HC Deb 13 July 1987 vol 119 cc801-16 10.31 pm
Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

There is no doubt that the Government have a mandate for change. There is also no doubt that for most people voting in the general election local government was an important issue. Many people are sick and tired of the present rating system.

A single person may live next door to a similar house where there are two, three or four income earners. That person may find that he pays exactly the same local tax—that is what rates are—as those four people. As a result, he feels hard done by.

There is no doubt that when it was first devised, the rating system was not intended to bear the huge and groaning burden that the present rating system must bear. It was devised to fill in potholes, to make sure that there was a road from one village to another and from one town to another, and to ensure that itinerants on the road were put into a home overnight and then moved on to another parish. Rates were meant to be a small burden on the community. However, as time has moved on the kind of sums that local government needs to raise have grown fast. The sums that local government spend today are between £26,000 million and £30,000 million. They are vast sums.

It is no good thinking that an outworn and overburdened system can bear such expenditure. There is a common feeling among people that the present system is unjust. There is no shadow of doubt but that the present system is unjust to many people. However, it is no good changing from one unjust system to another potentially unjust system or one that may be even more unjust. It is no good the hon. Member for Linlithgow (Mr. Dalyell) talking about Thomas a Becket or saying, "Who will rid me of this pestilent tax?", without suggesting some better tax to put in its place.

One Parliament after another in this country has fiddled around with local government, and nearly always to local government's disadvantage. We have had one local government Bill after another, in which I have had some hand since I have had the great honour of being a representative in this House. Has local government improved? The answer is that it has not. We have tried one system after another. We abolished one type of council and put in the great urban and district councils. We had a West Midlands metropolitan council, and what a disaster that was. We have now decided to do away with such councils. We must find a better, more efficient and just way in which to raise money for local government expenditure for the needs of our local people. It can, of course, be done by taxation or by VAT. However, the people who say that the few pay for the many have some justice in their argument. There must be some accountability, but, if one is to change the basis of local taxation, there must be that one essential justice that runs throughout this ancient country's history—the ability to pay. That ability to pay is missing from the poll tax as it will be. Let us be quite blunt; call it what one will, it is a poll tax.

Mr. Ralph Howell

Surely the ability to pay should be taken care of by the tax and benefit system. Why should there be two tax and benefit systems?

Mr. Beaumont-Dark

I am obliged to my hon. Friend. I shall come to that point. One could say that it should be done through national taxation. However, I am one of those people who, between the ages of 22 and 40 years, when I had the honour to come here was in local government. I believe in government, and I believe in it being local. I believe also that there should be a structure in government that accounts itself to local people and their needs. Therefore, there needs to be a local tax.

In a debate on one of the local government Bills, I suggested to Patrick Jenkin, the then Secretary of State for the Environment, that there was a need for change. I have not had any reason to change the system which I suggested back in 1983 and which I hope the Government will reconsider. It is quite simple. If we believe in a property-owning democracy as I do, that it is right to give between £2.5 million and £3 million of relief to people who own their own homes through mortgage tax relief, as I do, and that possibly the best investment that any person can make is in his own home—I believe that it is—then a property tax should form part of the basis of any form of collecting local revenue.

Therefore, I suggest that we need not to abolish the rating system, but to use the property tax in a rather different way. What we need to do—the Government could even do it—is to say that a property tax may not be increased by more than the rate of inflation without a Government edict. That would be fair. The same applies to the business rate. Because the business man is not represented directly by a local vote, he is represented by us. Therefore, the business rate should not he able to be increased by more than that same factor. In an inflation-proofed rating system that is above the rate support grant, one should get any extra expenditure from a poll tax. That poll tax should be based on nearly everybody except the most impecunious and poor. Everybody, except those people, should pay a poll tax, because it is right that everybody should be involved in, should bear some responsibility for and be willing to vote on what their local council does.

If the whole rating system is swept away and a poll tax is introduced, a vast and heavy burden will result. The system will not work, because it will not be just or based on the ability to pay. It is no good abolishing the whole of the property tax system; the problem will not go away. We are moving along the right lines in changing the system, but we must make it fairer and ensure that the tax can be borne by a greater number of people.

The Government will be out of their tiny mind if they think that they can abolish rates and transfer the burden without taking account of the ability to pay. As the Bill progresses, the Government will merely have to make one exception after another. I am told that London ratepayers cannot bear the full burden. Fine, we shall make an exception for them. Then there will be other exceptions. It is exceptions that make lousy legislation and bad, unjust laws.

Let us change the present system where it bears unfairly only on property owners and use all the benefits and systems of our modern society to ensure that the system is fairer than it is at present to a greater number of people. If we do this together we shall have a fairer system and more people will become involved in local government. Surely, that is what we want in the end.

It is no good any of us thinking that this is like a children's tea party, with everyone gaining. There is not a present for everybody. Some people who have not previously had to pay local taxes will have to pay, and so they should. In the end we want people to feel that, even if they do not like the system, it is just, because a just society is more united and happier than an unjust one. If the Government push through their proposals, the system will not be just, people will not be happy, and it will not work.

