§ 'For the purposes of this part (and subject to the provisions of sections 12 and 13 below) personal community charge shall be determined according to the following scale:
- (a) if the individual liable to pay the personal community charge is not liable to pay income tax, that person shall pay one half of the amount prescribed by the charging authority as the personal community charge determined in accordance with section 29 below;
- (b) if the individual liable to pay the personal community charge is liable to pay income tax at the standard rate, that person shall pay the personal community charge determined in accordance with section 29 below.
- (c) if the individual liable to pay the personal community charge is liable to pay income tax at the higher rate, that person shall pay one and one-half times the amount prescribed as the personal community charge determined in accordance with section 29 below.
- (d) in the case of a spouse who has no income of his or her own, the level of personal community charge he or she shall be liable to pay shall be the same as that of their wife or husband.'.—[Mr. Mates.]
§ Brought up, and read the First time.4.36 pm
§ Mr. Speaker
With this, it will be convenient to take the following: Amendment (b), in line 10, after 'charge', insert'on sliding scale in which the community charge payable increases from one half of the amount prescribed by the charging authority to one and one half times the amount prescribed by the charging authority in proportion to income, where the community charge is'.
Amendment (c), in line 15, leave out subsection (d).
Amendment (e), in one 15, after 'spouse', insert'or person living with another person as husband or wife as denned in section 16(7)(b)'.
Amendment (f), in line 17, at end insert'or the person with whom they are living as if in that relationship'.
Amendment (d), in line 17, at end add—'(2) Nothing in this section shall affect an individual's entitlement to community charge rebates calculated under the provisions of section 23 below'.
§ New clause 2—Regulations on personal community charge liability—
- '(1) Liability for personal community charge shall be determined in accordance with regulations to be made under this section.
- (2) The regulations shall provide that liability shall be by reference to ability to pay, and in framing the regulations ability to pay shall be determined by reference to taxable income of the person liable.'.
§ New clause 5—Liability for personal community charge—
- '(1) Liability for personal community charge shall be determined by regulations which relate the personal community charge to ability to pay.
- (2) Before producing such regulations the Secretary of State shall consult the local authority associations, such groups representing ratepayers as appear to him to be concerned and such groups representing the interests of families and the interests of those on low incomes as appear to him to be concerned.
- (3) In producing regulations the Secretary of State shall have regard to the concept of ability to pay exemplified in liability for income tax:
- (a) before the financial year 1988–89 and
- (b) in and after the financial year 1988–89.
- (4) A report as to progress in producing regulations under this Section shall be laid before both Houses of Parliament at the end of a period of one month beginning with the day on which this Act is passed.
- (5) Regulations under this Section shall be laid before both Houses of Parliament no later than 1st January 1989 and shall be subject to approval by each House of Parliament.'.
§ New clause 7—Local income tax—
- '(1) In accordance with this Part every person resident in the area of a local authority shall be liable to pay to that local authority for any year an amount of local income tax which is determined by that authority and which is proportional to the net income of that person.
- (2) A local authority shall set a rate of local income tax which is sufficient to meet their liabilities, whether in respect of a precept or a levy or otherwise, in so far as they are not met from other sources.
- (3) For the purposes of this Part a local authority is:
- (a) a district council
- (b) a London Borough Council
- (c) the Common Council of the City of London
- (d) the Council of the Isles of Scilly.'.
Amendment No. 197, in schedule 2, page 82, line 22, at end insert—
'Provided that for the purposes of section (Scale of personal community charge payments) of this Act a registration officer may not require the production of information from an individual other than a signed statement to the effect that he is, as the case may be, a non-income tax payer, a standard-rate income tax payer or a higher-rate income tax payer.'.
§ Mr. Mates
New clause I stands in my name and those of 44 of my right hon. and hon. Friends. I should like to deal briefly with a technical matter. Some authoritative sources have said, first, that my new clause is out of order, which clearly it is not, otherwise you would not have called it, Mr. Speaker, and, secondly, that it would require a money resolution, which clearly would be unsatisfactory and would cause my hon. Friends concern. I took this matter for advice early last week and on 13 April was informed by the Clerk of Public Bills:As drafted your Clause would not require a money resolution. That would only be a consideration if you required the Inland Revenue to be the collecting agent",which I do not, as I shall explain. The letter went on to suggest that I should make some consequential amendments, which have been tabled. I want to say to those of my hon. Friends who are listening to some of the arguments that, clearly, that is not what I am trying to do, nor is it the consequence of the new clause in the opinion of the officials of the House.
I have proposed, aá I think is now generally known, that we introduce, instead of a flat rate charge for the community charge, a banded system with three payment plans. I can say what I have to say in shorthand because the whole debate has had a good deal of publicity and I think that most hon. Members are aware of the terms of my new clause. The first band would be those who do not pay income tax; the second, which contains 90-plus per cent. of the population, would be those who pay income tax at the standard rate; and the third would be those who pay income tax at the higher rate.
574 This was worked out mainly during the Christmas recess and after Second Reading, as a result of what my right hon. Friend the Secretary of State for the Environment said on Second Reading to a number of us who were concerned about this aspect, and this aspect alone, of the Local Government Finance Bill. He challenged us, if we knew of a better idea, to produce one. He said that if there was a way of doing it, he would consider it and, furthermore, he would allow us to have it looked at. He has been true to his word. We came up with another plan; we submitted it to him; it was looked at by officials and then he and his colleagues said, "Thank you very much. We don't like it."
I do not quarrel with that. But the Secretary of State said—this has been a large part of the debate—that the new clause was unsatisfactory because it produceda sudden and painful earnings trap.That naturally caused us concern because—
§ Mr. Eric Forth (Mid-Worcestershire)
Will my hon. Friend accept that the new clause may also be unsatisfactory because it runs counter to the election manifesto on which virtually all Conservative Members fought the election? Apart from anything else, my hon. Friend must therefore explain to the House why he wants us to digress in a very basic way from the explicit terms of the manifesto on which we fought the election.
§ Mr. Mates
I fully intend to explain to the House why I have proposed the new clause and if my hon. Friend will allow me to do that in my own way we can perhaps then debate the proposal.
As I was saying, one of the major objections to the new clause was that it created a sudden and painful earnings trap. That would have been cause for concern and the suggestion did, indeed, worry many of my right hon. and hon. Friends. It was at that point that I went back to the Department of the Environment to speak to my hon. and learned Friend the Minister for Local Government. Let me say at this point that one of the good things about this debate is that it has been conducted throughout with courtesy and good humour. No personal attacks have been made by anybody against anybody else. We are debating principles and not personalities.
My hon. and learned Friend the Minister for Local Government then produced a graph, which has been much circulated because I produced it too. It helps the debate that we are both speaking off the same sheet of music. I then put the question to my hon. Friend—I put it again the other night to my right hon. Friend the Secretary of State —"Do Ministers agree or do they not that under my scheme not one person in the lower income brackets of society would lose one penny more than under the Secretary of State's scheme?" The Secretary of State has acknowledged that they would not lose, and that is now common ground between us. The phrasesudden and painful earnings trapis not the best phrase that could have been used, for the simple reason that nobody falls into that trap.
The objection has been raised that the Secretary of State's plan for rebates has a taper and therefore involves a gradual increase of a person's liability to pay as his income rises—that is shown on the graph produced by the Secretary of State—whereas my plan appears to involve a step at the point at which someone comes off the 50 per cent. rate. However, at that moment, one simply reverts to the curve that the Secretary of State has already proposed. 575 Meanwhile, a few people will have benefited—not many but some significant groups in society, the House may think. For example, married pensioners on rather high allowances who would be liable for the full charge straight away under the plan proposed by the Secretary of State will go part of the way on 50 per cent. under my scheme. My proposal will also help certain other groups, such as some of the disabled unemployed who have a high rate of allowances.
§ Mr. Redwood
Does my hon. Friend agree that under the Government's scheme, 9 million people are protected because they are on lower incomes and that, furthermore, all those protected under his scheme are protected because he has preserved the Government's protection, not by virtue of his own scheme? Therefore, if the matter is one of principle, is not that principle taken care of in the Government's proposals? Does not my hon. Friend agree that his scheme involves a large trap for those moving from 50 per cent. to 100 per cent. and from 100 per cent. to 150 per cent.?
§ Mr. Mates
My hon. Friend is quite right that both schemes are protected by the Government's rebate system. This debate is not about the Government's rebate system, although it may devolve on parts of it later. Of course the protection is the same with my scheme as with the Government's scheme. However, with respect, my hon. Friend is wrong in the sense that there is no trap between the 50 per cent. rate and the 100 per cent. rate. Where he is right is that there is a trap in the higher rate, and I shall come to that in a moment. I must leave this point, reiterating in the strongest terms the Government's concession that not one person who is lower paid would be worse off under my scheme. The new clause must be considered in that light. It may have other defects and other merits, but it is simply not the case that it is a trap for the less well off.
§ Mr. Churchill (Davyhulme)
I appreciate, as no doubt does the whole House, that my hon. Friend's desire is to help the most disadvantaged in our society. Can he say approximately how many will benefit under his scheme who would not benefit under the Government's scheme?
§ Mr. Mates
I cannot say precisely, because the Government cannot tell me precisely. I asked the Government and, in his letter to me, the Secretary of State replied that it would be a small group. I believe that the reason why neither he nor I can answer my hon. Friend's question is that the Government have not finally worked out their scheme. I do not criticise them for that, but the fact that they are unable to tell me means, alas, that I am unable to tell my hon. Friend.
Let me deal with the step between the standard rate taxpayer and the man on higher rate tax. It is right to assert in that case that there is a step. It has been argued 576 that £1 of extra income might produce a large extra responsibility for community charge. There is a step, but I must challenge my hon. and learned Friend the Minister for Local Government, who talks about a step of hundreds of pounds. He is using the worse case for his argument, which says that for someone earning about £22,000, £1 of increased income could mean liability for a further £600 of community charge.
§ Mr. Mates
My hon. Friend says, "In Camden." If that is the case and it remains the case, we have failed in the whole object of the Bill, which is to prevent high-spending councils from levying enormous community charges by increasing accountability so that people will not stand for it. If that is going to happen—and I hope that it will—we must conduct the argument using the average increase and not the extreme increase. If we are successful in achieving our aim, the extreme increase will vanish when the Bill becomes law.
§ Mr. Mates
Can I just have a sentence or two? I shall certainly give way when I have finished my point.
Therefore, we must return to the argument about the average, because it is the argument about the average that my hon. and learned Friend the Minister is using. I concede that he is right that, at the £22,000 a year level, a few pounds of extra income will create an extra liability of £85—half the average community charge. If I may say so, for someone on £22,000 income, that represents one ticket to the theatre and one dinner. I do not believe that, given the gains that they will receive from the abolition of rates, the better-off will be unhappy about paying that sum.
§ Mr. Leigh
I am afraid that my hon. Friend has to recognise that as a result of his proposals some married couples may have to pay up to £2,400. That is a very expensive trip to the theatre. The result of the new clause would be to allow Left-wing councils, which he has opposed all his life, to drive enterprise out of their areas.
§ Mr. Mates
I have to say to my hon. Friend, "I am sorry, you are wrong." If my hon. Friend wants to make a speech and produce these figures I shall certainly answer him. I am merely returning to the principle behind my argument and was simply telling the Minister, who is trying to describe the step effect as a spectre of unfairness, that he must get the matter in proportion. We have conducted the whole debate on the averages across the nation, and under my scheme the average liability for one person is £85. My hon. and learned Friend the Minister shakes his head. Would he like to intervene?
§ The Minister for Local Government (Mr. Michael Howard)
I am grateful to my hon. Friend for his invitation to intervene. If the community charge had been in force in 1987–88, the average would have been £224. Half of that is not £85 but £112, and since, under my hon. Friend's scheme, wives would pay at the same rate as husbands, it is perfectly possible for someone who receives a rise of £1 a year in income to end up, on the average community charge, paying an extra £224.
§ Mr. Mates
I am grateful to my hon. and learned Friend and, of course, I accept his correction. On Second 577 Reading, he was working on a standard community charge of £176. It has now gone up, but that is another matter. Instead of talking about £85, I am now talking about £112. That is not an unreasonable step for someone on that level of income who has, quite rightly in the view of most hon. Members, gained so much from what we have done to the taxation system over the years.
§ Mr. Jim Lester (Broxtowe)
Surely the people who would be liable for that step are the people who would gain on their overall budget from the tremendous rate reductions that would follow the introduction of the community charge. They would be paying less.
§ Mr. Mates
My hon. Friend makes a valuable point when he says that such people will gain most. That is right, because they have been carrying an unfair burden. They are the people who gained most from the reduction in the higher rate of taxation in the last Budget. That is right too, because we want a lower-taxed society. If we are to achieve that we must add the responsibility to those who will be best off when we have completely revised our old and outdated system of rating—as we are doing. When we turn to a new system, it must be fair. My hon. and learned friend mentioned a salary increase of £1. If a person on a salary of about £22,000 a year gets an increase of £1, his first step is to change his accountant.
§ Mr. John Butterfill (Bournemouth, West)
Does my hon. Friend agree that many people with such incomes run small businesses and are self-employed, and that it may not be possible for them to take the sort of action that my hon. Friend implies?
§ Mr. Mates
I shall leave my hon. Friend to argue that point for himself.
I shall now explain to the House the method for collecting the community charge under the new clause. This has exercised the minds of many people who have looked at my clause and asked whether it will work and could the charge be collected. Fear has been based on argument from certain sources that has not reflected the way in which my scheme would work. I say again that in trying to work this out I have tried to follow precisely the Government's scheme in every regard so that the minimum change is necessary to the Bill consequent upon my new clause being accepted. The same registration process applies as applies under the Government's scheme. The Government's scheme has some difficulties, but my scheme produces no more.
The same form would be sent by local authorities to every person liable for the community charge under my scheme as under the Government's scheme. It is precisely the same system. So far there is no increase in bureaucracy or complexity because the bureaucracy and complexity are those that will be required anyway. I propose that there should be three more questions on the form. They are questions that go the heart of the concern of many people and are about the tax situation of the person being questioned.
The first extra question is: "Do you pay income tax?" If the answer is no, there is an assessment of 50 per cent. of the community charge. The second question is one that obviously applies to most people. It is: "Do you pay income tax at the standard rate?" If the answer is yes, the 578 assessment is the standard rate community charge. The third question is: "Do you pay tax at the higher rate?" If the answer is yes, there is an assessment of 150 per cent.
It would be very difficult and wrong for that information to be traded between the Inland Revenue and the local authorities. In conceiving the scheme I have made quite sure that that does not need to happen. I know that that was the cause of a good deal of concern among some of my hon. Friends. The form is completed on a self-assessment basis and signed with the same implications as apply on the form anyway about whether the person has told the truth.
§ Mr. Tim Devlin (Stockton, South)
Is it not right to say that some people would not be able to verify their income because many self-employed people do not know their income until two or three years afterwards, when the accounts are made up?
§ Mr. Mates
I am grateful to my hon. Friend and to other hon. Friends for making these points. I am coming to them because I know that they need to be answered. If I could be allowed to complete a point before being asked to give way, it would save the House a little time. I assure my hon. Friend that I shall come to the question that he asked.
Three extra questions are on the form. Self-assessment takes place and the form is signed. The community charge becomes payable, as under the Government's scheme, and is paid to the local authority. There would have to be inserted in the Bill a power for a random check of whether what people had said was correct. I shall explain that, because it has caused anxiety to some of my hon. Friends. We would have to give the local authority power to send the Inland Revenue a random selection of answers received from the taxpayers, saying that Mr. X has stated that he is a standard rate taxpayer and asking if that is correct, or that Mr. Y has said that he is a higher rate taxpayer and is that correct.
My right hon. Friend the Secretary of State said that this was a fiscal nuclear deterrent, in that it would be oppressive because those who were randomly selected would have to have all their affairs gone through. That is not at all the case. My right hon. Friend is not quite right. Ninety nine per cent. of the people of Britain are honest.
§ Mr. Mates
My right hon. Friend asks whether that is a Government statistic. I shall not answer that question.
Most people in this country are honest, so in most cases the reply will come back from the Revenue that the answers are correct. That will be the end of the matter, because that is the only check that has to be made. In a small minority of cases, the Revenue will say that the answers are not correct. If that is so, an offence has been committed and the law will take its course in precisely the way that it will have to take its course if an offence is committed in the completion or non-completion of the Government's present registration and assessment form. Aside from that, there is no change in the system that I have devised.
§ Mr. Butterfill
On that point, does my hon. Friend accept that it will also be necessary to include on the form the tax reference of the person concerned? If that is not done, it would be difficult for the Inland Revenue to obtain 579 the information. Will he explain how he will deal with the problem of husbands and wives who are separately taxed or who may have the option to be separately taxed?
§ Mr. Mates
All those are complex arguments, which I shall be happy to explain to my hon. Friend, but I shall not take the time of the House to do so now. Suffice it to say that when the matter was examined—I want to be careful about how I say this—the Department of the Environment consulted the Inland Revenue. At my meetings thereafter, that issue did not form part of any objection to my proposals.
I do not wish to go further than that because I have been saddened by remarks over the weekend suggesting that I have behaved dishonourably by disclosing advice given to me by officials, courtesy of the Department. I know that my right hon. Friend the Secretary of State accepts that I have not made one remark about anything said by any official that was not said in the presence of Ministers. What was said to me in my one private meeting with a group of officials has never been made public—unless it was something that Ministers had heard about and to which they had assented. I do not think that that is a dishonourable way to proceed.
On the operation of my scheme, I concede that some people will fall between two barriers—but it will not affect anyone at the lower end who will be taken care of under the Government's scheme. The only problem with lack of knowledge might arise between the standard rate and the higher rate levels. A few people will face some difficulty and will need advice. I concede that that is a complication that does not exist in the Government's scheme. However, the whole of the tax system is riddled with complications that are constantly referred to and fro between the Inland Revenue and the individual. Only a small number will hop over the barrier—[Interruption.] It is true. Only 9 per cent. fall in the higher rate band, so only a small number will be affected.
The problems of evasion have been raised, but they are the problems of the Government's scheme, not my scheme. There is no greater opportunity for evasion under my scheme than there is under the Government's scheme. It is true that there will be problems with collection, but they are the problems of the Government's scheme, not my scheme. The Government have conceded that collection will be a difficult task and also that the scheme will be easier to evade than the current rating system. That is why it will cost twice as much and will require twice as many staff. We understand all the difficulties involved in a radical change in the system—but they are inherent in the Government's scheme, not my scheme. The only problem inherent in my scheme and not in the Government's scheme is that of assessment.
§ Sir Peter Emery (Honiton)
My hon. Friend's scheme is based on the conception that a tax system with only two bands will exist for ever. If there were to be a Labour Government, who would introduce many more bands, where would that leave my hon. Friend's scheme?
§ Mr. Mates
I hesitate to tell my hon. Friend where my scheme would go should there ever be a Labour Government, but I do not think that it would be a vastly 580 different place from where the Government's scheme would go. The point is that there will not be a Labour Government. That is why we must legislate properly now.
The Government have conceded that my scheme is practical. The Secretary of State said that it could work if the Government wanted it to work—but they do not like my scheme as much as they like their own scheme.
§ Mr. Timothy Wood (Stevenage)
Can my hon. Friend clarify the effect of paragraph (d)? If an individual is earning £25,000 a year and his wife takes a part-time job and earns £1,000 a year, would that couple transfer from paying one and a half times two standard community charges—that is, three community charges—to paying two community charges? Would that additional income result in a reduction in the community charge?
§ Mr. Mates
If I understand my hon. Friend's question correctly, the answer is no—[Interruption.] I beg hon. Members to listen and not to scoff. It is a complex argument. We want to understand such complex legislation. I know that some Opposition Members are not in the least bit interested in understanding. We are trying to arrive at a better solution. A little less scoffing and a little more listening would help.
My hon. Friend the Member for Stevenage (Mr. Wood) is not right in his assumption. Paragraph (d), as amended—I had made a technical drafting error—puts the spouse in the same position as the wage earner if there is only one wage earner in the family. I acknowledge that that is not an ideal solution and, indeed, it involves a certain amount of rough justice. However, the rough justice will apply only at the upper end, and not in the middle band where 90 per cent. of people fall, who will pay the same as under the Government's scheme. I believe that to be in the overall interest of families.
§ Mr. Patrick McLoughlin (Derbyshire, West)
I am concerned about a point of fairness. If my hon. Friend's new clause is intended to produce a fairer scheme, why was it not considered to be a fairer scheme when the House discussed the Scottish legislation? Why does my hon. Friend propose a community charge for England and Wales that will be different from that already agreed for Scotland? That is most unfair.
§ Mr. Mates
I do not want to be drawn down the Scottish road, but if we were to discuss the way in which the charge has been introduced in Scotland, there might be even greater internal dissent. If the House accepts my new clause, obviously there must be an amendment to the Scottish legislation. The same system must apply in Scotland as applies in England and Wales. We now have the advantage of a certain amount of experience in Scotland.
Having established that my new clause is practicable, I shall explain why I am introducing it. This relates to a question asked earlier by my hon. Friend the Member for Mid-Worcestershire (Mr. Forth). When we started down this most difficult road in an attempt to reform a complex, outdated and unfair system, we said that we would abolish the rating system and replace it with a more broadly based tax that would be based on people's ability to pay—[Interruption.] That is true; we said that in 1974. We said that the rating system was intolerable and that, as a party, 581 we would do something about it. We have been trying to do so since 1974. Until we decided to take the plunge last year, we had failed.
Many efforts were made during our first eight years in office to find a better system—a Green Paper was published, a study carried out and a committee established, but each time we reached the reluctant conclusion that to proceed with any of the options identified would be less satisfactory than staying with the present system. Many of us were unhappy about that. Many were the voices from Conservative Benches saying to the Government, "Get on with it and do something." To their credit, the Government have done just that. I am behind the Government 90 per cent. of the way. Having said that there were three legs to the change, I strongly believe that we have dropped one leg. To many of us, that has made the tax not ideal and not fair.
§ Mr. Simon Burns (Chelmsford)
As a new Member of this House, who was not here in 1974, I find my hon. Friend's argument slightly disingenous and unfair. I fought the election on the 1987 Conservative party manifesto. I assumed that 632 other Conservative candidates fought the election on it. In that there was a quite clear pledge to a fixed community charge. To my mind, the Government have been implementing that pledge, not reneging on it. My hon. Friend's amendment seeks to stop the Government from doing what they are pledged to do.
§ Mr. Mates
I am grateful to my hon. Friend for his intervention. Of course I was coming to what we said in the last manifesto. The line before the line to which my hon. Friend referred states that we shall introduce a fairer system. That is at the heart of the debate. That is why there is some difference on Conservative Benches about the best way in which to proceed.
Several of my hon. Friends have asked me why I have not accepted the concession that the Government made on Thursday and withdrawn my objections. To their credit, the Government conceded that their scheme was not fair enough, did not do enough for the less well off members of society, and that more help must be given. I congratulate them. It is always difficult for a Government to change course. My right hon. Friend the Secretary of State—I suspect, with tongue slightly in cheek—said that he had not been responding to pressure and that he wanted to do it, anyway. I do not know.
The House will recall that, in 1986, we found ourselves in major difficulty with the revaluation of the rating system in Scotland. On that occasion, in much more difficult economic times, the Government had to make an emergency concession of £100 million or so to alleviate the worst of the hardship that the revaluation would cause. That did not make the rating system any fairer, and nor, with the greatest respect to my right hon. Friend, will the concession that my right hon. Friend made on Thursday.
An injustice is not removed by throwing money at it. It may be made less painful, but, if the system is not fair, it must be changed, not the amount of help that is available to it. That is why the Daily Express, under Saturday's banner headline,Not a Penny More",could not have misunderstood what my hon. Friends and I are seeking more directly. We have not asked for a penny more. We are not asking for a penny more.
582 One of the reasons I came to the conclusion that this is the best way in which to present an alternative is that fundamental to everything that I am doing has to be the fact that it does not cost any more money. If it did, all my hon. Friends would say, "There he is. He is asking for more public expenditure." I am not asking for more public expenditure. It is right that we should control and restrict public expenditure, but, when we are reforming the whole taxation system, at the heart of it we have to make it fairer.
§ Mr. Tony Marlow (Northampton, North)
I am grateful to my hon. Friend. I want to ask my hon. Friend a point of clarification with regard to the position of a spouse—husband and wife. Am I right in believing that if one of the husband or wife goes into the higher rate of taxation then they will both have to pay the higher rate of community charge?
§ Mr. Mates
No, my hon. Friend is not right, unless they are both earners. The only time when these things are done is when there is a non-earning spouse. I use the word "spouse" because some people regard the word "wife" as sexist. Again, it is a matter of detail.
