Local Government Review (England)

HC Deb 21 March 1991 vol 188 cc401-30 3.30 pm

The Secretary of State for the Environment (Mr. Michael Heseltine)

With permission, Mr. Speaker, I wish to make a statement outlining progress on the review of local government—[Interruption.]

Mr. Speaker

Order. The whole House, and the country, too, have been waiting for this statement.

Mr. Heseltine

The House will remember that when I announced the review on 5 December I explained the comprehensive nature of our review. For the first time we are looking at the structure, functions and finance of local government in the round.

I should like to thank the very large number of people and organisations who have put forward their views. I do not need to tell the House that they have not always been compatible one with another.

We took as our starting point our firm belief that the local delivery of certain services—many of them essential—is a central feature of a pluralist society. Local government must enable local people to exercise continuing influence over the quality and the range of the services which Parliament entrusts to them.

Local government is responsible for the efficient delivery of these services. We need responsible, elected local authorities, not only to provide a check and a balance to Westminster, but also to reflect the multiplicity of aspirations amongst local communities.

But, given the primary responsibilities of central Government, local government cannot be a fully independent power in the land. It traditionally derives its power from Parliament, and it must complement and not compete with central Government in its activities.

Within this framework, we believe that councils should be accountable for their actions and that there should be a direct and visible relationship between the costs of services and the local bills to which they give rise. We believe that those bills should be spread widely and fairly throughout communities; that they should bear some relation to people's ability to pay; and that it should be possible to levy and collect them without difficulty.

These principles are guiding our review. I am able to announce today some interim conclusions and, in other areas, to narrow the options so as to proceed to more detailed consultations.

Many parts of England now have, in effect, unitary local government. The Greater London council and the metropolitan county councils were abolished in 1986. The Inner London education authority went in 1990. There is little demand for their restoration. Indeed, it is difficult now to perceive any real role that they played.

Outside the main conurbations, leaving aside the valuable rolë played by parishes, the system of two principal tiers is being questioned. Also being questioned is the continued existence of certain of the authorities which were created by the local government reorganisation of 1974, but which have not succeeded in inspiring local loyalty. Another challenge is that the role of authorities is changing as they increasingly become enablers rather than direct providers of services.

There is, therefore, now an opportunity to think afresh about the structure of local authorities. But the Government do not see this as an opportunity to impose a new pattern of local authorities according to a national prescription. Nor do we believe that it is necessary to have a uniform pattern of authorities in every part of the country. Local people should have an important role in determining what structure of local government best reflects their community loyalties. That does not mean, therefore, the wholesale abolition of either county councils or district councils, nor even unitary authorities everywhere. It means arriving at the right solution for each community. We intend to adopt a practical approach in response to local views and local conditions, but it seems likely that we shall move to a larger number of unitary authorities.

We shall, therefore, consult on the proposition that a local government commission shall be charged with responsibility for evaluating the most appropriate form of local government for individual areas, taking account of the wishes of local people and putting forward proposals for reform. We will proceed area by area.

The reduction in the local tax burden and the correspondingly larger contribution from central taxation announced in my right hon. Friend's Budget statement imply a need to consider whether a number of functions should now be brought into or financed directly by central Government. That would be without further changes to the balance between central and local taxation.

My right hon. and learned Friend the Secretary of State for Education and Science is bringing forward today proposals for such a transfer in one area of his responsibility.

The issue of how local authorities are managed is no less crucial. The problems that local authorities face are compounded by the cumbersome internal arrangements for the management of councils. The committee system—which dates back to the Municipal Corporations Act of 1835—requires that all decisions are taken collectively by large numbers of councillors, in full council or committees. Too many councillors spend too much time achieving too little.

Consequently, it is difficult for local government to attract and keep enough men and women of the right calibre both to lead what are now multi-million pound organisations providing a range of key services and to represent properly the interests of the people who elected them. We believe, therefore, that there should be a new look at the internal workings of local authorities to improve the decision-making process. I shall issue a consultation paper on these issues.

Alongside that, we also want to develop further the idea of the enabling council. Many of the Government's policies have been designed to move power to individual members of the community—in particular, the right to buy, the tenants' charter and local management of schools. Compulsory competitive tendering has also been part of that process and we will be looking at ways to make it more effective and to carry it forward. In particular, we will be looking at new areas where contracting out should be applied. Those will include professional and technical tasks, as well as manual tasks. Housing management, legal services and computer services could all be added to the list. The success of a local authority must be measured not by its size, but by the quality of the services delivered, from whatever source, by its responsiveness to its clients and customers and by the value that it squeezes out of each pound of taxpayers' money.

I now turn to the question of finance. A local tax base is essential if there is to be any meaning to the concept of local government. But local government services cost a great deal of money—more than £50 billion in the corning year—and the burden on local taxpayers has become too great. We have therefore decided to make a fundamental shift in the amounts which central and local taxpayers pay towards the cost of local government services. This change will take effect in 1991–92, and will reduce local taxation to a level that should be sustainable in the longer term.

The first consequence of this was announced by my right hon. Friend the Chancellor of the Exchequer on Tuesday. We have concluded that it is right to reduce the present average headline community charge of £392 in England for 1991–92 by £140 to £252. The average amount payable by charge payers, after allowing for the community charge reduction scheme and benefits, will then be considerably less than this. To secure this, my right hon. Friend is providing a further £4¼billion from national taxation to local authorities.

As a result, in 1991–92, the community charge will be raising less than rates in their last full year. For the coming year, locally raised finance will fund 22 per cent. of local government expenditure, compared to 34 per cent. this year. And these figures are before the substantial benefit of rebates and the community charge reduction scheme.

To achieve these objectives, my right hon. Friends the Secretaries of State for Scotland and Wales and I are today introducing in the House a short Bill. If enacted, this will have broadly three effects.

First, it will provide that the community charges which authorities have set for 1991–92 are replaced the day after the Bill's enactment by new charges £140 lower. Councils will not need to meet to set the new charges, but they will be treated in all respects as if they were set by authorities in the usual way.

Secondly, my right hon. Friends and I will be empowered to pay grants to charging authorities to make up the loss of income resulting from the reduction in charges brought about by the Bill's provisions. It is also our intention to pay grant to cover authorities' additional administrative expenses arising as a consequence of the Bill.