10.42 pm
Mr. Allen McKay (Barnsley, West and Penistone)

It is a pleasure to follow the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark ) because we have sat on many local government committees together and I hope that we shall sit together on many more. I shall read and analyse his speech carefully. Nobody would deny that the present rating system needs to be reviewed, but the Government's proposed rating system will be equally unfair, if not more so. The hon. Gentleman should note what happened in Scotland, because the poll tax had a great bearing on the election results there. There is great unrest about it throughout the country and among Conservative Members, and the Government should realise full well what is happening.

It is interesting to note that the hon. Member for Norfolk, North (Mr. Howell) intervened, because as a farmer he is one of the most privileged people in the country. Farmers do not pay rates. Every hon. Member present in the Chamber except the hon. Gentleman pays rates. His is a privileged position. But I shall not enter into the rates argument—I had that with my local branch of the National Farmers Union during the election. We agreed on many points regarding the necessity of rating and the problems of it for the farming community. The hon. Gentleman will know of those problems and somebody must pay for them.

Mr. Ralph Howell

I am sure that the hon. Gentleman recognises that if agricultural land was rated the price of food would have to rise considerably. That point must be accepted.

Mr. McKay

As well as land, we must consider buildings and other factors.

It would appear from some of the speeches made by Conservative Members today that no one will lose. We have heard about the old lady on her own and the young married couple who will not lose. We have also heard about industry and commerce, which will not lose. Who will pay, if no one is to lose? I am reminded of Paddy's donkey. Paddy had the bright idea that it was costing too much to feed his donkey. He decided that it would be more economical if he cut down on the donkey's food. He discovered that when the donkey reached the stage when it could do without food, it died. That is what will happen to local government. There will be so many cuts that eventually local government will be cut out altogether.

Mr. Bob Cryer (Bradford, South)

I shall try to help my hon. Friend. Of course we could rate farmers. That would help local authorities, because they could get back some of the £500 million to £1 billion net payments that have been made to the Common Market, most of which is recycled into the pockets of farmers for growing useless cereals or for storing them. It would actually be an advantage to rate the large cereal farmers.

Mr. McKay

I have taken that point up with the National Farmers Union and my local farmers, with whom I have a very good relationship. We are paying the farmers twice, once for growing the cereals, and then by subsiding them to put the crops into intervention. That is a crazy system.

How did the position in local government arise? Committees and Governments of various political persuasions have tried to find an alternative to the domestic rate for many years. They have not found an alternative that is as cheap or as easy to collect as the present system. There is no doubt that Government Committees have shied away from alternatives which were not as cheap or as easy.

The Government have now found a different method, but it will not be as cheap or as easy to collect as the present system. For more than 350 years the rates have been the principal source of local revenue. It will take a very strong case to justify the loss of that experience or the costs that will be incurred. The Government have not made such a case and we need more time to examine the proposals. We need more time than the Government are prepared to allow. Clearly, when the House reassembles in the autumn there will be a major Bill on the community charge, and no doubt that Bill will be in Committee after the Christmas recess.

We all know that there is a case against the present system. The single elderly woman who lives in a large house on her own and who is paying an enormous rate is often quoted. That is what the rate rebate system was brought into being for. Conservative Members go on about people not paying rates and about people receiving rate rebates. The reason why they receive rate rebates is that they simply do not earn sufficient, particularly in low-wage areas. Indeed, if they are earning at all in my area, they are extremely lucky.

We could equally make a case for a childless couple, asking why they should pay towards the education bill when they have no children and are not likely to have any. People with their own transport may ask why they should pay towards a transport system when they do not use or need it. We could go on and on citing reasons why people should not pay rates. People have made the point forcefully.

The problems with the rates have arisen because of the reduction in grant from central Government to local government, which has dropped from 61 to about 46.5 per cent.—and that has caused tremendous problems for local government—and because of the industrial depression.

I think that Conservative Members have got it the wrong way round. They say that industry moved out of areas because of high rates, but those high rates were caused by industries becoming depressed. They closed down; they went bankrupt; they were not earning. The old rateable base disappeared. The few industries that were left took on the burden of the rates that all the industries used to share.

A combination of those two factors—the loss of grant from central Government to local government, and the depression of industry—caused a rate problem, particularly in northern areas. The Government tell local government to cut back on its rate spending, but who are the so-called high-spending authorities, and what are they spending the money on? I do not want to hear about frivolous things such as newspapers. They take a very small percentage of what local authorities spend.

Local government has tried to take on the responsibilities abdicated by central Government. It has tried to take on board the loss of employment and to create employment. It has tried to take on board subsidies for housing, which has been sold off in some areas. Ironically, local government cannot touch that money either. It has been salted away in a bank and cannot be used. If it were released, some spending power would be released for the local authorities.

