the issue. There are many questions still to be answered on local income tax detail. There is PAYE, dividend payments and income from other areas. How will those factors be taken into account?

There are some similarities between local income tax and the poll tax in the sense that the number of people in a house will often determine the rates that people will be paying. There could be three earners in a house. There are many in that position because housing is not very affordable. Many young men and women are living with their parents, which means that sometimes there are three income earners rather than two or one. I have serious concerns about the application of local income tax in reality and I therefore urge the House to support the Opposition's amendment.