My right hon. Friend has met some objections and he has responded to pressures. I ask him to remember what is written in St. Matthew's gospel, which states:Whosoever shall compel thee to go a mile, go with him twain.
I am not asking for a confrontation with the Government—not to have a knock-down, drag-out fight at 10 o'clock tonight. I hope that that will not happen. I hope that those who listen to the debate will hear a n acknowledgement by the Government that, in future, they will base the Bill on the principle that it must relate to ability to pay. If my right hon. Friend says that, but then says, "I think that your scheme is crazy, bad, mad and hare-brained," that is fine with me, because I shall withdraw it, knowing that the Government, with the resources that they have, are bound to come to a better conclusion than I. But the Government need to change that one fundamental principle.
§ Mr. Kenneth Hind (Lancashire, West)
Does my hon. Friend agree that 50 per cent. of local government expenditure in most areas comes from the rate support grant that is provided by the Treasury? It is means-tested and comes from income tax. With my right hon. Friend's system, at least half the community charge is means-tested. Surely that meets my hon. Friend's argument.
§ Mr. Mates
As I have tried to demonstrate, that meets half the problem. The system has quite rightly tackled inability to pay, but it does not tackle ability to pay. The people who are most concerned about the present system are those who are just above that level—the people who are not at the level at which they get subsidies, but are struggling to make ends meet. As presently drafted, the Bill asks them to pay precisely the same in community charge as the richest alongside them in their communities.
I am conscious that I have detained the House for too long, and I apologise. It is because of the number of interruptions. I say to those of my right hon. and hon. Friends who have been good enough to support me and to sign my motion that I do not find it comfortable to stand here, offering criticism to the Government. I did not want the matter to be brought to a head in a full-scale debate. 583 For four months, I have quietly tried to persuade Ministers and others that we can make the change without destroying the legislation. I still believe that we can make the change without destroying the legislation. I believe, too, that my right hon. and hon. Friends who have come with me so far will make up their minds tonight, not about the minutiae—but not about an odd little trap or an odd wart here and there in the legislation. For goodness' sake, if the legislation were perfect, we would not set out with 139 Government amendments—that is after the Committee's deliberations and Second Reading.
My new clause should not be dismissed as cursorily as some have tried to dismiss it. It is worthy of debate. If, at the end of the evening, there is no concession from the Government, those who believe that this tax must be fair have to go into the Division Lobby to say so. The legislation will go on to the statute book, will become law, and will be effective in 1990. Only then will we know what the people outside this place think about it. Only then will we be able to gauge the effect of the measures that we are taking now.
I say to my hon. Friends, with the greatest respect, that, whatever else this new legislation is known as, it will be known as a Tory tax. We can accept taxation. Although no one likes it, taxation is acceptable to the vast bulk of people of this country because by and large it is perceived to be fair. My sole anxiety is that we must make every effort to see that this piece of taxation is seen to be fair and thus acceptable to the people at large.
§ The Secretary of State for the Environment (Mr. Nicholas Ridley)
It might be to the advantage of the House if I give my response to the speech of my hon. Friend the Member for Hampshire, East (Mr. Mates) and his new clause. I realise that new clauses 2, 5 and 7 have not yet been debated, although they are down for debate at this time, but it is true that all these new clauses suggest alternatives to the Government's plans for raising local revenue. I make no complaint that we are still discussing the principle of that matter even after two years and a very long Committee stage. It is right that we should. It gives me one more opportunity to demonstrate that we have the best solution.
Our solution is based on two principles. First, it makes nearly everyone contribute, at least a little, to local revenues, so that all can participate in democracy at local level. Secondly, the charge is moderated according to people's ability to pay, without detracting from the first principle of accountability. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) spelt out the Labour party's alternative and I do not intend to dwell on it. I should like to close, but I think that I should address myself to my hon. Friend's new clause. The right hon. Gentleman suggested a local income tax. He is trying to achieve that in new clause 5 and in the amendments to my hon. Friend's new clause. He also suggested capital value rates. To demolish that suggestion would be a very nice debate, but I leave that to others. The hon. Member for Southwark and Bermondsey (Mr. Hughes) has tabled new clause 7—this is about the only issue on which all wings of the erstwhile alliance agree—which proposes a local income tax.
The longer our debate has gone on, the more I have examined other alternatives. The more I have heard the 584 arguments for those other proposals, the more I have become personally convinced of the merits of our proposals. Locally determined taxes, based in any way on the national income tax system, are all unsuitable as a method of raising money from local people, even for part of the cost of local services. I shall give hon. Members a number of reasons. In this country, local authorities are relatively small geographically, but large in terms of expenditure. The objection that I shall give applies to all the new clauses that we are discussing, and I want to explain why.
First, a local income tax, or any variant of it, would diminish local accountability. Local services, provided by the local authorities for the local community, benefit everyone in that community. Everyone benefits, so everyone should contribute. Everyone should have the right, through the ballot box, to influence the level of service that is provided and the price that they must pay through their taxes. That is the essence of accountability and of responsible democratic control of the services provided by local authorities.
§ Mr. Simon Hughes (Southwark and Bermondsey)
Will the Secretary of State tell the House why, in his book, one principle is applicable for local government, but a different principle, whereby people pay for national services according to their ability to pay, has been endorsed for decades by his and every other Government in this country? Why are there different standards for the two levels of government and not the same principle—no taxation without representation—for both, as we are used to in this democracy?
§ Mr. Ridley
The hon. Gentleman would be wise to wait to hear what I shall say. I shall have ample response to the points that he has raised.
Secondly, the large variations in spending between the different authorities cause significant, and in some cases substantial, variations in the rate of taxation between neighbouring areas. The result is a strong incentive for local brain drains, whereby it pays people to move from one area to another to reduce their tax liability. The incentive is at its most severe with a full local income tax, and it is most ameliorated with a local community charge. My hon. Friend's suggestion in new clause 1 for a three-band system is somewhere in between.
A tax of this sort causes high spending to feed on itself by driving out the better-off and causing the need for higher charges on the less well-off. The unequal distribution of the better-off is bound to set up a need for resource equalisation and, as its effects work through, the resource equalisation system—
§ Mr. Ridley
—gets more and more complex and larger and larger, as we have discovered with the present rate support grant system. That applies to new clause 1.
Thirdly, the better-off tend already to be concentrated in some council areas, and, alas, absent from others. The grant has either to be switched from the richer to the poorer areas, meaning that people can no longer equate the size of their community charge to the performance of their own council, so weakening the accountability, or—I do not know whether my hon. Friend would like that—they would have to live with the situation where the 585 better-off areas may have a lower community charge than the poorer areas, because they would have access to a number of people paying one and a half shares. That is the obverse of what we should be seeking to achieve.
Fourthly, the technical arguments are also strong. The Inland Revenue knows that people's incomes are for national income tax purposes, but does not know where they have their sole or main residence. Neither the present system, nor those splendid new computers that the Inland Revenue is soon to commission, tell us that. To graft a system of local charging on to taxable income requires that local authorities not only have to compile a register of persons having their sole or main residence in each area—as my hon. Friend generously acknowledged—but they have to establish what their incomes are, or at least what band of income they fall into for my hon. Friend's scheme. That register would have to be a register of all adults, whether they are non-income, standard rate or higher rate income tax payers, and not just the heads of households. That is an immensely complicated administrative task.
Paul Beresford, the leader of Wandsworth borough council, expressed this point very clearly only last week, when he said:If the amendment were accepted, one could easily imagine the typical elector's response, having registered for community charge, to find that they also have to declare their personal tax bracket. Furthermore, these well-meaning Back-Benchers have not foreseen the enormous scale of bureaucratic time that will be required to be spent on extracting the information, locating the relevant tax office, checking their declarations and sorting out the inevitable discrepancies. Over and above that, they apparently have given little thought about the number of times this effort must be repeated every year to deal with the changes of residence, jobs and earnings, as well as tax system changes. It would be well nigh impossible to get to grips with the unimaginable complexity of a rebate system in which a small rise in income will usually lead to a lower rebate, but will sometimes lead to a higher rebate, coupled with a doubling in the underlying charge".The Association of District Councils, which is controlled by the Conservative party, has expressed similar views, as my hon. Friend the Member for Hampshire, East knows.
§ Mr. Patrick Cormack (Staffordshire, South)
I do not quarrel with my right hon. Friend's quotation, but is he aware that the Conservative leader of the Association of County Councils, which is opposed to the present scheme, endorsed that body's opposition, and said:On this crucial issue the Association wishes to see ability to pay reflected to a greater extent than in the present proposal.Some councillors may feel that the proposals that have been put forward by my hon. Friend the Member for Hampshire, East (Mr. Mates) do not make a great deal of sense, but the general view of Conservatives in the Association of County Councillors is directly to the contrary.
§ Mr. Ridley
My hon. Friend is confusing two things. At this point I am talking entirely about the possibility of administering the scheme and what that would involve. What the ACC has said is not about that; it is about the principle. I am talking about the administration of the proposal.
§ Mr. Devlin
Does my right hon. Friend agree that it is very much to be welcomed that, for the first time since the matter came before the House, there is an element of real 586 opposition and of real contribution to the legislation as it goes through the House? We sat through many hours in Committee, during which Opposition Members contributed little, if anything. Therefore, the debate is limited to discussion among ourselves as to how best to implement the financing of local government.
§ Mr. Ridley
I agree with my hon. Friend. I only hope that the Opposition's contribution to today's debate will not simply be trying to shout down that which they do not like, while my right hon. and hon. Friends and I debate the issue seriously.
§ Mr. Ridley
No, I have given way already.
Fifthly, any tax of this sort has to be enforced. There are two ways in which it could be enforced. The first is that the Inland Revenue could be required to tell councils the taxable income of each of its residents. This would be deeply offensive to the House on privacy and data protection grounds, as well as being beyond the present administrative competence of the Revenue.
The second would be a form of self-assessment—[Interruption.] The Opposition are living up to what I predicted they would do. They are trying to shout down the debate. The second is a form of self-assessment, as suggested by my hon. Friend the Member for Hampshire, East. He suggests that everyone should have to declare his status as a taxpayer. There would then have to be some verification procedure, and that is where the difficulty arises. I gather that my hon. Friend suggests that the council could challenge one in every 1,000 or in every 5,000—what it thought appropriate—and ask the Inland Revenue to adjudicate on whether that person is in the category that he has declared.
The problem that the Inland Revenue does not know where people live becomes immediately relevant from the moment that the first challenges start. Apart from that, there is the awful opportunity that this would give a local authority to discriminate between those to whom it issued a challenge. I can see politics coming into this. It is an appalling prospect that accusations could be made against citizens on a random basis, with no evidence whatsoever, on whether they fell into one category or another. Who would be the final arbiter? Would the Inland Revenue decide, or would there be some appeal? Surely there should be an appeal either to the commissioners or to some other tribunal or court, to decide whether the details of that person's income as given by the Revenue were correct.
We had a debate in Committee about the number of people called John Smith who might get mixed up, even in the same local authority area. We must make sure that we get it right, but my hon. Friend the Member for Hampshire, East has not so far suggested any ways in which that could be done. What would the penalties be?
§ Mr. Ridley
I have already given way to the hon. Member for Southwark and Bermondsey (Mr. Hughes); I give way to the hon. Member for Motherwell, North (Dr. Reid).
§ Dr. Reid
As the Secretary of State is labouring the point about a bureaucratic nightmare, will he explain why 587 all investigations into income tax can be made with the full support of the Government, without it being a bureaucratic nightmare, when it comes to housing benefit, family income credit or finding out whether an old-age pensioner has £6,000 in the bank, or when it comes to preventing someone from gaining benefits from the social security system, but when it comes to applying to the same system to income verification to alleviate the poorest from paying the poll tax it suddenly becomes impossible and a bureaucratic nightmare?
§ Mr. Ridley
Because the social security system will tell the collecting officer, under the community charge, what percentage should be raised from each payer according to the rebate that he is due. Councillors will not get to know about it.
I ask my hon. Friend the Member for Hampshire, East, to say what the penalties would be for a false declaration. How would he cope with the fact that some incomes are not determined for several years after the tax year has ended? He must make some plan for giving refunds to those who can prove that they were not in the bracket in which they originally thought they might be when they had to fill in the form. That is one of the great difficulties. A person would be asked to state the category that he was in before he could know what his income would be. All those problems would have to be thought out and solved, if solved they could be, which I doubt.
Sixthly, the concept of basing some form of tax on national income tax is full of anomalies. What may be appropriate as a national relief from income tax may not be appropriate as a local relief. For instance, mortgage interest relief, age allowance, working expenses and even life assurance premium relief all shift the point at which one moves from one level of national income tax to another, yet is it right that they should affect one's liability for a local charge, which is in the nature of paying for the services that are received? A cut in the mortgage rate because interest rates are falling could have the effect of pushing people into a higher band or rate of community charge.
Moreover, our rebates are closely aligned to the ability to pay. They are based on assessing the needs of the less well off and then assessing their means. Either benefit or community charge rebate is aligned on the gap between the two. Income tax takes no account of needs—it merely takes a slice of the means. Basing any system of local taxation on income tax scales is bound to be unfair to the less well-off.
For all those reasons, the income tax system is not a suitable vehicle for a locally variable tax on the better-off. It is both easier and fairer to achieve any redistribution of income for which hon. Members seek through the national taxation system.
§ Mr. Ridley
If I may just finish this point, I shall certainly give way.
Hon. Members can express their views about that proposal in the coming Finance (No. 2) Bill. If it were thought right to charge the equivalent of one and a half community charges on higher rate taxpayers, as my hon. 588 Friend suggests, it could easily be done by increasing the higher rate of income tax from 40p to 41.5p. That would produce the same amount of money.
The logical extension of that would then be to ensure that the amount raised found its way equally to local authorities through the Government grant system. For those who wish to achieve that objective—I am delighted that the Chancellor of the Exchequer has been able to reduce the top rate of income tax, as I think my hon. Friends are, and I do not want him to increase it again—that system avoids all the complexities, problems and difficulties that I have been highlighting.
§ Mr. Rathbone
To return to my right hon. Friend's point about the inequities of the new clause for the lower paid, how can he say that it has any effect on the lower paid when it embraces all the Government's actions to alleviate the burden of the community charge on the lowest paid and when 90 per cent. or so of those who pay income tax will pay exactly the same charge as the Government are asking them to be charged? The new clause will have no effect on the lower paid.
§ Mr. Ridley
I have a great deal to say about that, but in order not to dodge the question my answer is that if more money is to be spent on the less well-off by helping them with their charges, there are much more accurate ways of targeting the more deserving, which the Government have already adopted, as I shall show.
That link with grant, and thereby with national taxation, brings me to the next crucial point. It is necessary to consider the community charge, not in isolation, but as one source from which money will be raised for local services. The community charge in England will provide only about one quarter of the total cost of local services—half will come from Government grants paid from progressive national taxation. That is why households with the top 10 per cent. of earnings will contribute about 15 times as much in total towards the cost of local services as the bottom 10 per cent. Therefore, payment for local services is progressive and based on the ability to pay.
I quote in aid the words of the right hon. Member for Bethnal Green and Stepney (Mr. Shore), who is in a distant quarter of the Chamber—perhaps this is why—when he announced the Government's response in 1977 to the Layfield committee. He said:the Government finance about 60 per cent. or more of local government expenditure through the rate support grant. That is finance out of general taxation to which other people contribute just as much as householders do."—[Official Report, 19 May 1977; Vol. 932, c. 720]The right hon. Gentleman was absolutely right. He realised that the best way that the better-off could be made to pay more was through their share of the cost of Government grant. That must be right. That also means that our proposals are related to the ability to pay, both at the top end of the scale and at the bottom.
All these thoughts lead one to conclude that the best system of financing local government based on the ability to pay is, first, that everyone should make a direct contribution to achieve accountability; secondly, to use the social security system to reduce the liability of the less well-off; and, thirdly, to finance the lion's share of spending by progressive taxation collected by the national income tax system and paid as grant. In that way the better-off contribute the highest share. That is precisely what we have done.
§ Dr. Keith Hampson (Leeds, North-West)
Would the logic of my right hon. Friend's final comment about moving the bulk of the burden on to direct taxation be to transfer the bulk of the cost of education to progressive taxation, such as Lord Joseph proposed, with a 75 per cent. education grant? A specific grant could let the Government off the hook, in that the poll tax could be cut across the board.
§ Mr. Ridley
My hon. Friend is right in theory. If more money is transferred to Government grant, it has the effect of reducing the community charge and increasing what the better-off pay to Government grant. That figure need not be related to any particular services, whether education or police. That is not the right calculation.
The right calculation is how big a share should come through the grant, and what should be the resulting levels of community charges? All that is open for discussion and debate, and whatever the answer, the mechanism is in the Bill and would be wrecked by the new clause.
There are additional difficulties with the proposal in the new clause for a one and a half charge for higher rate taxpayers. I expect that that will not satisfy the Labour party, which wants to hit the better-off. Nor does it raise much money—about £200 million, which is sufficient only to cut the basic community charge by 10p a week for those on the ordinary rate of charge, most of which, if not all, would probably be lost because of the extra costs of administration, which, we are assured by local authorities, would be substantial.
§ Mr. Matthew Taylor (Truro)
The Secretary of State said that that would cut 10p for the ordinary ratepayer. If there is this much-vaunted rebate extension scheme, which he has announced proudly, it will mean that a student nurse studying in Camden who previously paid 17 per cent. of her income, equivalent to £15.03 in community charge, will pay £14.87, giving her a benefit of 16p. Is the difference between 10p and 16p particularly relevant in this case?
§ Mr. Ridley
That depends on many circumstances, and I shall come to the details of the rebate scheme shortly.
The new clause produces some additional awkward side effects, apart from the administrative problems. The right hon. Member for Islwyn (Mr. Kinnock) identified these and mentioned the large step in liability as one's income passes a certain point. I am sorry that he is not here this afternoon. There are two such steps: one when someone first pays income tax, contrary to what my hon. Friend the Member for Hampshire, East alleged, and the other when one reaches the higher rate of tax. They could easily be £200 or £300 steps for a couple, and more in the high-spending areas. As my hon. Friend wishes, I shall quote the average figures.
Obviously, there will be a smaller trap if one goes from the half rate to the whole rate only if the rebate is still there when one travels down that slope, but in many cases there will be a 50 per cent. increase in charge when tax liability is reached. Those are serious traps which could cause people to avoid overtime or more wages. Indeed, they are probably the highest incentive imaginable to operate on the black economy.
The Leader of the Opposition was right to dissociate himself from the new clause on that ground alone, and I 590 am sure that he will have the courage of his convictions and not vote for it. I shall be glad to hear what he will do He made it clear that he thought that the new clause was bad. I do not know whether the hon. Member for Copeland (Dr. Cunningham) has bullied him to stay away from the debate because he is a doubter in his own ranks.
With their amendments, Opposition Members have tried to turn new clause 1 into a more overt form of local income tax, which is at least logical in view of all the difficulties of my hon. Friend's scheme. That means that there is no halfway house between the community charge and local income tax, and I accept that that is what hon. Gentlemen are trying to achieve and point out.
§ Mrs. Elizabeth Peacock (Batley and Spen)
I ant listening extremely carefully to what my right hon. Friend is saying, and he has spent some time saying how unfair the new clause is. Before he sits down, will he explain to those who support the new clause how fair the Government's proposal will be?
§ Mr. Ridley
The answer to that is yes. I understand fully the anxiety that my hon. Friends have expressed about the position of the less well-off under our rebate scheme. Throughout our deliberations on the subject, we have been acutely aware of the need to protect people on low incomes from hardship, and I am satisfied that the generous rebate system will achieve precisely that. As the House knows, I improved it last week.
§ Mr. Timothy Raison (Aylesbury)
Will my right hon. Friend confirm that the rebate scheme, however generous, is subject to the capital limits from which housing benefit has suffered, whereas the scheme in new clause 1 would not be subject to capital limits?
§ Mr. Ridley
That is obviously right, but my right hon. Friend must admit, if he wants to base relief on ability to pay, that those with large capital have the ability to pay.
My hon. Friend's motive in trying to help people on low incomes is laudable, but his scheme does not achieve what he wishes to do. Its incidence, in terms of those whom it will help, is capricious. It does nothing for those just above benefit level—those between 80 and 50 per cent. rebate. The poorest people are already eligible for 80 per cent. rebate. It does nothing for most of those in areas with the highest community charges, and the help that it gives particular groups depends on the relationship between their tax thresholds and the benefits system. Benefits are much more closely aligned to ability to pay than is income tax, because they take account of needs as well as means. They are a much better basis for helping the least well-off.
Of course my hon. Friend is right to say that his scheme would make no one worse off, but that would happen, too, with the improved rebates that I suggested last Thursday. On the basis of 1988–89 tax thresholds, the main groups that he would help are single people living in low community charge areas and some pensioners who benefit from the higher income tax age allowances. Thus, its effects would be arbitrary. The new clause would add the quirk that, at the 50 per cent. rebate level, the rebate would not reduce as income increased until the point was reached where income tax became payable. Then there would be a sudden jump in liability, which could mean an additional £100 or £200 in community charge a year, depending on whether it was an individual or a couple, for each extra £1 591 of income. That is another example of the step effect against which the Leader of the Opposition rightly warned.
We have made our rebate system more generous, but we have targeted it very much better. We have reduced the slope of the taper from 20 to 15 per cent. This means that a single person aged over 25 with a £300 community charge would not have to pay the full charge until his or her gross income reached £4,550 per annum, and that a married couple with two children aged under 11 would have to earn a gross income of £8,800 before all rebate was withdrawn. While preserving the principle of accountability, everyone will benefit if a council reduces its spending. We are now extending help to 9 million people in the very area about which concern has been expressed. I can think of no scheme more closely attuned to ability to pay.
My hon. Friend acknowledged that if there are difficulties—or warts, as he called them—in his scheme he would be happy for the Government to take it away and come back with an improved scheme. The hon. Member for Copeland was even more generous. He would give me power to make regulations to design a totally new tax by order, which goes even further than my hon. Friend would.
I ask the House to reject the new clause. We have looked carefully at my hon. Friend's scheme and we genuinely find it wanting in the many respects that I have described. That is not because the details are wrong and could be improved. It is not because the experts in Whitehall could make a thorough and effective job of what my hon. Friend proposes. It is because there are fundamental objections to it, such as I have been rehearsing this afternoon.
Furthermore, if the new clause found its way into the Bill there would be no further opportunity for the House to improve it. Once the Bill passes through its Report stage the House has no further opportunity to amend it. As it is a taxing motion, I should have thought that my hon. Friends would agree that the House of Commons should get the details right, and I repeat that we would have no opportunity to do so later. We would have to leave the Bill with the massive defects that I have described.
The new clause would be unworkable. We have achieved ability to pay through the rebate system at the bottom end of the scale and through asking the better-off to contribute to the grant which is the main source of revenue for local authorities. It would be a great mistake for the House to deviate from the sensible plans that the Government have proposed, and I ask hon. Members to reject the new clause.
§ Dr. John Cunningham (Copeland)
The hon. Member for Hampshire, East (Mr. Mates) made a good speech—a brave speech. The Secretary of State for the Environment made a good speech, too—against a poll tax of any sort. The Secretary of State for Social Services must be thinking that there is hope for him at last. In a long speech, the Secretary of State did not answer the case put by the hon. Member for Hampshire, East, questioning the principle of ability to pay, nor did he move a single inch in that direction.
The Opposition remain implacably opposed to the idea that a flat-rate poll tax should be used to raise local government revenue. It can never be a fair or efficient tax. 592 It will never be accepted by local government or, more importantly, by the people of Britain. We said that in December and throughout the Committee stage, and we say it again today. As the first leader in the Financial Times today makes abundantly clear, our arguments are well-founded.
Today the House has another chance—the best possible chance—to make the Government think again. The hon. Member for Hampshire, East deserves credit for providing that opportunity. If his new clause were carried, the Government would be forced to think again. Our purpose is to uphold our view that taxes must be fair and reflect people's ability to pay. We, the House and the whole country know that there is no willing majority for the Bill in the House of Commons. The Back-Bench opinion that has been expressed by the hon. Member for Hampshire, East and his supporters is simply the tip of a large iceberg of submerged discontent and downright opposition among Government supporters. The Secretary of State knows that full well.
New clause 1 probably gives the House the only opportunity this evening to vote to make the Government reconsider. I agree with the hon. Member for Hampshire, East that his new clause makes modest but significant improvements to the situation. Of course there are objections to it. We have made our views clear in amendments and in new clause 5. The guillotine timetable is almost certain to prevent a debate and a vote on those amendments or the new clause.
