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Glyn Davies: Council Tax reaches unsustainable levels in Wales

Speech to the National Assembly for Wales

"We have chosen council tax as the subject of the minority party debate today because during the next six months, it will become the most important issue in Welsh politics.

The first reason for that is that council tax has already reached unsustainable levels. Many people are saying that.

I have heard the Westminster Minister responsible for local government say that it has reached the limits of acceptability. The second reason for that is the impact of revaluation on council tax across Wales.

In some areas, the impact will be extreme. In Powys, 1,600 people will see their council tax rise by three bands. While the full impact of that will not be felt for three years, there is no doubt that there will be a great deal of concern as people realise just what it means for them.

The third reason for that is that there will be an element of catch-up. Last year, I recall hearing the finance spokesman for the Welsh Local Government Association, who was then the leader of Cardiff County Council, say that the council had imposed an increase last year that it could not possibly match in future years.

There is no doubt that there was an element of pre-election holding back of council tax last year. For all those reasons, this will be a major issue in the coming year.

As a party we have not attacked the principle of council tax. However, I do not want to address that in today's speech; I will focus on the fact that council tax has reached unsustainable levels, and that it will punish the people of Wales. I hope that you will address that issue if you make a contribution later.

On several occasions, when I have spoken on this issue, I have verged on the intemperate, because I feel strongly about it.

I have put my reputation for reasonableness at risk, but I do not think that there is a need for that kind of approach today because the facts speak for themselves.

All one has to do today is to allow the Labour Government's record on this issue to be exposed, and allow the people to understand exactly where we are, and why we are in that situation.

When council tax was introduced in 1993-94, the average band D property payment was £328. A tax is never popular, but it was much more acceptable than the community charge that preceded it, and in many quarters it was welcomed.

By the time that the Labour Government came to office in 1997-98, that figure had risen to £498. It was much criticised by Labour at the time—as I am sure that many of you will remember—because of the impact that it had on people on low fixed incomes.

This year, the figure is almost £900, which is a 79 per cent increase. There is also every reason to suspect that there will be record increases this year.

It is too soon to judge the impact of yesterday's settlement, but we have heard local government leaders say how disappointed they are with it. In my local authority, all committees have been asked to make a 5 per cent cut across the board, and, even if they make those cuts, there is talk of a 19 per cent increase in tax.

The advertisements are already out for extra bailiffs to ensure that this policy works. I am certain that the average band D property across Wales will go through the £1,000 barrier in the next year—some councils have already gone through the barrier, but, next year, the average property will cross that barrier.

Labour AMs will speak today, and I hope that they will be able to justify these sorts of figures, but how can you possibly justify to pensioners and young people with families what you have done to council tax during Labour's time in office?

Will you try to blame the local councils, as has been attempted in England, and as the First Minister increasingly does when he is asked questions about council tax levels?

I am putting the facts before the Assembly. Since Labour has been in power, average council tax has increased from less than £500 to almost £900.

The important point is that responsibility for this matter lies with the Minister and the Labour Government. The people of Wales must know that.

Whenever we start talking about council tax the two parties here that do not stand any chance of being in power in Westminster raise the issue of local income tax, even though we do not have any powers to introduce it.

I have some sympathy with both parties in the sense that almost every contribution that they make in the Chamber calls for more spending, and there is no doubt that if the members of either of those parties had their hands on the levers of power, council tax would be a good bit higher than it is now.

Indeed, that was the record of the Government here when the Liberals had some role in it. We must understand that while local income tax would perhaps be superficially populist and attractive, it contains many serious problems.

I once described it in a debate as a Del Boy strategy that offers a shiny new bargain, but which will cost much more in the long run. That is the absolute truth.

It will be a huge disincentive to enterprise—we all know that. It will not be as easy to collect as council tax, which we also know. Currently, the average rate of tax collection by the Inland Revenue is about 86 per cent, while the collection of council tax is around 96 per cent. That is fact.

Local income tax would quickly become a national tax, and the element of local authority control would rapidly disappear. I heard you claim the Chartered Institute of Public Finance and Accountancy as one of your witnesses to support this tax as it described it as a realistic option.

It might be a realistic option, but CIPFA also said that it was a technically complex and challenging tax to introduce. It is potentially controversial, and it is at the complex end of the range of available options.

I do not think that you can quote CIPFA as being a supporter of local income tax. That is apart from the fact that it is not relevant to the council tax debate in the Assembly.

The main point, to which I will return when I finish, is that council tax has increased to a totally unsustainable level. It will rise much higher this year, and the blame for that lies with the Minister, her predecessor, and the Labour Assembly Government.

The people of Wales—every council tax payer—should fully understand that."

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