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Volume 78: debated on Wednesday 8 May 1985

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asked the Secretary of State for the Environment what recent representations he has received advocating the abolition of the present rating system.


asked the Secretary of State for the Environment what recent representations he has received on the reform of the rating system.


asked the Secretary of State for the Environment what representations he has recently received on the reform of the rating system.


asked the Secretary of State for the Environment how many representations he has received on the reform of local government finance since 10 October 1984.

We continue to receive many representations advocating abolition or reform of the rating system.

Will the Secretary of State confirm that he has received representations from some highly placed persons in the Conservative party making the absurd suggestion that the present rating system should be replaced by a poll tax? Will he make it clear to those highly placed persons that, apart from the astronomical cost of collecting and policing a poll tax, the British people will decimate any political party that seeks to impose a tax on the right to vote?

I have read a number of imaginative press pieces about the studies that I announced last October. I can assure the hon. Gentleman that in our studies of the local government finance system we are examining alternative methods of raising revenue locally and that all options are open.

In view of the difficulty of finding a satisfactory alternative to the present rating system, is not the most sensible step to transfer the cost of teachers' salaries from the rates to central Government?

Many of the complaints which Ministers face at the Dispatch Box are about the increasing centralisation of control to Whitehall. It would be a major act of centralisation if the Department of Education and Science took over the payment of teachers' salaries or, indeed, any other part of the education budget which is currently borne by local authorities.

Will my right hon. Friend confirm that the Government, unlike the Liberal party, do not intend to impose the rates burden upon agricultural land, but that they intend to relieve the commercial and industrial ratepayer of the pernicious burden of vindictive and profligate Labour-controlled local authorities, by fixing the commercial rate centrally? Does my right hon. Friend agree that an element of a poll tax, without safeguards, is regressive in some respects and involves the practical difficulty of updating the electoral register twice a year?

I note carefully what my hon. Friend has said. Agriculture has been exempt from rating since the 1920s and we have no plans to bring it back into the rating system.

Does the Secretary of State accept that the injustices of the rating system are made worse because in Engand and Wales it is based on valuations that are 12 years out of date? Does the right hon. Gentleman recall that he made commitments to take urgent action on revaluation as long ago as August 1983? In view of the Government's unhappy experience in Scotland, do they still intend to continue with revaluation, or will they be looking for a much fairer system, such as local income tax?

I am aware of what the hon. Gentleman mentioned. The Government now take the view that there cannot be a revaluation in England and Wales without a reform of the system.

Are not the present problems with the rating system directly attributable to the massive cuts in rate support grant? Will we not find it impossible to come up with a fair system until the Government carry their responsibility and restore to local authorities the money that they have cut during the past six years and restore the level of support given by the last Labour Government in 1978–79?

It is interesting that the hon. Gentleman chose that date, because he knows perfectly well that the last Labour Government reduced the proportion of expenditure by central Government from the level that it reached in 1976.

There is no preordained right for local authorities to have certain parts of their expenditure met by central Government. At the heart of the studies being undertaken by my hon. Friends is the restoration of full accountability by local authorities to those who pay for them and elect them. We are currently engaged in doing that.

Does the Secretary of State recall that in 1982 the Select Committee on the Environment said that a poll tax should not be introduced under any circumstances? Therefore the right hon. Gentleman's reply to my hon. Friend the Member for St. Helens, North (Mr. Evans) was disappointing. Is it not clear that a poll tax is undemocratic because the flat rate could be set at a level which the poor and the unemployed could not afford, and that they therefore would not bother registering to vote? The people who support the right hon. Gentleman's party—the wealthy—could afford it and thus use their votes against the Labour party.

At every election which the Conservative party has won, it has had considerably more votes from those on the lower end of the scale than from those on the higher end——

That is quite right.

On the question of raising revenue to finance local authority expenditure, the hon. Gentleman should recognise that it is an unsatisfactory system because in many parts of the country very few people pay towards the cost of local services, while so many enjoy them. It is that imbalance which seems wrong to us, and which any reform must right.

Is not the real problem with rates the fact that they are too high? Is that not at least partly because we are trying to finance too much public expenditure from rates? If that is so, rather than looking for alternative methods of raising local finance, would not the right answer be that suggested by my hon. Friend the Member for Staffordshire, Moorlands (Mr. Knox)—to consider transferring education expenditure, or at least expenditure on teachers' salaries, from local government to central Government?

I understand my right hon. and learned Friend's case, but what is wrong is that a tax that is property-based should now bear so much expenditure that is not property-related. There needs to be a wider tax base if local authorities are to be accountable to their local ratepayers. I do not believe that the answer to the problem is simply to centralise more spending in the Exchequer.

Are we to believe that local government finance is to suffer yet another fundamental change, decided in secret without proper public evidence and debate? Does the Secretary of State recall the recently published words of the Controller and Auditor General, who said that rates

"increases can therefore be attributed more to the reduction in the proportion of Government grant than to increases in local authority spending; and unless and until the level of central Government support is stabilised again it will be difficult for local electors to distinguish how far changes in rates should be attributed to the actions of the local authorities themselves."
Are we now to accept that the Government, having taxed water, energy and health, are about to tax votes also? Is that the prospect that the right hon. Gentleman is offering to the House? Does he not realise that the electors could fill a warehouse with broken Tory promises on rates?

The hon. Gentleman posed one serious query at the beginning of that supplementary question when he asked whether there was to be another fundamental review of local government finance.

I shall come to that. There is widespread recognition of the need for a reform of local government finance. I hope the hon. Gentleman welcomes the fact that the studies that will lead to that are well under way. We shall publish our proposals in the form of a consultative paper and there will be ample opportunity for all those interested to put forward their views before there is any question of legislation being introduced.


asked the Secretary of State for the Environment when he now expects to be in a position to announce the outcome of the Government's review of the rating system.

