NEWS RELEASE from the Liberal Democrats on Harlow District Council

Harlow’s Liberal Democrats Back Plan to Scrap Council Tax

Harlow’s Liberal Democrats have given their full backing to the ‘Axe The Tax’ campaign launched today in London by Liberal Democrat leader Charles Kennedy and Liberal Democrat treasury spokesman Ed Davey MP.

Cllr Lorna Spenceley, Leader of Harlow’s Liberal Democrats, said that the time had come to replace the unfair Council Tax with a fair Local Income Tax.

"The Council Tax was brought in as a quick fix by the Conservatives to get them out of the hole they dug for themselves with the poll tax. It is fundamentally flawed as it is an unfair tax, not based on ability to pay.

"Those on the lowest incomes pay a bigger share of their income in council tax bills than the highest earners. Families living in similar houses with similar incomes can pay very different amounts of council tax just because of where they live.

"At the moment, a pensioner couple with modest savings pays the same as the family like mine, with four adult earners.

"And as the Labour Government forces up the Conservatives’ council tax year after year, by far more than the rate of inflation, the unfairness in the Council Tax system gets worse and worse. Harlow residents really are feeling the pinch.

"It is time this unfair tax was scrapped and replaced with a system based on ability to pay. Harlow’s Liberal Democrats have long supported Local Income Tax."

To replace the Council Tax, Liberal Democrats propose a new Local Income Tax, set at an average of 3.75p in the pound. Based on people’s real ability to pay, the move would mean tax cuts for many Harlow pensioners and families. Mrs Spenceley said the new Local Income Tax would leave 70 per cent of households either better off or unaffected.

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Ed Davey MP (Liberal Democrat treasury spokesman – third from left) discusses local taxation with (l-r) Cllr Chris Millington, Cllr Lorna Spenceley and Cllr Robert Thurston.

Notes

The Local Income Tax plans include:

1. A tax free personal allowance of at least £5,000 on implementation
2. No rise in the overall tax burden
3. A cap of £100,000 on income subject to local income tax
4. Using the Inland Revenue to assess and collect local income tax
5. Estimated savings of over £300 million a year on bureaucracy.

Background briefing

Council tax is now the most unpopular tax in Britain today – because it’s the most unfair tax. Worse still, council tax, as part of a system of local government finance, was described by the Audit Commission last December as "fundamentally flawed".

So a major question for all Britain's political parties is, how do you propose to reform council tax, and the system of local government finance?

For Liberal Democrats, the only credible answer is to scrap council tax completely, and replace it with a tax related to ability to pay – a local income tax. This proposal forms part of the Liberal Democrat submission to the Government's Balance of Funding Review, being conducted by the Office of the Deputy Prime Minister.

Key parts of the Liberal Democrat package are:

• To scrap council tax, replacing it with Local Income Tax at 3.75 per cent – cutting the tax burden overall for most pensioners and households, with no rise in the overall tax burden.
• To use the national income tax system to administer local income tax, saving much of the cost of collecting Council Tax and operating Council Tax Benefit, estimated for the UK at over £650 million (a net saving after Inland Revenue extra costs of at least £300 million).
• To have a tax-free personal allowance for local income tax of at least £5,000 (for over 65s, at least a £7,000 allowance) when implementing.
• To cap an individual's income that can be taxed by a local income tax at £100,000 per annum.
• To allocate £1.7 billion from proceeds of our proposed new national 50p income tax on incomes above £100,000 to Local Government Grant support in order to keep Local Income Tax to just 3.75%, ensuring local taxes on most pensioners and the lowest paid are cut compared to Council Tax.

More information, including a list of Frequently Asked Questions, is available at www.axethetax.org.uk

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