In its published studies, the Chartered Institute of Public Finance and Accountancy has made it abundantly clear that a graduated tax could be made more sensitive if the Government wished it. Ministers talk of poverty traps, but the biggest poverty trap of all is a flat-rate poll tax. That is why it is so roundly and universally rejected by the people. The Secretary of State and the Government do not understand how seriously and persistently public opinion is moving against them.
Today, the Secretary of State has once again made it clear that he is not interested in fairness or the ability to pay. On 1 June 1987, in Blackburn, 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 be made to pay for other people's services.On 23 February, in Committee, he said:With a flat rate charge, it must be true that the burden will fall more heavily on those with low incomes than on those with high incomes. That is beyond contradiction in relation to those who pay the full community charge."—[Official Report, Standing Committee E, 23 February 1988; c. 936.]
At the annual meeting of his constituency association the right hon. Gentleman went further. The Wiltshire and Gloucestershire Standard of Friday 1 April—an appropriate day—reported:He added that there was no reason why local services should be paid by people according to their incomes. 'Why should a duke pay more than a dustman?' he asked. 'It is only because we have been subjected to socialist ideas for the last 50 years.'That gives some illustration of the depth of thought and intellect brought to bear on the matter of fair taxation by the Secretary of State.
§ Mr. Robert Adley (Christchurch)
The hon. Gentleman may be unaware that I had my constituency association annual general meeting on Friday evening. Lest he think 593 that people are unaware of the implications of the poll tax, he should accept from me that those of my supporters who believe that if they benefit, they will do so at the expense of the less well-off, are not happy with that proposition.
§ Dr. Cunningham
I am grateful to the hon. Gentleman for his intervention, and I applaud him for his courage in spelling out his views to his right hon. and hon. Friends. I share his sentiments.
§ Dr. Cunningham
No, I will not give way.
Let us consider the considerable amount of time that the Secretary of State has devoted to his concession. The Government's concession to their Back Benchers, who are increasingly unhappy about the impact of the poll tax, does not resolve the essential unfairness of the tax. Conservative Members should not be taken in by the Secretary of State's claim that his concession will adequately help low-income earners. The poll tax remains unrelated to people's ability to pay and the poor will continue to subsidise the rich.
The full poll tax—an average of £450 a year for two people—will still be payable by a pensioner couple with a net income of £111 a week and a working couple with two children with a net income of £131.80 a week. The Secretary of State was forced to concede that if a person has managed throughout the whole of his life to accumulate as little as £6,000, he will get absolutely no help as a result of the Government's concession. That is the reality of the marvellous new, magnificent, generous concession that the Secretary of State has alleged that he has made.
If we take the poll tax payment of £250 a year—about the average for authorities in England—which is therefore a tax of £5 a week, it is clear that, even under the Secretary of State's scheme, a single person under 25 with take-home pay of as little as £53.40 a week will get nothing. In other words, 10 per cent. of his or her take-home pay will go to pay the tax, with no Government support. We should not fall for the blandishments of the Secretary of State that, somehow, the concession is wide-ranging and generous. It is as mean and miserable as every other aspect of the proposals.
§ Dr. Cunningham
No, I shall not give way.
Why is it that, on 23 February, in Committee, the Secretary of State considered that the taper was "generous and eminently justifiable"? He said that about the existing proposals. If he is now suddenly convinced that the taper is not fair and generous, as he then said it was, will he now apply the additional proposals to those families who will have to pay more on their rates between now and the introduction of the poll tax? Will the Government make that concession? Of course not. The Secretary of State knows that only too well.
§ Dr. Cunningham
I shall give way in a moment.
Why make a concession in an attempt to mitigate the unfairness of it all? What is the argument? The Secretary of State is simply trying to buy off the fundamental opposition of his right hon. and hon. Friends. All he is doing is leaving 26 million people liable to the totality of the flat-rate poll tax. After all that he said about his new 594 concession, 75 per cent. of those over 18 will still have to pay the flat-rate poll tax. That major principle remains for the vast majority of people, including millions on low and average incomes. Where does that leave the famous promise of the Prime Minister? I have before me the press notice in which she promised:Any future local revenue should be based not on property but on the ability of people to pay.Where is that promise now? The hon. Member for Hampshire, East is right to remind his right hon. and hon. Friends that the Government are now running away from that commitment, which was part of Tory party policy.
The poll tax continues to be a huge and growing embarrassment to the Tory party. That is best illustrated' by figures published last week as a result of a MORI poll conducted in the city of Manchester. It showed that 75 per cent. of all respondents believe that the poll tax will discourage registration to vote; 63 per cent. believe that they will be worse off; 76 per cent. believe that the poll tax will involve official snooping and intruding into their personal and family affairs; and 71 per cent. believe that it will encourage the break-up of families. Since the general election there has been a 25 per cent. swing among the population away from the Government's proposals.
As a result of the Budget tax cuts, the rich will be significantly better off—£2 billion given away to 3.7 per cent. of taxpayers. Half of all tax cuts went to the top 10 per cent. of taxpayers, whereas cuts in housing benefit will damage the family income of millions of people throughout the country. The top 10 per cent. of people will, in addition, enjoy major gains because of changes in inheritance tax. That contrasts with up to 2 million people in low-income families who will receive nothing at all from those same tax cuts.
By contrast, even Government statistics show that 6 million claimants of social benefits will lose in real terms as a result of the structural changes made to the system and that 1 million people will lose in cash terms.
§ Dr. Cunningham
No, I shall not.
All the time, the poll tax time-bomb proposals have been ticking away beneath the Tory party, and they will blast the incomes of millions of people who can least afford it. I say to Tory Members who are concerned about the manifest unfairness of it all that there will never be a better time or a better opportunity than tonight to make their Government pause and think again before it is too late.
In case there are one or two waverers and doubters who feel that, because of the Secretary of State's concession, they ought to abstain or even go into the Lobby with their Ministers, I will enlighten them about proposals now being discussed. I will tell them what is said in a letter to the Secretary of State from 10 Downing street about proposals now under consideration. It is headed "Community Charge Rebates" and is from someone named Paul Gray to Roger Bright, who is the Secretary of State's principal private secretary. At the top of the second page, in sub-paragraph (iv), it states:Further consideration was being given in a group of officials chaired by the DHSS to the implications of the decisions to raise the housing benefit rent taper from 65 per cent. to 70 per cent. in 1989–90. The results of that work, which would involve looking at other options for yielding comparable housing benefit savings, would be for a separate Ministerial consideration at a later date.595 At the very time that the Government are publicly saying that they are making a concession, they are planning to raise the taper on housing benefit to take even more money away from the very people that the Government say they want to assist.
In the accompanying correspondence from the Secretary of State's office, there is a letter from a civil servant named Deborah Lamb that begins "Dear Paul", and which refers to the Secretary of State himself. It states:He is coming under increasing pressure in the Local Government Finance Bill where the issue is beginning to be understood by a number of backbenchers.At last the message has got through; after two days on Second Reading and three months in Committee, at last they are beginning to understand. I can tell them that the British people are way ahead of them, because they have understood all this for a very long time. Perhaps that is the best reason of all why Conservative Members should support their hon. Friend in the Division Lobbies tonight.
§ Mr. Deputy Speaker (Sir Paul Dean)
Order. Before I call the next right hon. or hon. Member to speak, I may say to both sides of the House that a very large number of right hon. and hon. Members are wishing to catch my eye, so I appeal for brief contributions. Mr. Cranley Onslow.
§ Mr. Onslow
It is good of you, Mr. Deputy Speaker, to catch my eye, but it was not my intention to intervene at this particular moment. If I might have a bisque on it, I am sure there are others of my right hon. and hon. Friends who would much rather speak.
§ Mr. Tony Banks
On a point of order, Mr. Deputy Speaker. To save you the bother of going round the Chamber and finding other Members who apparently do not wish to speak, may we have an assurance that this debate will be governed by normal conventions—that right hon. and hon. Members will have to rise and catch your eye, and that there is not a prepared list of speakers to defend the Government's position?
§ Mr. Amery
I was not expecting, Mr. Deputy Speaker, to catch your eye so soon, but I am grateful for the opportunity. This is the first time that I have presumed to intervene in a debate on the community charge, and I must first declare an interest. For about 65 years I have lived in a rented terraced house, and I must admit that the prospective disappearance of the rating system is inevitably welcome to me. Even more welcome is the removal of the sword of Damocles of revaluation that has hung over my head.
On broader, national grounds, I welcome the community charge proposal because it enshrines in local government the principle of no representation without taxation. That is the hallmark of a mature democracy. All 596 the same, when I first looked at the proposal and thought about it in the light of many years of electioneering, I felt deep concern. It is important that the charge should be not only fair but acceptable, and I was alarmed by the weight of taxation that will fall for the first time on people wholly unaccustomed to contributing, in any way, to local government.
Therefore, I confess that I approached the new clause with sympthy. My hon. Friend the Member for Hampshire, East (Mr. Mates) bases the new clause on a claim of fairness. He thinks that the present flat rate is unfair and that the criterion should be the ability to pay. That is an arguable point. Income tax can be based on ability to pay because it is raised from a single constituency—the United Kingdom. In so far as the better-off contribute more, the less well-off are enabled to contribute less. How far does that apply to local government?
I have been unable to find a good analysis of the distribution of wealth, less wealth, and poverty in different local government areas. But ordinary observation will convince many of us that there are some local government areas, such as the city of Westminster, which contain a great body of people who are well off and which would do very well out of my hon. Friend's proposal, and that there are many industrial towns where the better off get into their motor cars and leave. They pay their taxes not where they work but where they reside. I do not think that the extra money taken from the better-off under my hon. Friend's scheme will necessarily benefit the less well-off.
I doubt whether the principle of the ability to pay can be applied locally. We do not apply it in other branches of taxation. We do not apply it in indirect taxation. We do not apply it in national insurance or rents, whether public or private. In all those cases, the system on which we fall back is the rebate. My right hon. Friend the Secretary of State has produced what appears to me to be a pretty generous rebate offer.
My hon. Friend the Member for Hampshire, East is perhaps on rather stronger ground when he says that what matters is not so much whether it is fair as whether it seems to be fair. He advanced that argument in a very interesting newspaper article. I have questioned constituents and others on this topic. Two or three have told me that the proposed system is not fair. I asked what they meant. They did not say that it is not fair because it is not related to ability to pay; they meant that they were suddenly being asked to pay up quite a big sum when they had never paid anything before. "It is not fair" is the cry of any Englishman confronted with something unpleasant.
My guess is that the trouble with the present proposal is that it is a bit too heavy. It will not be easily acceptable because its incidence is too great. I may be wrong. If I am, then let us go along the lines that my right hon. Friend proposes. If, however, I am right, I do not think that the way to tackle the problem is the way that my hon. Friend the Member for Hampshire, East proposes. That is because his proposal does not make the burden substantially lighter for the great majority of people.
There are ways in which the burden could be reduced. My right hon. Friend the Secretary of State mentioned a few. It could be lightened by increasing Government grant to local authorities or by reducing local government's responsibilities. This is not the occasion on which to put forward concrete proposals, but I shall illustrate what I have in mind.
597 How far are we justified in calling education a local government service? My right hon. Friend the Secretary of State for Education and Science, in the absence of the Burnham committee, determines what teachers are paid. He lays down a core curriculum. He allows—some might think that he encourages—schools to opt out of local government control. How far is education still a local government matter? But it is responsible for nearly half the local government budget.
What about the police? During the miners' strike, there was an operations room in Whitehall which virtually created a centralised police force. Strong arguments are put forward by those who know more about it than I do that the career structure of the police would be more satisfactory if it was a national force. I do not know the answers and I do not pretend to, but I submit that the solution to any excessive burden which the community charge may place on the individual—taxation must be acceptable, even if it is not liked—may lie with increasing the central grant to local authorities or by cutting local expenditure.
I ask those questions to suggest that there is another way in which to consider these matters. The Bill has been called the flagship of the Government's programme. Does my hon. Friend the Member for Hampshire, East really think that the case that he has made is strong enough to torpedo the flagship, particularly on the eve of important local elections? I would not normally indulge in such a party political point, but the opposition is not on the other side of the House; it is over here.
I wonder whether it would not be wiser to examine the courses of action that I have suggested. I do not pretend to have an answer, but there is plenty of time. The community charge is not to be enforced for another two years or so.
§ Mr. Mates
I am grateful for what my right hon. Friend has said. He shows the House time and again what a wise person he is. Of course we would like this proposal to be reconsidered. I must tell my right hon. Friend with all the passion at my disposal that all I want is for the Government to say that they will look at it again. I am not trying to torpedo the Bill or to wreck it. I have looked for another course of action for three months since Second Reading, when I informed the Secretary of State that I could not support his plan and that I would look for another way. I have done that privately. I have not done it in the public eye. I have tried hard not to let the argument surface. We have been told, however, that there is no other way; that the Government's proposal is fair. Some of us do not believe that to be the case. I shall not prosecute this argument to a conclusion. I want to prosecute it until the Secretary of State or the Minister says, "We hear you; we have the point. Let us look at it again and find a fairer way." In that respect, my right hon. Friend and I are in absolute agreement.
§ Mr. Amery
I am grateful for what my hon. Friend says. If I understood the Secretary of State aright—I stand to be corrected—from what I could make out of it, he said, in a passage in which there was a good deal of interruption, that there are other ways in which to tackle the problem, including increasing the central grant. I do not think that he mentioned reducing local government responsibilities, but I have thrown that idea in. Am I acting as a midwife to produce a baby? There is a convenient room behind 598 your Chair, Mr. Speaker. I should be a proud man if my intervention were to lead to a successful meeting there. I shall keep my ears and eyes closed. Meanwhile, my blessing on you.
§ Mr. Cyril Smith (Rochdale)
The suggestion of the right hon. Member for Brighton, Pavilion (Mr. Amery), that this matter refers to the issue of no representation without taxation was particularly interesting. If it is true, in the case argued by the Government, that 50 per cent. of local government expenditure is paid for by taxpayers through taxes other than direct taxation, it is also true of people who do not pay rates at present. They spend money and they pay taxation through indirect taxes. It appears to me, therefore, that that particular argument is not applicable.
I often give after-dinner speeches, particularly in the north-west. Indeed, on occasions, I am paid for doing so; I make no secret of the fact. In some of those speeches I say that one of the objects of the British House of Commons is for Members of Parliament to dig as big a hole as they can and then drop their political opponents into it. I am beginning to revise my view about this place because, over the past few weeks, the Government have not needed the Opposition to dig the holes into which to drop their opponents. The Government have been perfectly capable of digging their own holes and dropping themselves into them. When we consider what has gone on over the past eight, 10 or 12 weeks, it is quite staggering, and tonight is only one more step along that road.
We set off with the under-funding of the Health Service. Then we had the Budget, with tax being reduced from a top rate of 60 per cent. to 40 per cent., and help for the rich, when so many causes that could and should have been helped—not just the Health Service, but, for example, extra improvement grants for houses—were not helped.
We then went on to the social security changes, which are absolutely disastrous, as the hon. Member for Copeland (Dr. Cunningham) said. I cannot speak for other hon. Members, but I say honestly and sincerely that I have had pensioners weeping at my surgery as a consequence of the social security changes. I have seen people who have been given a £3 a week increase in pension when their rent has increased by £9, £12 or £15 a week. This is relevant to the debate because the concessions announced by the Minister are related to the same benefit that is causing so much upset among pensioners at present—housing benefit.
Let no one be under any misapprehension. The point on which the right hon. Member for Aylesbury (Mr. Raison) intervened is absolutely vital. The sum of £6,000—which is chickenfeed—that a pensioner may have saved for his security bars him from all rebates under the poll tax system, and he loses his entitlement to housing benefit as a consequence. The Minister's silly £1 example is ridiculous. What about the pensioner who saves £6,001? We can use that example, too, if we want to get down to silly margins of that kind.
The final element in digging this great hole is the imposition of the poll tax. While we are talking about the Government digging holes for themselves, I must say that I bet that those councillors who come up for re-election in 599 May 1990 will thank the Government for introducing this in April 1990. I have seen no good timing, political acumen and shrewdness in this place over the past few weeks.
§ Mr. Tebbit
I can understand how the hon. Gentleman wins elections. He is a major personality in his own right. The trouble is that he is in a party that has never won a general election in the lifetime of most of us, so it comes a bit much from him and his party to be lecturing us on how to win elections when we have just won three on the trot.
§ Mr. Smith
The right hon. Gentleman typifies the points that I wish to raise later. The problem with the Government is that they have become power-drunk and the right hon. Gentleman is an example of that. However, although my party may not have won an election in my lifetime, it has not sacked me as chairman of my party.
In this debate I simply wanted to make a plea for the members of a section of our society about whom we hear very little, but who are deeply concerned. Thousands of people are suffering mental anguish because of the introduction of the poll tax. I refer particularly to old-age pensioners. They have never done anybody any harm. They have brought up their families. They have saved a few quid to try to give them a little security in their old age. They have been proud of what they have achieved, yet, because they have saved £6,000, they are being penalised.
Unfortunately, my ability to canvass is now extremely limited, for physical reasons, but in the past 10 days I have been out for 20 minutes at a time, knocking on doors in the run-up to the local elections in Rochdale. Many pensioners have come to me at the door and said, "Cyril, we were just managing. We have just balanced our budget. We have just got it right. Now the Government have taken another £8 or £9 a week off us for rent. We do not know how we are going to pay our way, but, honestly, what are we going to do when we have all that poll tax to find?"
I readily concede that, in some cases, pensioners' worry and concern are not justified. I tell them that the poll tax is not coming in until 1990, but old people are old people. I tell the Government, whether or not they listen, that pensioners are desperately worried and upset about what has gone on in the last few days in respect of social security changes. Pensioners see the poll tax as yet another burden that they will have to carry. I tell the right hon. Member for Chingford (Mr. Tebbit) that if I had anything to do with the Government I would explain to pensioners where they stood and what the future held for them, because they are desperately worried about the situation facing them.
§ Mr. Simon Hughes
Pensioners know that not all of them suffer in quite the same way. My hon. Friend will know that the Prime Minister and her husband, who are pensioners, live in my borough. These two pensioners are in the 5 per cent. who will gain under the poll tax, while 90 per cent. of Southwark households will lose. Many pensioners have nothing and do not have to pay at the moment because they do not have the money. They will be asked to pay a poll tax, but the Prime Minister and her husband will have their rates reduced by nearly £2,000. 600 Does my hon. Friend tell his pensioners that, and what would their response be to that fair system of local government finance?
§ Mr. Smith
My hon. Friend makes a valid point. I do not need to tell the pensioners that, because most of them know already. When I talk to pensioners, I do not try to inflame them. I try to calm them down and stop their worry. I explain that the poll tax is three years away. However, they are upset and worried. They are worried because it is a rotten tax. It is an ill-conceived tax. The new clause does not make it a good tax, but it makes it less rotten. That is why I and my hon. Friends will support the new clause this evening.
There are many criticisms of the poll tax. I shall not rehearse them all now, because it would not be proper in this debate. However, it will weaken local government and create an army of bureaucrats and snoopers, and it will certainly be more expensive to collect. Above all, it is a compulsory tax that bears no relation to ability to pay. That is why the new clause is an improvement. It at least makes some attempt, however crude, to relate the levy to ability to pay. The concessions announced last week do not answer the fundamental weakness in the basic proposals.
Rebates imply, rightly or wrongly, that one has to pay first and receive a rebate afterwards. That needs to be cleared up. In any case, if rebates are to be based on national average taxes, as I understand they are, that will certainly penalise the north as against the south. It will penalise the north for a simple reason. Many of the problems that have to be faced by local government in this country—I am thinking particularly of problems with housing and social services—are more apparent in the north than in the south, if only for reasons of history.
§ Mr. Smith
I shall give way in a moment. The Minister can be working out what he wants to say.
The cost of social services and housing will inevitably be higher in the north than in the south. In any case, if one talks about an average rate of rebate in relation to the poll tax it must imply that some authorities will levy a higher rate than others. Because of social conditions in the north—I am not referring to loony councils; I concede that they exist and I do not defend them—the higher rate of tax will often be in the north. If one refunds only the average level of tax, that means that people in the north will receive less rebate as a percentage of what they pay.
§ Mr. Howard
I had hoped to save the hon. Gentleman a bit of time. Will he accept that the rebates will be based, not on the average community charge, but on the community charge levied in each area?
§ Mr. David Clelland (Tyne Bridge)
Does the hon. Gentleman agree that the statement by the Secretary of State that the system of rebates is designed to help the poorest is the same as the statement that was made when housing benefit was introduced? However, this month we 601 have found that millions of people are losing because of changes in the benefits system. What guarantee is there that there will not be changes in the rebate system?
§ Mr. Smith
The hon. Gentleman has made a valid point. Perhaps the Minister should take that on board when somebody challenges the hon. Member for Hampshire, East (Mr. Mates) about what would happen if the band of tax changed or the Government changed. It is equally applicable to concessions.
I am glad to say that the official Opposition are supporting the new clause, as we are. There was a time when the Leader of the Opposition announced that they were not going to support the new clause. I can understand that point of view. Let me be frank. If we were speaking in terms of pure party political strategy, we would be daft to support the new clause. The new clause will help to get the Government off the hook on the matter of the poll tax. Many of us in one sense, not a caring sense but a party political sense, will not be upset if the poll tax is carried, because it will do the Government a lot of harm and it will do other parties a lot of good. Therefore, as I have said, I can understand the view of the Leader of the Opposition. Ultimately, he came to the opinion, as he often does, where he said, "I am their leader; I must follow them."
§ Mr. Smith
I am sure that the House will be glad to know that for this short spell, today's debate, I am acting as the leader of my hon. Friends.
I find it difficult to believe that this Government, or any Government, can seriously set out to attack those least able to defend themselves. That is what the Bill is doing. It attacks the pensioners, the sick and the disabled. As I said to the right hon. Member for Chingford, I can conclude only that the Government have become power-drunk. They have had eight or nine years with a substantial majority and they have lost no major decisions in the House over that time. There comes a time in politics, or anything else, when Governments think that they cannot lose and that they can get away with anything. If the new clause were to be carried tonight, it would do the Government a service in terms of political appeal. It would do them good, in that it would say, "Hang on. We will put up with just so much and no more. You have gone too far on this matter."
My party has always made it clear that it favours a local income tax. We believe that that is a fairer system because it works on the basis of from each according to his ability to pay. New clause 7, which is being considered with this new clause, makes that point. We have published detailed proposals on how that would be implemented and we would be glad to send a copy to any right hon. or hon. Member. New clause 1 is a move towards the principle of relating local government taxation to income tax. That is why we shall support it.
We have been given by the Secretary of State a long list of reasons why the new clause will not work. I began to wonder whether the London marathon was finishing today or yesterday. I listened with great interest—well, I listened anyway—to what the Secretary of State said. With the exception of young members such as the hon. Member for Chelmsford (Mr. Burns), who said that this was his first 602 Parliament, we all know how to defeat a new clause. There are many hon. Members who have served in past Parliaments, and there are plenty of ex-Ministers on the Conservative Benches. They all know that all one has to say is that it is badly worded, would not work or that the civil servants have said it is clumsy and so on. We all know all that and we have heard it all before.
If the Government wanted to introduce a poll tax that was related to the ability to pay, they could do so, and they know it. What matters about the new clause is not what it recommends, but the principle that it establishes. That is the key issue on which we are being asked to vote tonight. It establishes the principle that any change in local government taxation should result in a system that bears some relation to the ratepayer's or taxpayer's ability to pay.
I commend the hon. Member for Hampshire, East for moving the new clause, and my colleagues and I will support it.
§ Mr. Tebbit
Listening to the debate, one feels a sense of déjà vu. If the words, "Greater London council" were substituted for "community charge", I seem to have heard all the same arguments being made by many of the same people.
The same degree of opportunism was being practised by the Labour party on that occasion as we have seen today. It is prepared to support a clause that it opposes merely to seek to cause further embarrassment to the Government. I do not blame it for doing that, and it is perfectly entitled to do so. However, that shows that the Labour party still has no policy of its own to stand by. At least the Liberal party has a policy to stand by that is totally impracticable, but the Labour party has not even an impractical policy.
I am an unrepentant supporter of the community charge, and have been ever since I invented it in the early 1970s. I recollect that I wrote a paper to the then Secretary of State for the Environment suggesting that the community charge was the right way forward for the reform of local government. I was then a young man and untutored politician, so I called it a poll tax; I had not thought of calling it a community charge.
I finished my paper by suggesting that if the system were in force no one would conceivably dream of proposing to change it for a system so arbitrary and unfair as the rating system. I added that I very much doubted whether any Government would bring forward the system because of the difficulties, anomalies and the cries of "It's not fair" based on the definition of my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery).
