Birmingham Council sets Council Tax rise at 2.8% whilst Liberal Democrats call for Council Tax to be scrapped

4.00.00pm GMT Wed 2nd Mar 2005

Birmingham Council have announced a Council Tax increase of just 2.8%, this was so low in part to the Liberal Democrats being part of the ruling administration. The Liberal Democrats have also called for Council Tax to be scrapped and replaced with a fair form of taxation - A Local Income Tax.

Nicola Davies, Liberal Democrat candidate for Birmingham Hodge Hill said " It's about fairness, Council tax is now the most unpopular tax in Britain today - because it's the most unfair tax. Worse still, council tax, as part of a system of local government finance, was described by the Audit Commission last December as "fundamentally flawed"

Nicola Davies further said "For Liberal Democrats, the only credible answer is to scrap council tax completely, and replace it with a tax related to ability to pay - a local income tax."

Key parts of the Liberal Democrat package on reform of local taxation include:

To scrap council tax, replacing it with Local Income Tax at 3.75% - cutting the tax burden overall for most pensioners and households, with no rise in the overall tax burden

To use the national income tax system to administer local income tax, saving much of the cost of collecting Council Tax and operating Council Tax Benefit, estimated for the UK at over £650 mn (a net saving after Inland Revenue extra costs of at least £300 million)

To have a tax-free personal allowance for local income tax of at least £5,000 (for over 65s, at least a £7,000 allowance) when implementing

To cap an individual's income that can be taxed by a local income tax at £100,000 per annum.

To allocate £1.7 billion from proceeds of our proposed new national 50p income tax on incomes above £100,000 to Local Government Grant support in order to keep Local Income Tax to just 3.75%, ensuring local taxes on most pensioners and the lowest paid are cut compared to Council Tax.