Those, then, are some of the problems that have been caused, not by local government or by the rating system, but by the deliberate policy of a Conservative Government who have cut back and depressed local areas. Businesses that had taken on the huge burden of industries that had closed called for help, and rightly so. The Government reduced interest rates, abolished the national insurance surcharge, reduced corporation tax and dispensed with wages councils, so wages were lowered. All that was done to help industry, but while that was happening the opposite was happening on the domestic side. Rents and rates were increasing. Now, the Government are trying to turn the burden back from industry arid commerce on the on to the domestic ratepayer. Those ratepayers have already been hit, but the Government are saying, "You should help more."

There is little doubt that in my area industrial and commercial rates will be lower. I am not a betting man, but, if I were, I would put money on its not increasing prosperity, jobs or job opportunities. I know that in many cases industry in my area is running on a knife edge, not just because of the rates, but because of energy profits an energy prices. I can point to two firms in the area that are second to none. BXL plastics depends on the prices of oil and other commodities from abroad, and Shaw Carpets also depends considerably on oil produce, the price and the variance between the dollar and the pound. There is no doubt that the alteration in rate will lift the anxiety and the burden, but it will not increase the number of people employed. Only better sales.

Mr. Favell

One of the things that the Government have been trying to do is reduce energy prices—for example, by getting some sense into the coal industry. Reducing the number of people required to produce a ton of coal reduces energy costs. As the hon. Gentleman has suggested, lower energy costs help industry in his area. Why on earth will low rates not also help it? Will they not bring greater prosperity, and also jobs? Jobs, after all, are what we in the north want, not more people employed in the town hall. Where, for instance, is the sense in Manchester employing twice as many people as Stockport to empty a dustbin, when there is not the slightest difference between the two?

Mr. McKay

I cannot comment on what happens in Manchester and Stockport without examining the situation—no doubt there are good reasons for it—but what the hon. Member says about the mining industry and coal prices can be taken a bit further. The Government's policy has increased the rates burden in my area. Nine collieries have been closed. The area depended on the rates from those nine collieries, and the remaining businesses are now having to bear the burden of those closures. Furthermore, if the collieries are not producing coal, the spending power of the miners is also lost.

The domestic rate is now a political issue. Whether one is in or out of work, whether one is rich or poor, young or old, whether one lives in a bungalow or in a castle, everybody will pay the same rate. A person who lives in a bungalow will pay the same rate as somebody who lives in Wentworth Woodhouse. It is crazy to introduce such a system. As the hon. Member for Selly Oak said, we shall have to create exceptions. As soon as the Bill becomes an Act, statutory instruments will have to be introduced to cover those exceptions.

Whenever we alter the law relating to local government, we make it worse. A previous Government decided to abolish the small urban district councils, which were cheap to run and which provided an excellent service. That was when all our troubles began. How will the water and sewerage rates be calculated? The water supplies cannot be metered by next year when this measure is expected to reach the statute book. How, therefore, will water and sewerage rates be calculated? People are worried about this. They know what is to happen.

The poll tax will depress areas that are already depressed and it will place additional burdens on people who are already overburdened. The Bill will be discussed in Committee. The worst that we can do is to try to alter it. The best that we can do is to bury it.

11.57 pm
Mr. Robin Squire (Hornchurch)

I thank the hon. Member for Sheffield, Central (Mr. Caborn) for initiating this debate. At a time when we can, we hope, still influence Government thinking, it provides us with an opportunity to discuss again the community charge. The hon. Member for Barnsley, West and Penistone (Mr. McKay) last addressed the House immediately after I had spoken during the first day of debate on the Loyal Address. And surprise, surprise, we are discussing the same issue tonight. It is opportune to take it a stage further, because matters have moved on since then.

I shall concentrate on the few reasons that have been advanced by my right hon. Friends for introducing this charge. I make it clear, if I need to do so to any hon. Member, that I oppose its introduction. My right hon. Friend the Secretary of State for the Environment, for whom I have considerable personal affection, said in a number of interviews that this charge should be introduced because there is no logic in all those who enjoy the same local government services not paying the same charge. It is an interesting theory and at first sight it has a certain superficial attraction.

The principle is that we should pay the same amount for education and social services, regardless of our resources, but why do we not do the same on defence or the Health Service? What is so specal about local government services that they should be funded by a flat rate charge when we are not proposing to extend the same benefit to nationally funded services? The more that one looks at the matter the more one sees the logic of the proposition that we should continue to draw on a property tax, as my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) said. Broadly speaking, after income tax and VAT, a property tax is the natural third leg of the tripod. We can argue about the basis for a property tax and whether there should be a revaluation. If there is not to be a revaluation, I should like to be the first to opt to pay my income tax on the basis of my 1973 earnings. In principle, a property tax is a perfectly reasonable suggestion and we should stick to it.