All this means that where authorities have already issued their charge bills for 1991–92—I know that some authorities have done so—they will, after the Bill's enactment, need to issue fresh bills reflecting their new lower charges. We propose to amend the regulations on the community charge demand notice slightly to provide the basis for the new bills but we believe not in ways that would result in significant changes to authorities' computing arrangements. We are revising the profile of payments from the non-domestic rates pool to ensure that our proposals have no significant effect on authorities' cash flow.

These proposals do not affect the operation of the community charge reduction scheme or community charge benefits, though it will, of course, be necessary to recalculate entitlements under both schemes.

My Department has written to local authorities, and to the local authority associations, explaining the details of all these arrangements. Clearly, it is desirable that the new charges should be in place at the earliest opportunity. Accordingly, we shall be looking to Parliament to consider the Bill as a matter of urgency.

Having reduced community charges to reasonable levels, we shall expect local authorities to restrain their spending to keep them at those levels. I shall therefore be prepared to use my capping powers rigorously again in 1992–93.

Having achieved a reasonable balance between funding from national sources and funding from local tax, we need to address the question of the local tax itself. I referred briefly in my opening remarks to the principles which I believe should underpin any form of local tax. Let me spell them out.

First, accountability. As far as possible, a local tax should buttress the accountability of a local council to its taxpayers. People should be able to see some link between what they are being asked to pay and what their council is spending.

Second, fairness. Nobody likes paying taxes. But in our society taxes have to be basically acceptable to taxpayers; and to achieve that they must be perceived to be fair.

Third, ease of collection. Any tax will require administrative arrangements to collect the revenue, including measures to chase up those who are late in paying. But if the tax is too difficult to collect, the costs of collection become unacceptable.

Fourth, most people should make some contribution. We believe that it is right that, as far as possible, any tax should take some account of the number of adults in each household so that they contribute to the cost of services provided by the local councils which they elect. This principle has gained a wide measure of acceptance.

Fifth, restraint. No tax is acceptable if it is levied at penal rates either as a result of local authority overspending or because the burden on any individual or household is excessively high. We are adamantly opposed to excessively high bills for a minority of electors—a feature of the old rates system.

In accordance with these criteria, we have reached our conclusions about the future of the community charge. In spite of the comprehensive system of income-related rebates, and the reduction scheme that we devised, the public have not been persuaded that the charge is fair. We have therefore decided that from the earliest possible moment the community charge will be replaced by a new system of local taxation.

After a careful reappraisal of the options, we have decided in principle to bring forward a new local tax under which there will be a single bill for each household comprising two essential elements, the number of adults living there and the value of the property. There are a number of ways of assessing values, on a capital or a rental basis, which require careful evaluation and extensive discussion and consultation. But it is our intention that the system that we introduce should have the following features: it should reflect people's concern that the system is fair; the balance of funding as between central taxes and the new local tax should be broadly in line with that announced by my right hon. Friend the Chancellor of the Exchequer on Tuesday; it will be essential to ensure that local taxpayers do not face undue changes in their bills as a result of the introduction of the new local tax arrangements: there will therefore, need to be arrangements to protect them during the transition to the new system; the system should ensure that regional variations in property values do not lead to disproportionate bills in high price areas; there should be rebate arrangements to protect people on low incomes from making a disproportionate contribution to local taxation; there must also be restraints to ensure that local taxpayers do not face excessive bills as a result of overspending by local councils, either before or after the introduction of the new system: there are a number of ways, including capping, by which this may be achieved.

I made clear at the beginning of this statement my commitment to the institution of local government. But, for its part, local government must recognise economic reality and the duty and responsibility of central Government to manage the economy. Central Government also have a duty to protect local taxpayers from excessive bills.

I intend to publish a consultative document after the Easter recess setting out alternative approaches and dealing with these issues. At present, the Government have no intention to propose changes to the uniform business rate. My right hon. Friends the Secretaries of State for Scotland and for Wales will be making separate statements about the outcome of the review as it relates to those countries.

Let me summarise. We have already dealt with the burden of the local tax. I shall shortly publish consultation papers on structure, internal management and the new local tax. We will conclude the period of consultation in the summer. Depending on the outcome of that consultation, we intend to introduce legislation setting up the local government commission and providing for the new local tax in the next Session of Parliament. We anticipate that the first of the new authorities could be in place by April 1994. We shall consult local authorities on the basis that the new tax could be in place in 1993–94.

The proposals that I have outlined will establish a system of local government which will carry through into the next century. These proposals are designed to end the sterile quarrel between supporters of central and local government. They should attract men and women of sufficient quality and commitment to restore authority to and confidence in local government. They should enhance the quality of services and give extra momentum to the pursuit of value for money. They should result in a local government which puts people first. I commend the proposals to the House.

Mr. Bryan Gould (Dagenham)

We have just heard the most complete capitulation, the most startling U-turn and the most shameless abandonment of consistency and principle in modern political history. The former Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher), who cannot bear to be present, was famously not for turning. The Secretary of State and his new Prime Minister have not only turned; they have been through a revolving door. May we be assured that the new Prime Minister will not complain tomorrow that he has once again been bounced by this latest leak by the Secretary of State of his own proposals?

We have not heard from the Secretary of State a single word of contrition or apology. Will he now make a formal apology to the people of Britain for 12 years of arrogance, to local government for unprecedented chaos, and to millions of people who have been driven to despair by shattered services and unfair and ever rising bills? Is it not astonishing incompetence that, after 12 years in office and £13.5 billion of taxpayers' money, the Secretary of State still cannot tell us what he intends to do?

What happened to the Prime Minister's assurances on Tuesday that we would have all the answers this week? How could a Prime Minister on top of his job make promises on Tuesday which his Secretary of State is unable to fulfil on Thursday? Why are we left not with the answers but with the questions? Why have we not had answers to the most obvious questions? When will the charge take effect, what will be the valuation rate, how many people will be assumed to constitute a household, what will be the size of the poll tax element, and how many people will be losers?

Is not the problem that, while the Secretary of State clearly concedes that the poll tax flagship has been holed beneath the waterline, the wreck is still afloat and is a danger to all shipping? What the Secretary of State told us today, with its continued uncertainty and confusion, its inevitable doubts and delays, is in effect that the poll tax bills will keep on coming—this year, next year, in 1993 and in all probability in 1994 as well. Why will not he accept our offers of co-operation on a Bill to abolish the poll tax, on the basis of our fair rates proposals—the only way in which we can ensure that this year's poll tax bills will be the last?

