§ Order for Second Reading read.
§ Mr. Speaker
Before calling the Secretary of State, I inform the House that I have selected the reasoned amendment in the name of the Leader of the Opposition. It might also be helpful if I inform the House that all motions for instructions to the Committee on the Bill are out of order. Therefore I have not been able to select them. The instructions requiring the Committee to consider alternative ways of achieving the purposes of the Bill are out of order because the Committee already has that power. The instructions requiring the Committee to consider dividing the Bill are out of order because the Bill is not drafted so as to make a division practicable. The rules governing the admissibility of instructions are clearly set out on page 545 of "Erskine May".
§ Sir George Young (Ealing, Acton)
On a point of order, Mr. Speaker. Will you confirm that, none the less, it is still perfectly in order for those of my hon. Friends who think the Standing Committee should examine the desirability of linking the charge to ability to pay to add their names to the Order Paper at any time between now and 10 o'clock tomorrow?
§ Mr. Speaker
I can certainly confirm that to the hon. Member, and I confirm that it would be perfectly open for him to put down an amendment at a later stage.
§ Mr. Dennis Skinner (Bolsover)
On a point of order, Mr. Speaker. In recent times a change has been made to Second Readings and Second Reading amendments. Mr. Speaker, a practice has been adopted occasionally by you and the previous Speaker that when, for instance, the Liberal leader or SDP leader has put down a Second Reading amendment, it has been taken. There used to be a time when that gate was never opened, when Second Readings were simply voted for or against. Now, as a result of the change that has taken place in the past few years, any amendment to the Second Reading of a Bill, in effect, gives an indication to the Committee to take account of the amendment.
Some amendments have been put down on the Second Reading of the Local Government Finance Bill. As Mr. Speaker on occasions has found it necessary to take those Second Reading amendments and so give the Committee the power to take account of them, my argument is that the gate has been opened for instructions also to be presented. It puts the Chair in some difficulty if it is prepared, as it has been in recent times, to accept longwinded amendments on Second Reading, but not to accept instructions from other sources. I would have thought that the matter ought to be looked at again.
§ Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)
Further to that point of order, Mr. Speaker. If Committees have the power to look at those instructions, why is it out of order for right hon. and hon. Members to debate and vote on a motion which 41 Members have already supported, so instructing the Committee? It seems nonsensical if democracy cannot rule in the House, because you say it exists already. Why can we not put our names to it, speak to it and vote on it?
§ Mr. Speaker
The answer is simple: that is why I made, exceptionally, a statement. The hon. Member should look at page 545 of "Erskine May". I am unable to select these instructions as they are out of order, because it is within the competence of the Standing Committee to do this. It is superfluous to instruct the Standing Committee to do something it can already do.
§ Mr. Speaker
Order. Nothing else arises from that. It is perfectly in order to canvass the substance of the instruction in the debate.
§ Mr. Bennett
Mr. Speaker, I would like you to give us some guidance. As I understand it, votes taken on the Second Reading are for the guidance of the Committee of Selection about the composition of the Standing Committee, if the Bill is committed to a Standing Committee. The difficulty is that where an instruction such as this clearly indicates a view held in the House. it seems to me that that ought to be reflected in the composition of the Committee, but if the instruction is not selected there is no way for the House to indicate to the Committee of Selection the division of feeling in the House and therefore the sort of Committee that ought to be set up.
I wonder whether you could give us guidance on whether the number of names that will appear on the instruction ought to be taken into account by the Committee of Selection in setting up the Committee, or whether the practice, which seems to occur too often, will be that the Committee of Selection sets up the Committee simply on a formula of the number of hon. Members of different parties in the House, rather than taking into account the expression of opinion on the Second Reading.
§ Mr. Speaker
I do not think it would be right for me to give instructions to the Chairman of a Select Committee on how he should proceed, but I imagine that the hon. Member had that view in mind when he asked me if it was still in order for the names to be added to the instruction. I have no doubt that all kinds of matters are taken into consideration by the Select Committee when it makes its selection.
§ Mr. Speaker
I say to the hon. Member that, in raising points of order of this kind, which I cannot answer, he denies his colleagues the opportunity to make a speech. I shall bear that carefully in mind the next time the hon. Gentleman wishes to speak.
§ Mr. Skinner
Well, my shoulders are broad enough; I do not know about yours. Today you have agreed—I repeat the point I made earlier, to which I have not had an answer—that a practice is becoming, not prevalent, but is used on occasions, of taking amendments to Second Readings. I will read the amendment proposed today to the Second Reading:On Second Reading of the Local Government Finance Bill, to move, That this House declines to give a second reading to the Local Government Finance Bill because of the absence of any grading in the rate of community charge in proportion to the ability to pay and because of the absence of a comprehensive rebate scheme which would also take account of ability to pay.
Assuming that my right hon. Friend's amendment is carried, without any question whatsoever that would be an indication of the feeling of the House. In my opinion, that 1115 is no different from an instruction to the Committee because it introduces an argument. There used to be a time when a Second Reading was voted on and there was no such thing as a reasoned amendment. Now that we have reasoned amendments, arguments are introduced into Second Readings, and I do not see the difference between this precedent, the gate having been opened, and an instruction from another part of the House.
§ Mr. Speaker
The hon. Member read out the amendment and he correctly states exactly what will happen if the House declines to give a Second Reading to the Local Government Finance Bill. I cannot see his point. He knows perfectly well what the amendment says, and that is what we are about to debate.
§ The Secretary of State for the Environment (Mr. Nicholas Ridley)
I beg to move, That the Bill be now read a Second time.
The objectives of the Bill are, first, to abolish the inequities of the present domestic rating system; secondly, to make local councils more responsive and accountable to their electors; and, thirdly, to provide badly needed protection for business ratepayers. It will achieve those objectives first by replacing domestic rates with a fairer community charge; secondly, by establishing a uniform business rate, and, thirdly, by introducing a simpler and more stable grant system. Together, those proposals will provide the essential linkage between those who use, pay and vote for local services.
I think that it is generally agreed now that the present domestic rating system has not controlled local spending. It does not provide accountability and it is unfair. It must now go. Excessive local spending has plagued Governments of both political colours. When the International Monetary Fund was here and the late Anthony Crosland had to call time on the municipal partygoers, it was the Labour Government who first cut central grant support. It was the Labour Government who invented grant holdback.
My right hon. Friend the Member for Henley (Mr. Heseltine) will doubtless confirm that at the outset of this Government an important goal of his approach was to restrain local spending by means of the Local Government, Planning and Land Act 1980. We have had some success. The average real annual increase in local authority spending has fallen since the 1970s, but it is still too high. Since 1979–80 local spending has increased by 18 per cent. in real terms, but by much more than that in many of our cities run by the Labour party. That is an unacceptable burden when the key to prosperity lies in reducing the burden of how much the state spends and how much it taxes and borrows.
We have a system in which control of local government's £45 billion gross annual spending is vested in 35 million electors. Yet only 18 million are liable to pay rates and more than 3 million of those receive a full rebate. The fact is that 20 million of the local electorate make no direct contribution to the cost of local services. Under the present system half of local revenue is raised from businesses which are defenceless against exploitation by authorities, particularly those controlled by the Labour party.
The domestic rating system is also unfair. Many who benefit from local services pay nothing towards them. 1116 Payments based on rental values bear little relationship to people's ability to pay and even less to their use of local services. Forty per cent. of homes with above average rateable values are occupied by those with below average incomes. It is unfair that a single person can pay the same as four wage earners in the house next door. It is unfair that, because rateable values are taken as a measure of ability to pay, those in high rateable value areas pay more for the same services than those in low rateable value areas regardless of their income. As my hon. Friend the Parliamentary Under-Secretary of State said in response to the hon. Member for Workington (Mr. Campbell-Savours), a poor family in Birmingham is effectively subsidising a richer family in Copeland.
§ Mr. Patrick Cormack (Staffordshire, South)
My right hon. Friend used two extremely significant words. He referred to "wage earners". If the community charge applied only to wage earners, many people would have fewer objections to it.
§ Mr. Ridley
I would be delighted to withdraw the phrase "wage earners" and say "people". It applies whatever the source of one's earnings whether they be wages, salaries or benefits. I want to answer my hon. Friend with a precise example because he will find this revealing. In 1987–88, the shire area with the highest average rate bill was south Buckinghamshire where the average domestic rate bill per adult was £400, but the spending by the authority per adult was £650. The area with the lowest average rate bills was Pendle where the average rate bill per adult was £130, but spending per adult was £700. Thus, for example, a pensioner with no other income would pay three times as much for less spending in south Buckinghamshire than in Pendle. That is a measure of unfairness which is unconnected with earnings.
§ Mr. Ridley
I will give way to the hon. Member for Southwark and Bermondsey (Mr. Hughes) and I will then have got that over with for the day.
§ Mr. Hughes
Will the Secretary of State remind the House that the high-spending local authority of south Buckinghamshire is run by his Conservative colleagues while Pendle— [Interruption.] — the low-rating and low-charging authority, is run by my Liberal colleagues? What outside organisations, including those in local government, support his proposed solution to the abolition of rates? Who are the supporters?
§ Mr. Ridley
I must take the hon. Gentleman through the figures again. Spending per adult in south Buckinghamshire is £650. Spending per adult in Pendle is £700. Therefore, south Buckinghamshire is a low-spending area and Pendle is a high-spending area. But the people living in south Buckinghamshire pay three times as much as the people in Pendle.
§ Mr. Ridley
Last night, speaking alone, the hon. Gentleman described himself as "these Benches". I hope that "these Benches" — whatever they may be— do not make the same mistakes that he has made.
§ Mr. Ridley
No, not at the moment.
I think that I am right to say that no major political party supports the present system and all agree that there must be change. So domestic rates must go and few now dissent from that. That is the first leg of the Government's argument. The second leg is to find the best alternative. I believe that the Bill provides the best system — the community charge. It is fair, workable and, above all, accountable.
It is fair because it provides that nearly all adults will pay a flat rate local charge for local services which broadly reflect their use of local services. It is therefore a sort of pricing mechanism which regulates—
§ Mr. Beaumont-Dark
Will my right hon. Friend explain this? Those of us who agree with him about the unfairness of the present rating system are mightily perplexed as to how it can be fairer for someone living in a house worth £1 million to pay exactly the same rate as someone living in a hovel with rain pouring down the walls. How can that be fairer? Surely it is the fact that there is no true basis for the ability to pay that matters. Surely the ability to pay must play some part in a just scheme.
§ Mr. Ridley
My hon. Friend must, therefore, feel that vehicle excise duty, the television licence and a whole host of other charges that are flat-rated across the population are unfair. I have never heard him protest about those imposts because they are not related to the ability to pay.
The Bill is also fair because, accompanied by the new grant system—
§ Mr. Ridley
No, I want to make a little more progress and I will give way later. It would be a good idea if hon. Members reserved their marvellous contributions for the speeches that they want to make later.
§ Mr. Skinner
On a point of order, Madam Deputy Speaker. It is just curiosity really. The Tory hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) said that this Tory Minister is mad. It is in order—
§ Mr. Ridley
To my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who said that it was unfair to expect everyone to make the same contribution to local services regardless of their income, I would say this: we do not propose that they should. The community charge will raise only enough to cover about a quarter of local spending. About half will be met by grants from national taxpayers and a quarter will come from business ratepayers. Households in the top 10 per cent. income bracket will pay 16 times as much towards local services as the bottom 10 per cent. In addition, the cost of the rebates, which will be about £1,500 million, will be borne by national taxpayers, as will the benefit upratings which I have already mentioned.
My hon. Friend the Minister for Social Security and the Disabled will today confirm that the poorest will be protected with rebates of up to 80 per cent. of their community charge, with a tapering rebate down to zero as incomes rise. Those who receive 80 per cent. rebates will include all those on income support and all those fully reliant on state retirement pensions. Those on income 1118 support will also receive additional help with the remaining 20 per cent. of the bill through the income support arrangements.
§ Mr. Robin Maxwell-Hyslop (Tiverton)
Has my right hon. Friend not yet had it drawn to his attention that there is a very substantial band of people who do not qualify for housing benefit, as it is redefined—the people on very low incomes? They will have to pay the whole community charge. He must address himself to this problem or suffer the consequences.
§ Mr. Ridley
My hon. Friend, and all hon. Members, will know that as people's incomes rise above the level at which they qualify for a benefit, they will have problems paying the full amount of a charge. In this case, we have provided a taper, which means that the transition from paying only 20 per cent. to paying the full amount will be eased up the income scale. But there is no escape from the fact that if a benefit is directed at those on low wages, as they go up the incomes scale, they will have to start paying the charge.
I accept that the community charge will cost more to collect than rates, but ease of collection by itself is not a good argument for a tax. If it was, we would put the entire cost on to petrol duty. Ease of collection is not the test applied by those who favour alternatives such as a banded charge or local income tax.
The community charge will probably be twice as expensive to administer as the rates, and I have no doubt that there will be some evasion. But many chief officers are confident that they can manage, and are already well on with their plans for computerisation, administration and enforcement of the new system. The recent report by Cipfa Services Ltd. on the implementation of the community charge in Scotland confirmed that the system would be operable there by 1 April 1989. I have no doubt that, once the period for posturing and gesturing is over, others will rise to the challenge.
The community charge will provide accountability. Few have seriously challenged this claim. Voters will be able to make simple comparisons between the costs of services in their area and those in others. If the full system had been in place this year, authorities everywhere would have needed to charge £178 per head to provide a standard level of service. In some areas, that figure might have been as low as £130. In others, it might have been substantially higher. Whatever the figure, voters will know that it reflects the decision on spending which their council has made on their behalf.
§ Mr. Tony Marlow (Northampton, North)
I understand that some of my hon. Friends are floating the idea of a banded community charge. My right hon. Friend has been telling the House about the administrative costs of collecting the tax. Could he give the House some indication of what a banded community charge would cost and how much bureaucracy and administration would be involved in collecting it?
§ Mr. Ridley
It would certainly cost much more, but I shall deal with the banded community charge later.
The hon. Member for Copeland (Dr. Cunningham) will no doubt quote many high figures at us. He should quote them at his friends in local government and ask them what they plan to do about it. The new system will bring a new atmosphere to local politics. By giving people a clear sign 1119 of the costs of local services, they will be more inclined to turn out and vote in local elections and to vote on local, not national, issues. That will be good for local democracy.
Getting away from the present unfair system will involve gainers and losers—
§ Madam Deputy Speaker
Order. The Secretary of State is apparently not giving way at the moment. Hon. Members should desist for the time being.
§ Mr. Ridley
To help to manage the change, we have proposed transitional arrangements to phase in the full community charge over four years. First, domestic rates will be abolished and the community charge introduced in one go in 1990—
§ Mr. Kevin Barron (Rother Valley)
The Secretary of State talks about people having choices in local elections. Does he believe that it is fair to tell a family containing elderly people that the non-statutory home help will be taken from them because of other people's attitudes at the ballot box? Will it he fair to tell big families with young children that their non-statutory nursery education will be removed? Are those real choices for Britain in the 1990s?
§ Mr. Ridley
That intervention justified my previous action in not giving way. The hon. Gentleman does not understand that the choice is between providing services effectively, efficiently and cheaply and providing them extravagantly, stupidly and wastefully, as happens in many authorities run by the Labour party.
Domestic rates will be abolished and the community charge introduced in one go in 1990 in all areas except those where high spending causes very high community charges—the area covered by the Inner London education authority and Waltham Forest. Secondly, the new system will sweep away the unfair system of resource equalisation whereby those in high rateable value areas subsidise those who live in low rateable value areas. Instead of people paying widely different amounts for the same local services, everyone will pay the same. Of course, those who presently benefit from the hidden subsidies will regret their passing. But for those who live in areas where rate bills are unnecessarily high, our proposals represent fairness. Hence we have always included proposals for the safety net. It will not be an additional burden on the areas which will contribute to it; they are contributing to it now. But to allow time—
§ Mr. David Gilroy Bevan (Birmingham, Yardley)
Is Birmingham disprivileged by this proposal? The first announced figure on 1987–88 spending, with full poll tax and no safety net — year 1994–95 — was £186. About three or four weeks later my right hon. Friend announced a figure of £249. In my innocence, I assumed that this was a disprivilege to my city of Birmingham. I ask him whether, in the unbending from £249 to £186, for the first time the ratepayers of Birmingham will be relieved of the monstrous imposition that has existed for about 55 years. Is this a real reduction, or will they be paying more?
§ Mr. Ridley
My hon. Friend's constituents are already contributing that amount of money, through rate 1120 equalisation, to other parts of the country that are judged to be less favourable but very often are not. We are proposing to phase out the taxation of his constituents to benefit other constituents in other parts of the country. My hon. Friend believes that that should be done. We are the only party with a plan that suggests that that redistribution should be phased out, albeit over four years. In Committee we can discuss whether to phase it out over four years, or over a shorter or longer period, but phase it out we shall so that his constituents have to pay only for the level of services which they receive. We shall limit contributions to the safety net to £75 per adult. That means that many areas will benefit immediately from the change. Elsewhere the change will feed through progressively up to 1994. Of course, I understand the concern of hon. Members, including my hon. Friend, whose constituents will continue to contribute. I have much sympathy with them, but they must also consider the interests of those whose burden increases as we move towards a fairer system, such as those who live in the constituency of the hon. Member for Copeland.
§ Mr. Teddy Taylor (Southend, East)
Is the Secretary of State aware that in Southend, where the majority of the population readily accept all Government policies, irrespective of their content, local authorities are genuinely concerned about collection, and how we can chase people and get hold of them, particularly as a number of people move around, and an even smaller number of them swap addresses, girl friends and boy friends? Will there be any national guidance for local authorities as to how payment can be secured? Have the Government considered a card or a tattoo to ensure that the money is actually collected, bearing in mind that it will be terribly unfair if a minority of business people have to pay for those who do not pay at all?
§ Mr. Ridley
Any money which is not collected by the local authority will fall to the other charge-payers to pay, because it will result in a shortfall of revenue to that authority. That will be sufficient incentive to the charge-payers and to the local authorities to maximise collection. We shall certainly be happy to advise and help any authority that asks us to assist it with techniques and methods of collection, which are well advanced already.
I must turn to the national business rates. The uniform business rate is an essential part of the package. It will stop high-spending councils putting more than half of their overspending on to businesses which have no defence. The proposal does not mean that in future 75 per cent. of local income will be under the control of central Government. Non-domestic rate income will be a tax collected locally with the yield assigned by law to local government.
It is argued that local authorities will be worse off because they will not be able to keep their own business rate income. That is to misunderstand the present position. Changes in non-domestic rateable value are equalised through the grant system. The more rateable value, the less the grant, and vice versa. The arrangements for pooling business rates will achieve more or less the same thing but in a more direct and transparent form.
§ Mr. Christopher Gill (Ludlow)
Is my right hon. Friend aware that, in regard to non-domestic rates, there are anxieties about the manner in which consultations have taken place between business and local authorities in the past? He will no doubt be aware that those consultations 1121 have often been called at the eleventh hour, without satisfactory briefing papers. Will he assure the House that adequate and satisfactory safeguards will be built in to the new legislation for businesses to be properly consulted by local authorities?
§ Mr. Ridley
My hon. Friend makes a valid point. I undertake to consider how best to provide the new consultation arrangements that he seeks, and make sure that they are properly carried out.
§ Mr. Michael Grylls (Surrey, North-West)
Is my right hon. Friend aware that there is widespread support for the proposed national business rate? It will bring considerable help and relief to businesses in the north of England, which have suffered so much. However, is he aware of the anxiety that exists amongst businesses in the south, particularly the smaller businesses for whom rates form a very high proportion of their costs — a much higher proportion than for large firms? Will he consider representations for a safety net, to ensure that business rates, particularly for smaller firms, do not go up by more than 15 per cent. per year?
§ Mr. Ridley
Perhaps I should give way to my hon. Friends on all occasions. Their interventions are extremely sensible and helpful. We shall certainly consider whether we can improve the transitional arrangements for businesses which face increases in their business rate, and we shall see whether we can improve the suggestions that we have already made, on the lines of my hon. Friend's ideas.
The second function of the unified business rate is to remove the arbitrary variations in the amounts businesses pay at present. Rate poundages vary now by a ratio of 3:1, yet the services to businesses hardly vary at all. A business ratepayer in Manchester now pays 60 per cent. more in rates than his identical competitor in next-door Trafford, for no obvious benefit to him. That is not fair.
Together with the effect of the revaluation—which is now under way—those proposals will reduce rates by some £700 million in the north and midlands. The unified business rate alone will reduce rates by £380 million in inner city programme areas. Those reductions will give a major boost to employment in the areas of greatest unemployment and, at the same time, reduce the pressure for development in the south-east. That should be welcome news both to the Labour party and to my hon. Friends. Business location should be determined by business considerations, not by vagaries of local spending decisions. The changes for some businesses will be large.
§ Madam Deputy Speaker
Order. Even an insensitive person like me recognises that the Secretary of State is not giving way at the moment.
§ Mr. Ridley
I shall give way to the hon. Gentleman, but I hope that he will understand that I have given way to everyone so far, with one or two exceptions. —[Interruption.] I have a lot more to say, and I ask hon. Members to accept that I am not giving way because I want to allow as much time as possible for other hon. Members to speak.
§ Mr. Campbell-Savours
The Secretary of State referred to a statement made by his junior Minister in reply to me some weeks ago when he said that the poor people of Birmingham are subsidising the rich people of Cumbria. Will he explain what lies behind that statement? Does he mean that there will be a redistribution of the way in which the rate support grant works, away from the county of Cumbria and in favour of other counties in the south? That means a substantially greater level of community charge in the north of England, in the county of Cumbria, than we are assessing and calculating today.