My experience so far is that not a few people who stand to benefit should the community charge be introduced are embarassed by it and consider it unfair. They have said to me, "It would be nice for me personally, but I do not think that I can justify it when I look at the nature of those who will be paying much more.' It is a welcome, although not common, attitude. My hon. Friend the Under-Secretary should be aware of that attitude, because it is important. I do not believe that the claim that we should pay an equal amount for the same service stands up, and it is not consistent with the provision of national services.

The residual claim that is increasingly being uttered—occasionally with a note of desperation—is that the community charge proposals were in the manifesto. I commend to hon. Members the words of my hon. Friend the Member for Eastbourne (Mr. Gow) who last week skilfully made clear his position on the theory of manifesto accountability. He said that he had never believed in it as a reasonable concept. I agree with him.

I was not consulted on the subject, but I opposed the introduction of the community charge in Scotland. My hon. Friends who were in the House before the election may remember how our attitude was conditioned by the approach of our Scottish colleagues, who argued strongly for the community charge in Scotland. I am the last person to deny hon. Members a tax or a piece of legislations that they are seeking, particularly if it does not affect me——

Mr. Caborn

What has happened to them?

Mr. Squire

The hon. Member asks a pertinent if embarrassing question which is not for me to answer but, as he rightly implies, some of my colleagues asked for it.

I am anxious that the political lessons—there is a political dimension in this matter—be learned by the Government before it is too late. Much of the doubt and questioning and many of the fears that have been expressed by Conservatives on this issue have been on the structure of the proposed tax, its innate fairness or unfairness and the relative ease of collection. I urge my hon. Friend the Under-Secretary to bear in mind that, as the weeks and months go by, the political dimension will become stronger.

Because of the nature of any major tax, a number of hon. Friends will be a little embarrassed about its impact. That will not go away. They may not now be involved in our discussions about the fairness or rectitude of such a tax relative to the present form, but they will be involved in its political impact. I judge that they will be involved in a way that will not increase support for the Government's proposals. I urge my hon. Friend the Minister to think carefully about this measure.

We are pledged to introduce a fairer charge. I am happy to consider ways of improving the fairness of the payment for local government services. I suggest that, if we embark on the community charge course, there is little room for halfway measures. There are few compromises. There are few ways in which we can get a satisfactory answer if a number of people—perhaps a large number—object to the initial premise. My fear is that the majority of the people will not be convinced, whether in one year or five years, that it is fair for the man in his castle to pay the same as the man in his mid-terrace cottage. Because I believe that, I urge my Government to rethink.

11.6 pm

Mr. Ralph Howell (Norfolk, North)

I have listened to many speeches on this subject. Many hon. Members have said that there will be gaiiners and losers. But there is a way in which we can all be gainers, and that is if local government reduces overmanning. In 1960, 2 million people were employed in local government. There are now 3 million. We argue about how these charges will be levied on the whole population, but we should concentrate our minds on economising in local government and getting value for money. There could be a million fewer people employed in local government. What are they doing? There are virtually no more children to educate or dustbins to empty than 1960; also, there are about five times as many planners as in 1974.

There is much to be said for thinking about the community charge in the way Professor Patrick Mulford did in his article in the Daily Telegraph today. He said that, whether we are rich or poor, we pay the same amount for a Mars bar. I am not, however, convinced that the same applies to rates.

Mr. Favell

Why not?

Mr. Howell

I believe that there should be an element of property tax. It should not be charged entirely on property, as at present. I would prefer a halfway house between the two forms of charging. However, I am convinced that there should not be two systems which try to level out income. At present we have the income tax and benefits system to try to redistribute income and also rent rebates. The interaction of those two systems creates many anomalies. We should return to one simple system.

I hope that the Government realise that they will make a great mistake if there are two categories of ratepayers—those who pay 100 per cent. and those who pay 20 per cent. If that is how it will be, I should like my hon. Friend the Minister to tell me whether there will be any taper between 20 and 100 per cent. The publication., "Paying for Local Government", does not make it clear. Nor does it make clear how it is proposed to recover unpaid rates. It says: It is envisaged that the system regulating such deductions. will be a simplification of present arrangements for attaching earnings to pay family maintenance or court fines. It will apply to employees, but not to the unemployed, self-employed or retired. I am self-employed. It is very odd that people in normal employed work will have to pay whereas the others—I should like to know how many they are, but I believe that they number about 13 million—will not pay the full amount.

Is the change worth it if we do not spread its effects across the board evenly and make adjustments for people who are unable to pay in one tax and benefit system?

Mr. Fallon

My hon. Friend is making a good point. If there is to be attachment of earnings on those in employment, why not have attachment of social security benefit for people who are not in employment?

Mr. Howell

The Government must consider that matter, or they run the risk of making a traumatic change and achieving little. lf, as I believe will be the case, a vast number of people are left outside the scheme and are therefore not effectively charged, the object of the exercise will be destroyed.

