Vince Cable

Local residents face a council tax rise of over 16%, taking a Band D property from £1097 to £1278. This year's increase is a record, but council tax has been rising at well over inflation for some years, and not only in Richmond.

Local spending on education and social services has been rising to meet expanding need, and to pay scarce staff more. But government funding of councils has been tightly controlled. So the burden has fallen on council tax.

When council tax was introduced by John Major's government it was welcomed as an alternative to the hated poll tax. A decade later the design flaws are becoming apparent. Council tax would be made was supposed to be fair, taxing bigger homes more and by giving single people - such as widows - a discount. But, in practice, council tax is much more of a burden for a pensioner couple with a small occupational pension than it is for a well-off family.

What can be done? My party - the Liberal Democrats - has launched an alternative budget this week. We propose to cut council tax, across the board, by £100, using part of the receipts from a higher rate of tax (50%) on incomes over £100,000.

One longer-term solution would be to take the funding of education, and perhaps social services, out of local authorities. The danger, here, is over centralisation - even more interference by the Man in Whitehall.

A better idea, already used in Denmark or New York State, is to replace or supplement council tax with local income tax paid on a PAYE basis, allowing some variation between councils. Tax would reflect the ability to pay.