§ Mr. Ridley
The hon. Gentleman does not have it right. The present system means that there is a massive withdrawal of funds from certain areas with high rateable values to the benefit of others with low rateable values. So Birmingham is now subsidising counties such as Cumbria. We intend to be neutral in this matter, and have no cross-subsidy from one area to another.
The changes for some businesses will be large. They cannot be absorbed quickly, so, as I said to my hon. Friend the Member for Surrey, North-West, (Mr. Grylls), the Bill provides for transitional arrangements for those facing substantial increases over the full five years to the revaluation in 1995.
We are all agreed that the present system must go. I have described one option, which we believe is the best. In coming to this conclusion, of course we looked at the alternatives. During the passage of the Bill, I am certainly keen to examine in detail any alternatives put forward. We will analyse any detailed options which hon. Members want to put forward, and if possible help them with exemplifications of their ideas in terms of their effects on different local authorities. The Standing Committee will, of course, be free to consider them all. I have to say that no alternative that has so far been put forward is satisfactory, and we remain in no doubt that the community charge is superior to the alternatives.
First, let me look at the alternatives of the Labour party. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) told us in July that he did not wish towalk naked into the debating Chamberwithout an alternative policy. I had hoped he would have been able to spare you, Madam Deputy Speaker, the embarrassment of his nakedness in the Chamber today; but I fear not. He still will not tell us what his alternative is. Indeed the hon. Member for Copeland said— I am told—on 4 December:It is no part of our obligations to produce detailed responses of what we do in four years' time as an incoming Government".What a damning admission. Apart from leaving the hon. Member for Perry Barr cold and naked, the Labour party's inability to adopt an alternative shows that it knows that all the alternatives are worse—if not totally unworkable.
The recent history of the Labour party's policy is that, on 7 May in the local elections, their candidates were briefed to campaign on putting capital value rates in place. Two weeks later, in the run-up to the general election, the Leader of the Opposition denied categorically that his party intended to go for capital rates at all. On 25 September, the hon. Member for Perry Barr promised that by the Second Reading—that is, today—We will have in place an alternative".On 4 December, the hon. Member for Copeland said: 1123I've made it clear I personally favour a modern property based tax … the question is do we ally a property tax with a local income tax, do we have some combination of the two".But, he added:We don't have to produce our final proposals until the next General Election.
§ Mr. John Heddle (Mid-Staffordshire)
If, as my right hon. Friend says, the Opposition propose to adopt one or other or both of those alternatives—a capital valuation, which is, in effect, a wealth tax, linked with a local income tax —would not that produce enormous administrative problems and bear even more heavily than a local income tax alone on every average family in the country? Has my right hon. Friend's Department done any calculations on the effect that that would have on the poverty trap and on all those who would suffer from what is, in effect, a wealth tax?
§ Mr. Ridley
My hon. Friend is entirely right, as I intend to show.
The Labour party's opposition to these proposals would be much more convincing if it had an alternative that we could compare. I almost put down an instruction to the Committee asking it to consider any alternative of the Labour party.
The reason for this vacillation, deception and evasion is because the Opposition know none of these ideas will do. I will demolish them for them—and the ideas of what used to be called the alliance at the same time. First, I shall deal with local income tax. It would produce crippling tax rates and tax bills in high-spending areas-25.6p in the pound in Camden and 20.9p in Lewisham, compared with, for example, 5.9p in Barnet, or 4.3p in Bromley. A single person on average earnings would save up to £1,600 a year by moving from Camden to Barnet, and up to £1,350 a year by moving from Lewisham to Bromley.
People on higher earnings would have an even higher incentive to move. Those people who are vital to creating a balanced society in inner cities — the job-providers, business men, professionals, teachers, lawyers, doctors, social workers and so on—will have a huge incentive to move out, and the development pressures in low-spending areas will become even greater. The problem of fiscal migration has long been recognised by economists as a major drawback to any form of local income tax. Even in low-tax areas, the bills would be high. A single, newly qualified nurse would pay more in local income tax than she would pay in community charge in every local authority area in the country. In Westminster, she would pay £700 local income tax, compared with £400 community charge. On average, a single person on average earnings would pay £482 a year, compared with an average community charge of £224—more than double. Those who advocate this system have to make it clear whether they would be prepared to reintroduce resource equalisation and compensate authorities whatever the level of their spending. If they would, that would be a licence for any authority to continue spending, because it need not care how many people move away. If they would not, tax rates would soar as the better-off moved away. The incentives on those who remained to join the exodus would further increase. One economist has called that "musical suburbs". But it would be no parlour game.
Next, there are difficulties of enforcement. The tax would have to be enforced by means of a register, to stop people giving the Inland Revenue false addresses in low 1124 tax areas, and the income of each person on the register would have to be ascertained and given to the local tax authority—
§ Madam Deputy Speaker
I believe that the Secretary of State has given way to the hon. Member for Edinburgh, South (Mr. Griffiths).
§ Mr. Griffiths
If the Secretary of State believes that the figures show that the charge and the rebate system are fair, will he please explain why his right hon. and learned Friend the Secretary of State for Scotland produced figures two weeks ago that showed that in one of his low-rated authorities — Orkney Islands — people on supplementary benefit income level will have to pay, not 20 per cent., but 41 per cent. of community charge when the poll tax comes—including the personal community charge and the community water charge? Does he call a poll tax rate of 41 per cent. imposed on widows, sick people and pensioners a fair rate?
§ Mr. Ridley
The hon. Gentleman will not expect me to know the details. However, I know that he included in his question the water rate and he knows quite well that in England we do not pay that in the same way as it is paid in Scotland.
§ Mr. Ridley
I am sorry, I am not giving way.
Adding capital value rates to this makes the problems worse. Exactly the same criticisms about the fairness of a capital value rating system apply to a rental value rating system, only more so. Capital values vary even more than rental values across the country, so the resource equalisation transfer from high-value to low-value areas would need to be greater. On top of the administrative problems of a local income tax, there would need to be another collection system for rates and a complete revaluation of domestic properties based on capital values. The result would be to compound the unfairnesses of the present system, particularly for the less well off — [Interruption] J—living in high rateable value areas.
§ Mr. Patrick McLoughlin (Derbyshire, West)
On a point of order, Madam Deputy Speaker. This is an exceptionally important piece of legislation but even the Opposition spokesman is having trouble hearing because of the barracking from his own Benches. —[Interruption.]
§ Mr. Ridley
I shall pause until everyone can hear.
To combine capital value rates and a local income tax would be disastrous, which is why the hon. Member for Perry Barr is still naked. The hon. Member for Copeland obviously knows it, or he would not be so shy about advancing such a combination. If he is even rash enough to do so, I will have pleasure in providing him with some helpful exemplifications of the effects on people's local tax bills. It is damaging that the Opposition, while agreeing that the present system is grossly unfair, have absolutely no idea of what to replace it with.
By contrast, my hon. Friend the Member for Ealing, Acton (Sir G. Young) is far from naked. He is impeccably dressed in a banded community charge suit. However, his 1125 suit is not bespoke but off the peg, the CIPFA peg, and I am afraid that it fits ill. I fear that it represents the worst of all worlds. The proposals put forward by CIPFA contain a series of enterprise and employment traps that are pernicious and unique to this form of local tax. These traps arise because of the steps between the bands. If people earn a little more and thereby fall into the next income band, they would find that the extra amount of local tax that they would have to pay would be more than their extra earnings. Even an extra £1 or £2 a year on wages could mean an extra £400 on the local tax bill. In some cases it could mean an extra £2,000. To avoid this, as I am sure my hon. Friend would want, he would have to go for a taper between the bands. That is to say, a full local income tax.
Progressivity in local taxation, with our tiny local authority areas, is bound to lead to the local brain drains that I have described. We need to minimise them because of the damage that they do to urban communities, and I know that my hon. Friend is equally concerned about that. I will give him just one example of what the CIPFA scheme would mean for local taxpayers in high-spending areas. Using its methodology, with corrected Inland Revenue data, we estimate that in Greater London—where my hon. Friend represents a constituency with the misfortune of having a Labour-controlled council—a person with a taxable income of £10,000 a year would have to pay on average £1,600 in local income tax. On £20,000, he would have to pay £4,270 and, on £30,000, he would have to pay £6,135. I rather doubt that his constituents would welcome that. I understand full well that sense of responsibility that makes my hon. Friend feel that the rich should pay more than the poor, although, as I have explained, they will.
The answer to this concern, which is shared by many, is that the progressiveness of taxation must be seen as a whole in that the contribution of rich and poor to the public purse must be considered across the whole field of taxation. Only one person — the Chancellor — can do that, though of course many are keen to advise him and will no doubt continue to be. It would be disastrous to have 400 Chancellors, one in every town hall, and especially one in Ealing town hall.
§ Dr. John Cunningham (Copeland)
The Minister makes the point that there is only one Chancellor of the Exchequer. Will he assure the House that if the poll tax is introduced the Chancellor will promise not to introduce a domestic property tax?
§ Mr. Ridley
I cannot promise on behalf of my right hon. Friend. I would have thought that it was self-evident that after abolishing a domestic property tax we would be unlikely to seek to introduce a new one later on.
If we are to avoid migration, whether local or national, if we are to keep the incentives that have so dramatically increased our prosperity since 1979, and if we are to keep unemployment on the way down, redistributive taxation must be a national and not a local policy. It would be a mistake to allow prejudice to jeopardise prosperity even at local level. This is why, although I believe that we have the right solution, I am ready to look at any scheme that my hon. Friend might suggest which would help to meet his concerns. However, I have to tell him that the CIPFA scheme is fatally flawed.
1126 It is customary to outline the main provisions of a Bill. However, I think that I have discussed the content of our new proposals in sufficient detail.
§ Mr. Ridley
Therefore, I do not propose to go through the various parts of the Bill. These proposals are fundamentally to restore local democracy. They will restore to local authorities logical and practical—
§ Mr. Eddie Loyden (Liverpool, Garston)
The Minister's voice is getting weaker and is now almost as weak as his case. Will he raise his voice a little? He cannot improve his case but perhaps he can improve the level of his voice.
§ Mr. Skinner
I am a lot closer to the Secretary of State than my hon. Friend and I and my colleagues on this Bench are having the same difficulty in hearing him. What worries me most is that the Prime Minister has said that this Bill is the flagship of the Government. If the Minister is leading the flagship, he should want to proclaim the Bill to the world, never mind the House.
§ Madam Deputy Speaker
Order. I noticed that the hon. Member for Bolsover (Mr. Skinner) was engaged in deep conversation for some time.
§ Mr. Graham Allen (Nottingham, North)
Further to the point of order about hon. Members having difficulty in hearing, Madam Deputy Speaker. Is the Secretary of State having difficulty in hearing Opposition Members who are rising to ask him questions about this proposal?
§ Madam Deputy Speaker
Order. The Secretary of State gave way on several occasions and made it quite clear on others that he was not prepared to give way.
§ Mr. Ridley
I am afraid that the only conclusion one can draw from the past three-quarters of an hour is that the Labour party is determined to oppose the Bill, not by putting forward alternative strategies, not by putting forward an idea of its own, not by having the slightest intention of telling the electorate what it would do, but by shouting down those who advocate the Bill.
§ Mr. Ridley
It is the same technique that we saw last night, of trying to get the mob to suppress opinion. It is exactly typical of what happened in the Strangers Gallery last night. —[Interruption.] It is exactly what goes on in Labour town halls up and down the country. I hope that the Opposition can hear what I am saying. They do not like to hear it, but it is high time that they did.
§ Dr. John Cunningham (Copeland)
I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:this House declines to give a second reading to the Local Government Finance Bill because of the absence of any grading in the rate of community charge in proportion to the ability to pay and because of the absence of a comprehensive rebate scheme which would also take account of ability to pay.1127 We came to the launch of the Conservative Government's flagship—and it sank. We noticed that the skipper was not on board; we assume that she had inside information. We note that the Secretary of State did not command the support of a single member of the Cabinet for his performance.
§ Mr. Bill Walker
On a point of order, Madam Deputy Speaker. It will have been brought to your notice that the hon. Member for Copeland (Dr. Cunningham) commented to the effect that there were no members of the Cabinet on the Treasury Bench. My right hon. and learned Friend the Secretary of State for Scotland is here.
§ Dr. Cunningham
All I can say about the Secretary of State for Scotland is that he has certainly been keeping his head down.
The Bill contains proposals of the most profound importance for all the people of Britain. The consequences of a flat-rate personal poll tax will be much greater than those of any Finance Bill this century. The nature and scale of the proposals are such that every household, every adult, every organisation involved with people will be affected — the churches, charities, voluntary organisations and all of industry and commerce. This is not just another Local Government Finance Bill. It envisages the abandonment of the principle of fairness in personal taxation. It proposes unprecedented central control over 75 per cent. of local government finance and the introduction of a national business property tax. If these ideas are accepted, Britain will be unique in Western democracy because they have been rejected by every democratic political party, except the British Conservative party.
The true nature of the poll tax is exposed by an analysis of new powers and ministerial discretions in the Bill. They range from rebates, poll tax capping and future grants to local authorities to demands for information. In total, there are 344 such instances in this one Bill where only Ministers will decide what is to happen. These facts flatly contradict the Tory argument that the Bill is about greater local accountability. Parliament should deeply consider whether such changes are justified or necessary, and that is why we believe that the Bill as a whole should be considered on the Floor of the House.
The House should pause before taking yet another giant stride along the path of central control in Britain and reflect on the Government's record and the consequences of their policies. I have that record. In case anyone is in any doubt, I brought it all along with me: 46 local government Acts in eight years, 2,730 pages of legislation, 12 major changes in local government finance. Why should the House be persuaded by the Secretary of State that the Government have it right this time, when we have the encyclopaedia of failure here in front of us?
On each occasion, the Environment Secretary has said, "This Bill and these powers are necessary to control local government expenditure— to bring more accountability and to clarify the law more and more." Every member of the present Cabinet voted for the lot: targets and penalties, abolition of the English metropolitan counties, rate capping and grant-related expenditure assessments. We fundamentally opposed it all, and so did virtually all of local government.
1128 Now, without a blush, another Environment Secretary tells the House, "It is all over. It is no good. It does not work any more." With a gleam in his eye he proceeds to produce a new solution — a medieval flat-rate poll tax and a national tax on business property. As Bagehot said of Lord Brougham,If he were a horse, nobody would buy him; with that eye no one could answer for his temper.The Government assert that Britain's economy is strong, even booming, and that Britain is enjoying considerable economic success. But none of that alleged success brings any extra benefits in expenditure or the provision of better quality public services, on which the coherence, well-being and future of our society depend — education, housing, health, social services and the environment. The Government choose to ignore the crises that their policies have caused in housing, the Health Service and the inner cities. But a poll tax and a national property tax will exacerbate them and make it more difficult for people and families to escape the awful reality of those crises. A poll tax, a national business property tax and the new grant system, taken together, will make it more difficult than ever for local authorities more effectively to help their communities.
§ Mr. Eric Forth (Mid-Worcestershire)
Does the hon. Gentleman agree that the background to the proposals before the House, and an unusual amount of detail about them, was contained in the Conservative party manifesto for the general election this year? If he does concede that point—I am sure he must, because it is true—he cannot be surprised, nor can the House, when my right hon. Friend the Secretary of State produces a Bill that reflects with great accuracy what was in that manifesto, on which we won the election.
§ Dr. Cunningham
Of course I concede that the commitment to a poll tax was in the Conservative manifesto— it is a matter of fact. But I read with some amusement in "First Magazine" the comments of the hon. Member for Staffordshire, South (Mr. Cormack):It may have been in the manifesto, but it was not in my election address.
§ Dr. Cunningham
I shall come to that later. [HON. MEMBERS: "Answer."] Don't worry.
The Government choose to ignore the crises that their policies have caused. The House should ask Ministers who supports the proposals, and what is the case for them. True to form, the Government have not had the courage or the openness to publish the responses to the Green Paper. or even to publish a White Paper. It is clear none the less that there is not, and never can be, any political consensus on the proposals, and the Government have not even sought one.
More worrying—and perhaps more important—there is no significant social or economic consensus on the Government's position either. The ideas of the poll tax and the national business property tax have been massively rejected by nearly every organisation in Britain — the churches, the voluntary organisations, the Confederation of British Industry, the Institute of Directors, the National Federation of Self-Employed and Small Businesses —
§ Dr. Cunningham
I shall give way in a moment.
1129 The Economist called it "a bad new tax" which would make the local tax system worse. The CBI said:We cannot support the present proposals because of the social and political problems of the community charge, the lack of connection between local businesses and local authorities".The Institute of Directors said:A good local tax must be fair and accountable. The proposal for the national business property tax runs totally contrary to this principle".
§ Dr. Cunningham
When I have finished this passage, I shall give way.
The National Chamber of Trade said:A uniform business rate is not acceptable to the NCT.The Forum of Private Business said:The Government's rates reform proposals will have a disastrous effect on most of the UK small business sector".The National Federation of Self-Employed and Small Businesses said:We cannot support the concept of a uniform business rate because it fails to meet our fundamental objectives of equitability in the non-domestic sector and does not recognise business profitability and ability to pay.The three key professional institutions—the Rating and Valuation Association, the Chartered Institute of Public Finance and Accountancy and the Royal Institute of Chartered Surveyors—have all criticised all or part of the proposals.
§ Dr. Cunningham
I can only say that that is true to form for the Institute of Directors. It says one thing in one forum, and another thing in another.
§ Dr. Cunningham
I shall give way in a moment.
The Prime Minister and her Cabinet, if they were present—but I see that we now have the Secretary of State for Wales in our midst—could not even turn for comfort to that fount of Tory ideas, theory and doctrinal rectitude, Adam Smith. Adam Smith wrote:Capitation taxes, if it is attempted to proportion them to the fortune or revenue of each contributor, become altogether arbitrary … and if it is attempted to render them certain and not arbitrary, become altogether unequal … and the greatest sum which they have ever afforded, might always have been found in some other way much more convenient to the people.What a condemnation that is of what the Government are now proposing.
§ Mr. Leigh
I am grateful to the hon. Gentleman for giving way. I wonder whether he can now answer the question put to him by my right hon. Friend the Secretary of State. In particular, can he answer the question that might be put to him by a London docker in a modest house who would face a massive 80 per cent. increase in his rates 1130 if they were based on capital value, which we understand to be Labour party policy? Would he say, "Let me put you out of your misery, brother"?
§ Dr. Cunningham
No, I certainly would not. However, I admire the hon. Gentleman's wit, and I shall come to his point later in my speech.
The Government's main objective is plain. The Bill is a last-ditch attempt to control local government expenditure even more comprehensively than before. The Government wish to establish a system of local government finance that is designed to undermine local government. Why should further proposals designed to secure reductions in local government expenditure be necessary, when we consider the facts? In 1978–79, it was 10.5 per cent. of gross domestic product. In 1986–87, it is 10.7 per cent. of GDP, an almost neglible difference. Is not the Bill's real purpose to undermine the quality and range of publicly financed services?
The Government's case for the Bill, if there is one, rests on discredited arguments, dubious political claims and totally unsubstantiated assertions of the kind that we have heard today from the Secretary of State about local government finance and local taxes. Ministers say that the poll tax is necessary to make the system fairer, to improve accountability in local voting and to simplify the system. We challenge all those assertions.
We are told that the rates are too narrowly based— that not enough people pay rates. Let us look at the figures. A total of 19.5 million people receive a rates bill, and 12 million of them have spouses. At least 31.5 million people now contribute to rates, excluding other adults such as grandparents and children over 18 living at home. Income tax is paid by 20.4 million people. Conservative Members are not saying that, to make voting more responsible in general elections, more people should pay more income tax, are they? Is that the argument?
§ Dr. Cunningham
I am not giving way now. I shall do so in a moment.
The Government allege that only householders pay rates, yet in their own poll tax leaflet which is being issued to the people of Scotland they say:Each partner in a couple is responsible for paying their own poll tax but households' finances are often organised on a joint basis.
§ Mr. Bill Walker
The hon. Gentleman gave some very interesting figures about those who receive rates demands. Will he now link to those figures the number of people receiving rates demands who are receiving substantial, if not full, public assistance in paying their rates? More than 50 per cent. of council tenants receive such assistance.
§ Dr. Cunningham
We do not object to that. We are concerned about people's ability to pay.
In issuing that leaflet in Scotland, the Government are already contradicting the stupidity of their own assertions about the number of people who make a contribution to the rates. The argument that rates are not being broadly based is bogus. In proposing a flat-rate poll tax unrelated to a person's ability to pay, the Government are abandoning any claim to be fair in their taxation policy. Their argument seems to be "no representation without taxation".
In fact, the Government's own figures show that 14.2 million people will gain from the introduction of the poll 1131 tax, and 18.8 million will lose. We reject as contemptible the argument that people, regardless of income, must pay more tax to make them more accountable in their local voting. That view calls into question the abolute right to vote. We reject the argument, as a sham, and the theory as one that undermines the universal franchise, which for Opposition Members is simply not negotiable—
§ Dr. Cunningham
—and cannot be related in any way to tax payments. It is a threat to democracy itself.
§ Dr. Cunningham
I shall give way in a moment.
The Prime Minister — who is conspicuous by her absence — made her reckless, infamous promise to abolish domestic rates in October 1974, and she said that she would do it by Christmas. She did not say what year.
When the Prime Minister made that promise, she said something else. I quote from her press release:Any future local revenue should be based not on property but on the ability of people to pay.
§ Mr. Marlow
The hon. Gentleman knows that, whether people pay income tax or not, everybody pays value added tax and other taxes to central Government. Everybody is accountable to that extent. However, does the hon. Gentleman accept that, largely in Labour-controlled local authorities, only one in four ratepayers pays the full rate? Does he call that accountability? What will he do about that?
