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The Economy and Welfare Reform

Local income tax is a flat tax, so I cannot see the point of the intervention. Local income tax might be right or wrong, but it is certainly flat. I have always acknowledged the Chancellor’s pursuit of his objective of a fairer system over the past eight years. One of the problems is that all measures of pre-tax income and post-tax income show that income inequality is not significantly better—indeed, it may be worse—than it was in earlier periods. We need to debate the ONS numbers on the share of income paid in tax by different income groups, but, for some reason, the release of those figures has been postponed until next month. The available evidence suggests that the overall tax system in this country is highly regressive, which completely undermines the Chancellor’s pursuit of social justice through taxation and tax credits. That is why Liberal Democrat Members continue to believe that income-based local taxation based on ability to pay is the way to proceed, and we will continue to argue that case. We await the Government’s proposals with interest, because we understand that they to some extent converge with our point of view.