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Glyn Davies: Council tax has reached unacceptable levels in Wales

Speech to the National Assembly for Wales

"We have tabled this motion because of public concern regarding the unacceptably high levels of council tax.

I am sure that we have all read letters in our local newspapers from people who are deeply concerned about this issue.

I have held a number of public meetings on the Richard commission report, which were dominated by those who wanted to explain their concern regarding increasing levels of council tax. This has done a lot of damage to the Assembly's credibility - people still see the Assembly and the Government as being one and the same - and to all of us.

We believe that council tax levels are much too high. During the year that council tax was introduced, 1993-94, the average level was £328 per authority; it is now £887. Since Labour came to power in 1997, it has risen by 79 per cent, which is well above inflation, and it is higher in Wales than in any other part of the UK.

You can tell when the First Minister is concerned about something that will cause him serious embarrassment. Today, Leighton Andrews asked a question about the amount of money that had been given to local authorities.

The First Minister completely ignored the question because he became quite excited by a point that he believes is relevant, namely that the percentage increase during the first three years of council tax under the Conservative Government was higher than it has been since.

He completely ignored contemporary inflation levels, which are important, and the adjustments made when a new form of taxation is introduced.

The reality is that people are reaching the stage where they cannot afford to pay this tax.

The benefits system is meant to help those who cannot pay, but we all know that, for whatever reason, a huge number of the poorest people are not taking advantage of the benefits available to them.

The upshot is that these people are suffering as a result of the high level of council tax. It is important to understand why the tax is now at such a high level. I would be the first to concede that the Government has given local authorities a huge amount of extra money.

If the First Minister had answered Leighton's question, this would have been obvious. However, the problem is that the Government takes back a lot of this money before it reaches councils.

Last year's increase in national insurance had a huge effect on councils' budgets. The £5 billion taken by the Chancellor from the pension fund has led local authorities to face massive expense, and the underfunding, or temporary funding, of Assembly initiatives has also forced council tax increases. The blame lies with the Government, not with local authorities.

I have heard the First Minister say that the level of council tax is a matter for local authorities, and this is what he said in answer to my question on this subject in February.

However, we know that local authorities are only responsible to a certain degree. High levels of council are the result of the way in which the Government is managing its affairs.

Where do we go from here? We know that the Minister has signed a letter of agreement with Sir Harry Jones on behalf of the WLGA, which says that there will be no underfunding in future. I welcome this statement and believe that it should apply to this year as well. Harry Jones should not have signed the letter at this time, as it is rather improper. We must hold the Government to this promise.

The two parties with a chance of forming a government at a United Kingdom level are the Labour Party, as the incumbent, and the Conservative Party, in whose favour the pendulum is swinging strongly. There is serious possibility that we will have to deal with this issue next June, unless the Prime Minister has to leave office before then.

This issue involves a number of open questions. There is ongoing debate about the balance of funding and how it should be dealt with. The Conservatives and Labour would like to see a change in the 80:20 split, whereby only 20 per cent of local government funding is raised locally.

I contend that the way in which council tax has risen to its current level makes it difficult to change this split as we would like. I am sure that there will be many difficult discussions on this subject.

This is a serious debate in which both our parties are taking part. It involves open questions, and policy decisions have not yet been made by your party or by mine. The debate is ongoing in the Assembly and in Westminster. I can tell you that the answer is not a local income tax, as this would be a grave mistake.

However, I accept that if there are continual rises in council tax, as is currently the case, the integrity of council tax will certainly be weakened. The Government must put a stop to these great increases.

We support council tax; no-one likes tax, but this seems to be a perfectly reasonable way to fund local government. Council tax is a straightforward tax to collect, with a collection rate of 96.4 per cent. The Chartered Institute of Public Finance and Accountancy tells us that the collection rate for income tax is around 84 per cent. It is clear that we would be introducing more of a dishonesty charter if we moved to a local income tax instead of the current system of council tax, which is a better system.

Members of the Environment, Planning and Countryside Committee will know of the impact created by the sudden introduction of a new system, and the devastating effect that such a change can have.

The impact of a change to local income tax would be devastating for services in this country and no Government, or any party that is serious about the prospect of government, would contemplate introducing this tax, because of such a danger.

Again, we have the figures for the likely impact on income tax itself. The other parties' calculations fall short of 4 per cent on the basic and higher rates. That would have a significant effect on tax avoidance.

Clearly, as income tax rises, people will want to pay less in tax. We saw that when income tax levels decreased from the punitively high levels of the 1970s and 1980s. That has not been factored in. It would also encourage skilled people to leave this country for countries where there is not such a punitive level of tax on income. Those are the sort of problems that would accompany income tax rises.

Local income tax is an issue for the academics, the birds and the parties with no chance of being in power. I can hear Mike German sniggering: Mike, if you were to have a chat with your Liberal Democrat colleagues in Scotland, they would give you the same argument. They support council taxes because they have a prospect of gaining power in Scotland. You have no such prospect at Westminster or here, which is why you can come up with these fairy stories that sound good on the surface and attract votes.

We tabled this motion because this issue needs to be raised. The people of Wales care deeply about this matter. We want to place the blame firmly where it belongs—on the Government in this Assembly.

We want the council tax payers of Wales, and of Britain next year, to punish the Government in the way that that is done in a democracy."

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