§ Dr. Cunningham
I have just explained—clearly the hon. Gentleman was not listening carefully or did not understand — that the whole argument is bogus. The Prime Minister promised that the new system would be based on the ability to pay, but what happened to that promise? The Secretary of State said nothing about it. It has been ditched, abandoned and cynically cast aside because everyone knows that, whatever else a flat rate poll tax may be, it is definitely not related to the ability to pay. That is the whole point of it.
The Secretary of State does not believe in fairness in taxation or the ability to pay. He made that clear on 1 June in Blackburn during the general election compaign, when he said:I think, in terms of local authority services, people should be paying for what they get. It has nothing to do with how rich you are. In this country we are too sold on the idea that the rich should he made to pay for other people's … services.That is an example of the right hon. Gentleman's philosophy.
The argument is that non-ratepaying voters can exploit their ratepaying neighbours and that councillors can buy non-ratepayers' votes with domestic ratepayers' money —[HON. MEMBERS: "That is true."] Oh yes, that is the argument. It may sound plausible, but if it is valid in practice, there should be some evidence to support it. There should be a consistent relationship between the proportion of the electorate paying rates and the size of those rates. The highest rate increases should occur where the fewest electors pay rates. The Government should possess the information — if they have any — to substantiate the argument, but it is not present in the Green Paper, in the right hon. Gentleman's speech, or in any parliamentary answer that we have had from the 1132 Department of the Environment. Indeed, the right hon. Gentleman complained that we have asked too many questions. The reason why that evidence is not available is that it does not exist.
§ Dr. Cunningham
I shall give way to the hon. Gentleman in a moment.
Without such evidence, the argument that domestic rates weaken rate restraint cannot be used to justify levying a local tax on all the electorate.
§ Mr. Taylor
Does the hon. Gentleman accept that the reason why the evidence to which he has referred does not exist is the operation of rate support grant, or has he not heard of that?
§ Dr. Cunningham
Of course I have heard about the operation of RSG. After all, we have debated it again and again and again and we know that it has gone down again and again and again.
All the changes proposed are in the name of improving the accountability of voters in local elections. Perhaps the Secretary of State or the Prime Minister will explain why people in large houses and with large incomes—wealthy people — will need to pay less tax to become more accountable while people in small houses and with small or medium incomes, who are not wealthy, must pay more tax to become more accountable? What is the answer? What is the basis, logic and philosophy behind such an argument? There is no logic or fairness. If there is a philosophy, it can only be described as a contemptible one.
§ Mr. Irvine Patnick (Sheffield, Hallam)
I have listened to the hon. Gentleman rant on with his negative opposition to the Bill. However, the Labour party has no alternative. It has not made up its mind whether it wants capital values, capital rating, local income tax or what. All the hon. Gentleman has done is to say that we are wrong, but he should tell us about the alternatives proposed by the Labour party. My right hon. Friend the Secretary of State offered to listen, and the hon. Gentleman should explain the Labour party's alternatives.
§ Dr. Cunningham
I shall come to that later.
There is no philosophy in this measure that we can recognise or accept and none that any other democratic party in any other country could accept—all of them have rejected the poll tax.
In the United States, such a tax has been constitutionally outlawed. The 24th amendment to the American constitution says:The right of citizens of the United States to vote in any federal elections shall not be denied or abridged by the United States or any state by reason of failure to pay any poll tax or other tax.In 1966 the United States Supreme Court applied the same rule, by way of the equal protection clause of the 14th amendment, to state elections. Justice Douglas said:Wealth or fee paying has, in our view, no relation to voting qualifications; the right to vote is too precious, too fundamental to be so burdened or conditioned
§ Dr. Cunningham
Today, the Tory Reform Group issued a paper on the Government's proposals that said:The Government's case for the community charge rests, above all, on achieving proper accountability. Yet this is precisely where it fails".The community chargeshows every sign of being an administrative nightmare and will result in a massive increase in the centralisation of power.On "The World at One" today, Mr. Christopher Mockler, talking about the document, said:The Government's case is fundamentally flawed.Let us consider the Government's case presented to us in the Bill. On the backside of the Bill—probably the right place—we have the names:Mr. Secretary Walker, Mr. Secretary Baker, Mr. Kenneth Clarke".On the front of the Tory Reform Group document we have a list of patrons including:The right hon. Peter Walker MBE, MP, … the right hon. Kenneth Baker MP, … the right hon. Kenneth Clarke, QC, MP,".I am not surprised that they were not present for the Secretary of State's speech.
The Tory proposals have no international support and little support in Britain outside the Tory party. Indeed, within that party, inside and outside the Cabinet, we know that dissent and disquiet is widespread. How can the flat-rate poll tax fit with the Government's argument about "taxing people into jobs"? Surely apprentices, young trainees, newly qualified young people in their first jobs, will be taxed exactly the same as the managing director earning perhaps 10 or 20 times their income. How will the imposition of a personal tax of about £10 a week on a young nurse in London, with a take-home pay of as little as £76 per week, encourage more nurse training, which is desperately needed by the Health Service? To suggest that such policies will not harm young people and their careers brings to mind Disraeli's description of the Peel Cabinet as "an organised hypocrisy".
The Government's refusal to take account of the ability to pay will increase women's poverty and difficulties. Women, who form almost half of the labour force, still earn less than three quarters of men's average pay. If overtime it taken into account, the figure falls to less than two thirds of men's average pay—a differential of over £69 per week. More than half of full-time women workers and three quarters of part-time women workers are among the low paid. Overall, two thirds of all low-paid workers are women. Some 5—5 million women, which represents over a quarter of the work force, earn less than the decent threshold. They will be expected to pay the same flat rate poll tax as someone who may be earning more in a month than they take home in a year.
In the case of married women, or women living with a man, who are unemployed, at home caring for children or sick or elderly relatives, the Government appear to assume that their partners will pay their poll tax.
So much for the Government's argument that all must pay individually to become responsible local voters. The Government cannot have it both ways. Either they are saying that millions of women who, for a variety of reasons, are unemployed have been and will continue to be irresponsible local voters, or they are admitting that everyone in the household has always contributed directly or indirectly to the household budget.
1134 Women have always voted as responsibly as anyone else, and I say that knowing that, regrettably, the majority of them vote for the Conservative party.
The Government argument has another massive flaw. How will the Bill improve local accountability when it proposes to give Ministers and Whitehall civil servants more power over council revenue than ever before? The Bill proposes that Ministers should control 75 per cent. of all council revenue, which is an unprecedented state of affairs. In paragraph 3.11 of the Green Paper "Paying for Local Government", the Government spoke ofthe key to an approach to local government finance that rests on responsible local spending decisions and a reduction in central Government intervention.We would certainly agree with that, but the Government's present system, which was introduced in 1980 and which has since been manipulated, rigged and subverted by the imposition of targets and penalties, has completely destroyed any rational relationship between changes in expenditure and changes in local rates.
§ Mr. Jacques Arnold (Gravesham)
As the hon. Gentleman is worried about the ability to pay, why has he not referred to the rebate system that the Government are introducing or to support from social security?
§ Dr. Cunningham
If the hon. Gentleman had bothered to read the Order Paper he would have noticed that that is the subject of our reasoned amendment. Where is the rebate scheme? Why is it not in the Bill?
The present position will be manifestly worsened by the Bill, which will vest in Whitehall the direct control of 75 per cent. of total local authority expenditure. The proceeds of the centrally controlled national business property tax will represent about 25 per cent. of local authority spending. On top of that there is the new revenue support grant, which represents about 50 per cent. of that spending. The Secretary of State will have control of about 75 per cent. of local council spending, and thus will have a much greater impact on the poll tax and the business rate than anybody else or any councillor, individually or collectively.
Where does that leave local authority accountability, based as it will be on a residual 25 per cent. to be funded by the poll tax? It means that for increased spending of 1 per cent. in total budget, a local authority will have to raise 3 to 4 per cent. more from its poll tax payers. This is the notorious gearing ratio that is at the heart of the Secretary of State's proposals. It is an obstacle that is designed to prevent additional local spending.
In an interview on Radio 4 on 21 July 1987, the Secretary of State said:Spending in excess of that receipt of money from the Government will obviously cause all the extra spending to be placed on the community charge".The Government intend to punish people who vote for better services in their communities.
§ Mr. McLoughlin
A few moments ago the hon. Gentleman spoke about the ability to pay. Does he believe that the present system reflects the ability to pay?
§ Dr. Cunningham
Not perfectly, I concede, but it is fairer than the proposals by the Secretary of State.
If all this was not enough, the provisions of clause 96 give the Secretary of State power retrospectively to change any local poll tax. Thus, after a local authority has decided its priorities, finalised the budget and fixed the poll tax, 1135 after it has fought and won an election on the basis of its manifesto and come to office, the Minister can retrospectively enforce changes. That renders the process meaningless. It is an unprecedented state of affairs, for which there is no parallel. That is not the way to improve accountability; it is a prospectus for chaos, disillusionment and cynicism in local government.
The implications of the collection fund for local electors and their understanding of the spending decisions of local councils are also confused. Poll tax payers will receive one bill listing all the precepts being levied, along with various grants from central sources, and the bottom line will show the poll tax payable. How this will make the system more accountable or comprehensible to the average person is difficult to see, because county and parish councils will be precepting on the central fund.
The implementation of Labour party policy of annual elections for part of every local authority would do far more to increase local accountability than all this nonsense put together. We offered to co-operate with the right hon. Gentleman in that regard in a Bill during the last Parliament, but he declined the opportunity.
The Government's proposals for a national business property tax and a full business revaluation of 15-year-old rateable values will cause massive changes, as the recent Scottish experience shows. Business and commerce critics have focused on two aspects. First, the effect of the revaluation and national business property tax will be to alter relative rates burdens between different areas of the country. Secondly, although it is set centrally, the national business property tax will still be a fixed tax on property and will be as unrelated to a firm's ability to pay as the present system.
§ Mr. Ridley
Thirty-five minutes of waffle ago, the hon.
Gentleman said that he would tell us what his alternative system of local authority finance would be. When will he get to what we want to hear about?
§ Dr. Cunningham
I am coming to it, and I can well understand, from his performance in moving the Second Reading, that the Secretary of State would prefer us not to discuss his proposals.
Speaking in Sussex on 14 October, the Secretary of State revealed the new regional policy that is implicit in the tax. He said:High rates in the north are one of the engines which contribute to businesses wanting to locate in the south. The national business property tax is one of the weapons we have for reversing this trend and easing the pressures on land and land prices in the south east.Simply translated, that is a promise to have higher business rates in the south.
The rates-cost-jobs argument is not supported by the evidence. The Bill penalises businesses in areas whose councils — mainly Tory—have acted on the basis that that is true. It is no wonder that the business community is in an uproar. If the arguments about rates meaning job losses are true, the Government must have a calculation about the jobs that will be lost as a result of the national business rate, particularly jobs in Opposition Members' constituencies. For example, business rate increases of 91 per cent. in Kensington and Chelsea, 61 per cent. in Wandsworth, 42 per cent. in Croydon, 39 per cent. in Redbridge, 28 per cent. in Gillingham, and 24 per cent in Rochester are forecast. Will Tory Members vote for that in the Division Lobby tonight?
1136 The proposal for a single revenue support grant is an apparent simplification of the needs and standard grant that was originally contained in the Green Paper. Yet the Bill provides no sign of how the Secretary of State must distribute that amount of money, the criteria that he must adopt or the matters that he must take into account in distributing the grant. The Bill seems to provide for only scant consultation with local government, and it actually provides for even less consultation with the House. As the CBI said, the proposals will result in less accountability, not more, and a national business property tax will "unhook" local government from local business.
Abolition of resource equalisation will cause great damage to the northern regions of England. In the current financial year, almost £1 billion has been reallocated to the north of England through equalisation. The Bill eliminates that major contribution to fairer regional provision and regional policy without proposing any alternative. The Bill does little to benefit business. It favours suburban areas at the expense of inner-city areas, and will threaten public sector employment and investment while doing nothing to stimulate the private sector.
Serious questions about personal privacy and civil liberties are involved in the Bill. If the community charge proposals are implemented, local authorities will have to take steps to ensure that the Bill is enforced as comprehensively as possible. As the Scottish legislation shows, and professional bodies advise, enforcement will necessitate the collection, transfer and storage of personal information in ways that, in an entirely unacceptable way, transgress the privacy of the adult population and their ability to control the use of information about themselves. Therefore, there appears to be an irreconcilable conflict between the need for the efficient collection of a tax of this kind and the protection of privacy.
As CIPFA pointed out in its report to the Scottish Office:Canvassers will be required to be well trained not only in community charge law but also in interview techniques. They may well face resentment and, conceivably, hostility and will need to be trained to cope with this.No doubt that is armed combat.
The prospective canvassers will have to be vetted —a necessary control procedure, since opportunities for corruption may arise.We note that the Data Protection Registrar was not even consulted before the Scottish legislation was introduced. His advice was sought subsequently, but it has not yet been published. The registrar's advice should be made public, so that the public can endeavour to ensure that the safeguards that he advocates are built into the legislation. But, from a letter from the registrar to my right hon. Friend the Member for Glasgow, Govan (Mr. Millan), we already know that the registrar believes that there isan inherent conflict between the efficiency of a poll tax system and the privacy of individuals.
A Labour Government will abolish the poll tax, if it is in place. Before legislating, we shall publish a White Paper and seek a consensus. We believe that a modern property tax can be made fair and understandable. Unlike the Government, we believe that property should be taxed. I read an interesting and timely leading article today in the Financial Times. Under the heading "A tax that lacks support", it stated: 1137A long-run solution awaits acceptance that property-based taxes actually make a lot of sense as an adjunct to taxes on incomes and consumption, being relatively fair, cheap to collect and economically efficient.That is what we believe, and that is the way in which we shall proceed.
There are significant arguments for broadening the local tax base, and we are considering how that might be done. We are committed to the principle that taxes should be based on fairness and ability to pay. Discussions are still in progress with industry, the CBI and commerce about business rates and the implications of the right hon. Gentleman's proposition. In addition, we shall review the functions and duties of local government to re-establish sensible links between it and local government finance.
I make it clear that there is another fundamental difference in principle between Labour's policy and that of the Tories. We shall ensure that local government revenue-raising powers are free from central ministerial control. We value the devolution of powers and responsibilities that are so essential to the success of a pluralist democratic society.
§ Mr. Ridley
We now have some inkling of the hon. Gentleman's ideas. He has shown himself to be keen that the Standing Committee that examines the Bill should consider all sorts of possible options. I shall make him a fair offer. I shall do exemplifications for every local authority area on the basis of his proposals so that the full impact of them will be understood in every part of the country. Therefore, I should be grateful if he would let me have the full details of what he proposes so that I can ask my officials to prepare such exemplifications. The House will not be short of information about the alternative.
§ Dr. Cunningham
If the right hon. Gentleman thinks that that is a threat, he cannot have been reading his own written answers. I have put down a question. I have already asked him to do the work and provide the information, and he refused. To get the matter on the record, I shall read from a document on the subject, in answer to my question, which the right hon. Gentleman put in the Library. [Interruption.] I shall quote from the Official Report of 9 November. [Interruption.] It is in the Library; the right hon. Gentleman put it there. It is about rateable values and capital values. I shall happily put the question down again tomorrow. [Interruption.] The question is set out. It is long and complicated. It takes up almost a full column of the Official Report. [Interruption.] No, I shall not read the question. I am more interested in the answer, but I understand that Conservative Members are not. This is the answer:There is no comprehensive data available from which to assess the outcome of a capital revaluation of domestic rateable valuesandIt is not Government policy to undertake such a revaluation or to provide the information.That is what the right hon. Gentleman said. Why did not he provide the information then, when he had the opportunity?
There is a glaring omission from the Bill. No idea is given of how a rebate system will work and who will benefit. That is one reason why we tabled the amendment. Conservative Members surely cannot object to the wording of the amendment, as the first part is virtually 1138 indentical to the instruction to the Committee supported by so many of them and the second part, which refers to a comprehensive rebate scheme that would also take account of ability to pay, is taken straight from the Government's own publication on the poll tax in Scotland.
The hon. Member for Ealing, Acton (Sir G. Young) is in his place. I suppose that we should describe his revolt not as a peasants' revolt but as a gentlemen's revolt. Like the gentleman amateurs of old, he really did not want to win. I very much regret, Mr. Deputy Speaker, that it was not possible to select that instruction to the Committee. That is why we tabled our amendment. We invite Conservative Members to have the courage of their convictions and to support us in the Lobby.
In the face of all the evidence and opposition, and in the face of all reasonable argument and opinion, the Government stagger on from expediency to opportunism in local government policy. As the British people look forward to the next century, the Government look back to the Middle Ages. They now propose a tax without fairness, which is anti-family, which invades privacy, which is a bureaucratic nightmare and which has no vestige of intellectual support. We, in this most historic of Parliaments, are asked to approve a tax that has been internationally rejected and condemned by all other democracies. We should not do so.
§ Mr. Michael Heseltine (Henley)
I am sure that the House will have listened with fascination to the suggestion of the hon. Member for Copeland (Dr. Cunningham) that we are to have consensus policies from Her Majesty's Opposition. That is the first time that the word "consensus", on anything except their terms, has crossed Opposition Members' lips for a very long time. Its use had all the credibility of inviting the turkeys to agree the date of Christmas. Opposition Members can agree consensus only among an ever-decreasing number of voters. That probably explains their disgraceful treatment of my right hon. Friend the Secretary of State whom they tried to shout down.
Conservative Members' commitment to abolishing the rates was first made in 1974 in response to growing resentment about the system. The disease has as much to do with inflation as with the rating system itself. We faced exactly the same phenomenon in 1979, by which time local government manpower had reached record levels and wages were increasing at an unprecedented rate. However, we did not repeat the commitment in 1979. The reason was that our investigations between 1974 and 1979 had produced no attractive alternative to the rating system.
Instead, we began to tackle as best we could in difficult circumstances the root cause of excess manpower and excess wages. The fact that a record number of people were employed and that the vast majority of them were employed by Conservative-controlled authorities in 1979 meant that the Government were not faced with a set of easy options when they first came to power. I had responsibility for drafting the Green Paper of 1981. As many of my right hon. and hon. Friends know, I started with some sympathy for the poll tax — at least as a partial replacement for the rates. However, by the time that consultation period on the Green Paper was over, the idea of a poll tax had no friends. It was dismissed by the 1139 Cabinet with hardly a backward glance. I wish that I could come to the House and say that I won the argument, but in truth there was no argument.
In the last Parliament, this Government achieved a unique degree of constraint of growth in local authority manpower. In 1960, 1.5 million people were employed in local government. By 1970, the figure was 2.2 million, and by 1980 it was the equivalent of 2.7 million. There had been an apparently unstoppable advance under Governments of all parties, but by 1982 we had reduced the number employed to the levels of a decade earlier—in other words, in the period before the reorganisation of local government in 1973.
I know that the House will sympathise with me on this matter. No one can tell me of the blood that flowed in the battle that we fought to persuade local government to make those reductions in manpower. But one thing emerged beyond question. If one has to distribute billions of pounds of taxpayers' money to more than 400 authorities to finance 20 major public services, one will never satisfy the recipients. Frankly, if, at the same time, the Government are reducing their share of local expenditure and under-providing for wage settlements, one satisfies the recipients even less. However, it had to be done.
The problem that we faced was how to deal with and act against the profligate while recognising the constructive response that we received from much of local government, controlled at that time by the Conservative party. Rate capping was the agreed solution. A whole range of solutions was explored but rate capping was the solution that the Cabinet agreed should be the way forward. Today, slowly but perceptibly, rate capping is breaking the resolve of even the most obdurate authority. The Cabinet discussed these issues frequently, but I cannot remember a discussion of the option of a poll tax in which it was not rejected as expensive, ineffective and unfair. I shall come to the inherent weakness of such a system later.
The perception of Ministers changed with the experience of government. The first perception that changed was that there were easy economies to be obtained on a grand scale from local government. The Chancellor and the Secretary of State for the Environment talk of efficiency and value for money, and that is quite right. I certainly talked of those things, and there is some scope for savings. During the public expenditure round, the public listen to the Home Secretary pleading for more policemen on the beat or to the Secretary of State for Education and Science proclaiming increases in education expenditure, and all the victories of my right hon. Friends in the spending Departments are welcomed extensively on both sides of the House because they are in keeping with many of the aspirations of our society; but they are all victories for increases in local authority expenditure. They are increases stimulated and argued for by the great spending Departments of Whitehall and their Ministers.
There is a second way in which our perceptions have changed. In the summer of 1981, riots swept through eight or nine of our inner cities. Some of us became deeply involved in the brittle fragility of the societies that live there. Nobody disputes the conditions in which they live. One does not need a set of statistics. Just go and have a look. I could not be more in support of the Government's determination to do something about the inner cities, but doing something for them cannot mean making the poor pay more for the worst services in the land. Of course, my 1140 right hon. Friend can point to the extreme authorities. This legislation is driven by the need to curb the excesses of a limited but significant number of extravagant and politically irresponsible authorities.
The consequences of this legislation will be felt in every constituency in the land. It may be the Government's view that they can win their case where they can justify what they are doing against a background of extravagance and extremism, but what will they use for arguments when facing the millions of people who will lose out heavily under authorities which are neither extreme nor extravagant? How will they tell losers in Tory-controlled authorities that the Government must protect the voters from the decisions of their local authority?
After all the battles in which I have had the privilege to be involved in respect of this matter. I start with an instinctive support for a form of local government. I distrust monopoly, whether it he commercial, industrial or political. However, if we start with the suggestion that every authority is going to behave like Lambeth, Camden or Liverpool, then far and away the best solution is to get rid of local government altogether.