Considering the present defects in the rating system, is it not clear that the imposition of a poll tax would make the system far worse and would, in particular, penalise those on average and small incomes? Is it really proposed to have a poll tax in addition to the rating system? We appreciate that the Secretary of State is under great pressure from the Prime Minister. Will he inform her that the last occasion when a poll tax was introduced in this country led to the uprising of 1381? Is that not a good enough warning?

I was not about then. The concern in the country is very widespread because in recent years, often for the best of motives, a considerable gap has opened up between those who pay, those who receive and those who vote. That gap lies at the heart of the lack of accountability of local authorities to those who pay the bills and is greatly colouring the studies that we have undertaken. I ask the hon. Gentleman to await the outcome of those studies before jumping to conclusions.

Before my right hon. Friend announces the outcome of the review, will he bear in mind the crucial importance of ensuring that the cost of providing local services falls on all local people and that there should be no exemptions from and rebates of what I hope will be a residents charge introduced to replace rates?

Instead of undertaking another secretive review, why will the Government not just republish the Layfield report and make some conclusions based on that? Is it not a fact that a poll tax would need so many qualifications and exemptions that it would end up, as the Select Committee said in 1982, as a crude kind of local income tax, and that it would be far better to go fully down that road and introduce a properly worked out local income tax system?

The right hon. Gentleman's points are considerations which the Government are taking into account in the studies which we are undertaking. However, it must be recognised that there is widespread concern that many of those who benefit from local authority services contribute little or nothing towards them. That has undermined the principle of accountability in many areas, and we must address our minds to that.

In conducting the review, will my right hon. Friend give proper weight to the views of business and industry in Britain, because that is where much of the rating burden falls? Will he take on board the views of the Institute of Directors, as a recent sample by the institute revealed wide support for a poll tax?

Nationally, over 60 per cent. of the revenue raised by local authorities comes from non-domestic ratepayers, two thirds of it from industry and commerce. In some areas the figure is significantly higher. That is another point which leads to a weakness in the accountability of local authorities to their ratepayers. Part of the studies that we are undertaking will consider ways of dealing with that problem.

Given the controversial nature of any report that results from this review, can the Secretary of State say whether the Government intend to put the proposals of himself and his colleagues to the country in the next election manifesto or whether they intend to legislate before then on a reform of the rating system?

Although all options are still open, will my right hon. Friend be cautious about further raising public expectations about a poll tax, which is less attractive the closer it is studied? Although the system needs to be radically reformed, does my right hon. Friend agree that this would not be best done by inventing further forms of taxation?

If reform were easy and painless, it would have been done years ago. Because of the widespread feeling that doing nothing is no longer an option, we need to examine all the possibilities to maintain and improve the system of local government finance in order to strengthen the health of local government as a whole.

Has the Secretary of State studied the recommendations and conclusions of the Layfield report? Does he accept that the major change that has taken place since the Layfield report was published is that the share of local expenditure met by the Government has fallen dramatically? Does the right hon. Gentleman accept that this is the major cause of the widespread concern to which he referred?

I do not necessarily accept that, because many authorities have been able to cope with a reduction in the percentage of grant by imposing modest rate increases because they have been able to find economies and make savings. The Layfield inquiry was conducted eight years ago, and events have moved on substantially since then. I hope that the hon. Gentleman does not think it wrong for the Government to take a fresh look at the problem. The Layfield analysis is part of the evidence on which my hon. Friends are basing their studies.

I congratulate my right hon. Friend on achieving two out of three marks for discussions on public reports to date. Will he note that many of us support the transfer of non-domestic rate to the centre but recognise, as the Government appear to do, the need to create funding in addition to the present rating system? May I echo the point made by my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle). The single central failing of a poll tax is that it cannot command the broad support which a fundamental reform of the rating system must have if it is to be introduced.

I note my hon. Friend's view. During our studies, all the options are being studied carefully. We shall come forward with our proposals in due course.

Is not the Secretary of State getting rather fed up with being dropped in it from a great height by the Prime Minister over rating and the abolition of the GLC? Perhaps the right hon. Gentleman would like to tell us something about what happened in the other place yesterday. If the right hon. Gentleman is considering levying a poll tax, is he also considering making registration compulsory?

What happened yesterday in another place is not a matter that arises from this question. Obviously, if there is to be a reform of taxation, there must inevitably be laws to ensure that those liable to pay taxation do so. I do not think that the hon. Gentleman would expect it to be otherwise.

May we take it that the Government are firmly committed to replacing not only domestic but commercial rates? Will my right hon. Friend confirm that an overriding principle of any alternative system would be the ability of those to be taxed to pay?

Our studies embrace the entire system of local government finance, not only revenue raising, but the relationships between central and local government. I am sure my hon. Friend will agree that it would be wrong at this stage of these studies to rule out any of the options.

If the right hon. Gentleman wants to reform local finance, why does he not begin by abandoning the iniquitous system of targets and penalties which he and his predecessors have so unfairly enforced? Can the right hon. Gentleman name one country with a plural democratic society which actually uses a poll tax to raise local government finance? Does the right hon. Gentleman not recognise that the whole idea of taxing registrations to vote is abhorrent in a democratic society? May I tell the right hon. Gentleman and the House unequivocally that, if any such system were introduced, it would be abolished by the next Labour Government.

It is, I fear, typical of the Labour party that it promises to abolish things before it knows what they are. When one thinks of all the other things that it has promised—abolishing tax relief on mortgage payments, and putting capital gains tax on those who sell council houses—I am not surprised that the hon. Gentleman is becoming confused.