Fairer Deal for Harrow

Call for a fairer deal for Harrow – not new taxes: Bob Blackman

Letting Harrow Council tax pay packets isn’t the answer to soaring tax bills

Ahead of the Government’s publication of its review of town hall finances later this month, Councillor Bob Blackman Greater London Assemblyman called for a fairer funding deal for Harrow and criticised plans to introduce new town hall taxes. Liberal Democrats have called for council tax to be replaced with a local income tax, but Bob Blackman has warned that this would do nothing to tackle the problems of local tax bills rising year-on-year above inflation.

New analysis has revealed the fact that a working family in Harrow could end up paying £2,106 in local income tax, compared to the current average council tax of £1,407. A local income tax is being considered by the Government in its review of local government funding

Bob Blackman said:

“As we await Gordon Brown’s report in town hall finances, there is a lot of speculation about how council tax could change – with the real threat of a new house price tax or higher council tax bands.

“But the Liberal Democrat proposal of allowing councils to levy top-up income taxes on pay packets isn’t the answer. It could add an extra £699 to the tax bill of a working family in Harrow, compared to their current council tax bill.

“Local income tax might sound superficially attractive – until families realise the massive tax hike. It would do nothing to address the underlying problem of fiddled Whitehall funding and unfunded burdens from central government. Instead of just replacing one soaring tax with another and robbing Peter to pay Paul, we need a fairer deal for Harrow.”

Notes to Editors

Gordon Brown’s long-delated review of local government finances in England, by former Labour councillor, Sir Michael Lyons, is expected to report in March around the time of the Budget.

LOCAL INCOME TAX WOULD HIT FAMILIES HARD

·            It is long-standing Liberal Democrat policy to replace council tax with a local income tax levied by town halls. This policy was re-affirmed last year in their new tax plans.

·            Their tax policy document states, “to replace the revenue currently raised by council tax, LIT would need to be set at on average across England between 4.0 and 4.5%” (Liberal Democrats, Fairer, Simpler, Greener, Policy Paper 75, 2006, p.19). At the 2005 general election, the promised LIT rate was previously 3.75%.

·            Although they propose a national income tax reduction of 2%, this would only apply to the basic rate, not the higher rate. Yet local income tax would be charge on all income above the personal allowance. They state that the top marginal rates of income tax will now be in close to 46%. They explain, “as a corollary to dropping the 50p rate, we would not need to cap LIT at incomes of £100,000 pa… The effective combined top marginal rate of tax would be 40% income tax, plus 1% NI plus LIT – giving a likely figure in the mid-forties which would be somewhat higher than at present in the UK” (Fairer, Simpler, Greener, p.17).

·            Liberal Democrat Treasury spokesman, Vincent Cable MP, has admitted that many homes would pay more under local income tax. “If there are two full-time earners in the house, there would be more tax” with the new tax starting to bite for families with combined salaries “in the mid £30,000s” (Evening Standard, ‘LibDems admit tax reforms would hit families on £35,000’, 21 September 2004).

·            Many councils would face exorbitant LIT rates. They elaborate, “It may be that areas which currently have very high council taxes will have a slightly higher local income tax rate” (Liberal Democrats, Labour’s unfair council tax: the facts, September 2003). They have previously admitted, “we might get asked about the rate of local income tax we expect we would levy… we don’t want to be drawn extensively into this!” (Liberal Democrats internal briefing note, ‘Lines and ideas for Monday’s press conference’, 1 April 2003).

·            After the 2005 general election, Sue Doughty, the defeated MP for Guildford and former Liberal Democrat frontbencher, admitted that, “I did find people who really liked our policies, wanted to vote for me but local income tax was a real sticking point for them… young professionals such as two teachers living together struggling to pay the mortgage really didn’t like the policy” (BBC Radio 4, Today programme, 11 May 2005).

LOCAL FIGURES ON EFFECT OF LOCAL INCOME TAX

The chart below models the effect of local income tax on a typical working family. It compares the current average council tax bill (for 2006-07) with the amount of money that a family would pay (one male on full-time earnings and one female on full-term earnings), assuming a 4.25% local income tax rate and a personal allowance of £7,185 each.

Methodology note:

- Earning figures by local authority from Office for National Statistics

http://www.statistics.gov.uk/downloads/theme_labour/ASHE_2006/2006_res_la.pdf (Table 8.7)

- Where income figures were not available for 2006, 2005 figures have been used, uprated for wage inflation (3.7%).

ENDS