Let us consider the proposals. First, the unified business rate is designed to prevent inner-city authorities from milking their business ratepayers, but, of course, there is a price to pay for that. It removes any link between the local industrial and commercial community and any local government. We are creating a new national business tax. I have not the slightest doubt what any Government of any other political persuasion would do with that tax.
With the unified business rate comes revaluation. Revaluation is intellectually unopposable. It is politically disastrous. In 1979 we took a decision not to revalue formally, but the valuation practice has continued. In England and Wales 800,000 are valued or revalued every year. The only real demand for revaluation is coming from — guess who? — the valuers themselves. It is at least curious that a Conservative Government should put the tidy minds of the valuation officers at a higher premium than the anxieties of small businesses and large companies in many parts of the land.
I want to turn to the proposals for a community charge. It is important that people should believe a tax system is fair. Grievances are fed not so much on realities as on people's perceptions of realities.
§ Mr. Heseltine
I shall not give way to my hon. Friend. Other hon. Members will be denied the opportunity to speak unless we make progress.
Of course, there are many grievances about the domestic rating system. We could have dealt with some of the grievances within the rating system, but, having considered them with great care and with the benefit of all the briefing from the Department of the Environment and the Treasury, we decided not to do so. We could, for example, have addressed the problem of families with two or three breadwinners paying no more than a single peson in an equivalent house by introducing a single person discount. However, the more we considered the matter, the more we became convinced that it helped significantly the better-off members of the community and we thought that we could help them more by reducing direct tax rates.
Again, we dismissed the argument that only a minority pay. To argue this, because there is only one rates bill per 1141 household, is to argue that families who pay only one bill for rent, telephone, gas, electricity and water do not know what any of these things cost, but, in practice, families work these things out for themselves.
All of these are criticisms of a system that Conservative Members did not create. The most significant change that the poll tax will produce is that we shall be held totally responsible for it. Responsibility for the rates is confused in the legacy of history. Responsibility for the poll tax will now be targeted precisely and unavoidably at the Government who introduced that tax. That tax will be known as a Tory tax.
We argue for the cohesion of the family, yet it will be far easier for young people to evade the tax if they leave home and seek more anonymous accommodation. We urge families to look after their elderly parents, but the elderly relative pays a poll tax at home and none in a local authority home. We will have created a granny tax. Many mothers stay at home to look after their children. The poll tax will send more of them out to work. [Interruption.] I am asked why? The answer is: to pay the poll tax. We already have acute disincentives to work with the existing poverty trap. A poll tax will make it worse.
The rigour of tax collection will become more difficult as urban stress becomes more acute. The Inland Revenue cannot cope now with the burgeoning black economy. The poll tax will bring more tax collectors and more evasion. More evasion will bring more resentment, and the growing scale of rent arrears should be a warning of what lies ahead.
All of these resentments will build on a platform of crude regression which seeks to make equal in the eyes of the tax collector the rich and the poor, the slum dweller and the landed aristocrat, the elderly pensioners living on their limited savings and the most successful of today's entrepreneurs.
This brings me to the argument which is said to be the most powerful of arguments for a poll tax.
§ Mr. Heseltine
I shall not give way to my hon. Friend.
It is the argument that a poll tax will lead to greater accountability. First, the Treasury will always under-provide for wage settlements in the grant distribution process in order to squeeze wages down. It carefully tucks away its real expectations in the contingency reserve. The Government will be blamed for pushing up the community charge.
Secondly, we have two-tier local government. Confusion will not be eliminated by even the clearest demand note.
Thirdly, there is no coincidence in the electoral system between the date on which the increased poll tax is levied and the date on which the council that must account for what it has done seeks re-election. Councils, like Governments, have heard the political message about getting things done in the first year.
Fourthly, virtually nobody knows who their councillors are anyway. Only a small proportion of the electorate vote. Whether people pay rates does not seem to make a great deal of difference to the level of turnout.
Fifthly, incomparably the most important issue in local election results is the prevailing perception of the 1142 performance of the national Government. National opinion polls tell one far more about local election results than the rating policies of individual councils.
I used to be attracted by the argument of accountability, but no longer. The proposals are designed to bring down local authority spending. Even before Second Reading, the concessions that the Government have already had to make, as more and more problems are revealed, have thrown up their own anomalies. It is even possible that the expenditure changes announced will lead to higher public expenditure, especially in the shire counties.
There will be some savings in the inner cities, but my right hon. Friend is already achieving those through his rate-capping procedures. However, to avoid the harsh incidence of the poll tax in inner London, the Government are now committed to phasing in London's poll tax over a transitional period. That means that the non-London authorities will have to pay for London's poll tax in the early years. The Shire counties — they will not be controlled by Conservatives in such circumstances—will fix their initial poll tax at whatever rate is necessary to support their expenditure and the subsidy for London. They will blame the Government for the whole thing. Then, as the London subsidy is phased out, they will increase their expenditure but not reduce their poll tax.
§ Mr. Ridley
On a point of fact, I should like to tell my right hon. Friend that the special arrangements for London mean not that London will be subsidised from elsewhere, but that inner London ratepayers will continue to pay a proportion of rates as well as a growing proportion of their community charge. There is no subsidy to London in those arrangements. They redistribute resources as between ratepayers and community charge payers.
§ Mr. Heseltine
I believe that after he made his announcement my right hon. Friend published a schedule showing different levels of projected poll tax outside London as a consequence of his proposals. That must have the effect of confusing the transitional arrangements.
I understand fully the wish to reform. I lived for so long with the pressures that I understand that. Having been through the attempt myself, I cannot but admire the courage of my right hon. Friend in braving the storm that always engulfs a Secretary of State who tries to bring about any reform of local government. However, having said that, my right hon. Friend must know that his proposals cause profound anxiety in the Conservative party. It would be a tragedy if, in the name of reform, we ended up with a worse system than the one with which we began.
I must advise my right hon. Friend that I cannot support the Bill. However, let us be quite clear where the responsibility for this mess lies—it lies with the Labour party. Its savage disregard of its responsibilities has caused much of the trouble with which we are now faced. It is true that there are militants in some Labour authorities, but the authority for Labour militancy comes from the Opposition Benches. Year after year, Opposition Members have supported every disruptive protest, egged on every kinky fetish and tossed around the people's taxes as though they were the autumn leaves. If that has led to a winter of discontent in Britain's town halls, the responsibility lies with the Labour party.
§ Mr. David Steel (Tweeddale, Ettrick and Lauderdale)
As I am the first Scottish Member to be called in the debate, I say right away that I agree with the right hon. Member for Henley (Mr. Heseltine) and with many of his criticisms. Moreover, I agreed with him during the passage of the Scottish legislation during the previous Parliament. I am only sorry that the right hon. Gentleman voted for that Scottish legislation in the previous Parliament. Conservative Members should listen to the right hon. Gentleman's warnings, especially when they look round their Benches and see how few of their former colleagues from Scotland survived the general election. Of course, there were many causes for that. I do not attribute everything to only one factor. However, there is absolutely no doubt m my mind that, in addition to the economic arguments and those about unemployment and housing in Scotland. the fact that the poll tax was already known as a Tory tax and was already on the statute book, the fact that local authorities were already wrestling with it—I shall come later to some of the costs that have been incurred by Scottish local authorities—and the fact that the poll tax was the public issue during the election campaign in Scotland are major reasons why there are so few Conservative Members representing Scottish seats. Therefore, I hope that the right hon. Gentleman's warnings will be heeded by the Government because the proof of them is north of the border.
§ Mr. Steel
No, I shall not give way. Perhaps the hon. Gentleman will forgive me. I normally give way but there is great pressure from hon. Members wishing to speak, so I shall follow the example of his right hon. Friend the Member for Henley.
Many hon. Members agree about the unfairnesses and anomalies of the rating system. It has been with us for a long time. However, there is one basic difference between the anomalies and unfairnesses of the rating system and those of the poll tax. The anomalies and unfairnesses of the rating system are accidental. It is, at any rate, a tax which, in theory, bears some relation to the ability to pay — [Interruption.] It does bear some relation to the ability to pay because it is a tax on assets. If one owns a large house, there is at least the assumption that one is able to pay. Of course, it does not always work out like that in practice. However, the difference between the domestic rating system and the poll tax is that the poll tax is designed to be unfair. It is designed to be a flat rate tax, regardless of the ability to pay. A widow in a tower block will pay the same as a playboy in a penthouse, whereas under the rating system there is at least a differential in the amounts that those people would pay for local government services.
If I may expand on what the right hon. Member for Henley said, if one considers members of the Cabinet—I do not mean this in any party sense because, by definition, members of any Cabinet are among the better-off in our society because of the levels of income that they draw—
§ Mr. Steel
I correct the hon. Gentleman right away on that point because the leader of the Liberal party does not draw an income for that. Members of the Cabinet are 1144 among the better-off in our society. They are in the highest income bracket. If one considers the effect of the poll tax on individual members of the Cabinet, one can see right away why the public will blame the Government for the tax. The Prime Minister would be due to pay over £3.000 rates on her house in Dulwich, but under the poll tax she will pay only £1,136. The Secretary of State for the Environment will save £1,500 under the new proposal. Of course, the richer the individual, the more will be saved. The Secretary of State for Transport, for example, who is acknowledged to be one of the better-off members of the Government, will save over £6,000 as a result of the switch from rates to the poll tax. I do not see how that inequity can be defended to the country at large.
The hon. Member for Copeland (Dr. Cunningham) treated us to a short tour d'horizon and quoted from the American constitution. He sought to prove that no other country has a regressive flat rate tax of this kind. He was wrong because there is one such country—Papua New Guinea. That country has a hut tax but is about to abolish it. With that one exception, I cannot think of an example of such a flat rate tax.
The anomalies that will be introduced by the poll tax condemn it in themselves. A student nurse, for example, will be liable to pay the tax, but a medical student will not. I do not see how that can be defensible in terms of medical training. As the right hon. Member for Henley rightly said, not only will all the people living at home pay the tax whereas people in residential care will not pay it, but since, as a society, we are all trying to encourage people to accept their responsibilities and to look after the elderly in their own homes—partly because it is cheaper—that proposal will increase public expenditure. It will drive more people, particularly those on lower incomes, from private accommodation, where they are looked after by relatives. To avoid the tax more people will move into homes and hospitals and public costs will go up. Prisoners on remand will have to pay the tax, but prisoners on conviction will not, so in one prison building some will be liable to pay the tax and some will not.
The Government, after very strong pressure, said that they would exempt closed religious orders of monks and nuns, but clergymen will pay the tax. I ask the Minister whether people in schools and hospices run by non-closed religious orders will be exempt.
My hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) has shown me his correspondence with the Secretary of State, to which we are still awaiting an answer, relating to what will happen to those charities whose staff work for nothing as part of their commitment to charitable purposes for people in residential care. One charity for mentally handicapped homes is exempt at the moment. If the Government do not announce otherwise, it will be liable for the poll tax, but it has no income to pay it.
The Universe, the Catholic newspaper, reported that the Department was asked what will happen to nuns who have taken vows of poverty, and the reply was, "We have not thought about that one". The Government must think about these cases and about the anomalies which will make an already unpopular tax even more unpopular and indefensible.
The rebate will apply to people on supplementary benefit, who will pay a minimum of only 20 per cent., but the poll tax is designed to be varied locally. We are waiting for an announcement that the DHSS supplementary 1145 regulations will be locally varied, but we must assume that they will not be, so that a gap will exist between the benefit increase nationally to pay for the poll tax and the amount people will have to pay in particular localities. I resent that the Government, time and time again, pay out money with one hand to one bureaucracy to give to another bureaucracy to pay back through another door. That is a wasteful circulation of money.
The hon. Member for Copeland referred to the invasion of privacy and damage to civil liberties. The Secretary of State was reported on the Nick Ross phone-in radio programme as saying that young people may try to evade the tax. He said:I don't think they will succeed or find that a very easy thing to do, because one way or another the registration officer will discover they are there.Asked if that meant snoopers coming round to see who lived in houses, the Secretary of State replied:If you like to use that pejorative phrase, yes.He was admitting that snoopers will be required.
The House should note the experience of the Scottish Office which has issued a manual to local authorities on how to administer the poll tax. A copy of that manual is in the Library of the House of Commons, but I hope that the Library did not pay for it, since the charge to a member of the public who seeks to buy it is £4,000. I suppose that is market forces at work. The report, which is an enormous volume, suggests that poll tax payers could be given a personal identity number, which would stay with the individual as he or she moved around the country. It suggests that local authorities could rely on details held on individuals by health authorities, national utilities such as gas and electricity and on what is called a mutual exchange of information. It suggests that local authorities should buy up computerised information from trade organisations and should use their own records from housing, rating, libraries and housing benefit to keep tabs on the residents. One local authority chief executive is reported to have said that even records of bus passes will be used as a means of checking.
The hon. Member for Southend, East (Mr. Taylor) referred to the possibility of tattooing individuals to check when they move from place to place. Last night we voted against tattooing dogs — surely we will not have to tattoo individuals to check where they are. The Government should be in no doubt of the bureaucratic nightmare they have created.
The cost of collection has been proved in Scotland to be far greater than the Government have allowed for. The Scottish Office has allocated £9 million for extra capital costs on rates programmes this year, but the Strathclyde region alone reports that the capital costs already are £5 million, and estimates that the annual running cost will be £8 million. My regional council, which is much smaller than Strathclyde, has said that the cost in the Borders region will be 50 per cent. higher than the present rating system and will require 22 additional staff at an increased cost of £430,000 per annum. The sum of £300,000 will be needed to implement the registration and to upgrade the computer facilities. It is important to recognise that the Scottish Office has already demonstrated that its forecast of the cost of the tax is greatly exceeded by the experience of local authorities on the ground.
§ The Minister of State, Scottish Office (Mr. Ian Lang)
I reassure the right hon. Gentleman that present estimates of collection costs are exactly as shown on the Bill when it was published.
§ Mr. Steel
No, I will not withdraw. The Minister may correct me if I am wrong. The Scottish Office has allocated £9 million to local authorities this year and the figures I have quoted are from what local authorities say it is costing them. I do not know where the money will come from to meet that difference, but those are the facts and hon. Members from England and Wales should be aware of them. The Scottish electorate did not find the poll tax proposals acceptable and I do not see any reason why they should be more acceptable in England and Wales.
I agree with the right hon. Member for Henley that the proposal for a national business rate philosophically goes directly against the reason for the poll tax, which is to create a greater rapport between the electorate and local government, and would remove the only satisfactory method of communication between local business and local rates that we have at present. The short answer to the steady growth in rates is for the Government to transfer those items of national expenditure which are not variable locally — teachers' salaries are the most obvious — from the rates so that there will be less of a burden on expenditure. In the long run we must go back to the recommendations of the Layfield committee, of which my hon. Friend the Member for Woolwich (Mr. Cartwright) was a member, which recommended the introduction of a local income tax.
That committee report did not meet with Government favour because, to get a local income tax, the Inland Revenue would have needed more advanced computer programmes than it had then. Time has passed and it should now be possible, with the full-scale computerisation of the Inland Revenue nationally, to add on a local income tax together with a property tax on commercial business, based on land value taxation. If that were done, the estimates published by the Government of the effects of local income tax would be nowhere near as great as they suggest.
The Institute for Fiscal Studies has said, based on a survey as distinct from estimates, that 76 per cent. of households with a net weekly income of under £350 would be better off under a local income tax scheme. As we start from the proposition that taxation ought to bear a relationship to ability to pay, that is a strong recommendation for local income tax as against the poll tax.
§ Mr. Martin M. Brandon-Bravo (Nottingham, South)
Hon. Members have referred to London boroughs as if they are the be all and end all of the argument. There is a danger that we will say that this happens only in London and nowhere else. I put it to the right hon. Gentleman that the city of Nottingham has 20,000 unemployed and is surrounded by more affluent areas of low unemployment in districts such as Rushcliffe, Gedling and Broxtowe. It seems therefore that the tax base within a city such as Nottingham would be much lower than in the affluent areas around it. Therefore, the people living in the city would have to pay a higher rate of tax and the rich people would move out.
§ Mr. Steel
If local income tax was introduced without any system of national equalisation or support such as we have now, the hon. Gentleman would be correct. However, no one has ever suggested that that is how it would work. There is no escaping the fact that it would have to retain some measure of Government supervision of the ability of local authorities and particular communities to raise the required revenues. However much we fiddle with those taxation systems, we cannot get away from the central responsibility of Government to balance the needs of one community against those of another.
I hope very much that the Secretary of State for the Environment will live up to his reputation as a man of history. I am indebted to a profile on the right hon. Gentleman which appeared in The Times in July 1984 which said:Bidden to a fancy dress ball at the Mansion House some years ago, Nicholas Ridley did not have to rack his brains to find a costume. He just went to the wardrobe and took out a long brown coat which had belonged to one of his ancestors a century or two ago.`The costume suited him — he's a very 18th century figure, not entirely at home in the 1980s,' a former front-bench colleague recalls. 'He felt in the back pocket of the coat and came out with a card, which read: "Master Ridley calls on you and requests the honour of your vote" — a canvassing card from an election dating back to the 1790s.'I do not know what reception "Master Ridley" received, but I suspect that the canvassers for the poll tax will receive a very dusty reception indeed.
The Secretary of State should be aware that the history of poll tax in this country is not a happy one. In September the Financial Times stated that the original poll taxes of the 14th century were introduced to finance wars with France and the question of the social acceptability of the tax was a critical factor that led to the peasants' revolt and their march on London in 1381. At the end of the article in the Financial Times the author quoted the historian T. F. Tout as follows:The extreme incompetence of the administration was a widespread grievance which, it bearing most heavily on the poor, touched every rank of society … The fault was a mulish determination to enforce a thoroughly distasteful order in the face of public opposition.It looks as if history is about to repeat itself.
§ Mr. Patrick McLoughlin (Derbyshire, West)
I am pleased to he the first Conservative Back Bencher to be called to speak and to be fully supportive of the Bill to abolish the present rating system. We have heard much from Opposition Members about the great debate that is taking place over rates. That is revealed in the legislation on the subject that has been passed since 1979. As Opposition Members have spent so much time talking about local government finance, I would have thought that they could have told us fully what they intended to replace the present system with.
It is amazing that the debate about the abolition of local rates is not new. It has been taking place since 1979. The Government came forward with proposals. Indeed, a Green Paper was produced in 1983 towards the end of the first term of the Conservative Government and a declaration of intent followed. We took that declaration of intent to the electorate in our manifesto and received an overwhelming mandate. I am very pleased that we are debating the abolition of the present rating system today.
1148 It is interesting to note that the hon. Member for Copeland (Dr. Cunningham) started his speech at 5.40 pm and only at 6.23 pm referred to his alternative to the present system. He and the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), the leader of the Liberal party, spent a long time attacking the Government's proposals, but they offered no alternatives. That is quite strange. I thought that my right hon. Friend the Member for Henley (Mr. Heseltine) made a very good case for the abolition of local government. He seemed to say that, regardless of what happened, there would be no accountability for local councillors.
I became a Member of this House partly as a result of my experience in local government. I am a defender of local government and I believe that it should stay. However, for local government to stay, it must become far more accountable, and that accountability is sadly lacking at the moment. It cannot be fair that so many people do not exercise their votes, do not have a say in what councils are doing and are not even interested in having that say. The survival of local government rests on accountability. The system proposed in the Bill will bring that accountability to bear on local authorities.
Rates are totally unfair and the subject of rate reform has been raised with me on many occasions. It was a major issue during my by-election campaign in 1986 and it was a major issue during the general election in June. I have made no secret of my open and total support for the reform of local government finance that is before us today. It is not surprising that rates were such a big issue in Derbyshire. We have been landed with a very Left-wing Labour authority. Two years ago, it increased rates by 26 per cent. and last year it increased them by 12 per cent.
I am not surprised at the opposition that we have heard today from hon. Members opposite. Indeed, the leader of the Liberal party almost reflected the comments of the hon. Member for Copeland. When the Labour-controlled council increased rates by 26 per cent., the Liberals wanted to raise them by 24 per cent. There was a 2 per cent. difference between them then, and there was less than 2 per cent. difference between the leader of the Liberal party and the hon. Member for Copeland in the Chamber today. The following year, when the Labour councillors raised rates by 12 per cent., the Liberals wanted to increase them by 9 per cent. We would have had the highest county rate in the country whether the authority was Labour-controlled or Liberal-controlled. Only the Conservatives put forward proposals for a reduced rate.
It should not surprise anyone that the question of rating reform was raised so vigorously during my by-election campaign. I would not enjoy the prospect of another general election without the Conservative party having carried out its pledge to abolish the present rating system. To tinker with the present system is no option. We have seen what such tinkering has achieved over the past seven years, with the amount of legislation that has been passed on the subject. That is no option for consideration today.
I believe that the alternative in the Bill today will bring responsibility to local government. Many hon. Members have referred to the ability to pay. I asked the hon. Member for Copeland whether he thought that the present system reflected the ability to pay, and quite fairly he said that it did not. That is not surprising.
I should like to give details of properties on the market at the moment in Derbyshire. The first is a most magnificent stone farmhouse situated in a much sought 1149 after residential area within its own grounds, together with two paddocks and 6.5 acres. It is approached via a tree-lined sweeping drive. It enjoys quiet seclusion in the heart of rural Derbyshire with fine views towards the villages of Crich and Riber Castle. Although it has been altered in recent years, its character and charm has not changed. It comprises a summer lounge, a main hall, a lobby, a downstairs bathroom and a winter lounge. There are five bedrooms on the first floor.
§ Mr. McLoughlin
My hon. Friend has not heard the price yet.