Is it not clear that under the Secretary of State's proposals the poll tax will still be with us even after 1994? This is the tax that refuses to lie down and die. Under those proposals, will not people continue to be taxed simply because they live and breath? Are we not still faced with a head tax, with all the problems of a register, with all the unfairness of a flat rate tax, and with all the difficulties of extricating money from people with no income? Does not the right hon. Gentleman recognise that he cannot rely on the electoral register to solve his problems without putting a price tax on the right to vote and then inviting people to sell that vote at a price which may be as much as £150 or £200 per vote? Are we not left with all the objectionable features of the poll tax but with all the difficult and transitional problems of a new and untried property tax? Are we not faced with a pig-in-a-poke tax, a bed-and-breakfast tax, a property poll tax, a tax on the roof over one's head and a tax on the heads under one's roof?

How can the Secretary of State be confident of persuading his own party to support these proposals in the Division Lobbies? Does he recall the right hon. Member for Finchley assuring the country that she would never introduce a property tax? Does he expect her to follow him through the Lobbies? And what of himself and all his Front Bench colleagues—indeed, of the whole Tory party, all of whose members fought the last election on a manifesto commitment to abandon property taxes? Are they now to be whipped through the Lobbies—and how many of them will refuse to follow?

Are not the right hon. Gentleman's proposals for reorganising local government, vague as they are, also driven by the poll tax? Should not structure determine finance rather than the other way round? Why is the poll tax still in the driving seat, spreading its malign influence not just through education and through the whole of the Budget strategy but into the whole structure of local government, too? Are not this a Government who, despite their belated confession of terrible error, are still in thrall to the monster that they created?

There is, after all, some justice in the spectacle of the Government continuing to pay a heavy price for their poll tax debacle. The tragedy is that the rest of the country will also continue to pay that price—the price of a mistake borne of arrogance and perpetuated by a leaking and limping Government who, on the evidence of this broken-backed and blood-stained statement, are too weak and divided to correct their own error.

Mr. Heseltine

It will be apparent to the whole House that we have achieved more in three months than the Opposition achieved in 11 years. I repeat, for the benefit of the hon. Member for Dagenham (Mr. Gould) who obviously did not hear what I said, that we shall consult on the basis that the new local tax will be in place for the year beginning 1993.

Let me return to the spirit with which we began this review a few months ago. The hon. Gentleman has criticised our proposals. I will make him an offer: I would be very happy to include his proposals in the consultative process that we are about to begin—[Interruption.]

Mr. Speaker

Order. We have a very heavy day ahead of us.

Hon. Members

Labour party Members are leaving.

Mr. Heseltine

I am not quite sure who is deserting the sinking ship, but I should like to help the hon. Gentleman a little more.

To conduct that consultative process with the thoroughness that the hon. Member for Dagenham would want, I need to know answers to some questions about the costs of the fair rate proposals. The House knows that, in the past few days, we have put £4¼ billion into switching the incidence of responsibility from local people to the centre. The Labour party said that it would not have increased VAT to do that. What would it have increased? I need to know the answer so that I may consult thoroughly. If people need to know exactly who will pay how much, which is the complaint of the hon. Member for Dagenham, he must say precisely where he wants the tax burdens to fall. When the Labour party has worked out the answers to those questions, we shall have already won the next general election.

Mr. Bob Dunn (Dartford)

If there are any apologies to be made in the House today, they should be made by the Labour party, which allows law breakers to sit on its Benches.

Will my right hon. Friend the Secretary of State be a little more precise about the equalisation arrangement to reflect property values between the north and south. and within the regions?

Mr. Heseltine

I am grateful to my hon. Friend. Obviously, we must address the equalisation problem in the consultative document. It is not possible to do so in general terms, but we must weigh up the various elements of the local tax before making a judgment. Some remarkable figures have been quoted as the likely consequence of our proposals for people living in the south-east, but they bear no relationship to reality.

On my hon. Friend's first point about the discrediting of local government, it is impossible to overstate the damage that has been done to the institution of local government by the behaviour of many Labour-run local councils.

Mr. A. J. Beith (Berwick-upon-Tweed)

Why has the Secretary of State chosen to move from the most unpopular local tax ever to the second most unpopular local tax ever? He has gone straight from the frying pan into the fire. We have not learned much about the new tax this afternoon, except that it will not be based on people's ability to pay, which is the clear characteristic of a local income tax.

Will the Secretary of State accept our welcome for the fact that his proposals on structure follow closely—even, in places, word for word—our proposals? Why does not he accept our whole package and recognise that fair elections for local councils, together with a fair tax, could make local government responsible and genuinely local?

Mr. Heseltine

I very much appreciate the conversations that we conducted with the Liberal party. They were in marked contrast to the wholly irresponsible position of the Labour party, which so lacked confidence in its proposals that it would not even discuss them.

We started our review in the hope that we could find a measure of agreement on the various aspects of local goverment. We have been able to meet with the Liberal party on some of the approaches that we have adopted and I have no ground for complaint about that.

The hon. Gentleman asked why we did not pursue the option of a local income tax as advocated by the Liberal party. There were several reasons, one of which was that the mood of the country means that it would not be inclined to want to entrust its income tax rates to local Labour-controlled authorities. Having listened to the hon. Gentleman at great length and with courtesy, I was persuaded not to follow his arguments, but to reject them.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I support much of what my right hon. Friend the Secretary of State said in the first part of his statement. However, now that my right hon. Friend the Chancellor of the Exchequer has made a huge sum of money available to reduce the community charge, if my right hon. Friend the Secretary of State had put that money into improving the rebate system rather than reducing the total, might not the community charge have become acceptable in two years' time? The fact that my right hon. Friend has suggested a two-tax system that will be just as hard to collect as the present one, will not be related to ability to pay and will create a new class of losers might be simply because he decided to make his statement on the Ides of March.

Mr. Heseltine

As my right hon. Friend rises behind me, I do not think that anyone would suggest that he has a lean and hungry look. I very much welcome his support for the first part of my statement. To receive any agreement or support at all when dealing with the reorganisation and reform of local government is something of an achievement, so I am grateful to my right hon. Friend.