Mr. Caborn

Would the hon. Gentleman like to comment on redistribution through taxation? One of the sources of concern to the north of England, especially in view of its declining industrial base, is the fact that block grant has declined substantially. It has always been argued in local government circles that block grant is a mechanism to redistribute wealth throughout the United Kingdom. One of the major difficulties for the north is the reduction of Government grants. As I tried to explain, the burden is now clearly lodged with the north whereas previously there was much fairer distribution. If it had not been for the reduction in Government assistance, there would not have been the fairly massive increases in rate contributions in the north.

Mr. Howell

I am afraid that I am unable to follow that argument. There has been too much support from the Government and not enough responsibility in local government. The north, Scotland, Wales and Northern Ireland have had a very good deal; it is the south-east, which creates all the wealth, which has had to pay the bill.

I should like clarification on how married and unmarried couples will be charged. Paragraph 46 of "Paying for Local Government" says: The Government is therefore considering the suggestion that joint and several liability should apply to unmarried couples who live together. It is about time that the Government knew what they were going to do; otherwise we will have a further attack on the family and married people. I hope that the Minister will be able to assure me that those who are married will not be disadvantaged compared to those who are not married.

11.14 pm
Mr. John Fraser (Norwood)

There are four people I need to congratulate. The first is my hon. Friend the Member for Sheffield, Central (Mr. Caborn), on having initiated the debate and, although he is the only person to have done so in the debate, on emphasising the cuts in capital expenditure by local authorities, the effects of which are now being seen more markedly on our council estates. They are starved of capital investment and starved of improvement and are often situated in those difficult areas of the inner city and out city estates. My hon. Friend underlined the extent to which the Government are turning up the fire under the inner-city cauldron by that form of neglect. He also does us a service by initiating not only a debate on the poll tax but a debate in which every speaker since his opening speech has concentrated on that subject. The hon. Member for Darlington (Mr. Fallon) said that we will return to the subject time and time again. I expect that there is an enormous amount of truth in that.

Secondly, our congratulations go to my hon. Friend the Member for West Bromwich, West (Miss Boothroyd), whom we saw in the Chair tonight. I am sure that those congratulations have the endorsement of all hon. Members.

Thirdly, my congratulations go to the two hon. Members who made maiden speeches. The hon. and learned Member for Fife, North-East (Mr. Campbell) is clearly a Member of great ability. I understand that he has a great reputation at the Bar and we can look forward to hearing from him again. He rightly turned his attention to the poll tax.

The final congratulations are to my hon. Friend the Member for Derbyshire, North-East (Mr. Barnes), who spoke in an insistent regional accent about the problems of his constituency and about the predicament of a constituency where some of those facts are neither understood nor known to some Members on the Government Benches. He illustrated very well some of the absurd nature of local government finance when he dealt with the financial penalties that will be inflicted upon his council for dealing with the Dronfield fire. I hope that the Minister who is to wind up on the matter will say something about that.

The speeches of the hon. Members for Sevenoaks (Mr. Wolfson) and for Hornchurch (Mr. Squire) are probably more authentic of the concern of Government Back Benchers than those from some other Government Members. It certainly looks as though the non-ratepaying farmer, the hon. Member for Norfolk, North (Mr. Howell), also is a floating voter on the matter.

Mr. Ralph Howell

I am not sure whether I heard the hon. Gentleman correctly. I thought he said that I was a non-ratepaying farmer. That is not true, and perhaps he could withdraw that.

Mr. Fraser

Of course I withdraw if the hon. Gentleman is a ratepaying farmer. Perhaps many other farmers will now, in their enthusiasm to take part in this exercise of paying for the services which are received, join the hon. Gentleman in that activity.

A cinema in Baker street has become the centre of a cult movie called "The Blues Brothers". I heard somebody on the radio the other day say that they had seen the film over 100 times. The poll tax will achieve that kind of notoriety. The poll tax featured in the opening day of the debate on the Queen's Speech. It was the subject of a large part of the debate on 1 July. I sat through much of the Summer Adjournment debate today, of which the poll tax formed a fairly large element. It has also been adopted as the second debate in this series. I believe that that will be the pattern for the Session, if not for the entire Parliament. I believe that in adopting the poll tax the Government have adopted a legislative albatross that will fly behind them from the beginning to the end of the Parliament.

The case against the poll tax is not that it is a radical change in taxation. Many people would want to see a radical change in local taxation. I do not suppose one could argue, in principle, against the whole of that stated in the 1974 Conservative party manifesto. It said that rates should be replaced by a tax that is more broadly based and related to people's ability to pay. The trouble with the poll tax is that it remembers the first part of the 1974 manifesto but forgets the second.

This tax will be grossly unfair. It is certainly not based on people's ability to pay. The supreme example of that is the Dulwich case. I know it well because the Prime Minister's house is almost next door to the place where I play squash. It is interesting that the Prime Minister chose to move to Southwark. It shows that councils such as Southwark do not seem to act as that much of a disincentive. We find that the Prime Minister's rates, which will be around £3,000 a year, would fall under the poll tax to £1,136 a year. A family of five, living in a Lambeth or Southwark council home, would be paying £3,200 between them. Therefore, the sort of burden that would be borne by the Prime Minister and her husband at present in their Dulwich house would go down by almost £2,000 a year, but the burden borne by people living in a smaller, meaner council house would rise to almost the same figure as the Prime Minister is paying now.