It has another bathroom, workshops, two garages and stables. There is also an inner hall, dining room, kitchen, sun room, utility room and a separate toilet downstairs. [Interruption.] Opposition Members should hold on a moment. The market price of the property is £175,000 and the rates payable are £828.
I shall give the example of another property, which is not in my constituency but in that of the hon. Member for Bolsover (Mr. Skinner). It is a bungalow in the village of Wessington. It has a recessed porch, a reception hall, cloakroom, large lounge, separate dining room, study, two bedrooms and a box room. It is on the market for £77,000 —about half the price of the other property. The rates payable on that property are £1,210, or about £400 more than on the other property. That cannot reflect the ability to pay.
§ Mr. Alistair Burt (Bury, North)
Does my hon. Friend agree that the Labour party's proposal to use capital or property values would enshrine the inequality that he has described and do nothing to resolve it?
§ Mr. Allen McKay (Barnsley, West and Penistone)
One of the examples that the hon. Gentleman gave is almost a farmhouse. That would come under agricultural rating, which is a preferential system.
§ Mr. McLoughlin
The Opposition are clutching at straws. That property is not classed as an agricultural dwelling—[Interruption.] I have other examples if hon. Members want them.
§ Mr. Robin Squire (Hornchurch)
The two examples were in different rating authorities. However bad the difference in rates might be, it is possible that the services in one area are dramatically better than those in the other. Our worry about the Government's proposals is that people who live in the same street and pay the same amount may have vastly different incomes. There would be genuine resentment in that case.
§ Mr. McLoughlin
In the shire counties, 90 per cent. of the rates are levied by the county councils. West Derbyshire and Bolsover are in the same county.
§ Mr. Harry Barnes (Derbyshire, North-East)
Wessington may be in the constituency of Bolsover, but it is served by North-East Derbyshire district council. I represent the constituency of Derbyshire, North-East, but not that village. The area suffers from the fact that the Secretary of State for the Environment will not make arrangements to put out an underground fire, or even 1150 make a contribution towards it. The people of Wessington will be among the many impoverished people, including those from towns such as Clay Cross, who will have to pay exaggerated rates in the coming year.
§ Mr. McLoughlin
It is interesting that the hon. Gentleman says that the problems will emerge next year. I am talking about this year's rateable values. The hon. Gentleman is defending the present rating system. It is not surprising that the Opposition have defended the present system, because it depends on so few people paying their rates. But my constituents are worried about continuing the present system. The Opposition keep telling us how disastrous our policies will be and how they will lead to the end of the Conservative party. I should have thought that the prospect would make them happy.
This morning, Derbyshire county council met to discuss the report of the policy committee on the community charge. The report gives a clear sign of the council's attitude to the community charge. It states:Unlike the existing arrangements, once the Authority's grant entitlement has been set the amount would not be changed and would not vary with expenditure. Thus the full effect of any changes in expenditure would be felt by the ratepayer.That is what will happen, and we should not be frightened of it. We should be proud of the fact, because the intention of our system is that the people who want services should pay for them. We are told repeatedly that more money must be spent on the Health Service and other services. Those who believe that will now have ammunition for their views. It will be up to them.
§ Mr. Marlow
There has been a lot of talk about accountability today. Is not the trouble at the moment that local authorities are not accountable to the people who pay for them, but are accountable to the people who work for them? When we introduce this new system, they will, for the first time ever, be accountable to the people who pay for them.
§ Mr. McLoughlin
That is the point. The Bill will extend local government democracy because it will extend the base of people who pay for services. They will be able to see what services they are getting and make up their minds accordingly at local elections.
The policy committee's report continues:The only change to the notified grant would be made at the end of the year by a conclusive calculation to permit the correction of any errors in original data.We all know that that happens occasionally.
The report continues:Payment of grant and non domestic rate income would not be paid separately to County and District Councils but would be paid into a 'collection fund'. The costs of collection and administration would fall upon District Councils. The Government proposals required the community charge bill to show"—the committee regarded this as outrageous—the Authority's needs assessment, the Authority's actual spending level, the contribution made by business taxpayers, the contribution made by the Government, the community charge due and the community charge if the Authority had spent the level of its needs assessment.Then comes an interesting paragraph:Assuming no change in existing grant and non domestic rate level the Council's income would be made up of the national non domestic rate (30 per cent.) and revenue support grant (37 per cent.) both under the control of the Central Government, and the community charge (33 per cent.) under the control of the County Council.
1151 Under those proposals, the ability to pay is met largely through the business rate and through taxes which are collected by the national Exchequer. All that we say is that the people who live in an area will have to pay for a small percentage — a quarter or 30 per cent. — of local government expenditure.
§ Mr. Cormack
My hon. Friend is making a far better case than did the Secretary of State. But is it fair that the rich entrepreneur and the dustman, who has just enough to pay without qualifying for rebate, should pay precisely the same?
§ Mr. McLoughlin
In any reorganisation of local government finance, regrettably, some people will be losers. I hope that the new system will more accurately reflect local government spending. The present system is unfair—
§ Mr. McLoughlin
The present system is certainly not fair. If it was easy to reorganise local government finance, we would not have needed all the Acts of Parliament that have been introduced during the past eight years. It would have been done a long time ago.
§ Mr. Bennett
Yes, we are. It is a community charge for local government services. If the dustman uses the same services as the millionaire—he probably uses them more —it is fair that both should contribute towards paying for those services. In charging for other services, we do not discriminate according to people's incomes. The use of local government services should be based on the individual. The system of charging on the basis of a property, which does not use the services, is absurd.
§ Mr. McLoughlin
I am grateful to my hon. Friend. I would sum up the system by saying that through the new arrangement my constituents will clearly get the message about what local government does, and the level to which local government extends.
My constituency is made up of a large area on the Staffordshire county border. When I go to various parts of my constituency such as Doveridge, Sudbury, Ashbourne, Hartington, Thorpe and Fenney Bentley which are on the Staffordshire county border, I say to the people who live there that on a comparison between Staffordshire county council, which has been Labour-controlled since 1981, and Derbyshire county council, which has also been controlled by the Labour party since 1981, the rates in Derbyshire are 262p in the pound, but if they are lucky enough to live on the other side of the river, the rates in Staffordshire are 198p in the pound. I do not believe that many people know the rateable value of their houses, but they can easily calculate the difference that that means to them. It means that on average, for a house with a rateable value of £100, it is £64 a year more expensive to live in Derbyshire than in Staffordshire.
I have been a member of Staffordshire county council, and I have lived in Staffordshire for most of my life. I do not believe that the services in Derbyshire are far superior to those in Staffordshire. I would go further than that and say that the schools in Derbyshire are in a far worse state than those in Staffordshire. The difference between 1152 Derbyshire and Staffordshire is that no doubt Staffordshire county council does not waste money by overprinting school note paper with statements such as "Derbyshire county council supports nuclear-free zones". Staffordshire county council does not put through everyone's door a newspaper called "Insight", which costs hundreds of thousands of pounds to produce. Staffordshire county council has not increased its staff by more than 2,000 at a cost to the ratepayers of more than £24 million—as my hon. Friend the Member for Amber Valley (Mr. Oppenheim) tells me.
The new charge will make it far easier for ratepayers to understand such expenditure. People who live in Staffordshire Moorlands and in all the villages to which I referred are just on the other side of the border between Staffordshire and Derbyshire and are controlled by Derbyshire. Under the new system, the people in my villages will be paying an average of £246 in community charge this year. In Staffordshire Moorlands they will be paying an average community charge of £189. It costs them £57 more to live on the other side of the river, and that is what the Labour party is so afraid of.
§ Mr. Cormack
We are paying the same amount in South Staffordshire, which is a Tory-controlled authority.
§ Mr. McLoughlin
I would be safe in saying that the difference would be obviously reflected in the difference between those villages in my constituency and Staffordshire Moorlands. That is why the Opposition are so opposed to the community charge. No doubt people will be able to see the levels of expenditure of councils more easily than they can now.
§ Mr. McLoughlin
No, I shall not give way.
It will be understood more easily than under the present rating system. I wish the Secretary of State every success in the Committee stage of the Bill, and look forward to its Third Reading.
§ Mr. Barry Jones (Alyn and Deeside)
I recollect the by-election when the hon. Member for Derbyshire, West (Mr. McLoughlin) was elected, but I shall not follow him down the highways and byways of his county. I noted that the hon. Member for Staffordshire, South (Mr. Cormack) gave him a back-handed compliment while putting a knife between the shoulderblades of his right hon. Friend the Secretary of State.
The Secretary of State said that the Bill is fair. It is evidently not fair, and the right hon. Gentleman was floundering when his hon. Friends the Members for Birmingham, Selly Oak (Mr. Beaumont-Dark), for Tiverton (Mr. Maxwell-Hyslop) and for Birmingham, Yardley (Mr. Bevan) put questions to him. He gave no clear answers. Indeed, he evaded each question.
I agree with the Secretary of State when he says that the measure will bring a new atmosphere to local politics. That is certainly a prophetic remark, because the measure will devalue all hard-working councils. I heard the Secretary of State speak about the problem of fiscal migration—whatever he meant by that. He should know that many Welsh people are migrating from Wales because there are not enough jobs to sustain them and their families. The right hon. Gentleman's speech was perhaps the most abject speech from a Secretary of State on Second Reading 1153 for many years. Where were the Cabinet Ministers? Where was the Prime Minister when the right hon. Gentleman sought to put what is arguably the biggest measure in this Parliament before the House? My hon. Friend the Member for Copeland (Dr. Cunningham) effectively and devastatingly savaged the Bill.
The right hon. Member for Henley (Mr. Heseltine) made a speech such as we have not heard for many years. The right hon. Gentleman used his speech as a kind of political teach-in for the benefit of his right hon. and hon. Friends. He told them that if they proceeded down that path, they would lose the general election, and he told them who would be to blame. His speech dealt a brutal blow to the Secretary of State. The right hon. Member for Henley was right to say that the Bill would be expensive and unfair. As he made that broadside, the Treasury Benches were petrified, knowing that they were unable to make a case against him. I heard the hon. Member for Henley clearly say to his hon. Friend the Member for Eastbourne (Mr. Gow) "Forgive me", like some modern Brutus.
The poll tax is an unjust proposition which will hit hardest the underprivileged people in Britain. If we take the Bill in its social and economic context in northern Britain, we can see that it is quite unjust. I would call, as the latest witness, the Foreign Secretary's famous letter to his constituency chairman. It is now well read, and it describes his real concerns about the Bill. He cites racial, class, regional and social differences. The poll tax will bear heavily on the people for whom the Foreign Secretary expressed concern. The right hon. and learned Gentleman is not here today. I wonder whether that speech, which was published over the weekend, was his way of distancing himself from the poll tax. Certainly, the Foreign Secretary was not present this afternoon to assist the Secretary of State.
I shall attempt to put the proposal into a new context. About a fortnight ago, I heard a former Prime Minister, the right hon. Member for Bexley and Sidcup (Mr. Heath), denouncing the Education Reform Bill. I remind the House that in 1985 the Duke of Edinburgh made a report about the severe crisis in housing. All hon. Members will remember the tumultuous scenes in the House yesterday, because our Health Service is in great difficulty. The poll tax will hit those who are in need of National Health Service treatment and those of our citizens who cannot afford to pay for health care at the point of use.
I wish to relate the Bill to the problem of unemployment. Ordinary people—
§ Mr. Jones
I shall not give way. Many right hon. and hon. Members wish to take part in the debate. If I do not give way, I shall be able to assure the Chair of a much shorter speech than the one that preceded mine.
Ordinary people, as I was saying, are suffering from, or fear, constantly the evil of widespread unemployment. To foist a poll tax on communities that are already stricken by large-scale unemployment is manifestly unjust.
With regard to the inner cities, about which the right hon. Member for Henley spoke so eloquently, local authority associations now warn about the difficulties of collecting the poll tax. I remind the House that black communities are trapped in our decaying city areas. It will 1154 be wrong to inflict the poll tax on those beleaguered communities. As the right hon. Member for Henley said, one cannot make the poor pay more. That was a telling point made against his own Secretary of State.
It is instructive to note that former Cabinet Ministers such as the right hon. Member for Shropshire, North (Mr. Biffen), for Henley and for Chesham and Amersham (Sir I. Gilmour) are raising the standard of revolt. I am astonished that the Conservative party should be prepared to administer such large quantities of electoral poison. If the Government steamroller this measure through, they will lose their standing, their seats and the security of the Administration.
The poll tax is immensely divisive for Britain. As envisaged, it will be a further challenge — like unemployment and bad housing—to the social cohesion and stability of our nation. It will be another major step towards the permanent division of the United Kingdom into the north and the south — the have-nots and the haves.
The case against the measure is clear. As the "One Nation" document said, the tax is unrelated to ability to pay. It will mean that 2 million families with incomes well below the national average will be confronted by rises in local taxation of more than 50 per cent. It is a tax under which most households with weekly incomes of between £75 and £150 will be worse off. It is certain that ratepayers with valuable property will save large sums of money.
§ Mr. Jones
I shall not give way, because, as I said, I want to make a brief speech so that others, like the hon. Gentleman, can catch the eye of the occupant of the Chair.
The poll tax will transfer much-needed inner cities' cash to the county shires. It will not make local government more accountable to local electorates. It will be costly to operate and difficult to administer. Moreover, it is likely to lead to a sort of voluntary disfranchisement. We can expect to have fewer people voting and lower turn-outs at the next general election if our worst fears are well founded.
Another point that has not been seriously considered is that the poll tax will be a divisive factor within families. I urge hon. Members to consider families that are just above the bread line with adult children living at home. When the head of the family places the names of the adult children in his home on the electoral register, they will not thank him for putting them down to receive a major bill. In households that are afflicted by insecure jobs or unemployment, or both, the tax will contribute more to the sum total of human misery.
I want to relate the measure to Wales. I had hoped that my country would be exempted from the measure, which is shunned and unwelcome in the Principality. All the district council associations have given stern warnings about its impact in Wales. I take the example of the industrial valleys, which will be much worse off under a poll tax. These communities have Britain's worst housing —40 per cent. of it is pre-1917 — worst unemployment and the worst environmental blight. Statistically, they enjoy the worst rates of ill-health and the worst fabric of schools, many of which were built before 1903. To inflict this measure on our people is unjust; it is also unreasonable and unnecessary.
1155 I draw the attention of the House to the still massive unemployment figures in the Cynon valley, in the Rhondda and in Blaenau Gwent. In all the great industrial valleys of south-east Wales, unemployment is still hideously high. Therefore, to impose this measure on those communities is socially unjust. I do not believe that the Secretary of State has considered for one moment the impact that his measures will have on our people. Towns such as Swansea, Cardiff and Newport have many areas of severely blighted housing in which poverty-stricken citizens live. They will not benefit. Nor will the steel towns, which are still labouring under the impact of the large-scale redundancies of the early 1980s. We lost many textile jobs, and our quarry towns, too, are depressed. I shudder to think what the impact of the Conservative Government's poll tax will be on our people. It is a kick in the teeth and a wretched reward for stricken communities that once made Britain a great imperial power. It was our communities in Wales that coaled the dreadnoughts; it was our communities — as Mr. Macmillan said in relation to the coal strike — that defeated Mr. Hitler and the Kaiser's army. Our communities made Britain great, but now, because the profits from the last century's coal explosion bypassed our communities, we have nothing. We have to cope with an industrial revolution again, and we are being promised the poll tax instead.
A hundred years ago, many communities in Wales were extracting from the bowels of the earth the coal that made the owners of the coalmines some of the richest men in the world. The south-west Wales coalfield was a kind of Abu Dhabi, but the people of our communities did not benefit from the profits. Now we face a monumental task of reconstruction, which will take until after the end of this century to complete. Although we complain that there is not enough money for the Welsh Development Agency, we are assured of a pernicious poll tax. I urge the House not to reward some of the greatest communities in Britain with this pernicious tax. I warn the Government that if the poll tax is enacted, it will prove to be an impediment of great seriousness to the Government's most pressing duty—I use the word advisedly—to draw together the regions and areas of Britain, to unite them and to restore to those in the north of Britain some hope and prosperity.
Right hon. and hon. Members should know that in northern Britain there is a discernible sense of injustice. We in the north are missing out in the prosperity stakes, and we think that the Channel tunnel will not help us. The poll tax exacerbates that sense of injustice, and it is a step in the wrong direction.
The poll tax is a major political miscalculation. It will lose the Conservative party many votes. It is a complex suicide note. As the right hon. Member for Henley said, it is a Tory tax, and that is how Britain will remember it. If Conservative Members do not understand the catastrophe that will face them when our people realise what this stupid and cruel Government have done to them, they are even more stupid than the Opposition think they are. The Bill is a negation of the statesmanship that we require from the Government. Daily in the House Mr. Speaker's Chaplain prays for the "uniting and knitting together" of this realm. This Bill will have quite the opposite effect, because, if the poll tax is enacted, it will rip our country apart.
§ Mr. Michael Alison (Selby)
My hon. Friend the Minister will have heard the vigorous and sharp criticism that the hon. Member for Alyn and Deeside (M r. Jones) levelled against the Government. My hon. Friend will hear some much more modest and brief criticism from me. The difference between the hon. Member for Alyn and Deeside and me is that tomorrow he will vote against the Government but I shall support them. I hope that my hon. Friend the Minister will accept that as a sort of softening up before I speak about an area where the Government could and should be a bit yielding. I refer to the impact of the community charge on clergy, especially clergy in the Church of England on whose behalf I speak as one of the Church Commissioners, but also more widely on other churches as well.
Until now, Church of England clergy have been provided with accommodation free of rates and rent. That is a result of the deliberate policy of the Church Commissioners and the dioceses, which find the money for stipends and pay the rent and rates on behalf of the clergy. This enables clergy to move easily between posts without having to worry about the financial disadvantage that is involved in moving. It also makes it possible to employ and deploy many thousands of clergy despite their extremely modest remuneration. The average Church of England stipend is well below national average earnings.
Under the old system the Government derated clergy houses to the extent of 50 per cent. This derating relief is very welcome. It sprang from the deliberate recognition of the special nature of clergy and charitable employment. To the Church of England it is currently worth about £2 million. Therefore, rates cost us £2 million instead of the £4 million that would be payable if the Government were not generous about the existing derating.
§ Mr. Wilson
While not in any way dissenting from what the right hon. Gentleman says, may I gently suggest that perhaps he is failing to see the wood for the trees? Early-day motion 454 draws attention to a unique statement issued by the leaders of all the major Scottish churches. In that statement they denounce the poll tax, not on grounds of self-interest in terms of what it will do to the churches, but because they say that it is anti-democratic, a threat to family life and an affront to the Christian imperative of social justice. In his own Christian imperative the right hon. Gentleman should take account of those considerations and not only of the direct impact on the churches themselves.
§ Mr. Alison
In my speech I am briefly trying to deploy my own sort of early-day motion and I hope that the Minister will accede to that and that I shall not have to add signatures.
Under the new system, tax will attach to persons and not to property and this very generous and welcome 50 per cent. derating relief which the Government give to the Church of England and other clergy will disappear. The Church of England cannot suddenly unleash on the clergy which it has to sustain the full weight of the community charge, and thus the problems of a household rate. That is because the clergy, whose terms and conditions of service presume their housing costs to be met by their employer, would be gravely let down and morally cheated if the Church Commissioners and dioceses were suddenly 1157 to change their terms and conditions of employment and expect clergy to face the full impact of a community charge on themselves and on their wives.
§ Mr. Marlow
If the Government see the Church right, having taken account of the powerful and persuasive case being put by my right hon. Friend, could my right hon. Friend deliver the bishops in the other place on this?
§ Mr. Alison
It would be rash of me to presume to speak on behalf of any bishop, but I am quite certain that if my right hon. Friend listens to the arguments that I am trying to deploy and could see his way to helping us financially, the bishops would not be above receiving a little bit of hard cash by way of rate relief for the churches as an inducement to support the Bill, at least partly.
The full imposition of the community charge on the clergy would hit hardest the clergy who are serving in the worst urban areas where housing conditions for them are particularly poor. One of the special contributions which I think it is generally recognised that the Church of England clergy make is that they remain perhaps the only single professional group that actually lives as well as works in the worst inner-city areas of Britain. Most other professional groups such as lawyers, dentists, doctors and school teachers work in those areas, but leave them at 5.30 or 6 o'clock and go to nice salubrious suburbs.
As a group, the clergy of whatever denomination stay in the communities that they represent—even the worst of the inner-city areas. For that reason the Church Commissioners and dioceses will pay the full community charge on behalf of the clergy whom they sustain and their wives. That means that neither the clergy nor their wives will pay the community charge. However, the honouring of the obligation to continue to provide the clergy with housing free of rates and rent means that at least the Church of England — the Church Commissioners and our dioceses — will face a substantial extra cost. I am sure that the same thing applies to the other denominations.
Protecting the clergy and their wives will present us in the Church of England with a bill of about £6 million. Of course there will be a £2 million offset from that £6 million bill because rates, which at present cost us about £2 million after derating, will no longer be payable. Paradoxically, £1 million of the net extra £4 million burden that will fall on the churches will go in Inland Revenue tax, extra money for the Revenue. It will be a sort of tax upon a tax since payment of the community charge on their behalf by the Church of England, the Church Commission and the dioceses will amount in practice to an extra taxable emolument in the hands of the clergy and their wives. They will be liable for extra tax which the commissioners will also have to meet.