I was wrong about that. I must tell the hon. Member for Rochdale (Mr. Smith) that the Government are not power-drunk. We have a Government who have the courage to implement their manifesto. I realise that the hon. Member for Rochdale finds that objectionable because he did not like the manifesto and has never been a support of a Government that implemented their manifesto. However, he will have to put up with that.
Local government finance is a very difficult problem indeed. We do not have to pinch letters from the Labour party's headquarters to know that it opposes its own policies.
As usual, the debate is not about alternative policies being advanced by a would-be alternative Government, because the Labour party is not an alternative Government and does not have policies to put forward. As 603 so often happens, the debate is about various ways of modifying or changing to some extent the agreed policies of the Government and Conservative party. That is why my hon. Friend the Member for Hampshire, East (Mr. Mates) moved his new clause in the way that he did. He did so not in an arrogant or argumentative way, but in a thoughtful way, seeking to make his point in the best possible manner. It seems to me that he still has not quite accepted the basis of the community charge. He still has not accepted that it will account for only one quarter of local government finance, with the other three quarters being paid according to the ability to pay.
Of the one quarter that is represented by the community charge, the Government's assumption is that below a certain income level—that at which it is assumed full payment can be afforded—there will be increasing remission to a minimum payment of 15 per cent. We are saying that there is a level of income above which the elector should be able to afford to pay all the community charge.
I do not think that my hon. Friend the Member for Hampshire, East has accepted that argument. He is saying that the community charge should be adjusted so that wealthier people pay more than their nominal share and so that nobody below a certain level pays as much as the full nominal share. I think that that is the wrong approach. We should accept that, whether it be a matter of food, clothing, a roof over one's head or the payment of local authority services, for those who cannot afford to pay there should be help so that they can pay, and that that help should be graduated. Once one gets over that level, there is no case for adding a further level of penal taxation, which is what my hon. Friend is proposing. I believe that that misunderstanding has caused him to move the new clause.
§ Mrs. Maria Fyfe (Glasgow, Maryhill)
Will the right hon. Gentleman accept that, for someone who has a take-home pay of £53 per week, paying one tenth of that amount in poll tax is not a reasonable definition of ability to pay?
§ Mr. Tebbit
I make two points in response to the hon. Lady. First, she is coming towards my view in conceding that there is a level at which my argument is correct. She feels that the levels being proposed at present are too low. [HON. MEMBERS: "Give us the levels."] I think that, broadly, the Government have got it right. [Interruption.] We would get on much quicker if Opposition Members interrupted less. [Interruption.] I think that Opposition Members are making my point rather well.
According to the hon. Lady's argument, one must look not only at the income of the individual but at their needs and pattern of expenditure. We are talking about a single person who is not a householder, not paying rent and living in a home that is being provided, at least in part, by other people. He receives £53 net in take-home pay, and we are asking whether it is unreasonable that 10 per cent. of that amount should go towards the costs of providing local authority services which he enjoys and which are very much greater in value than that one tenth. We do not say that he should receive a subsidy for clothes, food or drink, so why do we say that he should receive a subsidy for the services that he receives from the local authority?
§ Mrs. Fyfe
The point that Opposition Members have been making is that we are talking about a tax, not the buying of goods. What proportion would an hon. Member or a Minister be paying of his take-home pay in poll tax and how would that compare to the rates that he is paying at present? We are talking about the ability to pay and a fair system that takes a proper proportion of a person's earnings. Labour Members do not consider it fair for someone to have to pay £5 out of a weekly income of £53.
§ Mr. Tebbit
I am glad that I have saved the hon. Lady the trouble of making her speech, but she makes the point perfectly. There are those of us who believe that the taxation element of local government is well provided for by the 75 per cent. of local government costs which are not paid by community charge and that there is an element of services which are rendered by local government which should be paid for according to the cost of the services rather than according to the income of those receiving them. The hon. Lady has rightly illuminated the major difference that splits the House and, to some extent, has illuminated the minor difference that splits my hon. Friend the Member for Hampshire, East and myself.
Misunderstanding of the nature of the community charge leads my hon. Friend the Member for Hampshire, East to bring forward a new clause which patently will not work and will generally make matters worse. Unfortunately, he did not find time to deal with the point made by my hon. Friend the Member for Northampton, North (Mr. Marlow) about the plight of a man and wife. The man may pay one and half times the community charge and his wife may be out at work. She may suddenly decide to stop work and have a child. She may have been paying community charge on the basis of one charge, but, now that she comes back home to have a child and is dependent upon her husband, she has to pay one and half community charges—according to my hon. Friend the Member for Hampshire, East—because she is taken to have the same financial circumstances as her husband.
That is not to nit-pick at new clause 1. It is to suggest that there is not a new clause of the kind which my hon. Friend the Member for Hampshire, East seeks which could conceivably be designed and which is fairer than the present system. In the same way, my hon. Friend has no defence against the point made by my right hon. Friend the Member for Pavilion—that the extra revenue which would flow from the 50 per cent. charges would flow overwhelmingly to the wealthy local authorities where wealthy people live, not to the poor local authorities where poor people live.
I think that the best course for my hon. Friend the Member for Hampshire, East would be to accept that his new clause is misdirected. He is trying to achieve something through a system which will not allow it to be properly and effectively made. If my hon. Friend wants the system to work in a way that gives more help to the less well-off, the right way to go is along the lines which have been outlined by my right hon. Friend the Secretary of State and the path which he has already taken. I very much hope that my hon. Friend and his supporters will withdraw the motion and support the Government.
§ Mr. Kevin Barron (Rother Valley)
If the right hon. ,Member for Chingford (Mr. Tebbit) had listened to his hon. Friend the Member for Hampshire, East (Mr. 605 Mates), he would have heard him say that he was not targeting anything in the new clause towards the less well-off. The targeting is the well-off, those on £22,000 a year. The hon. Member for Hampshire, East made a brave speech, trying to put balance into a Bill that hon. Members think is very unbalanced. Despite the 16 interventions in the hon. Gentleman's speech—15 of which disagreed with the new clause—he made a good speech.
§ Mr. Devlin
Would it be right to say that all the interventions in the speech of my hon. Friend the Member for Hampshire, East (Mr. Mates) came from Conservative Members and not one came from the Opposition? At that time, only 78 Opposition Members were present and there are now only 36. If the Labour party is so virulently against this tax, why is there not better attendance, while the Conservative Benches continue to be full?
§ Mr. Barron
The hon. Gentleman will find out in the Division Lobbies at 10 o'clock why no Opposition Member opposed the new clause.
The Secretary of State made a somewhat rambling speech. In Committee, more that 200 Government amendments were tabled. For this five-day debate another 139 Government amendments have been tabled. But the Secretary of State said something that left me with a smile on my face. He believed that the way to a fairer distribution of wealth was to have a flat-rate tax, as proposed in the Bill, and use the income tax system. On 15 March, 750,000 people were given a tax rebate worth £2 billion a year, so the Secretary of State must have made today's comments somewhat tongue in cheek. Only the Opposition have talked about what really matters—exactly how the ability to pay will operate. The new clause attempts to deal with this aspect, which will affect not Members of the House of Commons—none of us will be affected—but the country in general.
Unlike the right hon. Member for Chingford, I cannot say that the words "Greater London council" can be replaced with "community charge". The right hon. Gentleman aspires to be leader of a political party that could win office, but he will never be a leader unless he knows the effect of legislation where it matters, in the constituencies. We have been worried about the Bill for a long time in terms of its effect on the community.
I am concerned about the regional effect of a flat-rate tax in terms of ability to pay. In Yorkshire and Humberside—the area of my constituency—household income is 73 per cent. of the income of those in the south-east. Effectively, this means that 70 per cent. of households in Yorkshire and Humberside will lose under this new tax and 71 per cent. in the south-east will gain. The right hon. Member for Henley (Mr. Heseltine) is on record as calling this a Tory tax. It is a pay-off for people who voted Conservative and it attacks people who have not returned Conservative Members.
Using the Government's formula and the 1987–88 rates, the local authority calculation is that the average rates increase throughout the Rotherham metropolitan borough will be 32.2 per cent. There are 20 villages in my constituency which have 30 houses or more. Only five villages will be gainers under this legislation and 15 will be losers. The average rates increase throughout my constituency will be more than 50 per cent. I shall show two extremes in Rother Valley. There is the village of Catcliffe, which has old railway, back-to-back terrace 606 housing near the former Tinsley railway yards. The increase in domestic rates will be 73 per cent. In the village of Letwell, which has about two dozen big houses, the rates will decrease by 19.8 per cent.
Small terraced houses have been referred to. I live in a village called Maltby, where at present the average increase based on average rates is 42 per cent. A couple living in a small private terraced house in my constituency will face an increase of about 220 per cent., on 1987–88 figures, when the poll tax is imposed in Rotherham. A couple living in a house with a rateable value of £55 now pay £157 in rates. Under the poll tax, they will pay £504—an increase of £346.
Even given the rebate system in the Bill, we are still left with a £53 trigger; above that figure, a single person in my constituency will pay the full rate of poll tax—the same as the millionaire, and there are not many of them in my constituency. A couple with £140 a week earned income will have to pay the full amount. There will be no rebate for them. The increases are excessive and many households will simply not be able to take them.
It is predicted that if the community charge is introduced in Rotherham borough, the spending power of residents over the age of 18 will be reduced by about £12 million. The position would be made worse by the fact that the areas of Rotherham facing the largest increases would be those where the propensity to consume is the highest, and those who benefit from the introduction of the community charge may convert into savings the reduced call on their incomes. It is clear that the biggest losers would be those living in the areas of poorest housing. Consequently, it would be almost inevitable that the gap between the poor and the better-off would grow.
The borough council estimates that the cost of collection will increase from the £1.3 million that it now costs to collect the rates to about £2.9 million—an increase of £1.6 million. My area is impoverished. That money should be spent not on collecting the poll tax but on trying to raise the community above its present level of poverty. I see nothing in the legislation—I include the uniform business rate—that would help. [Interruption] The amendment is about the ability to pay. I am trying to educate hon. Members, if they will only keep quiet.
I have in front of me a brief sent to hon. Members today by Age Concern, which is extremely worried about the effects that the poll tax will have on care in the community. It says:The imposition of the … charge will erect further barriers to care in the community. People in residential and nursing homes … will be exempt from the charge; but those moving in and out of care, or moving into sheltered! accommodation, will be liable. Furthermore, households in which an elderly person is cared for by relatives or friends living under the same roof will be penalised by the community charge.
I understand the implications of the community charge for families that include young people. The head of an impoverished household may feel that a youngster of 17½ is a threat to that household's income because he is approaching the age at which he is liable to pay some or all of the tax. The Government say that people should come out of care and into the community, and to attack households caring for young people in that way is quite wrong.
607 Imperfect though the new clause may be, I hope that right hon. and hon. Members will support it to try to bring some sense into the Bill before it damages not only my community but many hundreds of others.
§ Sir George Young (Ealing, Acton)
It is no secret that the last time the House discussed the Bill, in December last year, a number of my right hon. and hon. Friends were thinking of voting against it or abstaining, but voted for it at the end of the day. There are three reasons why those who had reservations then should support the new clause.
First, last December my hon. Friends and I were asking hon. Members to vote against the Second Reading of the Bill. Had we succeeded, the flagship would indeed have sunk. Tonight, we are asking them, not to vote against the Second Reading and thus to sink the flagship, but merely to adjust the direction in which it is sailing. My right hon. Friend the Member for Chingford (Mr. Tebbit) described the new clause as "a minor difference." It would be wholly consistent for those who supported the Bill on Second Reading, but with reservations, to vote for the new clause.
Secondly, a number of my right hon. and hon. Friends voted for the Bill on Second Reading in the belief, hope or expectation that it might be amended in Standing Committee to take account of ability to pay. Attempts to do that in Committee were not successful. If my hon. Friends now want to inject ability to pay into the Bill, they have to vote for the new clause.
Thirdly—and this is the more powerful reason—we are now better placed to consider the measure in the context of the Government's programme of economic and social reform. The fiscal framework for this Parliament is now clearer as a result of the Budget, and the social security framework is clearer following the implementation this month of new measures. Although it may be inconvenient for local government Ministers, one simply cannot isolate this Bill from other legislation in assessing the impact of the Government's actions on living standards and disposable income for various sections of the community—in particular that section of the community whose incomes are just above benefit level.
Most Conservative Members have no difficulty at all in defending the Budget. The economy is performing better. Revenues are higher than budgeted for and there is evidence of a virtuous circle. Furthermore, all taxpayers benefit from the Budget. Likewise, the vast majority of us can back the social security reforms—particularly given the extra expenditure and the Government's undertaking to monitor the arrangements closely and, it is to be hoped, protect any casualties. While the Bishop of Durham and our political opponents may find it convenient to juxtapose the two reforms, it is perfectly possible to defend each of them intellectually.
However, without the new clause, the Bill commits the very crime of which our opponents accuse us, and we have no alibi. The Bill transfers resources from the poor to the rich, and does so in a highly visible and undeniable way. In two years' time the community charge will reduce the taxes paid by the better-off because the rateable value of their houses, which is above average, will tend to disappear from the equation. Under the Bill we shall reduce the taxes paid by the better-off not by reducing taxation or public 608 expenditure generally, as happened in the Budget, but by shifting the burden on to the shoulders of the less well-off. Likewise, under the Bill as drafted, the nearly poor will pay more, not, as under the social security reforms, to help the very poor, but to help the better-off.
Against the background of the Government's social and economic changes, it is wholly alien to our party's philosophy to introduce a taxation measure that pushes the burden on to the shoulders of the poor and the less well-off. The Bill will have a particular impact on one group of the population—those who are not well enough off to benefit from the Budget changes but who are not poor enough to get help from social security. This group includes those disadvantaged by the capital cut-off, by charges and perhaps by higher rents introduced by the new rent regime. This measure will disadvantage a vulnerable group of the population.
§ Sir George Young
In deference to the large number of hon. Members who wish to speak, I shall give way only once. Who better than my hon. Friend?
§ Mr. Leigh
Will my hon. Friend address the point made by the Secretary of State in his opening speech? He said that if the new clause was accepted it would raise £200 million at the cost of creating a significant earnings trap and that it would be easier to raise that extra money by increasing the higher rate of income tax.
§ Sir George Young
I shall come to that point in a minute. With a dismissive sweep of the arm, my right hon. Friend the Secretary of State said that any attempt to raise local revenue by a form of local income tax was inherently impossible—ignoring the fact that that is exactly how the vast majority of civilised countries fund local government and that not one civilised country funds local government in the way proposed by the Bill.
New clause 2, which stands in my name, proposes a slightly more radical approach to the matter by abolishing the bureaucracy, intrusion and cost required by the community charge register. Instead, it suggests the use of the database of the Inland Revenue, which has the names and addresses of 30 million people. That seems to me to be quite a good starting point for any tax.
When we raised this matter in Committee, I was surprised at the weakness of the case against it, but the case has been greatly strengthened by the Budget decision to tax married women separately. This will broaden the base of any local banded tax or graduated income tax. I have no doubt that in time we will end up with something that is rather like new clause 2. However, new clause 1 is far easier to commend to my hon. Friends because it is much closer to the Government's proposals.
I shall now deal with the point raised by my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh). He implied that there was some exciting discontinuity in my hon. Friend's proposals which constituted an earnings trap. In a rather extravagant article in a newspaper on Saturday, Woodrow Wyatt made exactly this point when he said:Mr. Mates wants all those with a taxable income of £19,300 and above to suffer further massive redistribution by paying a community charge 50 per cent. more than anyone else. This is a higher earner disincentive trap.We are talking about £100 for someone whose disposable income after mortgage interest tax relief, pension relief and 609 any other relief is about £20,000 a year. The discontinuity that ought to concern my hon. Friend is that of the national insurance scheme. When one's income rises from £38 to £40, one becomes exposed to 5 per cent. tax on the lot. Is my hon. Friend saying that £100 to someone on £23,000 a year is pernicious and an earnings trap, but that the same figure for someone earning £40 is quite acceptable?
§ Sir George Young
No, I shall not give way, because I gave an undertaking that I would give way only once.
The British people instinctively recognise what is unjust. The community charge, or poll tax, has been extensively debated and discussed over the past year and, despite heroic attempts by the Front Bench, there is still a belief in the country that it is unjust. The concession made on Thursday does not address the heart of the problem. In a sense it makes the matter worse, because on Thursday the Government sawed away even further at the branch of accountability, on which they have been rather precariously perched, by reducing the number of people who pay the flat rate tax—which was the main argument for the scheme.
It would be far easier to present this policy to the country if new clause 1 were added to the Bill. It would take some of the rough edges off the proposals and enable us to defend the Bill by saying that we have attempted to link it to ability to pay. I urge those of my hon. Friends who believe that the policy as it stands is damaging to the party, and at variance with our tradition, to support my hon. Friend the Member for Hampshire, East (Mr. Mates) in the Division Lobby.
§ Mr. Dick Douglas (Dunfermline, West)
Anyone listening to the debate would think that the community charge was to be introduced in 1990, but we know that in Scotland it will be introduced next year. We also know that the whole process of administering the charge is being brought into force in Scotland. In his interesting speech, the right hon. Member for Chingford (Mr. Tebbit) gave himself, perhaps quite rightly, some backhanded compliments on winning elections. The community charge or poll tax was the Conservative flagship in the election in Scotland as well, and look what happened there. To look at that is to deal in much more up-to-date terms with the actuality of what can happen.
I say to all hon. Members but especially to Conservative Members that if we were being politically devious we would let this tax pass because nothing is more likely to ensure a comprehensive Labour victory in the next general election. I speak from experience. The Opposition do not need to tell lies about this legislation but just have to tell the truth about what is happening. We do not have to manufacture any phraseology about it but need use only the words that the Secretary of State for Scotland and the Secretary of State for the Environment have used.
I should like to quote from a speech by the Secretary of State for the Environment on 19 March:Therefore, it must be right for all the people to pay a charge for local services, just as all the people can vote for them.Of course, on the basis of his own argument that is not true. He went on to say:That is what we mean by accountability.610 I should also like to quote from a pamphlet written by the Under-Secretary of State for Scotland, the hon. Member for Stirling (Mr. Forsyth) in 1985. The hon. Member has gained some reputation as being the architect of the poll tax. He said:To exempt people from liability to pay the poll tax, or to pay it for them through the social security system or via some scheme of rebates, would be to destroy accountability.That point has been made before in another context. The minute one tries to ameliorate the impact of this tax one moves away from accountability.
In his speech on 19 March, the Secretary of State, no doubt anticipating some of the arguments to be made by the hon. Member for Hampshire, East (Mr. Mates), said:There is now general acceptance that rates must go, and be replaced by a charge on people, as opposed to property. But there are critics who say that the Community Charge does not reflect ability to pay. They are wrong, and we are winning that argument too.How were the Government winning the argument on 19 March when they had to make concessions a few days ago? Was the argument so overwhelmingly won by the speeches of Ministers that they could afford to make the sort of concession that they did make, which is only a palliative?
The tax affronts the basic tenets and canons of taxation that people of all parties have accepted. Some hon. Members misquote and misdirect the words of Adam Smith. The first canon of taxation that he enunciated was related to the ability to pay. That was a measure of a tax's efficacy.
We know that the poll tax offends against that because the Secretary of State and others do not want a tax that is related to ability to pay. They want a penal tax. They argue that we should clearly identify what they choose to call large spending local authorities, profligate local authorities. They want to show the community charge, the poll tax, in national terms and to ask people to look at local authority bills and try to equalise the national impact of the tax. This will not work if local authority services are to remain local.
I return to what is happening in Scotland. I agree with the hon. Member for Rochdale (Mr. Smith) that those of us who conduct what we euphemistically call surgeries meet people who say that they will not be able to pay the tax. It is not that they want to break the law, but that they cannot pay the tax. In Scotland those people will be faced either with the poinding of their furniture through warrant sales or by arrestment of wages. That is what will happen, and we know that because of pressures on people from other Government legislation. Perhaps local authorities in Scotland will ameliorate some of the difficulties that those people face, but is it really the sort of tax that we want to introduce in 1989?
I predict—I say this especially for the right hon. Member for Chingford—that if we tell the truth about the poll tax during the coming elections in Scotland, the Tory party may well be eliminated from every council. Of course, I would not weep about that. The tax is repugnant because of its basic unfairness. Any defence of it is based either on the desire to control so-called profligate local authorities or the desire to enforce accountability—but there is no defence on the ground of fairness.
I do not want to disobey the laws to which I am a party, one step removed, in this House. However, we must unite those who cannot pay the tax because of a lack of resources and those who will not pay it because of conscience.
§ Mr. Phillip Oppenheim (Amber Valley)
When the hon. Gentleman faces the Scottish electorate in the May local elections, will he put forward his party's alternative either to the community charge or to the current system?
§ Mr. Douglas
I find myself in enough difficulty speaking for myself, let alone for the Labour party. I agree with the view taken by Layfield, who was rather fulsome about a local income tax. Paragraph 105 of his report states:The present structure of local government is a further complication. Generally LIT"—that is, local income tax—could not be introduced at the level of districts. However, we consider it would be feasible to operate LIT for each of the Scottish regions and islands.Therefore, there is some feasibility in a local income tax, but I should prefer to retain some form of property tax.
I repeat that in Scotland we must unite those who will not pay on grounds of conscience and those who cannot pay because they do not have the resources. Such a stance may or may not prove popular. Generally speaking, we are a law-abiding party and a law-abiding people, but there is no shame—[Interruption.] The House has its last chance tonight to recognise what it did not recognise in the Scottish legislation.
I have a great deal of respect for the hon. Member for Hampshire, East and other hon. Members who have had second thoughts—even though I may not agree with them. Unless we decide otherwise tonight, the poll tax will be in place in Scotland within a year—[HON. MEMBERS: "Good".] If hon. Members say, "Good," they are actually saying that Scotland should be used as a guinea pig for the rest of the nation. I cannot accept that.
Those hon. Members who are supposed to be interested in the Union—more Conservative Members than Opposition Members feel such an obligation—must take care how they vote tonight because it will be a signal to the people of Scotland on how we should proceed constitutionally in this House.
§ Mr. John M. Taylor (Solihull)
It is sad to follow an honourable legislator who concluded his remarks with an invitation to his fellow citizens to disobey the law. If we are not here in good faith as legislators, determined to live with the end product and to work for it or against it politically, we have no business to be here at all.
I shall be brief because I spoke on Second Reading and I have not changed my mind on any particular. There are taxes in society that are ad valorem or that are related to the ability to pay—for example, corporation tax, capital gains tax, taxes on benefits in kind, stamp duty and special car tax. Above all, income tax is not merely related to the ability to pay, but is a direct tax on the ability to pay.
All civilised societies should have such a tax, but that does not mean that all taxes should take the same form. We all pay the same for many goods and services, and there is an inherent fairness in that on the basis that equity is equality. There cannot be a more egalitarian regime than everyone paying the same. However, the community charge is not an exact egality because the poorer and most hard-pressed members of society will have rebates of up to 80 per cent. That is the essential derogation from the principle of everyone paying the same.
§ Mr. David Winnick (Walsall, North)
The Secretary of State has confirmed that a multi-millionaire in any given 612 area will pay precisely the same as a pensioner in that area who has only a small income but has more than £6,000 capital. Does the hon. Gentleman think that to be fair?
§ Mr. Taylor
The pensioner would pay the same as the multi-millionaire for a loaf of bread or a gallon of petrol. The richer man makes his heavier contribution to society through the other taxes that I mentioned. The hon. Gentleman well knows that a rich man travelling on a bus pays the same fare as other people, including the pensioner unless that pensioner has a bus pass.
§ Mr. Tebbit
Has my hon. Friend noticed the Opposition's assumption that the current rating system is fair? They assume that a schoolteacher in my constituency, who is paid not very much more than a schoolteacher in the north of England, should pay three or four times as much in rates simply for the privilege of living in my constituency. While we all accept that that is a very great privilege, it is overdoing it a little.
§ Mr. Taylor
My right hon. Friend is correct. There has been a deafening silence from the Opposition on any alternative.
The poll tax will be levied to pay for local government services in general. For local authority services in particular—for example, the use of swimming baths, the removal of garden refuse, application for planning permission, and so on—we all pay the same. For services that have a specific charge, the rich and the poor pay the same, with the exception of certain derogations available to the poor. If it is right to pay the same for specificially provided municipal services, why is it wrong to charge for them generically and generally? We have enough income tax in this country. Even the enlightened Labour Administrations in New Zealand and Australia have seen the necessity to pull down income tax if they want vigorous economies. Quite rightly, this Government have pulled down rates of income tax. I do not want any more income tax through the back door, by having a banding on local revenues.
§ Mr. Taylor
I have given way twice. I am anxious to proceed. I do not wish to offend my hon. Friend. I shall give way if his remarks will be brief.
