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Last Updated: Monday, 12 January, 2004, 13:19 GMT
Kennedy hails 'fairer' tax plans
Council tax explained

The Liberal Democrats have outlined their plans to scrap the council tax and replace it with a local income tax.

Leader Charles Kennedy says millions of people will benefit from the scheme, including pensioners and single person householders.

At a press launch Mr Kennedy said his plans were fairer because they were based on the ability to pay.

He said that to raise the same amount as the council tax, a local income tax would have an average rate of 3.75p.

Although the Liberal Democrats have long been in favour of a local income tax, it is now among measures being considered by ministers reviewing council funding.

'Tried and tested'

But Conservative local government spokesman David Curry described the plans as "an Exocet straight at the heart of young couples" trying to get on the property ladder and pay off student debt.

The Lib Dems say the present system is unfair because people on low incomes can pay more than top rate earners.

A lot of people have been clobbered hard, not least pensioners, and we just think that is simply untenable and we can't go on like that
Charles Kennedy

They argue that replacing it with a local income tax is fairer, cheaper to administer and had been successful in other countries such as America, Switzerland, Sweden, Norway, Denmark, Finland and Japan.

"There is no reason why it can work in other countries but should not be allowed in our country," Mr Kennedy said.

The local income tax would not be levied on the first 5,000 or on income topping 100,000.

Reducing bureaucracy

Lib Dems already have plans for a new 50p income tax band for people earning over 100,000 which they say will prevent the need for top up fees and enable the provision of free long term care for the elderly.

The local income tax would be collected by the Inland Revenue, which already collects income tax, meaning savings of more than 300m a year on bureaucracy.

If you are in receipt of a high income, you will pay that bit more. If you are in receipt of a rather low income, you will pay significantly less
Charles Kennedy

Under the plans, the government would not cap local income tax rates, which would be set by councils.

The Lib Dems say the measures could be brought in within two years and would make the average single earner household 356 better off.

The policy will be a key feature of their campaign for this year's local government elections.

Pay scales

Earlier, Mr Kennedy told the BBC's Westminster Hour: "A lot of people have been clobbered hard, not least pensioners, and we just think that is simply untenable and we can't go on like that ...

"What we are saying is, based on your income and the income stream that you receive as an individual citizen - that should be the determining factor for what you contribute."

In terms of the top income earners - those in excess of 100,000 a year - is that for every pound above that 100,000, the top rate of tax goes from 40p to 50p
Charles Kennedy

Reports claim ministers want to dump the council tax because of growing taxpayer opposition to it.

According to The Times, owners of expensive homes in the South East are set to pay more to ease the burden on the middle classes.

The current system of eight national band levels is likely to be go in 2007 when the next revaluation is due to take place, the paper said.

Ministers are also considering a new system of business rates, it reported.

Final details will be announced next summer following a review set up by the Office of the Deputy Prime Minister (ODPM).

Local Government Minster Nick Raynsford said the report would deal with "problems and unfairness" in the current system.

An ODPM spokesman said the idea of introducing new bands was just "speculation" at present.

Trevor Kent, former president of the National Association of Estate Agents, said: "It is all very well suggesting paying for your property through a quasi income tax, but that will not reflect in any way the value of the home you live in, which current council tax does recognise.

"There is many a millionaire living in an inexpensive home."

Q&A: Council tax rises
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26 Jun 03  |  Business

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