Therefore, an extra bill of £4 million will be suddenly unleashed upon the clergy and the churches as a result of the change from our present system of taxing property to the new proposal to tax the person. I cannot believe that it was part of the Government's intention, in switching from rates to the community charge, suddenly to worsen the lot of the clergy and the churches, while earlier, and at present, it is the deliberate policy of the Government to try to assist and to protect the clergy and the churches. I cannot see any rational cause for ending the principle of some relief for the churches, such as that which exists at 1158 present under the 50 per cent. derating relief. The Secretary of State and the Minister will know that the Green Paper originally envisaged the continuation at least of the principle of charitable relief. I shall quote from the well-known paragraph G33 of the Green Paper. It says:The Government intends to preserve the benefits of the existing rate relief arrangements in the form of a discount from collective community charge.That was the early warning—a helpful and positive one — that the benefits of existing rate relief would be preserved. As the Bill is drafted, I see no signs of the continuation, extension, refashioning or refurbishing of the present relief. I very much hope that the Minister will find it possible to honour the implications of the paragraph G33 undertaking and find a way—perhaps at no greater cost than the existing 50 per cent. derating for churches—of relieving the churches of at least part of the burden which they will have to bear to prevent poor clergy and their wives from personally having to meet the community charge. Ministers have kindly talked in an exploratory way to those of us in the Church Commission. So far nothing has come of that. I hope that the winding-up speech will refer to the Government's positive will and intention to continue this principle of relief.
I wish to make a point about church halls, and I apologise if it is slightly technical. Church halls, if not let for profit, and church buildings currently receive 100 per cent. relief from non-domestic rates. The Bill does something apparently illogical and rather disturbing. It provides that, where the ratepayer is a charity and the property is used for charitable purposes, the rates charged will continue to reflect the 50 per cent. relief hitherto available for such property. But there is no such carry-over of the 100 per cent. relief for church halls and churches on the face of the Bill. The 100 per cent. relief can apparently be provided only through an order made at the Minister's discretion.
Surely it is unjust that 50 per cent. charitable relief for some kinds of property should appear on the face of the Bill although the existing 100 per cent. relief for churches and church halls should not. This means that the 50 per cent. relief is guaranteed, but the 100 per cent. relief is not. In the interests of fairness and consistency, both should feature on the face of the Bill. I hope that my hon. Friend the Minister will allay anxieties about this omission and apparent discrimination and will accept an amendment in Committee to write into the Bill 100 per cent. relief for church halls and church buildings. In the expectation that my hon. Friend will listen sympathetically to my points, I again assure him of my general support for the Bill's philosophy and purpose.
§ 8.2 pm
§ Mr. Jim Cousins (Newcastle upon Tyne, Central)
I am grateful for the opportunity to speak in the debate. It has been an interesting afternoon. Conservative Members arrived full of a sense of their liberation from the complexities of local government finance and flushed with pride at the prospect. As the afternoon has passed, it has become all too clear that the hour of liberation, if it ever comes, does not come with this legislation. Already, even before this debate, there were significant signs that this hour of liberation would be postponed.
The simple clear lines of the original proposal have already been corrupted in a number of ways. We have seen the reintroduction of rate capping, of the poll tax, a 1159 cumbersome mechanism for paying 100 per cent. rate rebates in an incredibly complex way and of safety-netting procedures, which dampen the effects of the transition from the present rate support grant system to the new one. We see in the proposals the fatal reintroduction—albeit on only a small scale at present—of multipliers in the standard community charge, which still remains, as part of the proposals, as a property-based tax.
Conservative Members who imagine that in this legislation they are escaping from a property-based tax have evidently not considered the proposals for the standard community charge, the multipliers and the accompanying regulations.
The Government propose to introduce a tax on which there is little or no buoyancy. There is little alternative if one wishes to raise revenues in this system of taxation other than by raising the rate of tax. A form of taxation on which there is little or no buoyancy will inevitably be short-lived. Further corruptions of this wonderful simple system will be required in future to modify its workings.
I have said that there is no buoyancy in the proposed tax, but that is not quite true. There is negative buoyancy. Because of the long-running tendency of population to leave inner cities and the northern region — this has happened for 50 years — and because this is a population-based tax, built into the Government's proposals is a downward drift of locally-determined revenues in the north and the inner cities. It is remarkable that a Government who agree that there are problems to be dealt with at local level through local authority services in the north and the inner cities should have devised a taxation method that has this inbuilt downward drift of revenues in precisely the areas in which it is agreed that the problems exist.
The right hon. Member for Henley (Mr. Heseltine) pointed vividly to the problems of lack of buoyancy. The present rating system has been largely affected by the lack of buoyancy. The right hon. Gentleman clearly explained the reason: the present Government bottled out on the 1979 rate revaluation. Many of the trials and tribulations of central and local government since 1979 have been caused by the lack of buoyancy of revenues, yet its author opposes these proposals—which is at least a sign of one sinner repenting.
Because of the gearing effects on locally generated revenues in this legislation, it is virtually impossible to sustain large locally determined services or expenditures that are not approved by the Government and are not recognised in the new revenue support grant system. Because of these gearing effects, it will be impossible for a local authority to sustain any independence of policy under the new system. That may be part of the Governments's intentions — part of their way of controlling the activities of the dozen or so councils that figure in the list of the unrighteous that is constantly waxed in front of us. I invite Conservative Members to consider the fact that they are reducing all local government to total dependence on Government permission to spend under this rate support grant system.
After the passage of the Bill—if perchance it becomes an Act—local government will simply act as a postbox of complaints to central Government about the lack and poor quality of services in local communities. They will have very little role apart from that. As the right hon. 1160 Member for Henley said, it would be fairer, more honourable and more logical to do away with the whole of local government if that is what is intended.
Herein lies another central problem of the legislation —the revenue support grant system that is to replace the present rate support system. It is difficult to talk about this system, because it does not really exist. It is referred to in the legislation, but it is not described. One of the few detailed indications of what it might be is given in a special paper put out by the Department of the Environment, which states:The details of the methodology will be decided after discussion with local authority representatives. There will be a separate assessment of need made for each authority. Such a system will require far fewer separate indicators of need than at present.That is all that we know about the system of revenue support for local government, on which the pattern of expenditure and services in all our local authorities is to depend.
The future is very uncertain. The difficulties can be explained by reference to the present system of assessing the expenditure needs of local government. Let us take a relatively small matter, museums. Museums are important to my own city of Newcastle upon Tyne, and to the city of Liverpool, which runs one of the largest collections of museum services outside Greater London.
Of course, it would be far too simple to build into assessments of revenue needs a straightforward recognition of what it costs to spend on museums. The local authorities would then start converting everything that they had into museums to take advantage of the loophole in the system. The present system of rate support grant uses a proxy indicator, which is the square footage of shops and restaurants in a city, to determine its needs for museums. 0 happy city that has no museums and many take-aways! It will be credited through the rate support grant system with expenditure on museums that it does not actually incur, because the museums do not exist; meanwhile, authorities with considerable museum expenditure will see their expenditure go unrecognised in the system of assessed need to spend.
Here is the difficulty of the new, magical revenue support grant system, when we finally know its details. Either the indicators will be so few, and so gross, that the consequences for the pattern of expenditure and services in local government will be entirely unpredictable, requiring complex damping mechanisms—see how the old language creeps back into the new, and all the Sargasso sea of municipal controls from which we are promised an escape floods and seeps back into the new system—or the calculation about need to spend will be so finely drawn and so complex as to be impenetrable, having no visible connection with the actual pattern of expenditure in any particular authority.
However, it is on the robustness and consistency of the new revenue support grant system that the whole future of local government will depend after the passage of the Bill. Instead of the annual discussions about rate support grant, we shall have precisely the same anxious consultations when the Government present the annual calculations of revenue expenditure need assessment.
§ Mr. Cousins
I have only just started.
1161 When we are offered a simpler system in the legislation, we should be very cautious about what we are offered. I find some features of what is proposed quite remarkable. Lloyd George — [HON. MEMBERS: "Knew my father."] He may have known the fathers of some Conservative Members; that is their business.
Lloyd George could not achieve a national property tax, but, in the limited form of the uniform business rate, the present Government are introducing a national tax on business property. The right hon. Member for Henley was right to advise us of the awful possibilities of the future if such a tax were to fall into the wrong hands. That may at least sound a note of caution to supporters of the legislation.
At the same time as we are considering this Bill, the Housing Bill is in Committee. The purpose of that Bill is to encourage more renting of property—to encourage underoccupied property back into use. Yet this Bill confirms the undertaxation of underoccupied property. That cannot be logical, and it cannot be right. For the last generation, this country has seen the steady decline of the extended and large family. This Bill has decided to target for taxation large or extended families, although we all know that—for the purposes of community care and social stability, and for moral and philosophical reasons large and extended families are something we should attempt to defend.
The tax will be difficult to calculate, to collect and to police, but one thing is clear: in areas of high population turnover, the difficulties of tax collection will be particularly great. Our cities already contain many areas with a high population turnover, where no one knows who his neighbour is. Yet precisely that disintegration of community relations will be reinforced and encouraged by what the Secretary of State this afternoon, in a beautiful phrase that will long endure in the annals of the study of British urban communities, called "fiscal migration".
This is a tax on the north, on stable communities and on the extended family. More damaging for the Government's future, however, is the fact that it removes local government as a barrier between central Government and the people of the inner cities. Following the passage of the Bill, the independence, authenticity, quirkiness and diversity of policies in those areas will be impossible to sustain. It will be for the Government to negotiate directly through whatever channels they can devise the patterns of services and expenditure that they wish to see. That cannot be right, either for the inner cities of the north or, indeed, for the Government.
The Secretary of State has devised an enormous heffalump trap. Gently, kindly, firmly—with different motives and ultimate political purposes — can we not find a way to steer Eeyore away from the trap?
§ Mr. Roger Knapman (Stroud)
I am grateful to you, Mr. Deputy Speaker, for giving me the opportunity to make my maiden speech during this important debate.
In the course of a few minutes how does one pay tribute to my predecessor who sat for Stroud for a total of 32 years, given that I have known him for only 18 months? Sir Anthony Kershaw was one of that band of honourable and gallant Members. He had a distinguished war career and, in recognition, he was awarded the Military Cross. 1162 Thereafter, in the 1950 and 1951 elections, he contested Gloucester, a Labour stronghold. In 1955 he successfully contested the constituency of Stroud and, from then on, he increased his majority.
As has already been said today, politicians are largely concerned with people's perception of them. Some constituents are unhappy unless their Member is on television or on radio every night. Others imagine that we are glued—today we might be—to the green Benches from half past two to some unspecified, but generally considered anti-social hour. Others are not happy unless their Member is a Minister or, better still, a Secretary of State. Others want a good constituency Member. Sir Anthony was all of those things. He achieved a successful balance and I believe that that, to a large extent, accounted for his success.
For some years Sir Anthony was Parliamentary Private Secretary to my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath). In 1970 he became Under-Secretary of State at the Ministry of Public Building and Works. Thereafter, he became Under-Secretary of State at the Foreign and Commonwealth Office. In 1973–74 something went wrong and he was Under-Secretary of State at the Ministry of Defence. Sir Anthony developed an extensive and unrivalled knowledge of foreign affairs. As a result of conversations that I have had in this House I believe that, in recent years, he was a popular and effective Chairman of the Select Committee on Foreign Affairs.
With such extensive knowledge, I am sure that Sir Anthony has much to offer public life in the country. Hon. Members may be interested to know that Sir Anthony's predecessor, Sir Robert Perkins, is now 94 years old. He represented the Stroud constituency from 1931 to 1945 and from 1950 to 1955. A few weeks ago Sir Anthony had one of his many retirement parties—a spirited affair—and Sir Robert wrote to him to congratulate him on his 32 years in the House. Sir Anthony will do the same for me when I have been here for 32 years, but there will be one or two small problems, not least Sir Anthony's handwriting, because by that time he will be 105. I know that right hon. and hon. Members on both sides of the House will join with me in wishing Sir Anthony and Lady Kershaw a long and happy retirement. [HON. MEMBERS: "Hear, hear."]
On 11 June it became my privilege to represent Stroud. That constituency covers nearly 200 square miles of varied and beautiful countryside. It represents much of the green bit—geographically rather than politically — between Gloucester and Bristol. The constituency extends from the level reaches along the Severn vale through steep, wooded embankments to the Cotswolds. My constituency consists of the wide open spaces that are much favoured by royalty and commoners.
Apart from agriculture, there are many active local firms in my constituency, mainly engaged in textiles, engineering and hi-tech. I am pleased to report that, in general, prosperity is increasing in the area and that is largely attributable to the proximity of good communications, not least to the M4 and M5.
I am a chartered surveyor and, for the past 20 years, I have disliked the ever-increasing complexity of local government finance, as witnessed by the pile of documents on the Dispatch Box. I especially dislike the present rating system. If we understand capping, penalties, targets, recycling, hold-backs, slopes, thresholds and all the other 1163 jargon, do we understand the way in which they interact? No doubt in common with many hon. Members, what I do not fully understand I do not fully trust.
Many people outside the House assume that rateable and rental valuations—they mean the same thing—are somehow based on capital values. They are not. They are merely based on a notional rental value assuming a free market in the private rented sector. That calculation may have been easy enough some 50 years ago, but after decades of Rent Acts and civil Acts — however well-intentioned—there is now no extensive private rented sector. From experience I can tell the House that valuations that were always more of an art than a science are now more of a farce.
We have already heard that the present rating system is not related to an ability to pay. This afternoon we heard again from the Secretary of State about the much-publicised two semi-detached houses. There could be similar houses in any street, avenue, cul de sac or whatever in any constituency. In one house lives the widow, in the other a family of four or five, all perhaps of working age. It is quite wrong that the widow and the others should pay similar amounts. However, let us suppose that in each house there is a family of four or five—would the situation be any more equitable? Do we assume that because there are the same number of people in each property their circumstances are comparable? We do not know enough to make that assertion. Household A may have a 100 per cent. mortgage, but household B may have no such worries. However, whatever else this may prove it is clear that the ability to pay in each case is different.
On several occasions since June we have considered how important it is to maintain the housing stock of the nation. A great defect in the present rating system is that it discourages people from maintaining that stock. When people are retired they must, in general, anticipate some reduction in their income. Perhaps they consider that they need a new central heating system—that is important to older people—and they want to spend the necessary money. However, not only do they have to pay for the central heating, but soon after there will be a tap on the door and it will be the rating valuation officer. Because that heating system is an improvement the rates increase. At a time of life when one faces the prospect of decreasing income it takes a brave person to take on increasing overheads. For that and other reasons I shall not lament the passing of the present rating system.
I support the Bill in its present form. I do not know whether the community charge should be called the Tory tax, but I know that there is no popular way of raising taxes. I support the principle of that charge because it is right that all who receive the benefits of local government should make some contribution, however small. The community charge — I have not heard this said this afternoon — will not pay for local government expenditure; it will pay only for a tiny part of it, because 50 per cent. of local government expenditure comes from central Government, which derives its income from income tax, which is a progressive tax. A further 28 per cent. is derived from industrial and commercial properties, leaving 22 per cent. only to come from the community charge.
The rebates for low-income groups are well designed and will be effective. We should not assume that just because someone lives in a larger house they are better off without knowing whether they have a mortgage. That 1164 person will be paying a progressive tax on the 50 per cent. that they pay through central taxes, so why should they pay extra on the further 22 per cent?
I favour the provisions in the Bill for non-domestic rating. It is scandalous that department stores in Edinburgh or Glasgow should pay two or three times the rate per square foot of a similar property in London. We have heard much about Ravenscraig steelworks, and it is equally scandalous, although I am unaware of the figures, that it is paying more in rates than it would if it were 300 or 500 miles south and closer to its natural markets.
Initially the central rating lists will produce some tremors in some areas, but over a period of time company directors will be able to budget in line with inflation and will know their liabilities for years to come. That will create stability, which creates confidence and, with a bit of luck, confidence creates success. What a chance the Bill gives to businesses that we hear so much about in certain parts of northern England and Scotland, which will be able to compete once again on an equal footing.
There is a saying, no taxation without representation, which is a good maxim. The Bill will go far to reestablishing that principle and accountability in local government.
§ Dr. Dafydd Elis Thomas (Meirionnydd Nant Conwy)
It falls to me to congratulate the hon. Member for Stroud (Mr. Knapman) on his maiden speech. There was a convention when I entered the House many years ago that maiden speeches should be non-controversial. However, that convention has been broken for some years. It is a convention to refer to one's predecessor, and the way in which the hon. Gentleman did that drew support from hon. Members. He spoke of the attractiveness of his constituency, which I can endorse as I drive through it quite often.
The hon. Gentleman showed his strong support for the Government. I am sure that he will learn, when he has spent a little longer in the House, that it is important to be critical of one's party, and I am sure that in future he will do so in the same eloquent manner.
It is a convention not to respond critically to maiden speeches, but many of the points that the hon. Gentleman made were answered by my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins). My hon. Friend spoke, as shall I, about the impact of the Bill on local democracy.
The Bill is the final nail in the coffin of democracy in Britain. It must be considered along with the other drives to a centrally managed state with a concentration of power in Whitehall and a little less power in Edinburgh and Cardiff. It must be considered along with the policies of the Education Reform Bill, which deals with the privatisation and opting out of schools. It must be considered along with the proposals in the Housing Bill, which will transfer council housing estates to the private sector or to self-management. It must be considered along with the proposals to place inner cities under the control of unelected corporations, allegedly to regenerate derelict areas. We can look forward to a scenario in which local government will manage rubbish collection, which itself will be privatised.
There are three lines only in the Bill that I support. Clause 121(4) says: 1165Any power conferred by this Act on the Secretary of State may be exercised differently for England and Wales, whether or not it is exercised separately".Regrettably, there is no separate exercise of power for Wales in the Bill. However, there are some slight differences in the way that revenue support grant and non-domestic rate income are to be paid separately to county and district councils.
It is not clear how those slightly different aspects of the Bill will work in Wales. There are some differences in the non-domestic rate multipliers under schedule 4 and there will be a separate non-domestic rates pool for Wales under schedule 4. Other different arrangements are made for calculating the non-domestic rate income entitlement. Wales is following Scotland in having the tax imposed rapidly in 1990.
In one of my favourite readings, the Welsh Office handout, the Secretary of State for Wales said:The Bill provides for a separate system in Wales; one which is tailored to the needs of Wales. No resources will be lost to Wales as a result of the move to the new system.The new system has not been defined. In the same handout, the Secretary of State said:The new system will distribute grant on the basis of objective assessments of need. I am anxious to ensure that those assessments reflect the differences in areas of Wales as accurately as possible.He further said that there will be discussions with local authority associations.
It is not clear to Hon. Members on this side how the system of assessing needs will operate and how it is different from the present system of rate support grant. At least that was based on an attempt, through the GRE assessments and, traditionally, through the formula of the RSG, to establish an assessment of need for local authorities. Perhaps the Minister for Local Government, who, were it not for the political resilience of the Secretary of State for Wales, might be in his right hon. Friend's position—the hon. and learned Gentleman has a special interest in the subject as well as his own nationality—will explain how consultations are going and how the new revenue support grant system will assess the local needs of authorities. We were told in the Green Paper that there might be two grants—a needs grant to cover differences in needs, and a standard grant. However, that is no longer the case.
It would be helpful if the Minister would explain how the crude system of calculation in schedule 5 of the entitlement of each authority to revenue support grant will work in practice. That part of the Bill should be explored in detail today, tomorrow and in Committee.
The Secretary of State told us that there will be little or no change in Wales as a result of the Bill, but the effect on individual income and local authority expenditure is substantial. The Government intend that 16 per cent. only of local authority expenditure in Wales will come from the poll tax. That underlines the point that was made by my hon. Friend the Member for Newcastle upon Tyne, Central, who said that this tax lacks buoyancy and restricts the operation of local government.
Are the Government hoping that, if there will be a need for a local authority to increase the poll tax, it will result in a steep rise because of the small margin of flexibility that is available? Will the result be such local opposition to poll tax variations between authorities that it will be seen as a 1166 move towards a fully grant-aided system of local government? That was one of two stark alternatives offered by the Layfield committee to the Labour Government in 1976. It said that if local government were to be accountable it either had to be 100 per cent. grant-aided, and therefore accountable to the Secretary of State, or accountable on the basis of local income tax as a major source of revenue, and therefore accountable to the electorate.
In discussions on the Education Reform Bill, we shall be considering ways in which education authorities' formula for granting each school's budget will be discussed, and again the Secretary of State will have, in practice, to insist on high education expenditure, which will be at the expense of other local government services.
The possibility of discretionary expenditure by local government has now almost entirely disappeared. Locally elected authorities are in a similar position to that of health authorities in relation to central Government. Revenue is entirely determined by the Welsh Office, by the Department of Health and Social Security in the case of England, and by the Scottish Office in the case of Scotland. That is the position as a result of the changes.
With the current crisis among health authorities, we can clearly see where the mechanism of entire, complete central control leads. It leads to the fundamental discrepancy between Government statements on what funds they are providing and the reality of services. Surely the Health Service crisis is an example of the breakdown of democracy. Nominated bodies are unable to manage and deliver services effectively in accordance with local need, and centrally distributed resources cannot meet the needs. That is the path that we are following in respect of local authorities and health.
The loss of discretionary powers makes the possibility for local authorities to make substantial grants to voluntary bodies virtually nil. It will affect voluntary organisations such as the citizens advice bureau. I can envisage a day when the National Eisteddfod will become a wholly owned subsidiary of the Welsh Office.
As we have been told, the changes in the business rate will have a particular impact on areas such as rural Wales, mid Wales and north Wales. The business rate in such areas will increase. Ironically, one of the reasons why responsibility for assessing rateable value was taken from local authorities in depressed areas was that they tended to favour their own industries and businesses. Local government complained about the regressive nature of the rate and the need for another supplementary tax or taxes long before the Conservative party jumped on the bandwagon.