§ Mr. Cormack
My remarks will be brief. Would my hon. Friend have advocated people paying at the same rate, irrespective of the quality and location of the house in which they live?
§ Mr. Taylor
People who live in different quality houses take the same bus from the same bus stop and pay the same bus fares. That would seem to be an illustration of the proposition upon which I have been asked to comment.
All hon. Members who have contributed to the debate so far, particularly those with some predisposition to the new clause, have assumed that, at any given time, any given individual knows his tax band. Frankly, that is not true. It is certainly not true for the self-employed or for schedule D taxpayers, who are taxed on a preceding year basis. Alternatively, if that is not a problem in itself, during the year they may receive an accrual that will alter their tax band and will certainly affect their tax payments in the following year. Many people on schedule D do not know 613 their tax band to within two years, nor are they being obscure in that regard. The Inland Revenue does not know it either, so there is no point in asking.
I shall vote against the new clause. I have been in favour of a poll tax since 1977. I shall vote for the poll tax, even though it is called a community charge.
§ Mr. Martin Redmond (Don Valley)
New clause 1 is about people's ability to pay. Although there are anomalies within the clause, "owt is better than nowt". It is certainly better than what the Secretary of State is proposing. Conservative Members would do well to come down from their ivory tower to the world of reality, as the world of reality has poverty and despair. A classic example involves two Conservative Members who, for one week, attempted to live on the dole and, of course, ended up in debt. There is not enough reality among Conservative Members. That demonstrates why many Conservative Members are quite willing to sacrifice the poor of this country on the altar of greed and selfishness.
My constituency is within the Doncaster metropolitan borough area. Doncaster is a mixed area of pit villages, agriculture and industry. Property in Doncaster is reasonably priced—so much so that, with the east coast line electrification, London commuters will save thousands of pounds when they buy houses in Doncaster. Because house prices have historically been low, the rateable value of property in Doncaster is also low. The impact of the poll tax on the population of Doncaster will be devastating.
Based on figures produced by the Chartered Institute of Public Finance and Accountancy, in 1988 expenditure terms, the equivalent poll tax will be about £300 per person. A person living in a house with a rateable value of less than £100 will be worse off under the poll tax. Twenty-five per cent. of homes in Doncaster have a rateable value of £100 or less. A couple will be worse off if the rateable value of their home is less than £200. Ninety per cent. of homes in Doncaster have a rateable value of £200 or less. A family of three will be worse off if the rateable value of their home is less than £300.
A family of four adults living in Mexborough, recently named by a university study group as the poorest town in England, pay £160 in rates per year. Their poll tax will be £1,200. Hon. Members should contrast that with a person living in a village a few miles away and currently paying £3,800 a year in rates. If he lives alone, he will pay just £300 in poll tax. How does that help the elderly widow who is currently paying the same as the household with four adults? She will pay the same as the person in the mansion up the road.
The Government claim that many individuals will benefit from the poll tax. There may be hurricanes in Hampshire, Hertfordshire and Huntingdon, but in Doncaster, Barnsley and Rotherham there will be a tidal wave of poverty as a result of the tax. It is a tax on the family. The tragedy is that when the Prime Minister came to power she talked about the need to maintain family unity. The thrust of the Government's legislation has been to drive families apart. On the one hand, the social security and housing benefit changes virtually force young adults live at home. On the other hand, if young adults live at home, their families will pay more in tax.
614 Families in my constituency are close-knit. That is to be expected in the north. Many young people do not leave home until they are married, and some even stay on afterwards. How many parents will stand by and see bailiffs take their children's belongings because they cannot pay their poll tax? Very few in my constituency will do that. The family will stick together and pay for all its members.
Whether there is a rebate scheme or a banded tax, the vast majority of my constituents will lose under the pal tax. It is not just a flat-rate poll tax that will cause that state of affairs. The redistribution of resources between regions will have a most profound effect. How can it be fair and reasonable for Yorkshire and Humberside to lose resources, while the south-east of England outside London gains resources?
At the moment Doncaster receives grant, which partly makes up for its low rateable resources. The proposed grant system will take no account of resources, only needs. based on a comparison with a district in Surrey. The. people of Doncaster will have to make up that loss out of their poll tax payments.
The administration of the new system will cause costs to rise. Currently, Doncaster council sends out 80,000 rate bills, and the 35,000 council tenants pay their rates with their rent. If the Bill becomes law, in April 1989 the council will send out 110,000 canvass forms. When an entry is made in the poll tax register, over 200,000 notifications will have to be sent out. In April 1990, over 200,000 bills will be sent out. The cost of administering the charge will be wholly met by poll tax payers. The local council will keep track of the population over 18 years of age and, each year, will have to estimate what population movements will take place.
At present, 18 per cent. of properties change hands each year, but up to 30 per cent. of people move in and out of property. How can the council keep track of such movements without large staff numbers and frequent visits to people's homes? The poll tax will be ripe for people to avoid paying it.
A recent survey found that one person in 10 said that they would rather not vote than pay the poll tax. These are normal, honest people. If the trend were to be repeated around the country, 90 per cent. of those on the register would have to pay an extra 20 per cent. the following year to make up the shortfall and satisfy the council's need for that year. This will be a problem facing all councils and every individual in the council area. The answer is either for the council to employ more staff, or for all population movement to be monitored in some way, and of course that has implications for civil liberties.
The poll tax is a bad tax. It fails the test of a good tax. It is regressive and does not take into account the ability to pay, even with a rebate scheme. It is open to avoidance and abuse. It may work in Japan, but there it is only a tiny element in a huge local tax system. In Britain it will not work, as no doubt our friends in Scotland will demonstrate. If the Government are so convinced that the country wants this poll tax, why do they not have a national referendum on it?
§ Mr. Allan Rogers (Rhondda)
On a point of order, Mr. Deputy Speaker. The right hon. Member for Woking (Mr. Onslow) has spoken in the debate and sat down. He cannot be called twice.
§ Mr. Deputy Speaker
I shall not penalise the right hon. Gentleman for a genuine mistake which I made in the Chair.
§ Mr. Onslow
I am grateful to you, Mr. Deputy Speaker for responding in that way to that rather churlish intervention from the Opposition Front Bench. I recognise that I am fortunate in catching your eye now because one does not often get two bites of the cherry in this House. I shall not trespass on your generosity, Mr. Deputy Speaker, by making a long speech, but my anxiety to intervene now rather than sooner was prompted by a desire to listen to what was being said and not to take up time in debate.
Having listened to the debate, I must say at once that we have been discussing quite a complex subject and it is a great pity that much of it could not have been discussed in Committee. However, I understand how these things happen and obviously, that was not possible on this occasion. It is also clear that the new clause that we are discussing has nothing especially to do with the principle of the community charge as such.
My hon. Friend the Member for Hampshire, East (Mr. Mates) made a very able speech in introducing his new clause and went out of his way to emphasise that he was 90 per cent. in favour of what the Government were trying to do. I understand that to be support for the community charge with a reservation of 10 per cent. If I am wrong, no doubt I will be corrected.
The discussion and the thinking behind the new clause are prompted by a difference in the perception of equity in the treatment of higher-earning local residents under the proposed system of community charges. Again, I did not detect that my hon. Friend and my right hon. Friend the Secretary of State differed significantly about the impact that the proposed arrangements would have on those who are at the lowest end of the earnings scale or those who have no significant earnings at all.
I do not think that we are talking about that. We are talking about a fairly narrow point affecting 9 per cent. of the potential payers of the community charge up and down the country. That is because some people see a problem with the proposals which the Government have brought forward, in that they do not seem to be fair and in line with what was promised in our manifesto. I confess that, if such a problem exists, my hon. Friend has brought forward what the scientists call "quite a neat solution" to it at first sight. However, I say that the more closely we look at it, the less neat it seems to be. Indeed, I am not sure that I accept that the problem exists at all.
We were talking in our manifesto about introducing a fairer system, and practically everybody reading those words would have understood them to mean "a fairer system than the rates", which we all agree are unfair. My hon. Friend the Member for Hampshire, East agrees that the rates are an unfair system. By posing the manifesto test, I do not think that the case stands up any more than it can be said that the words in our manifesto committed the Conservative party to the introduction of an income-linked scheme.
The possibility of a local income tax was repeatedly and specifically excluded during the long-drawn-out election 616 campaign. I believe that most of my hon. Friends understood that. When there were references to an ability to pay, they were in the context that, if there are people who have genuine difficulty in paying, that difficulty will be recognised and taken care of in the scheme. That was precisely the point to which those words went, as my right hon. Friend the Member for Chingford (Mr. Tebbit) and my hon. Friend the Member for Solihull (Mr. Taylor) have pointed out.
I ask my my hon. Friend what he thinks will happen if his new clause is passed, if anyone should go into the Lobby with him to vote for it. The Opposition Front Bench gave its game away fairly clearly—and not very surprisingly—by making it clear that it stands for higher charges for people with higher earnings. Broadly speaking, that is what Socialism is about, and I was not surprised that they were so frank about it. I was also not very surprised to hear that, broadly speaking, the Socialist party is in favour of greater complexity and bureaucracy in the affairs of local government, which will mean more employeees for NALGO. It is in favour of greater intrusion into people's private affairs, including their tax affairs.
Anyone who has listened to the debate, as I did, must have realised that the scheme proposed by my hon. Friend would not work and could not work unless each signatory to the questionnaire dealing with the community charge was obliged to subscribe his tax reference number as well as his address. Without that tax reference number, there would be no way of telling in Wales which John Jones was which, and in England which John Smith was which.
My hon. Friend should not have dismissed as lightly as he did the clear statement by my right hon. Friend that that information would have to be available to local authorities, and would no doubt be used by local authorities of a Socialist frame of mind in ways which would not be welcomed by my hon. Friends at all. I doubt also whether any of our supporters would welcome it.
§ Mr. Onslow
No. I am going to be brief. It is sometimes necessary to raise one's voice to the hon. Gentleman to make him understand.
I also understand why the Scottish Labour MPs, to whom I am about to turn, should be tempted to vote for my hon. Friend's amendment. It was made clear by the hon. Member for Dunfermline, West (Mr. Douglas), who is not with us at the moment, that he was anxious to incite civil disobedience. The passing of this amendment would create even more opportunities and excuses for him and his hon. Friends to do just that. There is no doubt that there will be great confusion, if not chaos, in local government in Scotland if the amendment were to be passed.
§ Mr. Onslow
I turn now to a third group who I understand are likely to support the amendment, although I do not think that 617 there are any of them here at the moment. I well understand why some Northern Ireland hon. Members might seize this opportunity for what would seem to them to be a logical protest against the Anglo-Irish Agreement by voting in favour of my hon. Friend's amendment, even though they know, as I do, that the hon. Gentleman is one of the strongest and stoutest supporters of that Agreement. To the hon. Members from Northern Ireland, that may appear to be a logical, natural and respectable thing to do. However, my hon. Friend should be careful in the supporters whom he attracts to his corner.
I can understand all those things. I understand the less than reputable motives which may lead the various groups I have named to vote in favour of the new clause. However, I do not understand why my hon. Friend should seek to press it to a Division.
In his response to the new clause, my right hon. Friend the Secretary of State made it perfectly clear that if one is seeking equity in a fiscal system, that is already embodied in our taxation system, under which, the more one earns, the more one becomes liable to pay. As my right hon. Friend said, it follows from that that the more that local goverment expenditure is funded from the Exchequer, the fairer the overall effect. There is absolutely no gainsaying that.
My hon. Friend's proposal is an insignificant and minor search for equity, which could be achieved in a much more significant and dramatic way by the transfer of a greater share of local government funding from local residents to the taxpayer at large. I do not understand why my hon. Friend is distracting his many colleagues, who would like that objective to be achieved, by leading them down a path where, for insignificant consequences, enormous damage may he done.
If my hon. Friend wants the principle of ability to pay to be enshrined in the system of local government finance, he and his friends should use the next two to three years to press more and more for the transfer of the funding base to the Exchequer and to taxpayers as a whole. They should not look in the direction to which they seem so attracted this evening.
§ Ms. Hilary Armstrong (Durham, North-West)
This has been an interesting debate, in which we have heard some interesting arguments from Conservative Members. I was interested to hear the right hon. Member for Woking (Mr. Onslow) argue about the problems of privacy in new clause 1. He seems to have forgotten the base on which the rebates will he assessed. People will have to declare an income to get a rebate. It seems rather peculiar that we are again hearing the argument that it is all right for those at the lower end of the income scale to have their income exposed and to have no privacy, but that we cannot have that for people at the top end. Those inconsistencies and that division seem perfectly acceptable to some Conservative Members and are at the heart of much of our opposition to the fundamental abandonment of any idea that taxation should be based on the ability to pay.
I am sorry that the right hon. Member for Chingford (Mr. Tebbit) is not in his place. I should have liked him to be here so that I could say a little more about him, but never mind; I shall obey the conventions of the House and confine my remarks to what he said. He talked about the community charge as if it were not a tax and as if one 618 should pay, not according ability to pay, but because one receives services. Therefore, one would be paying for the services. That is a remarkable argument, which, in a sense, expresses the poverty of the Government's morality.
As you know, Madam Deputy Speaker, I do not use the school services of my local education authority. I have no need to use them, nor will I use them, because I do not have any children. However, I do not say that therefore I do not have a responsibility to pay for those services, because I believe that I do have a responsibility and I want to have that responsibility. I believe that local and other services are part of the way in which we, as a civilised society, have decided that we shall organise our society. Therefore, it is my responsibility to contribute to the community and to do so according to my ability to pay, not according to the extent to which I use the services. The arguments of Conservative Members have been based on the extent to which we use the services. I reject that completely. I hope that the House will say that we want to develop a community and that we recognise that all must contribute to that community.
The real problem is that the Government see many of the people of this country as mean, selfish and riot prepared to contribute to their communities, and prepared to pay only for what they get. That is an indictment of the Government. The British people are not like that. If the Government began to treat the British people with a bit of respect, that would enable the people to feel that they were part of a united country and the Government might get a better response from them—[Interruption.] It was interesting that the hon. Member for Stockton, South (Mr. Devlin) who is now making from a sedentary position—
§ Ms. Armstrong
No, I am responding to what the hon. Gentleman said earlier. He asked why, if the Opposition are really bothered, we are opposing the Bill, because if it is going to be so bad for the Tory Government the electorate will recognise it. I find such arguments sad. I did not come into politics to make people suffer to prove a political point.
I hope that the Government will change their mind about the tax. I hope that they will base it on ability to pay. I say that not because I think that I will get electoral advantage out of it, but because I know the effect that the tax in its present form will have on the people whom I have been sent here to represent.
My hon. Friend the Member for Rother Valley (Mr. Barron) made a general point about the north-south divide. It is a tragedy that the Government talk about the need for economic recovery, but are introducing yet another way of penalising the north for the benefit of the south, because money will flow from the north to the south. In the context of the general economic debates that we are having in the Chamber at the moment, that is crazy. It will make communities such as mine much less able to be independent and self-sufficient and less able to pay their proper contributions to the country.
§ Ms. Armstrong
No, I shall not give way.
I want to speak about one group that has not been mentioned and about people who will be some of the greatest losers—women. [HON. MEMBERS: "Oh."] Conservative Members might find this difficult, but 619 reality is that 77 per cent. of those who are judged as being in poverty among those of pensionable age are women. It is a fact that the majority of people who are carers in our society—people who are at home, looking after elderly or disabled relatives—are women. I have a high preponderance of them in my constituency, partly because my constituency has particular health problems because of the nature of its industry, but also because there is still strong family loyalty in my constituency. Women see it as their responsibility to keep their relatives at home for as long as possible. At the moment those relatives are not liable to pay rates, and many people get rate rebates, but that will not be so under the system that the Government are proposing.
The lunacy of that system is that it will encourage such families to say that they cannot cope any longer and that they will have to ask their mother or disabled relative to be taken into care.
§ Ms. Armstrong
I am sorry, but I shall not give way. I have been asked to be brief.
Until now, single parents and carers have been eligible for rate rebates.
§ Ms. Armstrong
I can take the hon. Gentleman to visit dozens of people in my constituency for whom that is true. Perhaps he would like to meet some of them. Many women in my constituency do not work, again because of the traditional nature of the industry there. They will now have to pay the tax, despite having no income, so I plead with the Government to reconsider that. If they want to say that they believe in getting rid of the divisions in society and want to create a country where people can work together, they need to consider the particular needs of some groups whom I represent.
Whatever the electoral consequences, any Government should be anxious to win the support of all the people and not depend simply on the support of those who can afford to pay for their policies.
§ Mr. Michael Heseltine (Henley)
I rise to support the new clause tabled by my hon. Friend the Member for Hampshire, East (Mr. Mates). The whole House understands that this debate, which stretches back over a decade or so, can always be extended into a discussion about the options before us. That then provides an opportunity for avoiding a decision or for moving to a further stage in the legislation, at which point it becomes harder to change one's mind.
My right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) made a persuasive speech, and my hon. Friend the Member for Leeds, North-West (Dr. Hampson) and my right hon. Friend the Member for Woking (Mr. Onslow) put forward several suggestions. It was suggested that if we take some expenditure out of local authority budgets and transfer it to the centre, the community charge level can be containable, so the problem that we may have to address will be diminished. If colleagues seek to increase local authority expenditure and public expenditure, the way to do it is to shift more of the costs of various services from local authorities to the central Exchequer.
620 That is not a reflection on the Government. They will undoubtedly do all in their power to contain the budgets transferred to them from local authorities, but, as night follows day, as local authorities are relieved of whatever level of expenditure one transfers, they, faced with the choice of offering more services or reducing the level of rates or community charge, will spend more money on a wider range of services. Naturally, they will certainly make some reduction, but it will not be commensurate with the burden that central Government have assumed. Any of my right hon. and hon. Friends who believe that there is a way forward by switching resource expenditure to central Government are exciting the prospects for local authorities to exactly what we in this Government have spent 10 years trying to avoid—increasing the rate of public expenditure.
The whole House knows that I approach this as someone who, for better or worse, has been involved in the process that arose from the commitmen—
§ Mr. Heseltine
I know that the hon. Gentleman has an interesting set of points to make, but we cannot always give way, or not enough hon. Members will have a chance to make their speeches.
I was present at the shadow Cabinet meeting when it was originally decided that we should make a further commitment to the British people to replace the rates with a system that was fairer and reflected people's ability to pay. That was when the debate began and it has gone on since, both when we have been in opposition and in government. It fell to me, both in opposition and in government, to produce a solution that my colleagues in the shadow Cabinet or Cabinet believed met those two criteria. Perhaps it was my failure or lack of ingenuity, but, whatever the explanation, we could not find a system that met the criteria of fairness and people's ability to pay. For that reason, it was not difficult to persuade the shadow Cabinet in 1979 that as a priority we should reform rather than replace the rates. That did not seem to do our electoral prospects irreversible harm.
It fell to me as Secretary of State for the Environment to look into that in government, with all the help available for specialist and expert advisers and with all the advantages of a major Department of State, in a way in which the Opposition and, with respect to my hon. Friend, even Back-Bench Members cannot be expected to do. We published a Green Paper in 1981. I carefully listed the poll tax as one option, and without any shadow of doubt it is now a matter of recorded history that, faced with the arguments, there was hardly a debate. The Cabinet was not prepared to introduce what we then called a poll tax, because it was neither fair nor did it reflect people's ability to pay.
Let us have no illusions about this. It was not until local authorities, largely under the control of the Labour party, sought to exploit the circumstances and to introduce an element of confrontation with the Government, quite out of keeping with the character of local government and its relationships with central Government, that this Government, understandably, were forced once again to raise the fundamental question of how we should replace rates, and to put that at the top of the political agenda.
The problem has been exposed time and again today: to bring some democratic pressure to bear on authorities with 621 the most extravagant expenditure policies, it was necessary to make their constituents feel the consequences of those high expenditure decisions by making them pay for those policies.
§ Mr. Heseltine
No. The hon. Gentleman must forgive me.
The House will not question that the poll tax undoubtedly has that characteristic of accountability, which is why it was chosen as the way forward. Nobody chose it because it was a perfect system. No one claimed that it was a system without blemishes or disadvantages. Who would question its administrative complexity or the regressive nature that is inherent in that type of taxation? Certainly not the Government Front Bench, and rightly so. It unquestionably met the overriding political priority of forcing those who vote for high expenditure policies to feel the consequences of their actions, and that political objective has overridden all other political disadvantages which had previously proved decisive.
When the proposals were first announced, the idea was that the charge should be per head of the population and be met equally by all adult voters. That, at least in theory, would have brought to account high-spending local authorities. The problem is that, from the moment the proposals appeared, their unacceptably regressive nature forced concession after concession, to the point at which today we are left with few of the originally claimed advantages and all of the self-evident disadvantages.
I speak for a large number of my right hon. and hon. Friends and perhaps for some Opposition Members when I say that we welcomed the protection of the very poor that was inherent in the Government's pre-election rebate scheme. My right hon. Friend has gone further and he deserves praise for that. But the more concessions the Government make to protect the poor, the less effective the community charge becomes in meeting the priority of accountability.
As universal accountability diminishes, another more damaging divide emerges in its place. The further we move to protect those just below the poverty line, the more we promote a sense of grievance in those just above the poverty line. The childless couple will pay the full charge if their income is above £100 a week.
Many of my colleagues will recognise the similarity between that case and what has happened in the social security reorganisation, where those just above the poverty line with £10,000 in the bank are bewildered by the fact that the allowance has been changed to £6,000. It is precisely those people—who tend to live in less valuable homes, who have bought their homes and paid for them throughout their working lives and who, until now, have paid relatively low rates because their properties had a low rateable value—who will most resent the new proposals.
I have no message for Labour Members, but I say this to my right hon. and hon. Friends: those are the people about whom we should be most concerned, because modern Conservatism has widened its appeal by embracing the instincts of those who want independence and self-reliance. If there is a pivotal point at which the political pendulum is hinged, it is that group of people who have lifted themselves not to great wealth, but clear of dependency on the state and into a position of self-reliance 622 —the council tenants who have bought their homes, the newly self-employed and the thrifty who have saved for their retirement. It is those people, still living in the old terraced houses on council estates everywhere, which the local rateable value reflects as being on low incomes, who will suffer disproportionately from the Government's proposals.
My hon. Friend the Member for Hampshire, East did not argue that he had a formula of impeccable integrity to deal with all those issues, and the Government will again make fun at the margins. Very generously, they conceded that when we are talking about the threshold of the higher band of tax, only £100 or so is likely to be at stake for those who have a net take-home income of more than £20,000. They put forward the idea that someone with the wit, the skill, the ingenuity and the imagination to reach the point of threshold and to move £1 over it lacks the wit, the ingenuity and the skill to say to his boss, "I do not want the other £1," or to say "Look mate, if you want me as a young budding manager in this company you had better pay me £201 to make it worth my while." The bosses will say, "No. We are not prepared to negotiate with you on the threshold of this senior management level into which you are going." That shows the credibility of my right hon. and hon. Friends' argument.
I concede that there will be some people—poor things—who will not discover until a year or so later that they have entered the realms of fantasy where they earn such high salaries. If we vote for my hon. Friend's proposals tonight, we shall have to explain the position to those people on the doorsteps.
I have received a letter from the town clerk of Wimborne Minster town council—not an area associated with the Labour party or the raving loonies of the Left-wing extremist authorities. He wanted me to know about the effect of the community charge on a typical low-rated house with a rateable value of £100. He told me that the consequences of the Government's proposal will be that a rates bill for two people will increase from £218 to £570.
The poorest people living in that area of Dorset will have to pay an extra £352 a year. They will be unable to negotiate a pay rise to cover the penalty of moving from one band to another. They will have no choice but to pay the increase. They will not be doing so to avoid the extravagances of Labour authorities, but to protect themselves from Dorset county council—to bring accountability to parts of England that are and always have been Tory controlled, in the name of enhanced local government accountability.
The House will wish to judge whether we are striking the right balance between the poor chap facing the agony of the decision whether to accept another £1 and go into the higher band and those people who are forced to accept the thought that, at that level of prosperity, they will have to pay another £7 a week because we introduced a community charge that was fair and reflected people's ability to pay.
My hon. Friend the Member for Hampshire, East must plead guilty to the charge that his proposals are complex. In a well-reasoned speech, my hon. Friend made clear how complex they are. But the House will wish to ask whether his proposals are complex or whether the community charge itself is complex. My hon. Friend proposes that the form should ask one or two extra questions, but he did not design the system under which 35 million citizens will 623 receive those forms in the first place. Those forms will have to be checked by an army of local authority officials. If I am bitter, it is because, when I was Secretary of State for the Environment, I greatly reduced local authority manpower, only to see it increase again now to police, not my hon. Friend's proposals, but the proposals of my right hon. Friends on the Front Bench.