There are many other examples of the tax being wholly unrelated to people's ability to pay. Presently rates are based on roughly on the size of a house and relate roughly—I do not say that the system is perfect—to the affluence of the occupier. However, that would be an even more accurate statement about the burden of rates if the present rateable value system were replaced by a system of valuation which was based on capital values, which is a much more realistic way of assessing the rateable value of property.

Mr. Favell

Will the hon. Gentleman give way?

Mr. Fraser

I am rather short of time. I mean no discourtesy to the hon. Gentleman, but I want to try to finish by 11.30 pm so that the Minister will have a chance to reply.

The present system has that degree of equity between the affluent and the poorer members of the community. Under the poll tax, four people living in an overcrowded pigsty will pay twice as much community charge as two people living in a palace. The dowager duchess who lives in a mansion will pay as much as the widow who is living in a basement. I realise that that is subject to rebate but, given that the widow is living in a basement is——

Mr. Tim Janman (Thurrock)

Will the hon. Gentleman give way?

Mr. Fraser

I would rather not. I do not have much time.

Almost invariably with the poll tax, the rich will pay less and the poor will pay more. The papers deposited in the Library showing the comparisons of average rates per household as against the new charge per person mask the inequity because average rates mask the fact that on the whole the rich tend to pay more in rates and the poor tend to pay less.

Apart from looking at it from an individual point of view, ability to pay will be ignored between one area and another.

Mr. Fallon

Has the hon. Gentleman not addressed his mind to the point that I and others have made, that the Prime Minister and her husband are paying tax at a rate much higher than the standard rate? The payment they make through tax is twice what they will be making through the community charge, so their contribution will be much greater than the family next door in the example given by the hon. Member.

Mr. Fraser

I certainly recognise that their tax contribution is high. I do not deny that. Equally, I do not think that the hon. Gentleman will deny that there will be an abrupt and hugely beneficial diminution in the amount of rate burden that they pay as a result of the introduction of the community charge, and that there will be a large increase in the total rate burden that will be borne by much poorer people than they. Let us bear in mind that the percentage of tax that is paid by ordinary working-class people has gone up hugely since the Tory Government got into office.

The next point that I argue is that the poll tax is not only inequitable as between one person and another but does not have regard to ability to pay between one area and another. Deprived areas would be defined as inner-city partnership areas. The definition does not lie for me to make; it is already defined by the Government. I shall gove the House the figures for London. On the Government's own figures, the average rates per head in Hackney, which is the most deprived borough in the country, would be up by £276 per adult. In Lambeth, an inner-city partnership area, the average per head would be up by £259 per person a year. In Islington, another inner-city partnership area, the burden would be up by £206 per head of the population against the average rates per head of the population at the moment. In Southwark, a newly created inner-city partnership area, rates would be up by £269 per head.

We must compare those figures with the most affluent areas of London. In Westminster, the figure would be down by £103 per head; in Barnet, it would be down by £71 per head; in Richmond, it would be down by £51 per head; and, in Bromley it would be down by £26. The House should be aware that the effect is not absolutely even as between rich and poor areas. For Brent's Labour council—it is not the flavour of the month with the Minister or the Government—rates per head will go down under the community charge by £51 per head.

In the local authority that is the flavour of the month—Wandsworth—community charge will lead to a rise or £217 per head per year in the burden of taxation. No wonder we read in this evening's edition of The London Daily News: Local Government Minister Michael Howard is working on a scheme to slowly phase in big bills from ILEA so that Westminster and Wandsworth boroughs have time to opt out of the schooling system. That was before they realised the huge burden that will fall upon them as a result of the proposals.

Of course, the community charge is equally undemocratic. It will certainly result in under-registration of votes, particularly in areas such as mine where there is already a great deal of under-registration, and the 20 per cent. minimum charge will make the poorest people in our communities hostage to their local authorities, and the charge will be twice as expensive to collect.

One or two hon. Members have referred to the problem of enforcement of the poll tax. I live in an area in which the population changeover in most of the wards is about 27 per cent. a year. I do not know how on earth it will be possible to compile a community charge register and to collect money in a borough that has unemployment running at one in four males. Since the only real sanction among poorer people against failure to pay the poll tax will be prison, I can imagine the Government declaring yet another amnesty in two or three years. They will make available several thousand places in prison for those who do not pay the community charge.

In introducing this measure, the Government have unleashed a spirit which will haunt them from the beginning to the end of this Parliament. My forecast is that the Government will drop the proposed community charge, but, if they do not, their victory on the community charge will, if nothing else happens, herald a defeat for them at the next election.