My right hon. Friend suggests that we should have taken the hypothetical concept of allowing the community charge to run on, perhaps spending more and more money and underpinning it with more and more social security arrangements. That is not a credible basis on which to sustain a tax. First, the tax is widely perceived as not being as fair as was originally intended and hoped. Secondly, there are undoubtedly collection difficulties because of the significant number of changes during the course of a given year. Therefore, introducing a new, local tax that combines many of the elements of my right hon. Friend's ideas but also holds out greater certainty of collecting most of the money moves us towards an important consensus.

Mr. John Garrett (Norwich, South)

Is it proposed that the Government would give evidence, or make recommendations, to the local government commission stating which local authorities they would prefer not to continue?

Mr. Heseltine

It is unrealistic to think that the Government will not have an input into the analysis of something of this sort. I cannot think of any reorganisation of local boundaries in which, in the end, Ministers of the Crown are not involved. Everybody should have a wide chance to contribute to such matters. The hon. Gentleman should bear with me until he is able to read the details of the proposals and the consultative documents. In drawing them up, I shall do my best to listen to points put to me from all parts of the House.

Miss Emma Nicholson (Torridge and Devon, West)

Does the Secretary of State agree with me that the Cassius's in this place sit on the Opposition Benches and that their skill lies in leading the electorate to their death? The answer proposed by the hon. Member for Dagenham (Mr. Gould), when he was invited just now by my right hon. Friend to consult again, was a helpless response—"Abolish the poll tax, abolish the poll tax." He had no constructive proposals to offer the British electorate or the Government. I congratulate the Secretary of State on retaining the key element of the community charge, accountability to the local electorate, while bringing in the greater concept of a household service charge.

Mr. Heseltine

I am extremely grateful to my hon. Friend for her constructive support. Nothing that we have heard from the hon. Member for Dagenham (Mr. Gould) today can in any way be described as an answer.

Mr. Stanley Orme (Salford, East)

What will be the costs of collection for the new poll tax—because that is what it is? Will there still be a poll tax register, with people being forced to register as they are at present? Will not the costs be increased? Is this not the poll tax under another name?

Mr. Heseltine

I can understand the dismay of the Labour party and its attempts to suggest that this is a poll tax, but it is not. It is a local tax which is quite different in its concept and application. It is perfectly possible that we shall not need a register to administer the tax. But all those matters need detailed consultation with the local authority associations. I am absolutely amazed that, every time I suggest discussing the detail with anyone, the only party that goes through the roof with indignation is the one that does not believe in consultation and wants to impose its own wholly unacceptable views on everyone in sight.

Mr. Cranley Onslow (Woking)

May I congratulate my right hon. Friend and his colleagues on producing a system that will preserve the principle that every adult should contribute to the cost of local government, that will take account of people's capacity to pay, that will ensure collection—even from the most notorious evaders on the Opposition Benches—and that will, above all, keep down the cost of good Conservative local government?

Mr. Heseltine

My right hon. Friend is as aware as I am that, on average, a vote for the Labour party puts £50 on the community charge. I welcome his support. We shall ensure that our proposals progress with the greatest dispatch.

Mr. William Ross (Londonderry, East)

As VAT was increased by 2.5 per cent. on Tuesday, may we assume that the extra income will be allocated specifically to local government or to its particular functions? Will he confirm that each elector or ratepayer in Northern Ireland will benefit by £140?

Mr. Heseltine

I pay tribute to the hon. Gentleman for the courteous and helpful discussion that I had with him. He has made an important point. This was not an hypothecated revenue that the Chancellor described when increasing VAT by 2.5 per cent. The important point that my right hon. Friend made was that he was broadly creating a new balance between revenue raised from local sources and revenue from the central Exchequer. The single biggest change for which he was responsible was in the balance between the very substantial amount funded from the centre and the amount that will increasingly be funded by the local ratepayer or charge payer. We have begun to reverse the process that began in 1976.

The right hon.

Member for Bethnal Green and Stepney (Mr. Shore), who I am glad to see in his place, began the process of increasing the amount paid locally when he reduced central Government support. That reduction continued between 1976 and 1979 until my right hon. Friend the Chancellor brought about a significant shift.

On the specific question about Northern Ireland—it is important to shed light on the darkness of Opposition Members, even though it means a slight digression—these are matters for my right hon. Friend the Secretary of State for Northern Ireland, but the same proportions will apply in Northern Ireland.

Sir Hugh Rossi (Hornsey and Wood Green)

I welcome the principles enunciated by my right hon. Friend as underlying the new form of local tax that the Government propose, and I recognise that much will depend on the balance achieved in the application of those differing principles, but I urge him to bear well in mind that what counts most in an area such as my constituency is the total demanded of residents by the local authority and the services provided in return for those moneys. Will he ensure that under the new system and structure of local government provision is made to regulate local authorities and greater power is given to the independent Audit Commission to ensure that real value for money is given?

Mr. Heseltine

I very much welcome my hon. Friend's question. We are aware that the issue is one of detail when it comes to the introduction of the specifics of the tax. It is important to issue a consultation document so that local authorities, which must administer the tax, can participate in how it develops. We shall bear that carefully in mind. All right hon. and hon. Members will have a chance to consider the issues in principle before we draft legislation. I thoroughly agree with my hon. Friend that, in many aspects of local government, the pursuit of value for money has not been taken sufficiently seriously. Our proposals will provide us with an opportunity to do so.

Mr. Merlyn Rees (Morley and Leeds, South)

In the midst of all the "interim", "in the future" and "after consulting" proposals that the Secretary of State made, there was the certain statement that we would be paying the poll tax in the 1992 financial year. The right hon. Gentleman says, "We do not know what the figures are." Will he tell me the figures so that when I return to Leeds at the weekend I can tell people what the average three-bedroom house with two residents will pay after 1 April next year?

Mr. Heseltine

I have been as fair to the Labour party as I can be. Can the right hon. Gentleman conceivably answer that question in terms of the fair rates policy of the Labour party? Would it not be easier for him, in giving fair and dispassionate advice to his constituents, if he could compare our proposals with those of his party? am offering the Labour party the chance to do that.

Because of the switch that my right hon. Friend the Chancellor made in the Budget, we have brought down the contribution by local payers to such levels that it would be wrong for the right hon. Gentleman to indulge in scare stories in Leeds or anywhere else.

Dame Peggy Fenner (Medway)

I am grateful that I caught your eye, Mr. Speaker, as I should have, being the Member who represents the area with the lowest community charge, apart from two London boroughs, which have heavy safety nets. Of course, my constituents will be pleased to have the extra money that my right hon. Friend concedes that they should have had from central Government. Will my right hon. Friend visit my constituency to find out how we produce value for money?

