Liberal Democrats - ahead of the rest!

Written by David Heath MP and published in Western Gazette on Fri 18th Apr 2008

Almost certainly the hardest thing that leaders of opposition parties have to do in the House of Commons is to respond to the Chancellor of the Exchequer's budget statement each March. They do so having to absorb a large amount of complicated financial information, often presented in a form intended to obfuscate rather than inform, and then make what they hope is a sensible and economically literate response while, of course, seeking to get their own party political points across effectively.

So I don't blame David Cameron for not having spotted one of the most glaring, and certainly most regressive, changes introduced by Gordon Brown in his last budget as Chancellor just over a year ago now. But, for the record, it should be recognised that Sir Menzies Campbell, excoriated by the press of the time as so far past his prime as to be virtually in his dotage, an impression carefully fostered by some scribblers but totally erroneous, not only pointed it out but set out the negative effects it would have on many less well-off families. The change was, of course, the abolition of the 10p in the pound income tax band. And as of this year it's coming into effect.

What bugs me, therefore, is the sudden realisation by many government backbench MPs as to exactly what it means. Because that was clearly set out a year ago, it was voted on then, and they all trooped through the lobbies to support it. Sometimes you do have to take responsibility for your actions.

Why is it so regressive? Because, in order to balance the books and pay for a reduction in the standard tax rate, our current prime minister decided that the best way to pay for a tax cut for better off people would be to increase the tax paid by those on some of the lowest wages.

Of course it wasn't put that starkly. Labour MPs were assured that everything would be alright because the tax credit system, either family or pensioners' tax credit, would make sure that in real terms people would not lose out.

To be fair, to some extent that is correct. But there are two problems. Firstly, there are a significant number of people who don't receive tax credits because they don't qualify for them. Those under twenty five, for instance. Those on low income who don't have children. Those short of retirement age. According to the government's own figures, up to 5 million may be adversely affected. Then there are those who do qualify for tax credits but don't get them. That is a very significant proportion, and despite years of strongly promoting take-up it is still very much lower than it could or should be.

So a large number of those who are struggling most to make ends meet will pay more tax. And the outcry now is a year too late. I opposed the change last year, and if we get the opportunity I will oppose it again this year, but I do wish people would wake up to these things in the first instance. And of course it matters, because the effects of a deteriorating economic position is really beginning to bite.

Again, I want to be fair. The British economy over the last ten years has, on the whole, been pretty strong and exceptionally stable. But with a worldwide banking crisis taking hold, the cracks are beginning to show, and one of the main difficulties is an issue which my colleague Vince Cable has repeatedly drawn attention to, that of personal indebtedness. Lending has been prolific over recent years, and some would say irresponsible. That means individuals have high levels of debt which are difficult to sustain when interest rates creep up and available credit is squeezed. When you add to that soaring utility bills, tight wage control, under-provided pensions and now tax increases, no wonder life is becoming more difficult for those on limited income.

And on top of that, there is council tax. Every year, in every council, it goes up way beyond the increase in people's pay packets, certainly if you're on a fixed income like an old age pension. The benefit of the increase doesn't go to the local council, nor does it increase local service provision. In effect, it's yet another national tax. But unlike income tax, it isn't related to ability to pay. The sooner we scrap the council tax and replace it with a fairer alternative the better.

Talking of councils, I spent a day last week talking to officers and members of Somerset County Council. The story they have to tell about what they have been doing over the last few years is extraordinary, and very good news for people across the county. They are now recognised by the government as one of the very best performing local authorities in the country, and certainly the best in the south west. They score beyond the top four star category, and are assessed as strongly improving even on that; beyond excellence, as they repeatedly told me.

One of the genuinely innovative arrangements they have introduced is a new partnership between the county council, Taunton Deane district, the police authority, and computer giant IBM to provide a wide range of support services. The plans have been subjected to what seems to me some quite extraordinarily ill-informed comment. Of course it's early days, but if South West One, as it's called, delivers the advantages claimed that will be yet more good news for council services and will drive down the costs of local government. And if a partnership between local authorities of different types and even different political complexion can cut costs, surely that's a good thing.