The Government have go away with actions against the homeless because the homeless are a minority; actions against the unemployed because the unemployed and a minority; and action against the poor because the poor are a minority. For the first time they have made the mistake of introducing a measure which has the ability to offend the majority, instead of simply penalising the minority. My view is that this measure is doomed to defeat. But, if I am wrong about that, the Government are doomed to defeat on this issue alone.

11.32 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope)

I join other hon. Members in congratulating the hon. Member for Sheffield, Central (Mr. Caborn) on having secured this debate at a relatively reasonable hour. The debate has been notable for the excellent maiden speeches from the hon. and learned Member for Fife, North-East (Mr. Campbell) and the hon. Member for Derbyshire, North-East (Mr. Barnes). I hope to have time to refer to them later in my speech.

This has been a serious debate about one of the central major reforms being brought forward in this Parliament—the future financing of local government, a system which consumes about one quarter of total public expenditure and touches the life of every citizen. It is not surprising that it warrants serious debate.

After listening to the debate, the question I ask is: do we want local government to have a future? I hope that all those who have participated in the debate would agree with me that we do, but I have to tell hon. Members that many outsiders are fed up with local government as it is now and would like to see it stripped of its revenue—raising powers, with local services adminstered more along the lines of health authorities. As recently as last Friday a letter published in the Financial Times advocated that course of action. It stated: So why on earth should local government have separate revenue-raising powers—whether by rates or otherwise? To ensure efficiency, councils should be cost centres with budget allocations made by central government, who in turn levy and collect tax revenue. Giving local authorities a set sum would concentrate their minds wonderfully on setting priorities and getting value for money. And it would quickly allow electors to judge which party could produce most for their money. I do not agree with that recipe, because I do not believe in the centralisation of power and direction of local government in that way. Hon. Members continue to defend the indefensible in the way that the hon. Member for Norwood (Mr. Fraser) has just been doing. He ignored the fact that Hackney is overspending £513 per adult, referred to Wandsworth, but quietly omitted to refer to the fact that the figures he quoted take no account of the situation where ILEA is overspending by £250 per adult in inner London. That is the extent of overspending against assessed need. If the authorities spent in accordance with their assessed need on the exemplifications for the current year, the community charge would have to be only £178 per adult, and that would be subject to rebate in certain circumstances.

I submit to all true friends of local government that our fundamental reforms of the way in which local government is paid for offer the last hope of saving local government. That may sound dramatic, but it is meant to be. Our system of local government finance is in an advanced state of senility and decay. It is antiquated, arbitrary and incomprehensible.

In preparing for tonight's debate I asked officials to find out the last occasion on which the present system of local government finance received praise in the House. They have not yet come up with the answer, but it must have been many years ago. That is hardly surprising, especially to those of us who have tried to work with the system, either inside local government or in the Department of the Environment. But now that this radical, reforming Government come to change it, we see that the very injustices of the present system have thrown up pressure groups of vested interests prepared to defend those injustices because they are the beneficiaries of them. That is something to which we shall have to pay careful regard in considering how to deal with the issues raised in this very serious debate. It is important that the fact that Hackney is overspending to the massive extent that it is should be brought home to the general public.

I shall briefly remind the House of how the present system operates. It is based upon rateable values—a notional rental value placed upon property. I say "notional" because, with the decline in the private rent sector, it is far from easy to ascertain true rental values. It assumes that differences in rateable value reflect differences in ability to pay. As has already been pointed out, that is clearly a wrong assumption. It is designed to ensure that a standard rate poundage is charged by a local authority for a standard level of service. Therefore, two identical properties in different parts of the country with the same level of local authority service will pay rate bills proportionate to the rateable value.

Those three principles, upon which the present system is based, are flawed and unfair. That is because rateable values take no account of financial status of the householder. For example, the average rateable value of a three-bedroom semi-detached house in Elmbridge in Surrey is £547; in Craven, in north Yorkshire, the same house would have a rateable value of only £188. That means that if both areas provided the same level of local services with the same degree of efficiency, the Elmbridge ratepayer would face a bill three times as large as the person in Craven. There is no reason to believe that the owners of those two houses would have widely different incomes, as income variations across the country are much smaller than variations in rateable value. If the house in Elmbridge is occupied by a widow on her own and the house in Craven is ooccupied by two adult earners the Surrey widow's per capita rate bill is six times that of each adult earner in Craven.

It is clear, therefore, that ability to pay is not reflected in the present system. Those with the lowest incomes presently pay a higher proportion of their income in rates than those with higher incomes because many of the poorest households in this country are single-parent families or single pensioners.

Is the present system fair? I will give way to any hon. Member who thinks that it is.

Mr. Dalyell


Mr. Chope

I will not give way to the hon. Gentleman, because he suggested, sotto voce, that he would not seek to intervene on the point on which I invited intervention. In the short time that I have left, I hope to deal with the points that he raised earlier.

