Jonathan Djanogly, the Member of Parliament for the Huntingdon Constituency, warned that the Liberal Democrats' proposals for a new local income tax, published this week, would mean an average household in Huntingdonshire paying £545 a year more in tax. A local income tax has also been suggested by the Labour leader of the Local Government Association, in its response to the Government's review of local government funding.
The plans for a new local income tax to replace council tax were announced by the Liberal Democrats on 12 January, yet analysis by the Conservatives has exposed the fact that the average household would pay more under the system.
Currently, households in Huntingdonshire pay an average council tax bill of £904 a year. To raise the same amount of money, this would require a local income tax of 3.7%. Yet a household with one person on average male earnings and one on average female earnings would end up paying a yearly local income tax bill of £1,449 - which even after getting rid of council tax, would still entail an additional £545 a year in tax.
Mr Djanogly explained:
"We already know that taxes on incomes have been hiked up by Labour through higher National Insurance, supported by the Liberal Democrats. Now, Lib Dems want to increase tax bills even more - first by introducing a national top rate of income tax of 50 per cent and also a local income tax of 3.7 pence in every pound. This could mean £545 a year extra for a typical two earner household in Huntingdonshire.
Local income tax has the disadvantages of the old poll tax - families and shared houses with more than one earner would see their tax bills soar. Pensioners would not escape either - their savings income would be taxed to the hilt by Inland Revenue too.
Rather than robbing Peter to pay Paul, the Government needs to end the fiddled system of local funding imposed by Whitehall, and give back the money it has snatched from Cambridgeshire. We need a fairer deal not ever higher taxes."
Notes:
Under the Liberal Democrats' proposals, council tax would be replaced with a local income tax (LIT). The average rate of local income tax would be 3.75%, but vary from council to council. The tax would be levied on all income from £5,000 and £100,000 - it would not just be on the bais rate (Source: Liberal Democrats, Scrap Council Tax, Briefing Paper, January 2004, pg 3).
Local income tax would be higher in council which currently charge above-average council taxes, as the Liberal Democrats have said - 'it may be that areas which currently have very high council taxes will have will have a slightly higher local income tax rate' (Liberal Democrats, Labour's Unfair Council Tax: the facts, September 2003).
Labour endorsement
Sir Jeremy Beecham, the Labour Leader of the Local Government Association, has also suggested that a local income tax could be introduced (LGA Press Release, 15 January 2004)."