There are fairer options that relate to two principles. Services are paid for on the basis of ability to pay. We have heard that phrase in Government rhetoric about their interests when it suits them. As an overall principle, the ability to pay must point to a form of local income tax. Also, there is a clear need for a property tax in the form of a capital or wealth tax. But the essential argument is that we need local payment and redistribution mechanisms. Both mechanisms are under threat in the legislation.
The Government tell us that, because of their complexity, the traditional rate support grant allocation formulas are no longer credible or viable. At least there was an attempt to assess need, to transfer resources, and to equalise resources according to needs. This legislation 1167 represents a crude assessment of need and gives no clear sign how the Government intend to deal with allocations to authorities.
Another aspect of the Bill relates to the changes that will affect various income groups in a differentially bad manner, particularly in respect of many low-income areas of Wales. Studies show that, as a result of the changes, two thirds of the population will be worse off in terms of their personal incomes and that of their households. In particular, women will be worse off. The average wage for female manual workers in Wales is less than £100 a week. Low-paid people will bear the burden of the Bill.
When we consider that together with the burden of the changes in the social security legislation, which will come into force early next year, we see that the Goverment's policy represents a class attack on those who do not support them. It is a clear attack on local democracy. Governments that attack local democracy only create a demand for a vibrant, diversified real democracy. The history of the relationship between central and local government in all states demonstrates an ebb and flow between the tendency for centralisation and the demand for greater autonomy from localities and regions.
§ Dr. Thomas
The Minister is smiling and agreeing with me.
The centralised phase, of which this Government have been the main example—it goes way beyond any Fabian centralism ever attempted by the Labour party — will create its own reaction. We shall see a system of democratic local government in the British counties that will replace the centralisation that the Government have imposed.
§ Mr. John M. Taylor (Solihull)
I congratulate my hon. Friend the Member for Stroud (Mr. Knapman) on his excellent maiden speech. He paid an eloquent tribute to his predecessor and to his lovely constituency. I am sure that all hon. Members look forward to hearing his contributions and observing how he gets his point across in such a good-natured way.
I have had the pleasure and the responsibility of holding one political mandate after another from the residents of the borough of Solihull since the autumn of 1971. For much of that time, I have held more than one mandate. The consistent, constant theme throughout that time has been the residents' dissatisfaction with the domestic rating system. Indeed, so constant has been residents' dissatisfaction about rates that that sentiment has spawned two generations of residents' associations —one in the 1930s and one in the 1970s. It is true that they have paid their taxes in sorrow, but they have paid their rates in anger. Since the 1970s, I have been in favour of a capitation tax in preference to domestic rating. I welcome the Bill.
Much has quite properly been said about the ability to pay. All civilised societies tax the ability to pay. We call it income tax, capital gains tax, or tax on benefits in kind. We also pay the same amount for many things — for example, car tax, television licences, petrol excise duty—or at the same rate as with VAT. We shall pay the same 1168 rate of community charge — just as we do for many things—except the poorer people in society. The least well-off will get substantial rebates, up to 80 per cent.
§ Mr. Cormack
Will my hon. Friend acknowledge that, with the example that he cited, there is an element of choice? There is even a choice in respect of black and white or colour television sets. People do not necessarily have to have such things. But there will be the same rate of community charge, regardless of personal circumstances.
§ Mr. Taylor
There is always an element of voluntariness about most taxes. If one chooses a frugal lifestyle rather than that of an investor, one will sidestep capital gains tax. That is true of many things. My central position remains. My hon. Friend the Member for Staffordshire, South (Mr. Cormack) can make his points in his own speech. I know that he is impatient to do that, so I shall try not to delay him.
Clearly, there are at least two groups of taxes. One is on an ad valorem basis and the other is on a flat-rate basis. The community charge will be a flat rate. Frankly, I welcome it as such.
Many would say that an ideal for local services is to get the payment mechanism as close as possible to consumption—that is, payment by consumption or, at least, payment by consumers. A capitation tax is much closer to a tax on consumption than a tax on the occupation of houses could ever be. It is not a tax on franchise. I suppose that it is a tempting play on words for the Opposition to pretend that it is, but it is not. I am on a voting register that is now held by a local authority, and I am on a rating register that is now held by a local authority. No one uses the one as a sanction against the other and there need be no fear on that count. —[Interruption.] What I have just said is unchallengeable. Opposition Members can read it in Hansard and see for themselves.
The community charge will confront a larger component of the community with a far closer approximation to the truth of the cost and value of what the local authority is doing in the community's name and with its money. That may not be fun, but it will be honest.
Many of my constituents are unhappy about the safety net or taper over a four-year period. I have taken no pleasure in explaining to them that I do not like it either, but that resource transfer is not new. It has been going on since the 1920s. The transfer of resources, often from provident authorities to improvident authorities, is as old as that. However, it is now visible by virtue of the safety net. I am not sure whether that was the first and prime intention of the safety net, but it has certainly had that effect. It may well be a casual benefit of the safety net transitional provision that it will show people starkly the sort of resource transfers that they have been underwriting for many years. Candidly, it will make a lot of people think. For those of us who live in prudent local authority areas, the safety net takes some of the gilt off the gingerbread. However, at least the reality of resource transfer by stealth through the rates will have been exposed, and that process will be eliminated over the four-year period.
Nothing could be more unloved than the present rating system. The Conservative party alone has shown a willingness to do something about it. It is clear from the debate that no one else has a better idea; in fact, no one else has any ideas at all. I shall support the Bill.
§ Mr. Harry Barnes (Derbyshire, North-East)
I shall refer to some of the points made by the hon. Member for Derbyshire, West (Mr. McLoughlin). I am sorry that he is not in the Chamber. I intended some of my remarks to refer to him personally, so I will leave those out. The others relate to what he said about the Government having a mandate for the legislation. He spoke as if that was somehow the end of the debate and we could disappear. That point is made not only by the hon. Gentleman; it is repeatedly made about the mass of legislation that is being rapidly pushed through the House. This is the first occasion on which we have had a two-day debate on a major measure. The Education Reform Bill — the Government have abused the title of the great 19th century reform Bills—has been dealt with in a summary fashion and pushed through on the basis that the Government have a mandate to take such action.
The way in which hon. Members such as the hon. Member for Derbyshire, West present the concept of a mandate is like politics for tiny tots. It is a crude understanding of the notion. The little book called "The How and Why Wonder Book of Parliament", published for young children, would not descend to such a simplified interpretation of a mandate. The people who wrote it presumably have some understanding of and a background in the study of politics and know that they could not say such things to young children.
If it means anything, a mandate means solid and sound support and enthusiasm from the majority of people in the country. I doubt whether any of the major measures that the Government are pushing through the House have that, and this measure certainly has not. The Government can lay claim to only about 42 per cent. of the vote. That does not make the case for electoral reform but it does make the case for the Government acting with restraint and realising that factors other than the issues dealt with in a document made available to only a few, which was never a major item of discussion at the election, need to be considered.
A mandate seldom relates to single issues. On some great occasions and in some great election campaigns issues of major concern — such as the reform of Parliament in the 19th century, to which I referred —have been serious considerations affecting the electorate. This was not the case at the last election. The only part of the country where the issue of the poll tax came under serious discussion was Scotland and the evidence from Scotland is that the measure is extremely unpopular. I criticise my hon. Friends and those responsible for organising Labour's election campaign for not making the poll tax a major item for discussion. Had they done so, we could have had some understanding in the rest of the country of attitudes in Scotland. We should then have seen whether there was a mandate and it would have been clear who had compassion and was concerned about the issues.
§ Mr. Howard
Does the hon. Gentleman not think that, had the matter been raised by his party during the election campaign, it might conceivably have been asked what its policy was?
§ Mr. Barnes
That is right. We have had presented to us a major measure of transformation. It is your job to argue 1170 the case for it and tell us why it is better than the present system. The fact that there might be problems in finding a replacement in no way excuses your position. It is a disgrace. It is rather like saying—
§ Mr. Deputy Speaker (Mr. Harold Walker)
The hon. Gentleman should be cautious in referring to me in that manner. He should use the third person.
§ Mr. Barnes
I am sorry, Mr. Deputy Speaker; I was not intending to refer to you. I have been here no longer than the maiden speaker who spoke tonight. I intended to refer to the Government Front Bench and to the barbs that it directed to me.
§ Mr. Allen McKay
My hon. Friend will not be surprised to learn that I made opposition to the poll tax a major plank in my election campaign. My constituents were interested to learn that 96 per cent. of them would suffer increases in rates while only 4 per cent. would gain.
§ Mr. Barnes
Those who campaigned during the election, as my hon. Friend did, and who have been campaigning since, have found that this campaign has been unlike many others. Those of us who have been engaged in the Campaign for Nuclear Disarmament, and in supporting the miners' cause or other causes have had to go out and take the lead. We had to hand people leaflets and gain their support. The poll tax is different. When one campaigns against the poll tax, people rush up to one asking for leaflets and information because they feel that the measure represents a great danger to them. In that context, how can we talk about a mandate? When mandates are seriously considered, they are only one element in our electoral system. They do not take away the responsibility for weighing up changes, developments, feelings, attitudes and the rights of minorities. Legislation was introduced last night which will take away the rights of minorities, but the fact that one has a mandate and that one might for example, develop it to exterminate 49 per cent. of the population would not make it justifiable. This measure will have serious consequences.
When one comes to the House, it is almost like going through H. G. Wells' time machine and moving backwards in time. That applies to the institution, the building itself and the way in which parties travel round it. In addition, legislation now reflects that feeling. H. G. Wells wrote "The Time Machine" in a period which fits in well with the heyday of the House as a Parliament-controlled rather than a Government-controlled body.
§ Mr. William Ross (Londonderry, East)
I have listened with great care to the arguments. As the hon. Gentleman is crystallising the view that this measure is a sure vote-loser and election-loser for the Conservative party, why is the Labour party arguing against it?
§ Mr. Barnes
The Labour party wishes to defend the interests of the people whom it seeks to represent. In defending those interests—despite the fact that it might not be within its own long-term interest within the electoral game — it is often obliged to vote in ways which are not cynical and do not hammer the people.
Current legislation, in respect of employment, immigration and education, reflects a society beyond which we have now moved, but this measure takes us even further back in the time machine. The Victorian images of 1171 the House have been replaced by images of the middle ages. The images in the building, which was rebuilt after the 1834 fire, link us to former times.
People are looking backwards to a time when revolt arose out of legislation. Modern techniques are being used to contain that situation.
§ Mr. Marlow
The hon. Gentleman says that we have been looking backwards. Perhaps we could look forward if the hon. Gentleman will tell us something about the consensus tax which has been outlined by the Opposition Front Bench. That is a tax which everyone will enjoy paying to their local authorities.
§ Mr. Barnes
If we went back to 1972, we would see an acceptable financial system, which operated in local government, despite the injustices in specific cases, such as those mentioned by the hon. Member for Derbyshire, West. We could accept those matters in a rough and ready way. Since then we have had grant capping, rate capping and other measures which have made nonsense of the basis of the current arrangements. We want to get the best out of the system and seek to build upon it. I should have thought that, until it was taken over by the new revolutionary tendency, the Conservative party would have appreciated such a way forward.
The ordinary people of the country are expected to be vassals. The Government are acting as the new barons and that is not acceptable to the people. They will react against it. The social bonds will be broken as a result of pressures exerted by the Government and this in turn will lead to anti-social behaviour or open rebellion against the measure. Conservative Members should face up to their responsibilities.
Several specific things are wrong with the legislation. It is unfair and unjust. It cannot be fair that somebody who earns £100 a minute, someone who earns £100 an hour, someone who earns £100 a day, someone who earns £100 a week and someone who earns £100 a month—that is roughly the amount that is earned by someone on a youth training scheme— should be expected to pay the same amount in taxation for local services. That would take us back to the period about which I have talked. However, such proposals have been presented in this century in Europe and in other nations. Essentially that has happened in fuedal-type regimes, rather than in regimes that operate on democratic principles.
The scheme is wrong because it is also expensive and unworkable. Many hon. Members have explained the problems and details of that. It is also a serious attack on civil liberties. That raises the problem of law and order and the desire for people to respond to a stable society, to seek to aid themselves and their families, and to advance their condition generally. People will be pressed, and will have to face up to whether they will take part in actions such as occurred in my constituency in 1972 during the passage of the housing finance legislation. People were pressed and oppressed. The social bond was broken and the Clay Cross rebellion was the result. However, that rebellion will be as nothing compared with the actions that could result from this legislation. The legislation will either be accepted by society with a dull acceptance and cause anti-social responses, or people will be galvanised to take action. The Government should not do that to their people.
§ 9.5 pm
§ Mr. Timothy Raison (Aylesbury)
I think that the House is agreed that we should have reform and that there is not a perfect system that would satisfy everybody. At times I suspect that if the Government's scheme were in being and somebody came along and said that they had had a brilliant idea for a property tax called the rates, many people would say, "What a good idea; let us put it into operation." However, I am afraid that time has passed and we must recognise the need now to move on to something else because the present system has clearly become discredited.
As the House knows, my right hon. Friend the Secretary of State has taken his courage in his hands and launched this scheme. As the House also knows., it comes in three parts. The first is the switch from the familiar rate support grant to the new revenue support grant scheme. Oddly enough, as has already been pointed out, the Bill tells us virtually nothing about that. It merely states that there will be a revenue support grant and that the Secretary of State must get it through Parliament. However, enough has been said outside the House for us to realise that in its objectives it is trying to get rid of the resources element of the present system and to introduce a more objective assessment of needs. I am bound to say that that seems to be right, with one proviso about resources. Essentially, as I understand it, the scheme is a move in the right direction. I should also acknowledge that it will benefit my constituents financially.
The second part is the unified, or sometimes uniform, business rate. Clearly, my constituents will not like that. There is no doubt that businesses in constituencies such as mine will be worse off as a result. That has been partly masked by the fact that the figures used have not incorporated an element for revaluation. I understand that until revaluation takes place it is hard to say what the financial consequences will be. However, they will be painful. On the other hand, we must set against that my right hon. Friend's desire to provide additional succour to those parts of the country where business and commerce are weak. If we suffer, no doubt we shall complain, but we shall watch what happens carefully. I cannot say, overall, that it is wrong to try to help industry in those parts of the country where there is clearly real weakness.
It is when I come to the third part of the Bill, the community charge or poll tax, that I part company with my right hon. Friend. I accept that it may mean increased accountability. However, if it will increase accountability, I still do not understand why it requires a capping mechanism to be built into it. That seems to undermine the claims that are made for it. I understand also that 'it will help some people, notably single people. However, as hon. Member after hon. Member has pointed out, it is not related to ability to pay and it will not be seen as fair by many people. In fact, it is an unjust tax. I believe that its injustice will make it appreciably harder to administer than would otherwise be the case. Goodness knows, it would be difficult enough to administer anyway.
In Aylesbury Vale, using the Government's figures and assuming an average of two persons per household—I understand the calculation was slightly under that—65.8 per cent. of households will be worse off initially than at present. The £500 they will have to pay for two community charges is more than they are paying at present. It is amazing what a high proportion of people are on rebates, 1173 but rebates apply to both the existing and the proposed system. In each case many people will receive rebates. When the transitional period ends and the safety net is withdrawn, the number of people worse off will drop to about 30 per cent. in Aylesbury Vale, with about 11—6 per cent. on roughly the same level. That fall will be due not to the poll tax but to the new revenue support grant.
It is inescapable that, comparatively speaking, under the proposed system the less well off will be still poorer and the better off will be richer. That is what makes the proposal so unacceptable. That fact is spelt out clearly in the Government's table comparing households under the rates and the community charge. Either way, the poor will be largely helped by rebates, but people on a net income of £100 to £400 per week will pay a higher community charge. It is only when net income for a household reaches £500 per week that the poll tax becomes attractive, and it becomes increasingly attractive as the income goes up the scale.
I am concerned particularly that the people who lose out will be not those who are in poverty, because of the rebate system, but those just above the poverty level—the people we have been trying successfully to appeal to politically in recent years, such as council tenants who have bought their own homes. I have no doubt that they will suffer heavily, as will council tenants who have not bought their own homes, such as those in older and poorer properties, couples with modest savings, and so on. As a Conservative, I am worried that we should run the risk of hitting those people and spreading disillusionment among them.
Reference has been made to history. I make one further reference to the days of the peasants' revolt. In "The Offshore Islanders," Paul Johnson describes what happened:By the 1370s the Government … sought to tap the new wealth of the masses by resorting to poll taxes, that is, by a direct, fixed levy on every adult, irrespective of income. This monstrous device, of Continental origin, was the perfect formula to provoke civil commotion. Attempts to take a preliminary census, in 1377, led to riots in the big cities, such as London, and resistance almost everywhere else. In 1381, the actual imposition of a shilling poll-tax was the signal for revolution, particularly in the heavily populated areas in the south-east.
I am not arguing that revolution will be produced as a result of the scheme, but I am genuinely concerned that in some inner-city areas we will see disorder and have great difficulty in compiling the register and collecting the tax. I fear that we will see disorder, or possibly no-go areas. I cannot believe that anybody could be happy about that The question is whether there is an alternative. Any alternative must be related to ability to pay. That is the essence of the argument. In the attempt to find an alternative, my right hon. and hon. Friends and I have put forward an instruction to the Committee. The House knows, perhaps for understandable reasons, that a Division has not been called for, but it is notable that more than 40 of my right hon. and hon. Friends, a substantial part of our party, have signed the instruction to the Committee, for the reasons that I have expressed.
I do not have time to set out in detail the scheme for a possible alternative, but the instruction indicates that it would be a type of banded system based essentially on the information available to the Inland Revenue. The local tax 1174 would fall on those who pay income tax in some form, but it would be graduated rather than the flat-rate system of the poll tax.
§ Mr. Raison
I am afraid that I cannot give way, because I want to finish my comments.
I recognise that there are problems. No one would say that my alternative is the easiest thing in the world. However, it is not impossible for the Inland Revenue to provide the data. It would mean more work for the computers, but that would not be incompatible with the kind of information that is being compiled and collected already. Some people are concerned about tax information being passed from the Inland Revenue to local authorities. In fact, at the moment Inland Revenue information is passed to the DHSS and to the Department of Employment. Those who have filled in an application for a grant for a child in higher education will have had to tell the local authority about their income level. I do not believe that there is anything particularly outlandish about that.
I recognise that if we go down this path we shall require some kind of resources redistribution, and I have already said that there is one element in which we would need to keep resources redistribution, otherwise there would be a very heavy burden on those parts of the country that are low in terms of taxable income. However, it can be done. The crucial point to remember is that, under the present scheme, £1,500 million is available for rebates. Obviously a system of the type to which I have referred would not require rebates, because it would be related to the ability to pay. It would therefore be possible to use that very substantial sum to achieve equalisation. It would not need to bite into the overall basis for the resources element because £1,500 million—as my right hon. Friend the Secretary of State for the Environment has confirmed—could be available for that purpose.
It has also been argued that there may be heavy burdens in certain areas under the type of scheme put forward by the Chartered Institute of Public Finance and Accountancy. However, the amount available for equalisation to which I have just referred will partly allay that. If we accept that type of scheme, we can choose at what rate we set it. Some examples produce rather intimidating results. If that happens, we can make the scheme less progressive, more progressive or strictly pro rata. A wide variety of options is available to find the most suitable scheme. After all, we should remember that, whatever the system, it will have to raise the same amount of money. We must choose those bands that make most sense.
The most important point that my right hon. Friend the Secretary of State put forward is the possibility that, as earnings increase, there may be a substantial jump in the amount of revenue that one would have to pay. I recognise that we must face that. The answer may lie with increasingly narrow banding. However, if, at the end of the day, the kind of examination that I have advocated leads us to suppose that banding is not the right way to proceed and that a simple direct relationship with income is a better way, so be it.
In putting forward the instruction, we are asking the Government to recognise the deep anxieties felt about the proposed scheme and to enter into some kind of 1175 constructive and realistic search for a better way to proceed than the present proposal. I sincerely believe that if we cannot find a better way to proceed, we may run into serious trouble. In view of the anxieties that I have expressed, I must state that I cannot support the Bill.
§ Mr. Gerry Steinberg (City of Durham)
The House is discussing the most radical proposals for local government finance for centuries. The impact of the community charge, or poll tax, which the Government propose to introduce to replace domestic rates will be as devastating as it will be iniquitous. The Government say that they are introducing the poll tax for several reasons, not least becausean unacceptable price has to be paid in the disruption faced by ratepayers following revaluation.That is poppycock. One need only examine the research carried out to know that that is not so. In my constituency, which is fairly representative, the poll tax would be seven times more disruptive than a rate revaluation.
The Government's criterion for unacceptability was that more than 5.26 per cent. of householders would experience an increase in their rates of more than 20 per cent. In Durham, 50 per cent. — not 5 per cent. — of householders will experience rates increases of more than 20 per cent. Indeed, under the proposed poll tax, nearly 50 per cent. of people can expect increases of more than 80 per cent. Even with the safety net, the poll tax will cause disruption in more than 34 per cent. of households—well above the 5.26 per cent. which is described as unacceptable in the Green Paper.
The real reason for changing the rating system has nothing to do with disruption and everything to do with favouring the wealthy, especially in the south and southeast of England. The Government are trying to harden the north-south divide. The benefits to occupiers of properties with high rateable values are obvious. The rich will make considerable gains while the poorest members of our community will become poorer. It is estimated that about 80 per cent. of householders in the south-east will reap substantial benefits, but in my constituency the average household rates bill will increase by more than 32 per cent., from £359 to £475.
Large families and those who live in small houses with low rateable values will lose, as will all households of more than two adults in lower-rated houses. The tax is exceptionally regressive and bears no relation to the ability to pay. The Secretary of State for the Environment, who is pushing these changes, will gain by as much as £1,500 a year. Many of his colleagues will also gain. The Secretary of State for Transport will benefit by more than £6,200 a year. Many unemployed people with children must live on less than that. What is fair about it?
