by Vivian Linacre
The bolts of lightning which have flashed from “Opinion” pages in recent issues(1) have illuminated the stormy debate on rating reform and merit peals of thunder in response from readers. Having predicted this crisis and proposed the only solution in these columns by correspondence and articles long ago(2), may I now contribute a few fresh rumbles to clear the air?
First, the public debate over the community charge is of an abysmal standard, concentrating on four sets of considerations which are wholly irrelevant to the real problems of funding local government:
(1)Among our masters it has become merely a political weapon, influencing the results of the recent local elections and prospects for the next general election.
(2)Among the masses it has become merely a “bread-basket” issue, support or opposition depending crudely on neighbouring comparisons of the amounts fixed for the current year.
(3)The system and alternatives canvassed are judged primarily on their apparent “fairness” — although any system can be utterly bad and yet “fair”, and in any event there are very few goods or services that are priced according to “ability to pay”.
(4)The public continue to cherish the illusion that the poll tax accounts for the bulk of local authority revenue; an illusion fostered by councillors (and the opposition parties generally) in order to disguise the true enormity of municipal spending.
If the public and media realised fully that the community charge represents less than 30% of town hall budgets in England and Wales and less than 20% in Scotland — ie that councils contrive to spend between £20 and £30 per week for every adult, including students, pensioners and the unemployed — then universal attention might be devoted to devising a system of direct accountability. No rating system nor a community charge set by the councils themselves can ever satisfy their insatiable appetites; the more money that they can raise the more they will spend, and they will always tend to exceed their budgets.
Nor can we expect central government to introduce radical reforms, since the root cause of the nation’s economic ills is precisely that under these three Conservative administrations (contrary to the monetarist myth) public spending has continued to soar. Meanwhile, its promised adjustments to the community charge can result only in either increases in rate support grant, further reducing the charge’s relative contribution to total revenue, or some form of means testing, further undermining the poll tax principle.
Indeed, the immediate reason why the community charge is doomed is because it is no longer a poll tax, having become just another crude and extremely inefficient form of local income tax, consequent upon the range of rebates and exemptions to which it is subject, as well as the penal charging of second homes, and quite apart from the massive incidence of evasion and non-payment.
Neither can we expect this Conservative administration to be deterred by the appalling costs of the bureaucracy which the system has generated, nor by the question (which it has never addressed) as to why domestic rating had to be abolished yet business rating perpetuated — to which the only implicit answer is that business commands no votes!
The ultimate reason for scrapping the community charge and the whole rating system, however, was always that any form of local taxation is not only archaic (deriving from medieval Poor Law and Victorian parish relief) but also entirely superfluous. PAYE, NIC, VAT and the vast array of other excise duties, with the panoply of company and special personal taxes, provide the Exchequer with an abundant armoury of funding for all purposes.
The solution, therefore, is for global block grants to the authorities, calculated in accordance with a single complex formula which reconciles a per capita basis with a demographic analysis as well as regional economic discrimination, which the councils are then free to spend (but on no account to overspend) as their electorate dictate. That alone would ensure proper budgeting and accountability as well as popular confrontation with the actual costs of local services and capital expenditure, which would bring about a revolution in local democracy.
Whenever the question was asked by politicians and bureaucrats throughout the 1950s, 1960s and 1970s, “Yes, we admit that Development Gains Tax/Betterment Levy/Development Land Tax is not working, but what do we put in its place?”, and I always answered “Zero!”, I was considered mad — yet that perennial monster was eventually despatched by Chancellor Lawson with scarcely a whimper. Rating is a colossal monster which is overdue for the coup de grace, together with its squalling brats. We shall not realise what a nightmare this all has been until we awaken.
(1) January 6, April 7 and 14, May 5.
(2) November 21 1987, p 1014; “Correspondence” May 4, June 8 and July 6 1985, January 16 1988.