Mr. Heseltine

If my hon. Friend will come with me, I shall be delighted to attend upon her constituents.

Mrs. Margaret Ewing (Moray)

I assure the Secretary of State that the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is totally wrong in assuming that the longer the poll tax is in place, the more popular it will become. The people of Scotland have testified to that in opinion poll after opinion poll, as we were used as guinea pigs one year in advance of everyone else.

When considering how to change this tax, will the right hon. Gentleman advise the House what assessment he made of the possibility of having in a unit the size of Scotland a local income tax, based on ability to pay, which could have been implemented in the next financial year? We should not be held back until 1993–94.

Mr. Heseltine

Again, I thank the hon. Lady. She was courteous in coming to talk to us and in giving her views—[HON. MEMBERS: "Oh."] It is embarrassing for the Labour party. I do not want to repeat my comments about the paucity of thinking behind the Labour party's views. All the other political parties joined our consultations, which were very profitable. We incorporated in the review many of the ideas which we discussed. A desperate bankruptcy exists, and it is to be found among Opposition Members.

We considered a local income tax, but we were not persuaded, for several reasons. First, within the totality of local government, entrusting local Labour authorities with setting the levels of income tax would have given them the power to reverse what was one of the main thrusts of Government economic strategy in the past decade. Secondly, in many local authority areas, where the number of income tax payers was relatively limited and the number of people on a form of rebate or exemption was high, the danger was that people with significant resources would be imprisoned in an area without having any effective control over the outcome of elections there. Adding a local income tax to a national income tax would create confusion in people's minds as to which function or service they were financing—whether local or central.

There were many complicating factors. We decided that a local tax formula would leave a clear idea in people's minds that they were paying a local authority which they could identify for local services.

Mr. John Biffen (Shropshire, North)

Is my right hon. Friend aware that when a flagship becomes a navigational hazard the best thing to do is to scupper? I congratulate my right hon. Friend on the professional way in which he has set about that job.

Mr. Heseltine

I understand something of my right hon. Friend's thinking, although I could never emulate his language.

Mr. Tony Banks (Newham, North-West)

The question directed to the Secretary of State by the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) was the first example I have ever witnessed of a Brutus stabbing a Judas. After 11½ years, local government has been reduced to absolute chaos and muddle by the Government's policies. What the Secretary of State has done today is to snatch chaos from the jaws of the poll tax defeat, and local government will suffer for it.

The right hon. Gentleman says that the commission that he is to set up will be able to consult local people and that if local people wish a certain form of government to be instituted, that will be allowed. If the people of Greater London decide that they want a strategic local government structure in London, along the lines of the old Greater London council, will the right hon. Gentleman allow that to happen?

Mr. Heseltine

Having listened to the hon. Gentleman, I am even more convinced than I was before of the dangers of such a proposal. If the hon. Gentleman were in my position, perhaps he would pause before accepting the advice of a former councillor from Lambeth.

Hon. Members

What about the Prime Minister?

Mr. Speaker

Order.

Mr. Robin Squire (Hornchurch)

May I wholeheartedly congratulate my right hon. Friend on introducing a system which will seem much fairer to the overwhelming majority of people in the country and which retains the important concept that most people will pay something? Will my right hon. Friend confirm that, for the two years—or whatever period—for which the present system remains, he, and local authorities, will expect all those liable under it to pay, whether they are Opposition Members or people occupying less illustrious positions in society?

Mr. Heseltine

While I was listening to my hon. Friend's important question, I was conducting a further interim review of local government and, on mature reflection, I have come to the view that some councillors from Lambeth are really rather good people.

There can be no shadow of a doubt about the need to collect in respect of legitimate bills issued by the legitimate authorities of our local democracy. There can be no question about that and the utmost rigour should be applied in enforcing the law. Nothing makes that harder than the utterly unforgivable behaviour of those hon. Members who do everything in their power to undermine the process.

Mr. Bruce Grocott (The Wrekin)

Does the Secretary of State accept that the most unbelievably arrogant part of his statement was his assertion that he would "improve the quality of local decision making"? That came from a representative of a Government the quality of whose decision making has so far cost us £13.5 billion. Will the Secretary of State assure us that any future assessment or review of the quality of decision making will include the quality of decision making in the Tory Government?

Mr. Heseltine

If the hon. Gentleman had spent even a tiny fraction of the time that my hon. Friends and I have spent consulting local councils, he would have discovered that what I said about the ability to manage local authorities and about the sort of people now attracted to them was not a party matter. Everyone is preoccupied about the problem of finding men and women with the time and resource to give to that vital part of our national life. By turning this into a party issue, the hon. Gentleman simply trivialises the debate.

Mr. David Howell (Guildford)

My right hon. Friend is to be commended on his unwavering determination to reform the structure, functions and financing of local government together, rather than—as in the past, with such unhappy results—separately. Certainly he will not get an atom of constructive help from the Labour party.

My right hon. Friend has not mentioned business taxation, although he did talk about a wider local government tax base. Will business taxation still be left out? Does he recall that a previous Secretary of State, during our debates on local business taxation, assured the House that close and intimate links between the local authorities and businesses in their areas would be reinforced?

Mr. Heseltine

I am very grateful to my right hon. Friend for his kind remarks. It is fundamental that, in the review, the structure, functions and financing of local government be linked. In my statement, I made it clear that the Government have no intention at present to make changes in the uniform business rate arrangements.

Mr. Ron Leighton (Newham, North-East)

Has not the main cause of the suffering and turmoil in local government been the successive cuts in rate support grant—from 60 per cent. in 1979 to 42 per cent. today? The burden of taxation was switched from central government to local government so that the Government might take the credit for tax cuts, and the local authorities the blame for increased rates and cuts in services. Was not the purpose of the poll tax to sweep away Labour local government by imposing a large charge on everyone in the hope that the town halls would get the blame? The British people had too much intelligence to fall for that scheme. It backfired and swept away the right hon. Member for Finchley (Mrs. Thatcher). Is not the present commotion the sound of panic-stricken rats deserting the flagship?