Those officials are there to record not only whether 35 million people are honest enough to declare whether they have lodgers, children or other family members in their homes, but the 3.5 million people who will move every year, claim rebates and change their circumstances. Perhaps their incomes will increase—I cannot tell. But the Government suggest that we register 35 million people, with all their lodgers and second homes, 3.5 million of whom will move every year in the ordinary course of life.
My hon. Friend the Member for Hampshire, East must plead guilty. He has made the system more complex, but where will the electorate believe the responsibility lies? My right hon. and hon. Friends will wish to ponder the answer to that question. My hon. Friend may have made a system of enormous complexity marginally more complex, but I do not believe for an instant that the public will perceive that the weakness of what will happen is the fault of my hon. Friend the Member for Hampshire, East.
We are told that my hon. Friend's new clause is unnecessary, because the rich already pay more. That is an interesting argument, and again my right hon. and hon. Friends will wish to ponder how convincing it will sound when, as they stand on the doorsteps explaining the complexities of the system, they point to the large house across the road and say, "Do not worry. They are paying more for local services because they pay more taxes."
Taxation is not just a matter of arithmetic; it is a matter of perception. When we are trying to persuade people at the lower levels of income to pay a great deal more than they have ever paid to their local authorities, and they know that they are paying precisely the same as the richest in the land, they may not accept the argument that the richest in the land pay more through the tax system. That will be especially so in those low-spending Tory local authorities where the amount of taxpayers' support coming through will be extremely small, because there will be no need in some of those authorities for there to be any equalising process from central Government. If there is, it will be very little because it will basically be the community charge and the business unified rate.
§ Mr. Howard
If my right hon. Friend is so totally opposed to the introduction of the community charge, can he tell the House why he voted for its introduction in Scotland?
§ Mr. Heseltine
I have no doubt that it was for exactly the same reason as other members of the Cabinet who were just as opposed to the concept of a poll tax and who were faced with the decision of what to do: we recognised the wider political party interests involved.
Is my hon. and learned Friend saying that what he wanted me to do was to go around the country before the election arguing against the policy that he was proposing? That was not what my right hon. and hon. Friends were urging me to do. I do my best to help the Tory party, but 624 I do not believe that I would have been helping it by following the advice that my hon. and learned Friend is apparently suggesting that I should have taken. [HON. MEMBERS: "Oh!"] Before the Labour party starts down the track of assuming that anyone who speaks for any party at any time believes in every single thing that that party says, what about its nuclear disarmament policies? The majority of the shadow Cabinet do not believe in one-sided disarmament policies, but they had no difficulty in advocating them during the election campaign.
The revolution of opportunity that the Government have made their own and upon which they have embarked rests upon the concept of consent. Increasingly, as the decade has advanced, that consent has been forthcoming because the spreading wealth and ownership that it has generated has created its own sense of fairness. Those who excelled were admired because so many in society had themselves gained. The entrepreneur at the top of the pile was seen only as an example to stimulate the newly self-employed. The council tenant saw the attractions of home ownership—even for those who had made significant gains in large valuable homes—and became determined to share in the growing prosperity.
The Conservative party has enabled that consent to be drawn in gathering scale from the community at large. But the assumptions of that fair society are challenged by a local charge, independent of people's resources. The fairness upon which we pride ourselves is affronted. If my hon. Friend the Member for Hampshire, East pushes his new clause to a Division, I shall vote for him and his new clause. I shall do so not from any sense of enthusiasm for the detail, but from an unswerving allegiance to the principles upon which it is based.
§ Mr. Harry Barnes (Derbyshire, North-East)
New clause 1 and clause I need to be seen in the context of the assault on local government and local democracy that has been launched by the Government since they were first elected in 1979. Grants have been cut from 61 per cent. to under 40 per cent. In Derbyshire, grant capping has occurred. In the Bill there are proposals to introduce poll tax capping because, despite all the arguments about accountability, people are not to be trusted to be accountable if they vote for high poll tax levels.
The impact of cuts and capping has been to destroy a system of rating. Rate increases have taken place to provide much needed services. The cuts have enabled the Government to destroy the system and then come along and describe it as unfair and to argue that the poll tax is the only alternative. Rates had a rough and ready justice about them in that, in general, the poorer people lived in poorer property and the rich lived in larger properties. A tax that was related to the size of property, together with other facilities introduced a reasonable fairness to the system. The poll tax is no solution to the problems that have been created.
Local government has also faced the abolition of the metropolitan counties. The county of South Yorkshire was abolished. On one occasion, a fantastic bus service was provided in that area and all sorts of provisions were made to ensure that other services were linked with that transport system. Local government is also faced with privatisation proposals in relation to the Government's plans for contract compliance. All those measures have 625 combined to push local government down. Now the poll tax provisions are to be introduced, and they represent the final destruction of local government and local democracy.
In common with other hon. Members, I wish to discuss the fairness or otherwise of the measure. The poll tax, given certain exemptions and the rebate scheme, insists that, within the same district, everyone should pay the same amount per head. Furthermore, the internal logic and the pressures of the Bill are clearly intended to try to introduce a form of rough and ready harmonisation across the districts so that the level of poll tax charged in different areas of the country will, as a result of the pressures of the legislation and political pressures, be roughly the same. It will be quite possible for us to talk about millionaires in different parts of the country who will be expected to pay the same as people who live in modest circumstances.
The exemptions—they will be dealt with in later amendments—either deal with modest elements in terms of the deserving who need to be considered, or affect prisoners, visiting forces and diplomats. Those categories represent an additional problem in terms of whether they should be added to an exemption list.
My hon. Friend the Member for Rother Valley (Mr. Barron) referred to the press release issued by the Department of the Environment on 13 January. It stated that 53 per cent. of householders would be gainers, but "householders" does not describe the population who will be poll taxed correctly and fairly. In Dronfield in my constituency, the figures in one street have been investigated. They show that 26 households will be gainers and 15 will be losers. However, if we add that figure to the number of those over 18—the electorate—in those houses, it means that there will be 42 gainers and 47 losers.
The whole thing is mad political arithmetic on the part of the Government. They are introducing a measure by which there will be far more losers than gainers among the electorate. In the south-east, 71 per cent. of households will gain, compared with 70 per cent. of losers in Yorkshire and Humberside. The divisions between the north and the south will be exacerbated.
My constituency is within the east midlands, within which 51 per cent. of households will lose—60 per cent. of those in the north-east Derbyshire district area. My constituency is wedged between the Labour-dominated constituency of Bolsover and the Conservative constituency of West Derbyshire. It is split down the middle socially. To the east there is a solid Labour area and to the west there is a strong Conservative area.
Let us consider the seven wards where there will be the major losers and the seven wards where there will be gainers. They are divided entirely on political grounds between Labour and anti-Labour political forces, mainly Conservatives and Independents masquerading as Conservatives. That is an unhealthy situation, which will be reflected in the rest of the country.
It is a serious problem for my constituency. Places such as Renishaw, where the pit is being closed and where 70 per cent. of households will be losers, will contrast sharply with areas such as Brampton and Walton, where 59 per cent. of people will be gainers. It is not healthy to have such figures. The social reality to which they relate will mean some people supporting the measure merely because it will be to their own benefit, whereas others will desperately oppose it because they cannot pay the poll tax and feel justified in not paying it in those circumstances. 626 That will create great social problems as people find that they are unable to meet the bills that they are expected to face.
There are many other inappropriate measures in the Bill, which we shall be debating later, following on from the clauses that we are discussing now. They include the serious attack on civil liberties mentioned by Conservative Members in connection with the new clause and concern the difficulties of obtaining information. However, that is nothing compared with the difficulties in the bureaucratic system set up by registration officers seeking to unearth information. They will seek to unearth information which, first, requires registration.
Secondly, when such registrations need to be checked, immediate reference will be made, initially, to the electoral register. This register will create considerable problems because the information from the MORI survey in Manchester, together with the indications from Scotland, suggest that masses of people will not register for the electoral register as a means of avoiding, or seeking to evade, payment of the poll tax.
§ Mr. Bill Walker (Tayside, North)
Is the hon. Gentleman aware that we have been down that road for some time in Scotland? I held an open meeting in my constituency last Friday, when the hall was packed, and at question time there were only two dissenting voices. People there are beginning to realise how fair is the community charge in Scotland.
§ Mr. Barnes
I am sure that there are many right hon. and hon. Members on this side of the House who have attended packed meetings in Scotland and who have faced an entirely different situation from that which the hon. Gentleman describes. Whatever it may be that is generating public response at particular meetings, there will be situations in which masses of people will begin to disappear from the electoral register.
§ Mr. Brian Wilson (Cunninghame, North)
I had no intention of intervening in my hon. Friend's speech, but one might as well stop the House from being completely misled by the unscientific evidence just presented by the hon. Member for Tayside, North (Mr. Walker). I advise my hon. Friend that, when the Government set out with this legislation, the opinion polls of MORI and System 3 showed that 40 per cent. of those questioned supported it. After two years of the hon. Gentleman's Front-Bench colleagues going forth in an effort to multiply, support for the poll tax in Scotland has fallen to 15 per cent. I am sure that my hon. Friends in England and Wales cannot wait for the Government Front Bench to do a similar job there, because the more people know about poll tax the more they reject it.
§ Mr. Barnes
I thank my hon. Friend for that contribution, which puts the situation in Scotland into proper perspective.
In addition to the attack on civil liberties that I have mentioned, tremendous centralisation is involved in the Bill, which follows from the clause now before the House concerning the need for poll tax provisions. I have already mentioned poll tax capping, which gives greater authority to the Secretary of State. He also has power over rebate levels and the operation of the national business rate. That is a trend in which the Government are involved in 627 education, which gives considerable authority to central Government. When I raised that point during the debate on the timetable motion, I described the Secretary of State as acting like a municipal Mussolini. I did not expect that he would enjoy being so described, but when he came to sum up afterwards, he thought that it was some form of compliment.
The worst element of the centralisation factor is that which begins to use the Bill so that, when it comes to elections, people are given Hobson's choice in respect of how they should act. Labour authorities will have to decide whether they are to protect services or are to take the poll tax down, because it will even hit people entitled to rebates and others in modest circumstances. In that situation, it will be something of a Hobson's choice operated by the system, because Labour authorities must act like Conservative councils or they will find that the pressures on them are unreasonable. People in the electorate will begin to abstain or keep out of the electoral system, which would help to achieve the results that the Government require.
That situation, added to up to 10 per cent. of people disappearing from the electoral register, is one of the most serious ills in this measure. It could be described as disfranchising the people. It is something about which all right hon. and hon. Members should be deeply concerned.
In the House on 28 March, during a debate on community charges in Scotland, the Minister of State said in summing up:The hon. Member for Renfrew, West and Inverclyde (Mr. Graham), in a telling intervention, asked what was the point of all the petitions that he and his hon. Friends have been submitting. As my hon. Friend the Member for Stockton, South (Mr. Devlin) pointed out, they could be a useful source of names and addresses for the community charge registration officer.Later, my hon. Friend asked:Is the Minister saying that from now on the names and addresses on petitions will be used for purposes of gathering the poll tax?The reply was:That is broadly what I suggested."—[Official Report, 28 March 1988; Vol. 130, c. 851.]I hope that the Secretary of State will disown those remarks and state that petitions will not be used in that sense and that duress will not be placed on people signing petitions objecting to legislation.
A fact sheet published by the House of Commons Public Information Office deals with the subject of petitioning. It points out:The right of the subject to petition the Monarch for redress of personal grievances, well known and exercised, probably since Saxon times, was implicitly recognised in Magna Carta; and more explicitly laid down in legislation in 1406 … Parliament itself arguably originated in those meetings of the King's Council which considered petitions. The first known petition to the Lords and to both Houses of Parliament date from the reign of Henry III.
It is a serious interference with the rights of citizens in this country when Ministers suggest that petitioning rights are something that should be used against people who take a line and oppose measures that the Government wish to push forward. The Government's authority should not be used in this way. This legislation introduces serious democratic interference, unless the Government will move 628 away from this particular aspect, both in terms of the electorate, where the franchise is being reduced, and in terms of the traditional rights for petitioning.
§ Mr. Allan Stewart (Eastwood)
I am sure that the hon. Member for Derbyshire, North-East (Mr. Barnes) will forgive me if, in view of the constraints of time, I do not follow his more general arguments, but I should like to comment later on what he said about Scotland.
My hon. Friend the Member for Hampshire, East (Mr. Mates) has made a genuine effort to meet problems which he recognises in the Government's proposals, but the question for the House is whether the alleged benefits would be greater than the consequences of voting for new clause 1. It should be remembered that those consequences will have an affect north as well as south of the border.
The hon. Member for Dunfermline, West (Mr. Douglas), the new militant in Scottish politics, was right in one respect when he said that the situation in Scotland is different. As he said, the Conservative party lost support in Scotland at the last general election. I must tell my right hon. and hon. Friends who may be in some doubt about the point, however, that one of the reasons for that loss of support was revaluation. It was politically cataclysmic, and my right hon. and hon. Friends south of the border are fortunate not to have experienced it.
§ Mr. Butterfill
Does my hon. Friend agree that the very people in Wimborne to whom our right hon. Friend the Member for Henley (Mr. Heseltine) referred would be likely to suffer most from revaluation?
§ Mr. Stewart
I am sure that my hon. Friend is right. It is my experience that revaluation was cataclysmic because it highlighted the unfairness of the rating system.
In support of new clause 1, my hon. Friends have concentrated on ability to pay and the rather different political argument about what the Conservative party has said in manifestos and the like. I think that ability to pay is not just the obverse of inability to pay. It is about the effects on people who are either genuinely unable to pay or have great difficulty paying. In principle, therefore, the ability to pay argument can be met by a rebate system, as is proposed by the Government.
My hon. Friends are right to consider the effects on certain income groups of community charge and general taxation, but that also is in principle a concern of the Government. It is something that they can correct, if they perceive injustices, using the income tax system.
As for the argument about what has been said previously, it is quite clear that what is important is not what may or may not have been said in 1974, when the Conservative party lost the election, but what was said in 1987. The manifesto then was absolutely clear. We said that we proposed to introduce a fixed rate charge. If any people were in any doubt about what that meant, they had only to check the Scottish legislation. It is inconceivable that a system radically different from that introduced north of the border would be introduced in England and Wales. I do not see how anyone who went into the subject could have been in any doubt about what kind of system the Conservative party proposed.
§ Mr. Stewart
No. I have already said that I shall not give way because of the lack of time.
629 The new clause may produce small benefits for certain groups. It has other disadvantages, some of which my right hon. Friend the Member for Chingford (Mr. Tebbit) and others have mentioned. We would introduce a wholly new principle in British taxation the—principle of self-assessment. It works in other countries, but the proposal presents several major difficulties. It is clear that a local authority would need to have a tax reference number to pass on to the Inland Revenue. Moreover, one of the features of self-assessment systems is that they work only when the penalties are pretty severe.
My hon. Friend the Member for Hampshire, East said that he thinks that 99 per cent. of the population are absolutely honest. That is a pretty optimistic view. Self-assessment requires fairly major penalties to be effective. The figure in Eastwood is 101 per cent. Another of the difficulties with a self-assessment system is that forms would have to be filled in on the assumption of a person being in a certain income bracket, but that could change in the year because of changes in earnings and because of variations in mortgage interest rates.
I hope that my right hon. and hon. Friends who are considering voting for the new clause will consider the consequences for Scotland as well as south of the border. It is quite clear that my right hon. and hon. Friends on the Front Bench believe that new clause 1 would lead to an unworkable system and that the Bill would have to be withdrawn. The consequences for Scotland would be chaos. My hon. Friend the Member for Hampshire, East said that he recognised that there would be a need to amend the Scottish Bill, but it is not a Bill, it is an Act which comes into effect next April.
The consequences of accepting new clause 1 for Scotland would be cataclysmic. The hon. Member for Dunfermline, East, who is leading one of the non-payer campaigns, would he encouraged, as would others. I hope that my right hon. and hon. Friends will take account of the implications north and south of the border before they vote.
§ Mr. Dafydd Wigley (Caernarfon)
I note with interest what the hon. Member for Eastwood (Mr. Stewart) said about Scotland. Perhaps there is a lesson to be learned from what happened there. It seems that many of the hon. Members who voted for the Scottish legislation did so without understanding it. Of the 44 signatories to the new clause, 36 have supported the Scottish legislation at some stage. On 5 March 1987, moreover, the Abolition of Domestic Rates (Scotland) Bill was given a Third reading. Fifteen Scottish Tories voted for the imposition of a poll tax. Three months later, more than half of them were unemployed. That is what has happened in Scotland as a result of passing ill-advised and ill-thought-out legislation. Some people are living with the consequences.
We have heard that this is a flagship Bill. We have had one flagship speech. It was not the flagship HMS Poll Tax but the flagship HMS Henley. It was perhaps the most stirring and memorable speech of the debate. Where that flagship is sailing we do not know. What turbulent seas it may be going through we can only guess, but I suggest that we shall look back on tonight's debate as the disappearance of HMS Poll Tax in a stream of bubbles, unmourned and lost in a grey, distant sea.
We support the new clause because it improves the Bill marginally. The Bill is bad and it is better to have a less bad Bill. It is not that we believe that the Bill will be welcome 630 if the new clause is agreed to. We support the concept of a local income tax. Nothing that I have heard tonight and nothing that I have heard from the Minister or others has persuaded me that a local income tax is impracticable. If other countries can do it, we can do it, and it is a fairer system for raising revenue.
Tonight the chickens have certainly started coming home to roost and three points have become clear from the debate. First, the basic principle behind the tax has not won general acceptance on either side of the House. The doubts that we have heard from hon. Members who have spoken and the doubts that have been apparent on the faces of some of those who have not spoken, during speeches by both Back-Bench and Front-Bench Members, have spoken volumes.
We have heard from which stable the Bill came. It came from the Chingford stable, which may well explain a considerable amount about the Bill. It may be known in future as the Chingford vision, but the Chingford poll tax is certainly nothing to be proud of. I should have thought that the silence that greeted the Secretary of State when he finished his speech would have brought the message home to the Government. As Conservative Members will be aware, there is of course a great difference between a poll tax and a flat-rate poll tax. That is essentially what we are debating here.
Secondly, there is a difference between hon. Members in their understanding of the concept of fairness. The term "fairness" has arisen in many speeches and has meant different things to different people. To the Conservative party, it appears to mean that people pay the same price for a commodity or service that they obtain, irrespective Of their ability to pay. The Secretary of State quoted the case of someone on an income of £4,500 as an example of someone who would not be hard done by as a result of the Bill, but the European Community has defined £115 a week as the poverty level. In those circumstances, a married couple without children will certainly be taking the full impact of the Bill.
The present rating system is certainly unfair to single pensioners and widowers, but the poll tax is manifestly more unfair to many more people and that is why it needs to be amended. If it is not amended tonight, we should send a message to another place to say that we are expecting it to do what we have failed to do in Committee and in the Division at the end of this debate.
I do not know whether Conservative Members who talk about fairness and having an even charge for each service really mean that education, public health and the social services should be treated as commodities, like beer, cigarettes or Mars bars. Certainly fairness means something different to many of us and I suspect that that does not just apply to this side of the Chamber. I suspect that the concept of fairness means very much more o many Conservative Members as well. That will be their test when they come to decide how to vote at the end of the debate. That reflects the great division, not just between both sides of the House, but in the approach to fairness in life.
It is ironic to claim that there should be an even charge for local services because the people who receive them do so in even quantities, whether or not that is true. That argument has not been put forward in respect of central 631 services. If we are seriously saying that, on the same basis, the charge for hospitals, roads or security services should be on an even basis, the argument loses its validity.
Thirdly, centralisation is an implicit and inevitable consequence of the poll tax. The right hon. Member for Henley (Mr. Heseltine) rightly put his finger on that when he said that, if services are to be offloaded from local government, there will be a temptation for local government to spend more on the residual services. However, if we follow the logic of the right hon. Gentleman's argument, services should be devolved from the centre to local government and local government should be given the freedom to make the charges that it considers fair for funding those services. Those charges should be within a structure that is sufficiently flexible to allow that and to maintain a basic level of service in all parts of the country.
However, if we go down that road without an amendment—perhaps not the amendment proposed tonight, but a more sophisticated amendment from another place—we shall inevitably have a crescendo of calls for services such as education to be directly funded from the central Exchequer. We have heard some hon. Members talk about that tonight, and, if the Prime Minister had not given an absolute commitment in the Chamber in March last year not to bring education into the central Exchequer, the Government might have moved much earlier in that direction.
It is ironic that we are holding this debate only a few weeks after a Budget in which rich people were given a great helping hand, whereas poor people were given next to nothing; and only a few days after the implementation of the social security changes, which have hit poor people even more. We have seen what has happened in Scotland. In Wales, too, with lower average wages, and where the rates are at present relatively low compared with many areas in England, there may be a massive reaction against the tax. Certainly there is no mandate for the changes in Wales, any more than there is in Scotland.
This is a flagship debate. It may be rather late in the day to be looking at the central principle of the legislation but, my goodness, it is much better to recognise the inherent weakness of the legislation even at this late stage than to put on the statute book an Act that will be unworkable and unfair and which will cause a massive reaction throughout these islands.
§ Sir Peter Hordern (Horsham)
My right hon. Friend the Member for Henley (Mr. Heseltine) made a powerful speech against the community charge. I suspect that he would have made an even more powerful speech against the idea of a local income tax and a yet more powerful speech against the old rating system. I was unable to detect in any of the words of my right hon. Friend what proposal he might favour in regard to local government expenditure.
My right hon. Friend did one thing clearly. He damned with faint praise—although I understand that he will support it—the new clause tabled by my hon. Friend the Member for Hampshire, East (Mr. Mates). The House will recollect that my hon. Friend the Member for Hampshire, East said that he supported 90 per cent. of the Local 632 Government Finance Bill. It was quite clear that my right hon. Friend the Member for Henley supported little or nothing of the Bill.
My hon. Friend the Member for Hampshire, East said that he was prepared to have his new clause looked at as it was. He said that he thought it was workable and right in principle. I know that some of my right hon. and hon. Friends believe that, no matter what the finer points of it, the principle is what matters. I can well understand that point of view, because I was attracted by the idea of a graduated charge when my hon. Friend first mentioned it. However, the more I have looked at it, the more convinced I have become that not only would it be unworkable but it would be unfair in practice as well as in principle. I shall tell the House why.
First, I take it that we are all agreed that the Government's concessions last Thursday have brought them into line with the proposals of my hon. Friend the Member for Hampshire, East and that at least the lower paid have rebates that are more satisfactory than they were. I do not think that there is any difference among hon. Members on that point.
Sir Peter Horden
I will not give way, because I have little time. If I had more time, I should be delighted to give way.
The difference in the practicality of the new clause is on the higher charge for higher taxpayers. My right hon. Friend the Member for Henley said that there is little in that. He said that all that is involved is an extra £110 per head for the rich and that that will not cause much difficulty. I can well understand that point of view. What is not simple—this was mentioned earlier—is that there are some people on the margin. They do not know whether they will be in the higher tax bracket or not. That is not a small number. My right hon. Friend the Member for Henley suggested that few people might fall into that category.
I have made some inquiries of the Inland Revenue. I do not know whether my hon. Friend the Member for Hampshire, East consulted the Inland Revenue among all the other civil servants that he consulted. My inquiries lead me to believe that there are as many as 500,000 people who each year change from being in the category of a standard rate taxpayer to being a higher rate taxpayer. They can do so by any manner of events. They may lose their job, change their occupation or merely have a rise.
It is all very well for my right hon. Friend the Member for Henley to say that it is simply a matter of negotiating with the boss. We are talking about 500,000 people, by whom, according to my hon. Friend the Member for Hampshire, East, a form of self-assessment will be made. It will be checked by local authorities with the Inland Revenue. As has been said, anyone who does the self-assessment has to face the sort of inquiries that take place in the United States. I can assure the House that, if that were to be the case, it would be a much more rigorous examination than anything that happens now. It is an impractical suggestion.
What would be the practical effect if my hon. Friend's new clause were to come to pass? I understand that it would raise £200 million and that by redistributing that—as my hon. Friend the Member for Hampshire, East, said, it is not extra money—the rich would pay £110 extra 633 and the poor would be asked to provide £5 less. All those mountains are to be moved so that the poor will pay £5 a year less before expenses and charges. We are talking about a new clause that, for those paying at standard rate, will make a difference of perhaps £3 or £4 a year, which is hardly a great matter on which to go to the stake.