The Bill is offensive and pays little regard to the ability to pay or earnings and spending. It is a flat-rate tax. The same amount will be paid by the millionaire living in a mansion and by the widow living in a small cottage or flat. It is not my idea of reform for the better. It leaves a nasty taste in my mouth, but it is what we have come to expect from the Government during the past eight years. They have pushed local government finance into complete chaos.
Even the former Secretary of State for the Environment, the right hon. Member for Henley (Mr. Heseltine), was kind enough to consider the plight of the 1176 owners of modest terraced houses, some of whom are first-time buyers. He said that those owner-occupiers represent about half of the householders whose rate bills would increase by 80 per cent. or more under revaluation. That represents about 3 per cent. of all householders, but research shows that 15 per cent. of occupiers of properties with a rateable value of £100 or less, which is a fair description of modest housing, would suffer increases of more than 80 per cent. under the poll tax.
We all know that the unfortunate householders who will be affected by the new charge will not live in the more desirable parts of our towns or rural areas. They will be the people who can least afford to pay the increased tax. Safety nets may provide temporary protection for local authorities, but there is no such provision for individual householders.
The poll tax will be much more disruptive than revaluation. It is directed against those who live in low rateable value properties and it favours householders in high rateable value properties, such as those in Dulwich. The disruption will be far more severe than a fair rating revaluation. In my constituency, one in three householders faces a poll tax increase of more than 20 per cent. and one in seven faces an increase of 80 per cent. I must conclude that the disruption caused by the poll tax will be at least three times as extensive as that caused by revaluation.
We are told that some poorer sections of our community will pay only 20 per cent. of the new tax and that people on supplementary benefit will be protected. The majority of people will be asked to pay, regardless of their ability to do so.
Who will pay the poll tax for the housewife or for the unemployed youngster? We all know that it will have to be paid by the working husband or father. Once again, pensioners will be most severely affected by the poll tax. Age Concern states that as many as one third of all single pensioners will be £5 a week worse off because they are more likely to be living in low rateable value properties.
The Bill will push up the prices of bigger houses by removing the burden of rates, and once again house prices may crazily spiral upwards as they did in the early 1970s. Since it is generally accepted that most wealthy people and high wage earners live in good quality, high rateable value properties, and the poorer sections of the community live in low rateable value housing, the disposable income of wealthy people will be increased as their tax burden is reduced, whereas the opposite effect will apply to poorer sections of the community. There will be a definite effect on assets as house prices change. If property no longer has a tax liability placed upon it, the value of large, high rateable value property will significantly increase, unlike that of small, low rateable value houses.
How on earth can the Government justify the poll tax? It is simply a philosophy of robbing the poor to pay the rich, and the Bill is a shameful one. The Bill will have far-reaching effects. It will make it difficult for poorer local authorities to afford the basic services needed by their residents. The poll tax has no regard to the ability to pay it, so authorities with a high proportion of residents on low incomes in their areas will find it difficult to increase the poll tax. Those authorities will have to settle for lower levels of services, unlike authorities in the more affluent areas of Britain. That will undoubtedly, serve to widen the north-south divide.
The Government say that the Bill will increase the accountability of local authorities, and that accountability 1177 is one of the key factors of their supposed reform. That means that local authorities will now control only 25 per cent. of their income, so it is ludicrous for the Government to talk about accountability, since the Government will also determine a uniform business rate nationally. Under the new provisions, 75 per cent. of council income will be under direct Government control, so the poll tax will be the only means by which councils will be able to meet special local needs. The Government will have greatly increased power over local authorities, and local accountability will be confused and severely undermined. The poll tax will mean more simple control and less accountability.
The true motive of reducing local government expenditure is clear, since the Government have decided to retain the power to cap the poll tax. If the poll tax is not a sufficient deterrent, community charge capping is being held in the wings by the Minister.
The cost of collecting the new tax will be three or four times more than that for the present rating system, but loss of income through evasion will certainly be higher. When a poll tax was introduced in the 14th century, it was extraordinary that the adult population fell by a third in four years—according to the poll tax register. History has an uncanny knack of repeating itself.
It may be necessary to change our present rating system, but the speed at which the Government have bulldozed their way through the Bill, ignoring the outcome of the consultative process, and rejected proposals put forward by organisations is neither reasonable nor rational. It has been rejected as an option on every occasion that it has been considered. If a long-standing local tax has to be changed, everyone concerned would be much happier if more time and general debate could be given to other options. No solution would be perfect.
§ Mr. Steinberg
No. It is almost 9.30 pm and other hon. Members are trying to speak.
I do not believe that any solution would be perfect or would satisfy everyone, but all of us should satisfy ourselves that what replaces the old is fair, will better serve our needs and will strengthen the status and accountability of local government and its relationship with central Government. No other country in the civilised world has such a tax, which is not surprising when the disadvantages are considered.
I want to quote an example that sums up the iniquity of the proposed legislation and provides firm evidence of how unjust the Bill is. A recent television programme focused on two young men living in London. One worked in the City as a dealer in securities, and earned £100,000 a year. He lived in a new luxury flat valued at £150,000. His poll tax would be £674. The other man also worked in the City, but as a shop assistant. He earned £8,000 a year and lived with his wife and baby in a one-bedroomed council flat. He and his wife would pay a total of £1,348. He would have to pay it all, because where will a mother looking after a baby find £674? The first young man would have to find 0.674 per cent. of his income for the poll tax. The second would pay 16.85 per cent.—exactly 25 times as much. That is surely evidence of the iniquity of the Bill.
1178 The poll tax will be costly to administer, complicated, impractical, centralist and, most importantly, unjust.
§ Mr. Alan Williams (Swansea, West)
I understand that we have had a maiden speech. Unfortunately, I did not hear it and I apologise to the hon. Member for Stroud (Mr. Knapman) for that. However, I assure him that my hon. Friends who heard it have commented on its eloquence. They said that it was a good speech, even if they did not necessarily agree with all the sentiments expressed in it. I am told that the hon. Gentleman's predecessor, Sir Anthony Kershaw, who was much respected in the House, would certainly have been pleased with the performance of his successor.
The right hon. Member for Aylesbury (Mr. Raison) in a way summed up in one sentence the reasons for the opposition to this Bill that exists on both sides of the House. He said that the poor will be poorer and the rich richer. That seems to be the theme of the Bill—to them that have, it shall be given.
The performance of the Secretary of State when presenting the Bill was remarkable by any parliamentary standard. I heard some parts of his speech. He seemed to spend half of it knocking down propositions that had not been put forward, and half avoiding answering questions that had been put to him. In political terms, never before have I seen a Minister teetering on the window ledge with his enemies trying to pull him back and his friends shouting, "Jump"—and jump he did. He said that, in the name of efficiency, accountability and fairness, he was introducing the Bill. That presented us with a slight problem, because his right hon. Friend the Member for Henley (Mr. Heseltine) denounced the Bill on the grounds that it was expensive, ineffective and unfair.
It is not for me to enter into a family row on the Conservative Benches, but the right hon. Member for Henley is another Swansea man, and, as one Swansea man to another, I feel that I should lend him a little support. In fairness, his was not a complete denunciation of everything that the Secretary of State had said. He agreed about one thing — that the Bill would increase accountability. The trouble is that he did not want the accountability that would be increased. The ex-Secretary of State for Defence said that the Government would be held accountable for having introduced the Bill in the first place.
We are grateful to the right hon. Gentleman for a delightful phrase. He described this as a Tory tax, and that is a phrase that we can all use. In the same way the national non-domestic rate, another Tory tax, is an instrument that we can all use and for which at some time we may have cause to be grateful.
The right hon. Member for Henley revealed that, when he was still a friend of the Prime Minister, the poll tax had been rejected by the Cabinet. He said that that happened without argument, as if that would have been a surprise to anybody, because, as far as we understand it, all decisions in the Cabinet are taken without argument.
§ Mr. Williams
Yes, because I am sure that the hon. Gentleman has a far better knowledge of what goes on inside the Cabinet than I have.
§ Mr. Hamilton
The difference between the right hon. Gentleman and my right hon. Friend the Member for Henley (Mr. Heseltine) is that in the Opposition there are arguments without decisions. I hope that in the course of his speech the right hon. Gentleman will come to what the Labour party proposes.
§ Mr. Williams
Labour party policy will be spelt out in the most minute detail when we need to bring forward a Bill to enact it. We are now talking about the Government's Bill and that which it is intended to replace.
The right hon. Member for Henley has a certain antipathy towards his right hon. Friend the Prime Minister because in the 1970s the Prime Minister said that any tax that replaced rates would have to be based on the ability to pay. The right hon. Member for Henley had the feeling that perhaps the decision to sever any relationship from the ability to pay must be the fault of the Secretary of State. It is unfair of the right hon. Gentleman to hold his colleague guilty, because of the nature of the Prime Minister and the Secretary of State. The right hon. Gentleman should realise that there can be no guilt where there is no comprehension.
It was entertaining to watch the manoeuvrings of the right hon. Gentleman. I wish that he were here. Today we had the privilege of sitting in on the launch of his leadership campaign, although, in fairness, he had to try to be even-handed and at the end of his speech put in one paragraph of statutory ranting against the Labour party. The target throughout the rest of his speech was his own Front Bench. I felt sorry for the Secretary of State for Wales. who had to sit there locked into the Bill while his opponent, his challenger, was making his bid. If the Secretary of State for Wales disclaims the Bill, he will lose his Cabinet post and if he disclaims his name on the front of the Tory Reform Group document, he will lose the support of his fellow wets. What a dilemma he faces.
§ The Secretary of State for Wales (Mr. Peter Walker)
It is nothing like the dilemma faced by someone for whom four out of five people in the Labour party refused to vote in the election for the shadow Cabinet.
§ Mr. Williams
It will be interesting to see the support given to the right hon. Gentleman when he puts his name before a ballot. He will face a dilemma tomorrow. I gather that he will open the debate, and I look forward to hearing him speak. It will be a performance of ethical gymnastics of olympian proportions, but, of course, he is the Government's most experienced surviving gymnast.
The Tory Reform Group correctly described the Bill as centralist. The right hon. Member for Henley said that if local government is as bad as the Bill implies and as bad as is implied in what the Tory Reform Group says, the sensible thing might well be to get rid of it altogether. Frankly, we suspect that that is what the Secretary of State and the Prime Minister wish that they could do. Instead, as they cannot, they have consistently eroded and undermined—in 46 Acts and with 344 powers given to central Government — the power of local authorities. They put ministerial diktat in the place of local democracy. They have taken unto themselves the ability to determine the business rate and the level at which councils can spend and the power retrospectively to cap the community charge. It is interesting to note that there is no reverse power in respect of authorities which are negligent or inadequate in their provision.
§ Mr. Williams
I gave up half the time available to respond, so I shall not give way. I normally give way, as the hon. Gentleman appreciates.
It is slightly poetic that we have two Secretaries of State — for Wales and for the Environment — calling upon councils to be more efficient, yet they admit, as the Secretary of State for the Environment made a point of saying, that the tax that they will introduce will be twice as expensive to collect as the rates that it replaces. I dispute that it will be twice as expensive. With an extra 28 million tax accounts, an extra £300 million in tax receipts, the cost of the extra accommodation, staff and computers and the compiling and updating of the register, twice as expensive is a modest estimate, and it is almost certainly an example of the central Government being caught at creative accounting.
Frankly, whether it is twice as expensive does not matter. It does not matter whether it is two, three or four times as expensive. The point made by the right hon. Member for Henley is valid—the real cost of the Bill is not in finance but in the destruction of the sense of fair play. Only this Secretary of State for the Environment could envisage making the poor pay more and the rich pay less as fair play. The manifest unfairness of the Bill will create resentment. It will perpetuate a sense of deprivation.
What does the Secretary of State think will be felt by those who live in the riot areas of the inner cities when they see that they have to pay more yet are told that the people living in Hampstead will pay less? What does the right hon. Gentleman think the effect of the Bill will be in terms of resentment when people in the jobless valley towns of south Wales have to pay more—for example, two and a half times more in the Rhondda — and those in the grassy suburbs of the Vale of Glamorgan and along the coast pay less?
The sense of unfairness is erosive because of what it does to attitudes and standards. Many will say, "I f the tax is unfair, it is unfair to try to avoid it." If 3 million people are not on the electoral register, when it does not cost them to register, it is naive to think that fewer names will be on the community charge register when it will cost them to be on it. Even if the figures are the same and only 3 million people are not on the new register it will mean a loss of £500 million in revenue.
The cost is also in the threat to our civil liberties. Compilation of the register is a complex task. The constant updating needed will be nightmarish. The Scots have found that there are about 800,000 changes in the register in a year. But the real threat will be in the measures and actions that the Government will need to take to stop this avoidance. They will have to create a snoopers' army. In Strathclyde nearly 1,000 people are being recruited to register and check. What data will be sacred? The Law Society is worried about personal privacy, whereas the Chartered Institute of Public Finance and Accountancy is worried about the safety of the people who have to collect the information, and understandably so.
Does the Minister really think that there will be a welcome, a cup of tea and a rock cake for the official who arrives on the doorstep to ask questions about marital status, or to ask, "Does anyone in your family have a serious mental illness? Is anyone in your family in prison? When did you last see your father?" — or, more 1181 probably, son or daughter—and other items of social chit-chat? How will the Government trace people who move? They will not get very far if, as we have seen in some of the reports, they rely on checking library tickets and, perhaps, fingerprinting pensioners' bus passes.
What central Government and local authority information will be available? If evasion reaches a level of £500 million or £1,000 million, the pressure on the Government to take further action to stop it will be irresistible. Already, in Scotland, they are talking about identification numbers. That is only one step away from the identification card, without which a person is a nonperson and is entitled to no services.
My hon. Friend the Member for Copeland (Dr. Cunningham) pointed out today that the poll tax has been virtually shunned in all other advanced countries. However, I must tell the Secretary of State that there is some support for his position. The Guardian of 5 December tells us that the nearest equivalent to the new system is apparently the hut tax, which is used to finance local services in Papua New Guinea and a handful of Polynesian islands. The bad news for the Secretary of State is that they are planning to get rid of it. While Papua New Guinea is stamping out head-hunting the Secretary of State is bringing it in by statute.
If this were just another political wrangle, it would not matter; however, a look at the Order Paper reveals that it is much more than that. The Bill is more than unjust and ill-conceived. It is dangerous, and it should be rejected by both sides of the House.
§ The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope)
We have heard a number of distinguished contributions, but let me mention particularly the maiden speech of my hon. Friend the Member for Stroud (Mr. Knapman). I was sorry to miss the first part of his speech, but it was distinguished and robust, and we look forward to many future contributions imbued with the same common sense. My hon. Friend rightly paid a warm tribute to his predecessor, Sir Anthony Kershaw, whose fine record of service to the House is well known. That tribute will have brought pleasure to hon. Members on both sides of the House.
The debate about reforming the way in which we pay for local government has now continued for more than 10 years, and some would say for even longer. Our Green Paper "Paying for Local Government", issued in January 1986, brought the debate to a head. The Bill contains a comprehensive package of reforms, which will provide a fairer system of paying for local services—and fairness is what the whole debate is about.
The shortcomings of the present rating system are well known. No one, I think, has advocated that that way of funding local services should remain. The present system needs reforming because it is unfair, unaccountable and complicated; indeed, it is incomprehensible to all but a few experts.
Rates are certainly unfair. What, for example, is fair about a widow just above the benefit level paying exactly the same amount as the family with three or four wage earners living in a similar home next door?
§ Mr. Marlow
Is not the secret — the proof — the reason that the Labour party is against the Bill—to do 1182 with accountability? The problem now is that local government is accountable to local government unions, public sector unions, the people who work for it. What we are going to do is make local government accountable to the people who pay for it, and that is what the Labour party does not like.
§ Mr. Chope
My hon. Friend is absolutely right. Under the present system, there is no proper accountability. As my right hon. Friend the Secretary of State said at the beginning of the debate, 35 million people in this country are entitled to vote. Of those, 12 million—just over a third—pay rates directly and in full. A further 3 million pay a proportion of their rate bill—
§ Mr. Chope
I have got 11 minutes only in which to try to reply to some of the points that have been made in debate.
Twenty million people pay nothing at all and in some areas the figures are even more dramatic. For example, in Liverpool, only one voter in four pays rates directly and in full. In Manchester the proportion may be even lower. What has developed is a system in which the majority of the electorate may vote for services for which they do not pay or for which they pay only a small contribution. The opportunities for abuse that are presented by the system have been and are being exploited by the most irresponsible councils. By their actions they are bringing local government into disrepute.
My right hon. Friend the Member for Henley (Mr. Heseltine) made an eloquent speech to which the House listened intently. My right hon. Friend has said that he would have liked to have been here for the wind-up, but was—[Interruption.]
§ Mr. Chope
I recall that when Opposition Members were making their speeches my hon. Friends listened—[HON. MEMBERS: "Oh!"]— and it is rather a pity that Opposition Members have sought, throughout the debate, to shout down my hon. Friends' speeches.
I remember when my right hon. Friend the Member for Henley was Secretary of State for the Environment because, at that time, I was leader of the London borough of Wandsworth. My right hon. Friend visited Wandsworth to look at the newly privatised street sweeping system. There were ugly scenes of violence and my right hon. Friend was attacked and intimidated. Those actions were certainly supported, if not organised, by the Labour party.—[HON. MEMBERS: "Withdraw."' I agree with my right hon. Friend that—
§ Mr. Chope
I accept that my right hon. Friend was responsible for some.
1183 I believe that what my right hon. Friend said about Opposition Members' abdication of responsibility was entirely correct. However, I was slightly disappointed with my right hon. Friend's speech. He voted in support of the Abolition of Domestic Rates Etc. (Scotland) Act 1987 I fail to see any major distinction between that measure and this legislation— [Interruption.] My right hon. Friend argued for the status quo on the ground of expediency rather than of principle. I do not believe that that is an attractive argument.
My right hon. Friend said that he was against the revaluation of non-domestic property despite the fact that the case in its favour is intellectually overwhelming. I am sure that engineering employers and manufacturing industries in those parts of the country that have carried an unfair rates burden for far too long would not be prepared to put up with the status quo supported by my right hon. Friend.
My right hon. Friend says that he fears the consequences for the inner cities—that was echoed by my right hon. Friend the Member for Aylesbury (Mr. Raison). My right hon. Friends do not seem to appreciate that, as a result of the reforms in the Bill, there will be a £380 million reduction in the business rate burden in the inner-city areas. In the inner cities there are many single pensioners and one-parent families and they are the very people who will benefit as a result of our reforms. I cannot accept the argument that our proposals will be inimical to the inner cities.
In that regard, the hon. Member for City of Durham (Mr. Steinberg) suggested that single pensioner households would lose out. He claimed that one third of single pensioner households would be more than £5 per week worse off, but nothing could be further from the truth. Some 137,000 people will be £5 better off per week under the new system.
§ Mr. Chope
I shall not give way.
My right hon. Friend the Member for Henley argued that responsibility for the rating system was confused with the legacy of history and can be ignored. I do not agree with him because when I have talked to individuals I have found that they are extremely discontented with the present rating system. It is not my recollection that right hon. and hon. Friends, during recent rate support grant debates, have expressed contentment with the existing and extremely unpopular system of resource equalisation.
My right hon. Friend dismissed the accountability arguments and put forward his support for rate capping. I recollect that my right hon. Friend introduced legislation in the earlier part of the decade to withdraw grant from councils that were over-spending. That did not work effectively, so rate capping was introduced. The reason why that system did not work effectively was that so few people, relatively speaking, were having to pay full rates. It meant that in the Inner London education authority area about 81 per cent. of rate income was coming from businesses, and that there was no effective restraint on expenditure of the Inner London education authority, 1184 which increased expenditure so much that it forfeited all of its grant entitlement. My right hon. Friend's experience should lead him to support the principles of accountability in the Bill.
We should be discussing what we shall replace the present system with. We came close to hearing an alternative from the hon. Member for Copeland (Dr. Cunningham), which seemed to be based on capital revaluation. Now that the hon. Gentleman has had a chance to see the detailed question to which he referred he may wish to withdraw what he was suggesting to my right hon. Friend the Secretary of State—that my right hon. Friend had dismissed any idea of considering other proposals. [Interruption.] The sentence comes from a parliamentary answer given in July 1986, but the hon. Member for Copeland did not make it clear that he was referring to a parliamentary answer that was given as long ago as that.
My right hon. Friend the Member for Aylesbury put forward his alternative proposals for a banded community charge. He distanced himself from the proposals put forward by CIPFA and suggested that there should be a revised system of banding. The effect of changing the banding so that those on low incomes have to pay less inevitably means that those on higher and moderate incomes will have to pay even more.
My right hon. Friend the Member for Selby (Mr. Alison) mentioned churches and church halls. He is right that provision for continuing the rating exemption for churches and church halls does not appear on the face of the Bill. I can assure him that that will be put right in Committee.
We have reached the halfway stage of the debate, but it is clear that those who are putting forward alternatives do not have any coherant alternative—
§ Mr. Chope
—that they are prepared to submit to the scrutiny of the House.
My right hon. Friend made it clear early in the debate that the Committee will be delighted to look at any alternative proposals. I am sure that all alternative proposals will be totally unacceptable. They will not deal with the fundamental flaws of the present system with which the Bill seeks to deal.
The new system will be an uncomfortable experience for some local authorities because more people in their areas will be aware that it is their money which is being spent and how it is being spent. No longer will they be able to explain away different bills through the complex grant system or resource equalisation.
§ Debate adjourned.—[Mr. Boscawen.]
§ Debate to be resumed tomorrow.