Mr. Heseltine

The hon. Gentleman cannot have been listening. The switch in resources, at the expense of the local payer, whether of rates or of the community charge, began in 1976 under the right hon. Member for Bethnal Green and Stepney (Mr. Shore). By 1979, the rate support grant had been reduced to 61 per cent. It is perfectly true that the change continued thereafter. Not until the Budget that my right hon. Friend the Chancellor delivered on Tuesday was the direction reversed. The reversal is to be maintained at about the present rate.

Mr. Roger Sims (Chislehurst)

Is my right hon. Friend aware that many of our constituents fully supported the principles that lay behind the community charge but thought that there were faults in the way in which it was implemented? People will feel that the proposals that he has presented in outline today meet the criteria and, at the same time, are practical. I congratulate him on his refusal to be pushed into presenting detailed proposals at this stage, and on his intention to put the matter out to consultation. That will provide the opportunity to ensure that, before matters are finalised, there has been proper discussion, that details have been worked out, and possible anomalies avoided.

Mr. Heseltine

I am extremely grateful to my hon. Friend for his remarks. We have tried very hard to adopt an evolutionary approach. The local tax meets certain criteria that are widely accepted, especially in the Conservative party. It is absolutely fundamental that changes of this sort be introduced following consultation with the people who will have to apply them. That is what we are doing, and we have no intention of allowing ourselves to be stampeded or forced to move faster than we think is compatible with proper completion of the job.

Ms. Mildred Gordon (Bow and Poplar)

Can the Secretary of State tell us whether women with no personal income who stay at home to look after their families will be expected to pay the new poll tax, head tax, adult tax—or whatever he calls it—and whether the joint and several liability proposals will still apply?

Mr. Heseltine

If the hon. Lady waits until we have produced the consultation document, she will see the assumptions upon which it is based. There will, of course, be a rebate scheme associated with our proposals. As for the period between now and the introduction, in 1993, of our local tax proposals, we have no intention at present to change the incidence of the scheme.

Sir Peter Blaker (Blackpool, South)

My right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) appears to have confused the Ides of March with the equinox—not that either appears to be particularly relevant.

I congratulate the Secretary of State on one aspect in particular of his excellent statement, and that is the proposal to introduce more unitary authorities, which has the great merit of making it easier for the taxpayer to identify excessive spending authorities. Is he aware that that is particularly relevant in Lancashire, where there used to be several county boroughs and where we now have an excessively spending Labour-controlled county council?

Mr. Heseltine

My right hon. Friend represents his constituents extremely effectively because when I was in Blackpool not long ago I was left in no doubt about the depth of feeling there. I must not prejudge any local consultations or recommendations of the local government commission, but I understand exactly the strength of feeling.

Mr. John Fraser (Norwood)

In relation to the £140 per head subsidy for the poll tax mark 1, does the right hon. Gentleman agree that it is wholly unrelated to the demands on, or resources of, the local authority? If there is to be a subsidy for the poll tax in the current year, should it not be based on the principle, from each according to his resources and to each according to his needs? In relation to the poll tax mark 2, will the registration arrangements be substantially different from those obtaining now?

Mr. Heseltine

I have already said that it is possible in the new arrangements that a register of the sort associated with the community charge will not be necessary. It is a detailed and technical matter that must be looked at. We shall be putting forward in the consultation document a number of options—they are not firm proposals now—to deal with the matter because it is important, as I have said several times, that the local authorities become involved at this stage in advising on the most effective way forward. If the Labour party decides to end its ostrich-like silence, we shall listen to what Opposition Members, along with everybody else, have to say.

Sir William Shelton (Streatham)

There will be great sighs of relief among my constituents in Lambeth as a consequence of the abolition of the community charge. Will my right hon. Friend please use his powers to cap the Lambeth budget, which is £8 million or £9 million above the £307 million allowed by the Government? On the other hand, will he urge his Department to be as sympathetic as possible over the back debt repayment due to Lambeth's inefficiency over many years? He must be aware that, of the present poll tax set by Lambeth, little over half is going to pay for the services of the council and the remainder towards the wretched debt accumulated by its inefficiency.

Mr. Heseltine

I am wholly in agreement with my hon. Friend. The new system that we introduce will, of course, be seen as a fair system, but it will also reflect the need for local authorities to bear down on their expenditure patterns. That principle will remain with the new system. It is worth saying that it is not just the community charge that the Lambeth authority does not collect. It does not collect the rents, and it did not collect the rates before the community charge was introduced. The most profound anxieties are developing about that local authority. They exist across the Floor of the House, and there are deep and justifiable concerns on the part of the Labour party because, after all, that party is in control there.

Mr. James Lamond (Oldham, Central and Royton)

In the muddle of criteria, platitudes and principles contained in the Secretary of State's announcement, he seemed to forget two principles that we used to hear from the Conservatives. The first was that one could not solve problems by throwing money at them—even though the Conservatives then threw £4.25 billion at the poll tax problem—and, secondly, that the Government had no money of their own because it was all taxpayers' money. Those two points seemed to escape the right hon. Gentleman as he tried to get out of the muddle into which the Conservatives got themselves.

Why does the right hon. Gentleman think it behoves Opposition Members to give him advice now when he was so well advised by us before he introduced the poll tax? We gave him advice on Second Reading, in Committee and on Third Reading of the measure which introduced the poll tax. He took no notice whatever of our advice. Why should we think that he will take notice of any advice that we give him now?

Mr. Heseltine

The more I listen to Labour Members, the more I wonder why I keep asking them whether they want to join the consultative process. Patently they have little to say. If I may offer a personal word of advice in commenting on the hon. Gentleman's welcome conversion to the view that one cannot solve problems by throwing money at them, it is lucky for him that there are so few of his hon. Friends left or he might be deselected.

Mr. Michael Mates (Hampshire, East)

Will my right hon. Friend accept that many of us are relieved that the new proposals which he has announced today will take account of ability to pay because that is a fair system which is essential to any new tax? Will he accept that I and many of my hon. Friends to whom I have spoken about the matter will do all that we can to unite the party and the people behind the proposals, which this time have been fully discussed and agreed within a united Government and a united Cabinet? In the review, will he pay particular attention to the peculiar way in which the community charge operated among our armed services, who were subject to whims of movement over which they had no control and who must be considered fairly in the new arrangements?

Mr. Heseltine

I am extremely grateful to my hon. Friend for drawing attention to the consideration that we have given to members of the armed forces. If I may pay a tribute to my hon. Friend the Member for Salisbury (Mr. Key), the Minister in my Department who has taken a particular interest in the matter, he has showed great concern for those who played such a conspicuous part in the Gulf. We must all be grateful to him.

