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Creating a fair tax system

March 8, 2010 2:00 PM
By David Goodall in Southampton Pensioners Forum

Good afternoon and thanks for inviting me.

This afternoon I am going to talk about just two things firstly what the Liberal Democrats vision for the future is and secondly why you should vote on 6th May. But first a bit about me

Many of you will have read the brief biography about me, so you will you know I am 47 years old, married to my lovely wife Kerstin for 21 years this year, we that have two boys Wesley and Samuel, who both go Secondary School here in Southampton.

You also be able to read about me being a school governor at Townhill Infant School and Bitterne Secondary Park School. And that as family we attend Thornhill Baptist church

You may have even read more on my website about me leaving school at 16, doing an apprenticeship, getting a degree and eventually becoming a senior consultant engineer and project leader within Siemens.

So here is something you don't know about me. I am interested in genealogy or my familytree research. In the course of which I discovered my great great great grandfather Thomas Figes, in 1819 was living in a place called Northam in the County of Southampton. In actual fact his son Henry my great great grandfather in 1860 was married in Northam.

Now 190 years ago Thomas was signing a petition to the council and in the past year I too have been gathering signatures to try and improve roads in Southampton and stop Fluoride being added to the water supply. However the ambition of the Liberal Democrats is not limited to road improvements and preventing fluoride the water.

We wish to create a different Britain one which is fairer and greener, but is not a idea which has been that has been formed after discussion with a focus group. It is an idea that comes from our party constitution part of which is printed on every membership card where it says:-

"The Liberal Democrats exist to build a fair, free and open society, in which we seek to balance the fundamental values of liberty, equality and community and in which no-one shall be enslaved by poverty, ignorance or conformity"

This is why the main theme of our general election message can be summed up by one word "fairness". We wish to create a fairer Britain in all areas of society, in particular:-

• Creating a fair tax and benefits system

• Giving young people a fair start in life through the education system

• Creating a fair, balanced, affordable and local political system

• Creating green and sustainable economy with fair chances for all

This afternoon a am going to talk about just one, which always gets more than a little attention at election times - taxation.

Currently we have a taxation system where the poorest 10% of the population pay a great percentage of their income in taxation than the richest 10% of the population. In view this is unjust and unfair it is a taxation system that has been designed more by the Sheriff of Nottingham than by Robin Hood. And it is a system that must change.

That is why we propose to increase the basic threshold for paying income tax to £10,000 it would remove nearly 4 million of very low earners from paying tax and reduce the tax burden on many other low and middle income earners.

In actual fact it would cut the average working age person's income tax bill by £700 and cut average pensioner's income tax bills by £100. This change would be paid for by closing tax loopholes on high earners, switching taxation from income to pollution and the introduction a mansion tax.

We would also wish to simplify the benefits system. The current system is far to complex. In particular tax credit system is over complex. Each year it leads to billions of pounds tied up either in money owed to individuals or money owed by individuals. And all too quickly many people end up owing money they can't afford to payback because they have been caught out by the complexities of the system.

This time last year the figures showed that:-

On repeat overpayments

• 1.8 million families have been overpaid tax credits more than once in the four years that the system has been running, an increase of 400,000 in just one year. That is one in five of all families who have claimed in the same period

• And over 60,000 families have been overpaid more than three times

And on repeat underpayments

• 555,000 families have been underpaid more than once since 2003, an increase of 150,000 families in just one year

• 82,000 families have been underpaid more than twice

• 6,000 families have been underpaid more than 3 times

The real down side to this is that many people who deserve help, and need help, don't get it because the system puts off the very people it is there to help. And worst still the complexity of the system is there to stop people cheating the system. It doesn't even do that.

For example I had a person come to me who had benefit problems. Now to cut a very long story sort the verdict after the official adjudication was:-

• He had not deliberate claimed excess benefit

• He had not received excess benefit

• He had just received benefit from the wrong benefit pot

• So he must repay the benefit - all the benefit he had received that year, about £5,000

• And he would not be entitled to back claim benefit from the right benefit's pot.

I ask you what is fair or just about that.

And what had he and his good lady wife spent this "excess benefit" on, which was the majority of their income that year, well the luxuries of life, of course, like food to eat and heating to keep warm. Still on the bright side he may get the money paid back before his 75th birthday if he can afford the £5 a week cut in his income.

Our proposal is to introduce a single form which will make an assessment of the person's income, their physical needs and their dependant's needs and then make an award, which would be valid for six months. After six months a reassessment would be made, but there would no payback of monies paid out on any award, unless the original award was found to be made under false pretences i.e. they lied at the time

Finally on the creating fair taxes we would abolish the extremely unfair council tax and replace it with a local income tax. People would be taxed on what they could afford to pay rather than type of house they live in.

Just a few points on council tax:-

• Council Tax is the least fair major tax, already taking 5.1% of the incomes of the poorest tenth of people compared to 1.2% of the incomes of the richest tenth of people even after Council Tax Benefit has been taken into account.

• Two million needy households are poor enough to get Council Tax Benefit, but do not claim it because it is either demeaning or too complex, whilst £560 million a year is wasted simply administering the Council Tax and Benefit system that could be better spent on services or cutting local tax.

• Council Tax is an unfair tax which particularly burdens pensioners, with the poorest 20% of pensioners on average paying nearly six times more than the richest 20% of non-pensioners, as a proportion of their income.

• Council Tax as a share of the basic state pension has been rising over the last 10 years and now accounts on average for over 20% of the state pension.

• The Council Tax Benefit system is complex, bureaucratic and seen by many older people as demeaning, with the result that up to 1.75 million pensioners entitled to this benefit do not claim it.

These are all reasons not to simply tinker with the system by added extra bands, or freezing it for a couple of years or evening giving 10% discounts. These are all reasons to scrap council tax completely.

Replace it with a local income tax, where the level is set by the council but the administration is performed by the Inland Revenue. This was it would be about £300 million cheaper to administer each year. And people would not have to give any more information to the Inland Revenue than they already do.

Spending tax income on benefiting the country and its people rather than just collecting taxes has to be a good idea.

All of these areas fair taxes, fair benefits, a fairer start for our children, fair and open democratic process, fairer and greener economy and environment are possible.

And we have ideas and plans for them all, it but depends not on me but on you. As a party we can have all the good ideas we wish, we can have conferences at which we talk and put the 'world to rights' as my mother says.

Yet the power to start the change, the power to create a fairer Britain, requires one simple thing - and that is a cross in a box on polling day.

Thank you for listening to me, are there any questions on any topic whether covered this afternoon or not