It is important to consider some practical effects of the new clause. Some of my hon. Friends suggested earlier—my hon. Friend the Member for Ealing, Acton (Sir G. Young) did so—that a form of local income tax would be more to the point. Indeed, that is what the Social and Liberal Democratic party has suggested in its amendment. Conservative Members who believe that should join the Social and Liberal Democratic party in voting for new clause 7.
New clause 7 would destroy accountability. In however poor a form, the community charge has some effect with regard to accountability. All the faults with a local income tax that have been mentioned in successive White and Green Papers still remain. I am not saying that the community charge is perfect, but there is no perfect form of charge.
My hon. Friend the Member for Hampshire, East suggested that his measure would at least help the poor. The practical effect of the new clause is that rich people living in the south of England would pay a higher charge. He suggested that the extra money thus derived would mean that standard ratepayers living in that area would pay less. The total effect would be that the community charge in rich areas would decline, whereas in poor areas it would increase: in other words, the very reverse effect that my hon. Friend the Member for Hampshire, East wants.
If my hon. Friend wants to address the problem, he should try to ensure that poor people are helped by the rate support grant. I believe that this is a very important matter, because in successive years—indeed, ever since the Government took office in 1979—the central plank of the Government's policy has been to reduce rate support grant as a proportion of local government expenditure. There may have been a good case for that in the first two or three years, but if anybody wants to impose difficulties on local authorities and the poorest people they have only to reduce rate support grant, which my right hon. Friend the Member for Henley did more than anybody else. I believe that that will he the test of the Government in future years.
My right hon. Friend the Secretary of State has at least kept the rate support grant steady. If it declines as a proportion of the whole, we shall no longer be able to claim that the rich, through taxation and the operation of rate support grant, pay 15 times as much as the poor. It is important that, as a proportion, the rate support grant remains at least as large as it is today, and I hope that my right hon. Friend will accept that proposition. I am sure that it will not be an easy measure to get past the Treasury.
In the past, when a reduction in the rate support grant has been proposed, and when some of its effects on local authorities, not on the needs element or their ability to pay, have been seen, some of my right hon. and hon. Friends have voted against it. There cannot be a fixed-rate community charge with a reducing element of rate support grant. I do not believe that that can be tolerated. If it is argued, perfectly validly, that extra support for local authorities should be given through the rate support grant, as envisaged, the high proportion of support given at present must at least be maintained.
634 I am sure that the motives of my hon. Friend the Member for Hampshire, East in moving the new clause were admirable. I believe that as it stands it is fatally flawed in practice and principle. It follows as a necessary collorary that my right hon. and hon. Friends, In considering the proportion of rate support grant, should remember what has been said in the debate and act accordingly.
§ Mrs. Fyfe
We have heard from the hon. Member for Horsham (Sir. P. Hordern) the extraordinary proposition that hon. Members should vote against new clause 1 because, if people assessed themselves for the poll tax, there would be closer examination of that self-assessment than there is for the national income tax. The country will listen with interest to that argument. Many millions of honest people who have no control over their tax because they pay through the PAYE system will join me in saying that anyone who honestly declares his income for tax purposes has nothing to fear from such a close examination and it is only right that people should pay what they can afford to pay and what the law requires them to pay. That argument is an irrelevance in this debate.
Many Conservative Members have clearly shown that they care a lot about the fact that people on low incomes will pay the same as the richest in the land. The duke arid the dustman have been contrasted. We have learned with great interest that the Secretary of State believes that the dustman should pay the same as the duke. That will resound in Conservative ears for many elections to come. It so happens that the House of Commons does not represent dukes—not yet, anyway—but there are hundreds and thousands of dustmen who will listen to that argument with interest.
The Low Pay Unit, which has been described by the Economic League as a subversive organisation, has produced much interesting information about pay. It has pointed to the appalling fact that poverty among the low paid is worse than it was more than 100 years ago. People on low pay are worse off relative to the average in 1886. Consider how much work was done by social investigators in the late Victorian years and the state of poverty then, when people lived in appalling conditions. It will happen all over again as society increasingly criticises what is happening at the Government's hand.
The bottom 10 per cent. in the earnings league earned 68.6 per cent. of the average wage in 1886, compared with 64.4 per cent. in 1987. It is appalling that 100 years of parliamentary Government have put the poorest paid in a worse position than they were 100 years ago; yet, instead of recognising that, the Government have been bent on demanding that the lowest paid—those who bring home £53 a week—pay the same as the richest. There are 9.4 million workers who earn less than the decency threshold of 68 per cent. of average earnings laid down by the Council of Europe. Forty-four per cent. of the total work force is affected—an awful lot of people, who will oppose this poll tax.
I have one last word of warning about the hon. Member for Eastwood (Mr. Stewart). Hon. Members should not pay attention to his attempt to pull 'the wool over their eyes. Any Conservative Members deceived into thinking that in the case of the Scottish legislation they were voting 635 against revaluation, and not the poll tax, will live and learn. I look forward to the day when Conservative Members do.
§ Mr. Jeff Rooker (Birmingham, Perry Barr)
In many ways, this has been a unique debate. In my 14 years service in the House, this is the first time that I have seen two Conservative Members called in succession who did not even rise to speak. That must be a unique experience for all hon. Members. It is a new technique, from which my hon. Friends will attempt to learn.
We all pay tribute to the hon. Member for Hampshire, East (Mr. Mates) for the way in which he introduced the debate. This has been a general debate that goes to the heart of the Bill. Hon. Members have not bothered too much with facts, but have dealt with principle, because that is what the new clause is all about. It goes to the heart of the Bill. The new clause will undermine the flat-rate nature of the poll tax; that is its whole purpose. There are several ways of doing that, but not all of them are available for debate because of the guillotine.
Many people outside the House are bewildered. At a meeting yesterday afternoon, one of my constituents said to me, "I do not understand. If twice as many people are to pay the same grand total of local government taxation under the poll tax, how is it that me and my wife in our semi are going to pay more in poll tax between us than we pay in rates?" He said, "If 35 million, not 18 million, will be paying how come we are going to end up paying more?" The answer is that the rateable value of his house is less than the average. As instanced by hon. Members on both sides of the House, he is the very kind of person who will end up paying more for his household in poll tax than he pays in rates, and there are many such people in many of our constituencies.
From day one—even in the Green Paper—we were told that one of the reasons for the introduction of a flat rate poll tax was universal accountability, for all the world as though members of households are unaware and do not contribute to local government at the moment. They do contribute. Everybody knows that they contribute. Hon. Members on both sides of the House have said so.
I did not think that I should be able to pray in aid the leader of the Conservatives on Birmingham city council, but in a recent letter to The Birmingham Post, Councillor Reg Hales, who complained that I had used figures dealing with individual losers rather than households, said:Mr. Rooker complains that I refer to households in assessing the effect of the charge on Birmingham residents, but isn't that how most families work out their expenditure —as a family, not as individuals£That is exactly our point. The 18 million ratepayers have 12 million spouses. Already more than 30 million adults contribute directly to the system of local government taxation. It is a falsehood to claim that they do not.
Over the weekend, I honestly thought that we had not been given a concession on Thursday. Given that we were to have a big debate on Monday, I thought, "On Friday, or Saturday, they will do the sums. They will work out that it is not a concession at all." I warned my hon. Friends, "They will have something bigger still on Monday. We have to be prepared for the real concession." Thursday's so-called concession was not worth a row of beans. What a way to deal with the flagship of the Government's legislation.
636 The press release made no mention of the cost of the concession. "An extra million people on rebate, and yet no figures to show the public expenditure cost," I said to the Prime Minister. Of course there were no figures. That cost will be £130 million, and neither the Prime Minister nor the Secretary of State had the guts to tell the House that a ministerial decision had already been made to claw back the £130 million in 1989–90 by changing the tapers in housing benefit.
That means that the Government intend to claw back the cost of the concession in the year before the poll tax is introduced. They did not even have the guts to tell us that. In the correspondence that we have read from Paul Grey, Roger Bright and Deborah Lamb, it is all there for everyone to see. We have had the Budget, we have had the social security and pension changes, and now we have the poll tax itself. To come along after all that with a so-called concession that is to be paid for by further cuts in benefit to the very low-paid people whom the Government claim they are trying to help is nothing short of damned outrageous.
The Government will prattle on about the gains. Let us look at the figures. The Government have never published a set of rebate tables. They say that they cannot do it. They have never published figures about income or the poll tax or about what the rebates would be. The Library can do it, but not once during nearly 160 hours in Committee did any of the three Ministers change any of the figures produced by the statistical section of the Library about the community charge rebates paid for last December. The Government could have worked them out on the basis of knowing that they would be based on the housing benefit scheme.
What happens after the so-called concession to protect the flagship£ It is still the case that in not one local authority except Camden will a student nurse obtain a penny in rebate. That is a measure of the concession on rebates. Student nurses receive £5,000 a year gross. That is £76 a week net, and the amount of poll tax payable will be higher if the Government meet the nurses' pay claim. Perhaps student nurses in Camden will not get a penny either. That is the measure of the rebate concession.
A couple with young children will receive no rebate if they earn over £130 a week—an income that is well below average earnings—and a couple with no children will receive no rebate if their earnings are over £100 a week. Those are the figures that will apply under the average poll tax authority, and we know that the tax payable will be £224, near enough £5 a week per adult.
A couple with a net income of £100 per week will be expected to pay £10— that is, 10 per cent. of their net income—in local authority taxes. The same rate applies to the worker under 25 years of age who will receive no rebate once his earned net income goes above £50 a week. His poll tax will be £5, or 10 per cent. of his income. Conservative Members say that that is OK, that the expenditure pattern of such people is different from the pattern of the well off and that they do not need to spend. They do not have the money to spend. Conservative Members talk as if such people had spare coppers to pay the poll tax. They say that the system is OK for the low-paid. A couple on £100 a week are low-paid and the Government take the view that it is all right for such people to pay 10 per cent. of their net income in poll tax.
The Government have attacked the hon. Member for Hampshire, East (Mr. Mates) and talked about a massive 637 earnings trap for higher rate taxpayers. For people on net incomes of over £400 a week, the poll tax payments will not be 10 per cent. of their net earned income. It will not be even 8, 6 or 5 per cent. Only 1.6 per cent. of their net income will be paid in poll tax. That compares with 10 per cent. for a couple on £100 a week. That is a measure of what we are dealing with.
§ Mr. Rooker
No, I shall not give way, because there is no time. The hon. Member voted for the guillotine, as did a majority of his hon. Friends. They have curtailed the debate and have prevented the Opposition from debating new clause 5 and new clause 7. There was no genuine debate on new clause 2, which was tabled by the hon. Member for Ealing, Acton (Sir George Young). The guillotine has meant that we have to restrict debate to new clause 1. When the guillotine falls it will not even be possible under the rules approved by the Government for hon. Members to vote for any of the alternatives. New clause 1 is our only option. Not even amendment (d) to the new clause or any of the other new clauses can be voted upon.
The Minister will have plenty of time to deal with interventions. He will have to come up with another concession, because Thursday's concession will not save the flagship. We know that it will be paid for by the recipients of benefit and that it is not worth much to the low-paid. As the right hon. Member for Henley (Mr. Heseltine) said, it destroys at a stroke the idea of universal accountability, as does the very concept of a rebate. About 9 million people might benefit, but 26 million adults will pay a flat rate charge unrelated to their income. That must be unfair.
If anything has come across in the debate, even from Government supporters, it is the question, which Tory manifesto counts—the 1974 or the 1987 one? One Conservative Member as good as told the hon. Member for Hampshire, East that although the 1974 manifesto referred to fairness and to the ability to pay, the 1987 manifesto did not, and as the electorate voted on that manifesto, we were stuck with it.
The Tories do not want to know about the concept of ability to pay, because it was not in their last manifesto. It was in their manifesto in 1974 when they first pledged to abolish the rates, but now that the time has come to put that pledge into practice, it is convenient to forget about the ability to pay. That is grossly dishonest in a parliamentary democracy that is founded upon the concept of a contract between the winning party and the electorate.
§ Mr. Rooker
I am not giving way to that hon. Member —[HON. MEMBERS: "Give way."] No.
The legislation is about local government taxation. I accept that it is also about the grant system and business rates, but the central argument is about local taxation. It is not a tax bill or a money Bill in the conventional sense of a Finance Bill. During the early stages in Committee, we sought a ruling, through the Clerks, from the experts in the House on what would happen if a Member who was not a member of the Government sought to move an amendment that would introduce a new tax—something 638 that cannot be done in a Finance Bill. We were told that that would be perfectly in order in the House of Commons because, as the money did not form part of the Consolidated Fund, we were not bound by those rules.
We were also advised that the other place operated under its own rules. We wanted to know what would happen if, during the final stages in this House, a hint was given that perhaps the other place might make some change. We were told that we could not be sure of that because this House does not control the other place. 1:n fact, we now have further and better advice from the Public Bill Office. Any Conservative Member who thinks that he can cop out tonight because the experts along the Corridor—those who know about local government and fairness—may force the Government to think again, is wrong.
I wish to quote one brief paragraph about financial privilege as it relates to the Bill:But there are some types of amendments in respect of which the Commons cannot waive their privilege because the Speaker is directed by Standing Order to prevent their consideration by the Commons by negativing them forthwith. Such amendments are said to constitute 'intolerable' breaches of privilege. An amendment to change the nature of the community charge to local income tax would be 'intolerable'. So would an amendment to introduce 'banding' of the charge. The latter would be intolerable because the Commons have fully debated and decided against `banding'.
There is no Tory long-stop along the Corridor. The decision must be made tonight, and the guillotine ensures that that will happen at 10 o'clock. It is the only way to force the Government to think again—that is what the passing of new clause 1 would achieve. It is not a perfect mechanical tool that has had expert technical drafting. Everyone knows the consequences that will flow for the remainder of the legislation. However, because the Government have a majority, the guillotine motion could be rewritten and further proposals could be delayed for a couple of days. We could pass all the consequential amendments without any difficulty. There is nothing standing in the way of that.
There is no time to do that tonight, but I tell Conservative Members that there will be no time in 1990 when poll tax bills start dropping through doors. There will be no time whatsoever. It will be no good saying, as they said last week in respect of social security, "I wish that we had dealt with the matter in a bit more detail in 1986 to stop this mess-up in 1988." Tonight is the time to change what will happen in 1990. We should get on with it.
§ Mr. Howard
The most striking feature of the debate has been the extent to which all the ideas—and all the constructive thinking—have come from the Government Benches. Opposition Members are bereft of any fresh thinking on the matter. Their opposition has been described as vacuous by no less a person that the Deputy Leader of the Opposition himself. They will go into the Division Lobby in support of the new clause, if my hon. Friend the Member for Hampshire, East (Mr. Mates) presses it to a Division, not because they care tuppence about the new clause—the Leader of the Opposition himself has made that clear—but simply because they see in it a device for embarrassing the Government. It is a display of cynicism that is entirely characteristic of the Opposition.
At the heart of the debate has been the ability to pay. That phrase clearly means different things to different people. For example, the present rating system is poorly 639 related to ability to pay. Nearly half the houses in this country with above average rateable values are occupied by households with below average incomes, and nearly half the households with above average incomes live in houses with below average rateable values. The system that we are sweeping away with the proposals enshrined in the Bill scores badly indeed on the criterion of ability to pay.
The proposals that we seek to put in place of that discredited system are much better related to ability to pay. Families with a net income of up to £150 a week will, on average, pay less in community charge than they pay in rates. Many of the poorest sections of our community—80 per cent. of single pensioner households and 80 per cent. of single-parent families—will pay less in community charge than they pay in rates. Of course, their position will be significantly improved by the additional rebates that were announced last week by my right hon. Friend the Secretary of State.
§ Mr. Simon Hughes
Will the Minister confirm that, despite last week's announcement about rebates, in every area in which the poll tax will be higher than average, no matter what their income may be, all individuals will have to pay something, whereas now some get a complete rebate and pay nothing at all?
§ Mr. Howard
The hon. Gentleman is as wrong as he usually is about such matters. People now have to make a contribution towards rates, regardless of their incomes.
As a result of the proposals by my right hon. Friend the Secretary of State, those who are least well off at the bottom end of the income scale will have a community charge that is entirely related to ability to pay. That is where it matters most. That is where it will fully apply.
As my right hon. Friend the Member for Aylesbury (Mr. Raison) said in an article in The Times last November,We have to be absolutely sure that…the not quite poor do not get a raw deal.I agree with my right hon. Friend. The improved rebates announced by my right hon. Friend the Secretary of State will fully meet that requirement.
I appreciate that many of my hon. Friends would like to see that principle of ability to pay extended throughout the income scale. Taking the system as a whole, as my right hon. Friend has explained, that is indeed the case. The community charge will account for only a quarter of the cost of local authority services. The top 10 per cent. of households by income will pay 15 times as much towards the cost of local authority services as the bottom 10 per cent. So, in that real sense, the rich will pay far more than the poor.
But some of my hon. Friends say that that is not enough. In their view, the community charge itself must be related directly across the whole range of incomes to the principle of ability to pay. There is only way in which that could be achieved. I hope that my hon. Friends are in no doubt about it. That can only be done through the introduction of a local income tax.
§ Mr. Howard
No, I am not giving way to the party that has made no constructive contribution to this debate at all.
640 I know that one or two of my hon. Friends are in favour of a local income tax, but I suspect that the overwhelming majority of them are not. I know that my hon. Friend the Member for Hampshire, East says that he is not. According to the Deputy Leader of the Opposition, the Labour party may wish to combine local income tax with a property tax, but even that party does not put forward the proposition that local income tax alone should pay the cost of local government. Indeed, Opposition Members were warned in the clearest possible terms against doing so by the hon. Member for Blackburn (Mr. Straw)—at the time Opposition spokesman on local government matters —when he advanced no fewer than 10 separate reasons why a local income tax would be a bad way of paying for local government.
My hon. Friend the Member for Hampshire, East has sought to avoid the dangers of a local income tax, because he recognises them. He has done his best to produce a scheme which relates the community charge more closely to the ability to pay, while avoiding the worst dangers of a local income tax. It is no fault of my hon. Friend that his best endeavours have been unsuccessful. He has, in fact, failed in the task that he has set himself, because it is simply impossible to produce a system which seeks to relate payment to ability to pay across the whole range of incomes without introducing a full-blown local income tax.
The defects in my hon. Friend's proposals have been referred to more than once—[Interruption.]
§ Mr. Howard
The defects in my hon. Friend's proposals have been referred to more than once during the debate. The fact is that, as a person stepped from one band to another for a trifling increase in income, he or she would face an extra bill for the community charge which could run into hundreds of pounds a year. That is not simply the case when one moves from the standard rate to the higher rate of income tax. That would also be true—contrary to what was said by my hon. Friend—when one moves from a position of not being liable to income tax at all to becoming liable to it for the first time. That is not an accident. It is not a superficial problem that can be ironed out with a few more Green Papers or White Papers. It is absolutely fundamental to any banded charge proposal.
§ Mr. Mates
I am sorry to resurrect this, but there is a fundamental point, which my hon. and learned Friend has already stated, which he must in all honesty repeat. There is a step at each of these stages. Is it not a fact, and has he not acknowledged, that if the House were to adopt my new clause and graft it on to the Government's rebate schemes, not one person in the lower paid bracket would be worse off under my scheme than under his?
§ Mr. Howard
As my hon. Friend agrees, up to the point where they reach the step in his scheme, that is correct. However, that does not do away with the trap that is inherent in his scheme. It remains a fact that, as one reaches that trap, for a trifling increase in income, one 641 would become liable to pay up to hundreds of pounds more in community charge—[Interruption.] Hon. Members are wrong
§ Mr. Howard
I shall give way to my hon. Friend in a moment.
That is not the case under our scheme. Under our scheme, for every extra pound in income, one cannot lose any more than 15p. However, under a banded charge, including my hon. Friend's version, one can end up losing several hundred pounds.
§ Mr. Mates
I am sorry to interrupt my hon. and learned Friend again, but this is such a fundamental point that we must at least make sure that the whole House understands it. If my scheme is adopted, there is a moment when one stops being entitled to pay only half the community charge and becomes liable to pay most, if not all, of it, but at that point—[Interruption.] Hon. Members should wait because this is the interesting point that we must get across. It is when one has lost that half entitlement that one returns to the point on the line at which the Government would place that same person. Therefore, that person would not be one penny worse off.
§ Mr. Howard
That is not necessarily the case. It depends upon the precise application of the rebate at that point. There will be many cases in which the rebate will not apply and someone will come into tax for the first time and have to meet the full community charge. They will find themselves with an additional liability of several hundred pounds. That is an inescapable consequence of my hon. Friend's case.
My hon. Friend justifies his proposal on the basis of what he regards as its presentational advantages compared with the Government's scheme. I certainly do not relish explaining on the doorstep or in my surgery to an irate contituent whose bill had gone up by hundreds of pounds a year because his income had increased by a trifling amount that that was a price that he had to pay in order to get a scheme that was more related across the range, so-called, to ability to pay. I would not expect any sympathy from any constituent of mine in receipt of such advice, and I do not think that I would be alone in that situation—[Interruption.]
§ Mr. Speaker
Order. This has been a very good-tempered debate until now. I ask the House to give the Minister a fair hearing.
§ Mr. Howard
My right hon. Friend the Member for Chingford (Mr. Tebbit) referred to several other anomalies that would arise. Some were pointed out in a question that was put to my hon. Friend the Member for Hampshire, East by my hon. Friend the Member for Stevenage (Mr. Wood) about the position of non-working wives. My hon. Friend the Member for Hampshire, East dealt with that by saying that only non-working wives would pay the community charge at the same rate as their husbands. However, I fear that that inescapably leads to further anomalies.
I shall give the House the figures. Under the proposal of my hon. Friend the Member for Hampshire, East, in the case of a wife with no income who is married to a higher-rate taxpayer, both the higher-rate taxpayer and his 642 wife would pay 150 per cent. of the community charge. If the wife has an income of £ 10,000 per year of her own, and is married to a higher-rate taxpayer, although the husband would continue to pay 150 per cent. she would pay only 100 per cent—less than she would pay if she were a non-working wife. If she has a still lower income, she might end up paying 50 per cent. of the charge while her husband continued to pay 150 per cent. That kind of anomaly is bound to arise under my hon. Friend's scheme.
The same applies to the other difficulties that have been identified. With the best will in the world, it is no use my hon. Friend saying, "Take my scheme away; look at it again; all I am interested in is the principle." The unavoidable fact is that, if one wants to relate a charge or tax, call it what one will, to income, one has to have an income tax that avoids the steps, the bands and the traps which are such an inherent feature of my hon. Friend's scheme.
My right hon. Friend the Member for Henley (Mr. Heseltine) made a powerful speech; but it was a powerful speech against the whole principle of the community charge. It was certainly not a speech in support of the new clause tabled by my hon. Friend the Member for Hampshire, East. My right hon. Friend the Member for Henley talked about accountability. He suggested that the Government's scheme had lost accountability because of our rebates. I do not agree with my right hon. Friend about that, but, if he is right, that problem would he made much worse under the provisions of my hon. Friend's new clause.
My right hon. Friend mentioned the sense of grievance of a person who was above the rebate level and no longer entitled to it. No doubt he would be aggrieved, but how much greater would be the grievance felt by someone who encountered the traps inherent in my hon. Friend's scheme?
§ Mr. Heseltine
Why would anybody feel aggrieved at encountering a trap from which he did not lose any money?
§ Mr. Howard
I have made it perfectly plain that such people would lose hundreds of pounds for the sake of a trifling increase in income—[Laughter.] Hon. Members may mock, but that is the fact of the matter. The Leader of the Opposition mocks, but he recognised that aspect of my hon. Friend's scheme in its early days.
Finally, my right hon. Friend the Member for Henley gave the House an amusing example from Dorset, which he rightly said could be not be regarded as a high-spending council whose irresponsibility we wish to curb. He is right about Dorset county council, but the community charge figures he gave were wrong. He referred to a house in Wimborne with a rateable value of £100, but he did not say that the rate bill now would be £195 and that the community charge would be £173—[Interruption.] Yes, per person. My right hon. Friend gave the figure of £516 for a couple living in Wimborne, and that is nearly £200 more than the community charge.
§ Mr. Howard
No, I want to refer—[HON. MEMBERS: "Give way."] No, I must leave time for my hon. Friend the Member for Hampshire, East and I want to deal with—[Interruption.]
§ Mr. Howard
I want to deal with an important point made by my right hon. Friends the Members for Brighton, Pavilion (Mr. Amery) and for Woking (Mr. Onslow). They suggested that the impact of the community charge could be alleviated by increasing the rate support grant—the proportion of local government spending paid by central Government. My right hon. Friend the Member for Henley clearly disagreed with them and expressed a different view, so there is no consensus on that important question. As my right hon. Friend the Secretary of State said, the mechanism for an increased contribution from central Government and for more money in rate support grant is provided in the Government's proposals. In future years we shall no doubt have to consider how that mechanism is to be used.