I am also grateful to my hon. Friend the Member for Hampshire, East (Mr. Mates) for referring to the fact that I have stressed ability to pay. My hon. Friend has taken a keen interest in these matters, and I am glad that he feels that what we have done today reflects his concern.

Mr. Dennis Skinner (Bolsover)

Bearing in mind that the Secretary of State referred to a £140 reduction, will he tell us how many people will get a reduction of less than £140 under the new system, taking into account the first transitional relief scheme, the second tranche of transitional relief and the fact that some people pay only 20 per cent.? Since the Tories have consistently told us that 11 million people are not paying the full poll tax, can the Secretary of State tell us how many will not get the reduction of £140 and whether some will not get anything at all?

Mr. Heseltine

All the hon. Gentleman has pointed out is how generous are the schemes that we have already announced. Of course, if we have given people benefits once, we cannot give them benefits again.

Dame Elaine Kellett-Bowman (Lancaster)

May I thank my right hon. Friend the Secretary of State and my right hon. Friend the Prime Minister for listening to those of us who come from low-rated areas in the north-west for lifting the burden from us? May I thank the Secretary of State too for giving county towns the prospect of running their own affairs, as my colleagues in Blackpool and all the other areas wish to do, so that we may have the opportunity of getting out from under Lancashire county council once and for all?

Mr. Heseltine

I welcome my hon. Friend's observations. The north-west is a particularly important part of the country and we have considered its problems carefully. Again, I am enthusiastic about the way in which my hon. Friend is indicating that there may be local interest in some of the changes that we have in mind. I am sure that she will play her usual active part in pursuing them.

Mr. Allen McKay (Barnsley, West and Penistone)

The Secretary of State is well known for wanting to get rid of the poll tax, and his Minister of State is well known for wanting to retain it. I am concerned, therefore, that when the Secretary of State was making his statement the Minister for Local Government and Inner Cities was nodding in agreement.

It appears that we will get the worst of both worlds—a poll tax based on property. Can the Secretary of State tell me how the tax will be collected? Who will be responsible? Will each person be responsible for his own tax, or will one person in the property be responsible for the whole lot? As he is now keen on consultation, will the Secretary of State overrule his office and meet the leaders of South Yorkshire county council—the South Yorkshire authority—whom his office has refused to meet concerning a difference of opinion among his office, the Department of Transport and ourselves about the funding of the super tram?

Mr. Heseltine

We are in some confusion as to which authority the hon. Member has in mind, but we run an ever-open-door policy in the Department of the Environment and I am sure that we will bring our usual courteous attention to bear on any formal requests that we receive.

The hon. Member referred to the support that my hon. Friend the Minister for Local Government and Inner Cities was giving to what I said during my statement. It would have been impossible—if I do not embarrass him in front of the Prime Minister—for any Minister to give more support to the Secretary of State than my hon. Friend has given me on this matter.

The hon. Member asked how we will collect this local tax. I said in my statement that there would be a single bill to the household; and that will be exemplified in more detail in our consultative document.

Several Hon. Members

rose——

Mr. Speaker

Order. I am very anxious to ensure that all hon. Members who wish to put a question on this very important matter shall do so. I ask hon. Members, in view of the fact that many of the questions have been answered by the Secretary of State, to put new questions and perhaps single questions, and then all of them will be called.

Mr. Michael Brown (Brigg and Cleethorpes)

I have never made a secret of my support for the community charge, but, as one who has the misfortune to represent a constituency in the ghastly overspending county of Humberside, may I tell my right hon. Friend that the structural reform proposals that he has announced today make his statement worth studying very closely with a view to giving it wholehearted support, not only on the structure but also on the finance? It is the structural reform as well as what my right hon. Friend the Chancellor of the Exchequer said on Tuesday which makes it possible now for us to get local government bills down for the people who have to pay them.

Mr. Heseltine

In the spirit of the day, I shall have to continue my consultations with my hon. Friend in order to be sure that he can give me wholehearted support later on.

Mr. D. N. Campbell-Savours (Workington)

Is it not fair to say that what the Secretary of State has announced today is nothing more and nothing less than poll tax mark 2, insofar as it relates to the number of individuals in a household and will also call upon information held in the register of electors? Is that not the case?

Mr. Heseltine

No change is necessary in the basis of collecting information in any new system that we have in mind. No one has raised this issue as a problem in the course of designing it. No one has raised it with me as a problem in moving from the community charge to the local tax, so I have no reason to suppose that there is any problem that I must account for.

Mr. Ivan Lawrence (Burton)

As we have so acceptably slashed the burden of the community charge upon the charge payer, and as my right hon. Friend has so courageously decided that we could get rid of county councils if the local authorities wanted, some of us are left wondering why it is necessary to introduce a complex property tax which most of us have spoken against for the past 20 or 25 years. Will my right hon. Friend give some assurance that refusal to pay this tax, which might be branded as uncollectable, will not be a reason for withdrawing it in due course?

Mr. Heseltine

I hope that my hon. and learned Friend will feel that, as the last question but one referred to it as a poll tax and he sees it as a property tax, it may be that I am entitled to insist that it is a local tax and cannot be defined in any of the neat packages that are being used so to do. I believe that it will be seen as a tax which complies with the principles that I have set out, which means that most people will pay towards it, it will reflect people's ability to pay and it will be seen as fair. It is in no way capable of being described by either of the labels put on it.

What I have said today is not a prescription for getting rid of counties or districts; it is to look at the administration of local government on the ground and come to a view of what makes sense.

Mr. Nigel Spearing (Newham, South)

Does the Secretary of State realise that, ever since he first became Secretary of State for the Environment, local government has suffered greater difficulty and its ability to deliver quality services has been reduced? Is he aware that this review will further prejudice the ability of local government to work properly and that it will reduce the confidence and the professional expertise of those who are professionally involved?

When the Secretary of State says that the 22 per cent. and the means of obtaining it will be reviewed, does he include by definition the poll tax or "head" element, or would he permit other ways of raising that relatively modest 22 per cent. Of tax?

