04 April 2003
The Liberal Democrats pledged to abolish council tax and replace it with a locally set income tax, as they launched their campaign on March 31 for the May council elections.
Local government spokesman Edward Davey told Public Finance the tax was 'grossly unfair' and should be replaced by one related to people's incomes and set by each authority.
Such a move would also address local government's concerns over the balance of funding, he said, because it would allow councils to raise a greater proportion of their own income and give them greater control over how it was spent.
'Our basic position is that more money should be raised locally, and there should be a greater shift to local powers in income-raising to promote democracy, efficiency and stability,' Davey said.
'The problem with council tax is that it can't bear the weight of financial devolution… Council tax is just so unfair, whereas a local income tax would be paid by a lot more people.'
The plans, unveiled at the party's manifesto launch, envisage an average local income tax of around 3%. But the actual figure would be at the discretion of each town hall.
Davey said that, over a period of years, there would be a corresponding reduction in central taxation to compensate for the introduction of a local tax. But, he added, a proportion of funding would continue to come through central grant. 'You still need to have resource equalisation so that authorities that don't have a wide tax base are not disadvantaged.'
The party would rely on a reformed electoral system delivering more representative councils to ensure authorities did not impose excessive tax hikes on residents. 'With these sorts of reforms in place, there would be no need for the sort of reserve powers the secretary of state has at the moment,' Davey said.
A LibDem government would immediately cut all council tax bills by £100 before scrapping it completely, party leader Charles Kennedy said at the launch. 'This is something that will ring true with people. It is something they will see as fair,' he added.
There are around 11,500 English council seats to be decided on May 1, and the LibDems are hoping to make substantial gains.
PFapr2003