I can well understand the desire of my hon. Friends to find a system of paying for local government that will meet all their anxieties, but that holy grail does not exist. If they want a local income tax—and I understand their view —but I cannot give it to them, neither will the scheme of my hon. Friend the Member for Hampshire, East. If they want to keep the existing rate system, as one or two do—and I understand their view—but I cannot give it to them, neither will my hon. Friend's scheme.
But if they want a new and improved system of paying for local government that will provide the British people with the advantages of fairness and accountability, without the anomalies, uncertainties and, yes, injustices of all other proposals, including that of my hon. Friend, the only way forward is the way that is enshrined in our manifesto.
How dare the hon. Member for Birmingham, Perry Barr (Mr. Rooker) talk about dishonesty and our breaking faith with the electorate? Our manifesto sets out in detail the proposals for a community charge, on which we fought and won the general election, and those proposals are enshrined in the Bill. It is for all those reasons that I urge my hon. Friends to reject the new clause.
§ Mr. Mates
With the leave of the House, may I make a few comments in reply. Of course I agree with the Minister that it has been a constructive debate, and I do not want it to be spoilt by the only difference of fact that we have had during four months of debate, private and public. During those four months, it has been my hon. and learned Friend's position that, although he did not like it and thought that it was flawed, my plan did not leave any of the lower paid a penny worse off than his did. When I put that to him tonight, he said that it was not necessarily so. That is a world of difference. I am sure that he did not want to mislead the House, so I want to know whether he agrees that if my new clause was carried—I know that there is a jump, and the price that must be paid—no one would be worse off than he would be under his scheme. I would like a quick yes or no answer, because I should hate us to end on any terms other than that.
§ Mr. Howard
My hon. Friend knows the answer. Until one reached that trap, it is true that no one would be worse off. But when one reaches the trap, as one's earnings increase by a trifling amount one can become liable to several hundreds of pounds extra community charge. That is the fact of the matter, and it is impossible to escape it.
§ Mr. Mates
But it is the same amount of liability as exists under the Government's scheme—my hon. and learned Friend does not deny that—which means that they would be no worse off under my scheme.
I will not pursue that matter, because, as we go into the Lobbies very soon now, I believe that this vote will not be about the minutiae of the new clause. Nor—I say this with all the passion that I feel—is it about wrecking the Government's Bill. We can still proceed perfectly well with the community charge on a banded basis. That is what many people have been advocating inside and outside the House, and most recently from the heartland of Conservative support has come yet one more plea to reconsider the matter.
That is why I introduced the new clause, and if a message is sent from the House tonight that we are not entirely satisfied with this aspect of the Bill, I hope that the Government will listen. Until now, they have been listening with a little reluctance. We have a long way to go before the Bill becomes law, and many more changes will be made. Many changes will be made to the Bill this week, and no doubt many changes will be made, not by their Lordships but by the Government, in another place. Complex legislation changes constantly in the light of experience, research and what people are told will be the consequences that no one could have foreseen.
There is no doubt that that would happen, too, if we were considering the principle of a banded community charge. That is why I have said all along that if they would only concede the principle, I should be content to leave the details to a Government who get most things right—[HON.MEMBERS: "It cannot be donel Hon. Members say that we cannot do it. Last Monday, someone said that we cannot do anything to make the position better. Then 30 of my hon. Friends had signed the new clause. On Tuesday, 40 had signed, but nothing could be done. By Wednesday, 51 had signed, and something was done on Thursday. I am sorry to have to say that, but it is incontestably the truth.
One does not become more or less disloyal— if that is the word that people wish to use—simply by pressing one's point a little harder. The question is whether one's point is sound. Some of us believe that the point is sound. Some of us believe that the matter should be reconsidered and some of us believe that if it was possible to meet the point, the Bill would be the better for it. If it was met, all of us could go about our soulless task in two years' time and say, "It may not be popular, because no tax is, but we have done our damnedest to make it fair."
§ Question put:—
§ The House divided: Ayes 295, Noes 320.648
|Division No. 262]||9.59 pm|
|Abbott, Ms Diane||Barnes, Mrs Rosie (Greenwich)|
|Adams, Allen Paisley N||Barron, Kevin|
|Adley, Robert||Battle, John|
|Aitken, Jonathan||Beaumont-Dark, Anthony|
|Allen, Graham||Beckett, Margaret|
|Alton, David||Beggs, Roy|
|Anderson, Donald||Beith, A. J.|
|Archer, Rt Hon Peter||Bell, Stuart|
|Armstrong, Hilary||Benn, Rt Hon Tony|
|Ashdown, Paddy||Bennett, A. F. (D'nt'n & R'dish)|
|Ashley, Rt Hon Jack||Benyon, W.|
|Ashton, Joe||Bermingham, Gerald|
|Banks, Tony (Newham NW)||Bidwell, Sydney|
|Barnes, Harry (Derbyshire NE)||Biffen, Rt Hon John|
|Blair, Tony||Godman, Dr Norman A.|
|Blunkett, David||Golding, Mrs Llin|
|Boateng, Paul||Goodhart, Sir Philip|
|Boyes, Roland||Gordon, Mildred|
|Bradley, Keith||Gorst, John|
|Bray, Dr Jeremy||Gould, Bryan|
|Brown, Gordon (D'mline E)||Graham, Thomas|
|Brown, Nicholas (Newcastle E)||Grant, Bernie (Tottenham)|
|Brown, Ron (Edinburgh Leith)||Griffiths, Nigel (Edinburgh S)|
|Bruce. Malcolm (Gordon)||Griffiths, Win (Bridgend)|
|Buchan, Norman||Grocott, Bruce|
|Buchanan-Smith, Rt Hon Alick||Hampson, Dr Keith|
|Buck, Sir Antony||Hardy, Peter|
|Buckley, George J.||Hargreaves, Ken (Hyndburn)|
|Caborn, Richard||Harman, Ms Harriet|
|Callaghan, Jim||Haselhurst, Alan|
|Campbell, Menzies (File NE)||Hattersley, Rt Hon Roy|
|Campbell, Ron (Blyth Valley)||Hayhoe, Rt Hon Sir Barney|
|Campbell-Savours, D. N.||Haynes, Frank|
|Canavan, Dennis||Heath, Rt Hon Edward|
|Carlile, Alex (Mont'g)||Heffer, Eric S.|
|Cartwright, John||Henderson, Doug|
|Clark, Dr David (S Shields)||Heseltine, Rt Hon Michael|
|Clarke, Tom (Monklands W)||Hicks, Robert (Cornwall SE)|
|Clay, Bob||Hinchliffe, David|
|Clelland, David||Hogg, N. (C'nauld & Kilsyth)|
|Clwyd, Mrs Ann||Holland, Stuart|
|Cohen, Harry||Home Robertson, John|
|Cook, Frank (Stockton N)||Hood, Jimmy|
|Cook, Robin (Livingston)||Howarth, George (Knowsley N)|
|Corbett, Robin||Howells, Geraint|
|Corbyn, Jeremy||Hoyle, Doug|
|Cormack, Patrick||Hughes, John (Coventry NE)|
|Cousins, Jim||Hughes, Robert (Aberdeen N)|
|Cox, Tom||Hughes, Roy (Newport E)|
|Critchley, Julian||Hughes, Sean (Knowsley S)|
|Crowther, Stan||Hughes, Simon (Southwark)|
|Cryer, Bob||Hume, John|
|Cummings, John||Illsley, Eric|
|Cunliffe, Lawrence||Irvine, Michael|
|Cunningham, Dr John||Janner, Greville|
|Dalyell, Tam||John, Brynmor|
|Darling, Alistair||Johnson Smith, Sir Geoffrey|
|Davies, Rt Hon Denzil (Llanelli)||Johnston, Sir Russell|
|Davies, Ron (Caerphilly)||Jones, Barry (Alyn & Deeside)|
|Davis, Terry (B'ham Hodge H'l)||Jones, leuan (Ynys Môn)|
|Dewar, Donald||Jones, Martyn (Clwyd S W)|
|Dixon, Don||Kaufman, Rt Hon Gerald|
|Dobson, Frank||Kennedy, Charles|
|Doran, Frank||Kilfedder, James|
|Douglas, Dick||Kinnock, Rt Hon Neil|
|Duffy, A. E. P.||Kirkwood, Archy|
|Dunnachie, Jimmy||Knox, David|
|Dunwoody, Hon Mrs Gwyneth||Lambie, David|
|Dykes, Hugh||Lamond, James|
|Eadie, Alexander||Leighton, Ron|
|Eastham, Ken||Lester, Jim (Broxtowe)|
|Evans, John (St Helens N)||Lestor, Joan (Eccles)|
|Ewing, Mrs Margaret (Moray)||Lewis, Terry|
|Fatchett, Derek||Litherland, Robert|
|Faulds, Andrew||Livingstone, Ken|
|Fearn, Ronald||Livsey, Richard|
|Field, Frank (Birkenhead)||Lloyd, Tony (Stretford)|
|Fields, Terry (L'pool B G'n)||Lofthouse, Geoffrey|
|Fisher, Mark||Loyden, Eddie|
|Flannery, Martin||McAllion, John|
|Flynn, Paul||McAvoy, Thomas|
|Foot, Rt Hon Michael||McCartney, Ian|
|Forsythe, Clifford (Antrim S)||McCusker, Harold|
|Foster, Derek||Macdonald, Calum A.|
|Foulkes, George||McFall, John|
|Fraser, John||McGrady, Eddie|
|Fyfe, Maria||McKay, Allen (Barnsley West)|
|Galbraith, Sam||McKelvey, William|
|Galloway, George||McLeish, Henry|
|Garrett, John (Norwich South)||Maclennan, Robert|
|Garrett, Ted (Wallsend)||McNamara, Kevin|
|George, Bruce||McTaggart, Bob|
|Gilbert, Rt Hon Dr John||McWilliam, John|
|Gilmour, Rt Hon Sir Ian||Madden, Max|
|Maginnis, Ken||Ross, Ernie (Dundee W)|
|Mahon, Mrs Alice||Ross, William (Londonderry E)|
|Mallon, Seamus||Rowlands, Ted|
|Marek, Dr John||Ruddock, Joan|
|Marshall, David (Shettleston)||Salmond, Alex|
|Marshall, Jim (Leicester S)||Sedgemore, Brian|
|Martin, Michael J. (Springburn)||Sheerman, Barry|
|Martlew, Eric||Sheldon, Rt Hon Robert|
|Mates, Michael||Shore, Rt Hon Peter|
|Maxton, John||Short, Clare|
|Meacher, Michael||Skinner, Dennis|
|Meale, Alan||Smith, Andrew (Oxford E)|
|Meyer, Sir Anthony||Smith, C. (Isl'ton & F'bury)|
|Michael, Alun||Smith, Cyril (Rochdale)|
|Michie, Bill (Sheffield Heeley)||Smith, Rt Hon J. (Monk'ds E)|
|Michie, Mrs Ray (Arg'l & Bute)||Snape, Peter|
|Millan, Rt Hon Bruce||Soley, clive|
|Mitchell, Austin (G't Grimsby)||Spearing, Nigel|
|Molyneaux, Rt Hon James||Steel, Rt Hon David|
|Moonie, Dr Lewis||Steinberg, Gerry|
|Morgan, Rhodri||Stott, Roger|
|Morley, Elliott||Strang, Gavin|
|Morris, Rt Hon J. (Aberavon)||Straw, Jack|
|Morrison, Hon Sir Charles||Tapsell, Sir Peter|
|Mowlam, Marjorie||Taylor, Mrs Ann (Dewsbury)|
|Mullin, Chris||Taylor, Matthew (Truro)|
|Murphy, Paul||Temple-Morris, Peter|
|Oakes, Rt Hon Gordon||Thomas, Dr Dafydd Elis|
|O'Brien, William||Thompson, Jack (Wansbeck)|
|O'Neill, Martin||Townsend, Cyril D. (B'heath)|
|Orme, Rt Hon Stanley||Turner, Dennis|
|Paisley, Rev Ian||Vaz, Keith|
|Parry, Robert||Walker, A. Cecil (Belfast N)|
|Patchett, Terry||Wall, Pat|
|Peacock, Mrs Elizabeth||Wallace, James|
|Pendry, Tom||Walley, Joan|
|Pike, Peter L.||Wardell, Gareth (Gower)|
|Powell, Ray (Ogmore)||Wareing, Robert N.|
|Prescott, John||Wells, Bowen|
|Primarolo, Dawn||Welsh, Andrew (Angus E)|
|Quin, Ms Joyce||Welsh, Michael (Doncaster N)|
|Radice, Giles||Wigley, Dafydd|
|Raison. Rt Hon Timothy||Williams, Rt Hon Alan|
|Randall, Stuart||Williams, Alan W. (Carm'then)|
|Rathbone, Tim||Wilson, Brian|
|Redmond, Martin||Winnick, David|
|Rees, Rt Hon Merlyn||Wise, Mrs Audrey|
|Reid, Dr John||Worthington, Tony|
|Richardson, Jo||Wray, Jimmy|
|Riddick, Graham||Yeo, Tim|
|Roberts, Allan (Bootle)||Young, David (Bolton SE)|
|Robinson, Geoffrey||Tellers for the Ayes:|
|Robinson, Peter (Belfast E)||Sir George Young and|
|Rogers, Allan||Mr. Robin Squire.|
|Alexander, Richard||Biggs-Davison, Sir John|
|Alison, Rt Hon Michael||Blackburn, Dr John G.|
|Allason, Rupert||Blaker, Rt Hon Sir Peter|
|Amery, Rt Hon Julian||Body, Sir Richard|
|Amess, David||Bonsor, Sir Nicholas|
|Amos, Alan||Boswell, Tim|
|Arbuthnot, James||Bottomley, Peter|
|Arnold, Jacques (Gravesham)||Bottomley, Mrs Virginia|
|Arnold, Tom (Hazel Grove)||Bowden, A (Brighton K'pto'n)|
|Ashby, David||Bowden, Gerald (Dulwich)|
|Aspinwall, Jack||Bowis, John|
|Atkins, Robert||Boyson, Rt Hon Dr Sir Rhodes|
|Atkinson, David||Braine, Rt Hon Sir Bernard|
|Baker, Rt Hon K. (Mole Valley)||Brandon-Bravo, Martin|
|Baker, Nicholas (Dorset N)||Brazier, Julian|
|Baldry, Tony||Bright, Graham|
|Banks, Robert (Harrogate)||Brittan, Rt Hon Leon|
|Batiste, Spencer||Brooke, Rt Hon Peter|
|Bellingham, Henry||Brown, Michael (Brigg & Cl't's)|
|Bendall, Vivian||Browne, John (Winchester)|
|Bennett, Nicholas (Pembroke)||Bruce, Ian (Dorset South)|
|Bevan, David Gilroy||Budgen, Nicholas|
|Burns, Simon||Hargreaves, A. (B'ham H'll Gr')|
|Burt, Alistair||Harris, David|
|Butcher, John||Hawkins, Christopher|
|Butler, Chris||Hayes, Jerry|
|Butterfill, John||Hayward, Robert|
|Carlisle, John, (Luton N)||Heathcoat-Amory, David|
|Carlisle, Kenneth (Lincoln)||Heddle, John|
|Carrington, Matthew||Hicks, Mrs Maureen (Wolv' NE)|
|Carttiss, Michael||Higgins, Rt Hon Terence L.|
|Cash, William||Hill, James|
|Chalker, Rt Hon Mrs Lynda||Hind, Kenneth|
|Channon, Rt Hon Paul||Hogg, Hon Douglas (Gr'th'm)|
|Chapman, Sydney||Holt, Richard|
|Chope, Christopher||Hordern, Sir Peter|
|Churchill, Mr||Howard, Michael|
|Clark, Hon Alan (Plym'th S'n)||Howarth, Alan (Strat'd-on-A)|
|Clark, Dr Michael (Rochford)||Howarth, G. (Cannock & B'wd)|
|Clark, Sir W. (Croydon S)||Howe, Rt Hon Sir Geoffrey|
|Clarke, Rt Hon K. (Rushcliffe)||Howell, Rt Hon David (G'dford)|
|Colvin, Michael||Hughes, Robert G. (Harrow W)|
|Conway, Derek||Hunt, David (Wirral W)|
|Coombs, Anthony (Wyre F'rest)||Hunter, Andrew|
|Coombs, Simon (Swindon)||Hurd, Rt Hon Douglas|
|Cope, John||Irving, Charles|
|Couchman, James||Jack, Michael|
|Cran, James||Jackson, Robert|
|Currie, Mrs Edwina||Janman, Tim|
|Curry, David||Jessel, Toby|
|Davies, Q. (Stamf'd & Spald'g)||Jones, Gwilym (Cardiff N)|
|Davis, David (Boothferry)||Jones, Robert B (Herts W)|
|Day, Stephen||Jopling, Rt Hon Michael|
|Devlin, Tim||Kellett-Bowman, Dame Elaine|
|Dickens, Geoffrey||Key, Robert|
|Dicks, Terry||King, Roger (B'ham N'thfield)|
|Dorrell, Stephen||King, Rt Hon Tom (Bridgwater)|
|Douglas-Hamilton, Lord James||Kirkhope, Timothy|
|Dover, Den||Knapman, Roger|
|Dunn, Bob||Knight, Greg (Derby North)|
|Durant, Tony||Knight, Dame Jill (Edgbaston)|
|Eggar, Tim||Knowles, Michael|
|Emery, Sir Peter||Lamont, Rt Hon Norman|
|Evans, David (Welwyn Hatf'd)||Lang, Ian|
|Evennett, David||Latham, Michael|
|Fallon, Michael||Lawrence, Ivan|
|Farr, Sir John||Lawson, Rt Hon Nigel|
|Favell, Tony||Lee, John (Pendle)|
|Fenner, Dame Peggy||Leigh, Edward (Gainsbor'gh)|
|Field, Barry (Isle of Wight)||Lennox-Boyd, Hon Mark|
|Fookes, Miss Janet||Lightbown, David|
|Forman, Nigel||Lilley, Peter|
|Forsyth, Michael (Stirling)||Lloyd, Sir Ian (Havant)|
|Forth, Eric||Lloyd, Peter (Fareham)|
|Fowler, Rt Hon Norman||Lord, Michael|
|Fox, Sir Marcus||Luce, Rt Hon Richard|
|Franks, Cecil||Lyell, Sir Nicholas|
|Freeman, Roger||McCrindle, Robert|
|French, Douglas||Macfarlane, Sir Neil|
|Fry, Peter||MacGregor, Rt Hon John|
|Gale, Roger||MacKay, Andrew (E Berkshire)|
|Gardiner, George||Maclean, David|
|Gill, Christopher||McLoughlin, Patrick|
|Goodlad, Alastair||McNair-Wilson, M. (Newbury)|
|Goodson-Wickes, Dr Charles||McNair-Wilson, P. (New Forest)|
|Gorman, Mrs Teresa||Madel, David|
|Gow, Ian||Major, Rt Hon John|
|Gower, Sir Raymond||Mans, Keith|
|Grant, Sir Anthony (CambsSW)||Maples, John|
|Greenway, Harry (Eating N)||Marland, Paul|
|Greenway, John (Ryedale)||Marlow, Tony|
|Gregory, Conal||Marshall, John (Hendon S)|
|Griffiths, Sir Eldon (Bury St E')||Marshall, Michael (Arundel)|
|Griffiths, Peter (Portsmouth N)||Martin, David (Portsmouth S)|
|Grist, Ian||Maude, Hon Francis|
|Ground, Patrick||Mawhinney, Dr Brian|
|Grylls, Michael||Mayhew, Rt Hon Sir Patrick|
|Gummer, Rt Hon John Selwyn||Mellor, David|
|Hamilton, Hon Archie (Epsom)||Miller, Hal|
|Hamilton, Neil (Tatton)||Mills, lain|
|Hanley, Jeremy||Mitchell, Andrew (Gedling)|
|Hannam, John||Mitchell, David (Hants NW)|
|Moate, Roger||Soames, Hon Nicholas|
|Monro, Sir Hector||Speller, Tony|
|Montgomery, Sir Fergus||Spicer, Sir Jim (Dorset W)|
|Moore, Rt Hon John||Spicer, Michael (S Worcs)|
|Morris, M (N'hampton S)||Stanbrook, Ivor|
|Morrison, Hon P (Chester)||Stanley, Rt Hon John|
|Moss, Malcolm||Stern, Michael|
|Moynihan, Hon Colin||Stevens, Lewis|
|Neale, Gerrard||Stewart, Allan (Eastwood)|
|Needham, Richard||Stewart, Andy (Sherwood)|
|Nelson, Anthony||Stewart, Ian (Hertfordshire N)|
|Neubert, Michael||Stokes, John|
|Newton, Rt Hon Tony||Stradling Thomas, Sir John|
|Nicholls, Patrick||Sumberg, David|
|Nicholson, David (Taunton)||Summerson, Hugo|
|Nicholson, Emma (Devon West)||Taylor, Ian (Esher)|
|Onslow, Rt Hon Cranley||Taylor, John M (Solihull)|
|Oppenheim, Phillip||Taylor, Teddy (S'end E)|
|Page, Richard||Tebbit, Rt Hon Norman|
|Paice, James||Thatcher, Rt Hon Margaret|
|Parkinson, Rt Hon Cecil||Thompson, D. (Calder Valley)|
|Patnick, Irvine||Thompson, Patrick (Norwich N)|
|Patten, Chris (Bath)||Thorne, Neil|
|Patten, John (Oxford W)||Thornton, Malcolm|
|Pattie, Rt Hon Sir Geoffrey||Thurnham, Peter|
|Pawsey, James||Townend, John (Bridlington)|
|Porter, Barry (Wirral S)||Tracey, Richard|
|Porter, David (Waveney)||Tredinnick, David|
|Portillo, Michael||Trippier, David|
|Powell, William (Corby)||Trotter, Neville|
|Price, Sir David||Twinn, Dr Ian|
|Raffan, Keith||Vaughan, Sir Gerard|
|Redwood, John||Viggers, Peter|
|Renton, Tim||Waddington, Rt Hon David|
|Rhodes James, Robert||Wakeham, Rt Hon John|
|Ridley, Rt Hon Nicholas||Waldegrave, Hon William|
|Ridsdale, Sir Julian||Walden, George|
|Rifkind, Rt Hon Malcolm||Walker, Bill (Tside North)|
|Roberts, Wyn (Conwy)||Walker, Rt Hon P. (W'cester)|
|Roe, Mrs Marion||Waller, Gary|
|Rossi, Sir Hugh||Ward, John|
|Rost, Peter||Wardle, Charles (Bexhill)|
|Rowe, Andrew||Warren, Kenneth|
|Rumbold, Mrs Angela||Watts, John|
|Ryder, Richard||Wheeler, John|
|Sackville, Hon Tom||Whitney, Ray|
|Sainsbury, Hon Tim||Widdecombe, Ann|
|Sayeed, Jonathan||Wiggin, Jerry|
|Scott, Nicholas||Wilkinson, John|
|Shaw, David (Dover)||Wilshire, David|
|Shaw, Sir Giles (Pudsey)||Winterton, Mrs Ann|
|Shelton, William (Streatham)||Winterton, Nicholas|
|Shephard, Mrs G. (Norfolk SW)||Wolfson, Mark|
|Shepherd, Colin (Hereford)||Wood, Timothy|
|Shepherd, Richard (Aldridge)||Woodcock, Mike|
|Shersby, Michael||Younger, Rt Hon George|
|Skeet, Sir Trevor||Tellers for the Noes:|
|Smith, Sir Dudley (Warwick)||Mr. Robert Boscawen and|
|Smith, Tim (Beaconsfield)||Mr. Tristan Garel-Jones.|
§ Question accordingly negatived.
§ Bill, as amended (in the Standing Committee), to be further considered tomorrow.
§ Mr. Neil Kinnock (Islwyn)
On a point of order, Mr. Speaker. At the conclusion of the debate tonight, it is clear that at least 38 members of the Conservative party have voted for the new clause presented by the hon. Member for Hampshire, East (Mr. Mates). Other Conservative Members abstained and yet others were cowed and coerced into supporting the Government.
It is clear that the flagship is badly holed and sinking fast and that the measure will leave the House for another place without a clear mandate from the House of 649 Commons. The country will know that, the other part of Parliament will know it and the Bill can still be stopped in its tracks.
It is only right, given the importance of this issue—[Interruption]
§ Mr. Kinnock
It is only right, given the importance of the issue and the small nature of the Government's majority, that we secure from the Government tonight a statement as to their intentions on a measure that will relate local taxation to the ability of people to pay.