If we go to a system of revaluation, which is the proposition of my hon. Friend the Member for Hornchurch (Mr. Squire)—and I admire him for his courage in putting it forward—and if that were to reflect the massive changes in turbulence in the capital values of houses currently taking place, there would be consequences for him and his constituents that I doubt he has fully considered. According to the recent Halifax Building Society house price index, house prices have risen nationally by 47.3 per cent. over the past four years, but they have risen by 95.6 per cent. in the Greater London area. Therefore, if there were the same system of equalisation of rate poundages, based upon a system of rateable values based on capital rating revaluation, it would result in massive increases in rate bills in the southeast and London and reductions in rate bills in the north. In the example that I quoted, I have shown that currently the system is loaded in favour of those in the north and against those in the south.

Mr. Squire

As a former chairman of the finance committee of a large local authority when the previous revaluation took place, I am aware of the impact of such a measure. I am sure that my hon. Friend is aware that a revaluation is neutral and that the significant factor is what a council does with the revised poundage. It is possible to build in safety nets to prevent excessive increases in any one year.

Mr. Chope

My hon. Friend the Member for Banbury (Mr. Baldry), in an excellent speech, anticipated my hon. Friend's intervention. My hon. Friend the Member for Banbury talked about the consequences of a revaluation in Scotland after only seven years, when the valuation of an ordinary house increased from £171 to £726. Opposition Members and some of my hon. Friends think that the electoral difficulties that the Conservative party experienced in Scotland were the result of the Government's proposals to introduce a community charge. At the time of the revaluation in Scotland the popularity of the Conservative party had declined to about 13 per cent., but by the time of the general election it had risen to about 24 per cent. I have little doubt that by the time the much fairer community charge comes into operation, our popularity in Scotland will have increased even more.

Mr. Dalyell

Will the Minister give way?

Mr. Chope

I shall not give way to the hon. Gentleman, because only a short time remains available to me to reply to the debate.

The present rating system is short on accountability. Councils have the power to increase spending without the responsibility of being properly accountable to those who pay. The non-domestic ratepayer—whether the huge multinational or the cornershop—provides more in rate income than all domestic ratepayers put together. If we add to that grants from national taxpayers, we find hat about three quarters of local authority revenue comes from those with no local vote. The problem goes much deeper than that. because, of 35 million adults in England, only 18 million are heads of households directly liable to pay rates, of whom only 12 million pay rates in full. There are 3 million who receive partial assistance with their rates and the remaining 3 million receive full relief from their rates bill. In Liverpool, only one voter in four pays rates directly and in full. In Manchester the proportion is even less.

Those figures speak for themselves. A system has developed in which the majority of the electorate can vote for services which they will either not pay for or pay only a small contribution towards. The opportunity that the system presents for abuse is being exploited by the most irresponsible councils. By their actions, they have brought, and are bringing, local government into disrepute.

I shall refer briefly to the two maiden speeches this evening. The hon. and learned Member for Fife, North-East paid a generous tribute to his predecessor, Barry Henderson, whose comradeship and company my right hon. and hon. Friends and I certainly miss. The hon. Gentleman's comments struck a chord with all those who enjoyed the time when Barry was a Member of this place. We look forward to his early return.

The hon. and learned Member for Fife, North-East referred to my old university and that of my hon. Friend the Member for Darlington (Mr. Fallon), whose excellent speech I have not had the time to take up and do justice to in replying to the debate. It is notable that the fine university of St. Andrew's, despite having a lower Government subsidy now, is doing better than ever before as a result of the long-established principle of self help. I agree with the hon. Member for Fife, North-East that the rating system is thoroughly discredited, but I cannot agree that the only fair system would be a local income tax Such a tax would be a disaster. It would be fiendishly complicated to administer, there would be only 20 million taxpayers and there would have to he an extremely complicated register. I am informed that it would increase income tax by anything between 4p and 11p in the pound, thereby exacerbating unemployment and the poverty trap. It would drive those in work out of the inner cities and he a recipe for even greater dereliction and despair.

The hon. Member for Derbyshire, North-East paid a fitting tribute to his predecessor, Ray Ellis. He referred to the mining industry and tantalised us by referring to three hon. Members who were his pupils when he was a school teacher. I hope that we shall be able to guess in due course who they are.

The hon. Member for Derbyshire, North-East referred to Claire Staines and asked when her father would be able to get a job. If we bring in the unified business rate, rates in north-east Derbyshire will be reduced by almost 26 per cent., and that will provide a boost to employment opportunities in the area. I think that it is disappointing that the hon. Gentleman did not find time to include that in his speech.

Sadly, I do not have time to deal with all the other issues that have been raised in the debate.

Mr. Dalyell


Mr. Chope

I refer the hon. Member for Linlithgow (Mr. Dalyell) to the yellow booklet, "Paying for Local Government: The Community Charge", published by the Department of the Environment and the Welsh Office. If the hon. Gentleman reads that carefully, he will discover that it contains most, if not all, of the answers to the questions that he raised in the debate tonight.