Mr. Heseltine

I do not identify the figures that the hon. Member gave from what I have said. If he has any further exemplification that he wants to put to me, perhaps he will write to me and I will try to deal with it. I cannot accept for a moment, however, that what I have proposed will do other than enhance the possibilities and prospects for local government. In all seriousness, my Ministers and I have spent an inordinate amount of time, with great pleasure, talking to councillors of all political parties who have put to us a remarkable consensus of view on what should be done; and it will not serve the best interests of local government if the Labour party now tries to besmirch the opportunities that we are determined to achieve.

Mr. James Couchman (Gillingham)

My right hon. Friend's statement will receive a warm welcome in my constituency where it will be widely seen as promoting a fair system of providing local government finance, in particular, his assurance that properties in the south-east will not be disproportionately disadvantaged because of high value. Will he take it from me, however, that there is a disproportionate disadvantage to business properties in the south-east which were revalued at a time of historic highs in trading and where the UBR has had a disproportionately large impact?

Mr. Heseltine

I am grateful to my hon. Friend. I can reaffirm our clear awareness of the imbalances that are thrown up by capital values between one part of the country and another. When we publish our consultation document, my hon. Friend can rest assured that we will address that issue directly. We are also quite aware that there have been changes in valuation since the initial uniform business rate valuations. There are proposals for a regular revaluation process, but I would be very surprised if we have not seen a restoration, at least in substantial part, of the values of south-eastern property by the time we get to that point.

Mr. David Winnick (Walsall, North)

Is the Secretary of State aware that, as long as everyone in the household has to pay the same amount of money minus any rebate, it will be totally unacceptable? Why is it that the Secretary of State and, indeed, the Cabinet have responded to those members of the Conservative party in the House of Commons who clearly want to keep the poll tax, as has been indicated this afternoon, instead of listening to the overwhelming number of people who time and again have said that they want no poll tax, mark 1, mark 2, mark 3 or anything else? Is it not clear that when the elections come—the May local government elections and the general election—the British people will reject the mark 2 poll tax as they have rejected the mark 1 tax?

Mr. Heseltine

I am sure that the hon. Member will do his best with wholly inadequate arguments to put that case forward, but he will find that it is not very successful, particularly as he will have to explain how his own party is proposing to go to one system of local government finance in one year and then tear the whole thing up and go to another in the following year. He will also have to explain how his party will finance both those systems when it has rejected the proposal of my right hon. Friend the Chancellor of the Exchequer to put £4.25 billion into the system.

Mr. Patrick Cormack (Staffordshire, South)

Is my right hon. Friend aware that in south Staffordshire there will be few tears for the poll tax but many cheers for the courage that the Prime Minister and he have displayed? Is he further aware that as long ago as 1974, when the Labour party was in office, our right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) was co-sponsor of a Bill which would have introduced the sort of system that he is now advocating and which would have saved us a great deal of aggro?

Mr. Heseltine

My hon. Friend will not expect me to go too far back in history. When dealing with local government, history has a way of rearing up and smiting one. I thank my hon. Friend for the tribute that he paid to our right hon. Friend the Prime Minister, who has unquestionably played the decisive role in bringing about the conclusion that I have announced today.

Mr. Dave Nellist (Coventry, South-East)

The Prime Minister said on Monday night that the poll tax was uncollectable because so many people were not paying it and the courts were overloaded. Does the Secretary of State realise that, despite the rout today and on Tuesday, in the words of a saying, it is not over until it is over, and it is not even over then? There are 15 million people in Scotland, England and Wales facing prosecution, the threat of bailiffs or the threat of gaol and the Secretary of State has said nothing about them today. Unless that threat is lifted and compensation is provided to the millions of others who went into debt to try to pay the poll tax, he will find that those numbers will increase from 1 April and that the flagship of the right hon. Member for Finchley (Mrs. Thatcher) will be his Titanic.

Mr. Heseltine

The hon. Gentleman is wrong. I made express reference to that point, and the answer is clear. The law is the law and bills have to be paid.

Mr. David Gilroy Bevan (Birmingham, Yardley)

I congratulate my right hon. Friend on his excellent proposals. Will he bear in mind the reprehensible behaviour of authorities such as mine in Birmingham, which, in setting the new poll tax level, incorporated the Government's transitional relief of 65 per cent. and £25 extra to allow for non-payers of the present rate, making the total £150 higher than the Conservative proposals? Will my right hon. Friend ensure that the non-payers are brought to heel as 50 per cent. of them have followed the advice of Birmingham city councillors about non-payment and are council employees?

Mr. Heseltine

I share my hon. Friend's concern. Perhaps he will share the dilemma of the Secretary of State for the Environment, who knows that the irresponsible behaviour of Labour councillors is an every-day, inbuilt definition of the job that he does.

Mr. Harry Cohen (Leyton)

Does not the Secretary of State think that keeping the poll tax in 1992–93 as well as in 1991–92 is totally unacceptable? Does he have so little confidence in his hybrid tax that he has to keep the poll tax that extra year? If by any horror the Tories should win the next general election, what is to stop the headline figure for the poll tax for 1992–93 soaring again? Is not the poll tax still the curse of the undead?

Mr. Heseltine

The hon. Gentleman obviously did not follow my right hon. Friend the Chancellor's statement. He made it clear that he intends to preserve in subsequent years the balance that he has struck for 1991–92. Of course that will not deal with overspending local authorities. It will deal with Government support and maintain it at the same levels as have been broadly outlined by my right hon. Friend the Chancellor, but if local authorities choose to overspend it will still leave bills of unacceptable levels for the local community.

The hon. Gentleman also asked whether we should move faster. The practical solution is that there is no way of moving from where we are today in a quicker time scale than that I have outlined. That is why the Labour party is prepared to inflict on local government two different systems in two consecutive years.

Mr. Robert Boscawen (Somerton and Frome)

Does my right hon. Friend accept that many of us supported the community charge because of the unfairness and inequality of the old rating system? I feel sure that my right hon. Friend will agree that it is absolutely right to hold further discussions with the people who thought that the community charge was unfair. Let them give their views as to how we can make the new tax fairer. Let us hear their views before we settle into another system.

Mr. Heseltine

I appreciate my hon. Friend's point. We have considered this matter carefully in Government and have decided that there must be a degree of certainty about our intentions. That is why we have announced that our new local tax will be in place, hopefully, by 1993–94, which we believe is the earliest practical time that that can be achieved. I wholly accept my hon. Friend's point about the unfairness of the old rating system. That is one reason why one is utterly aghast that the Labour party wants to bring it back.

Mr. Max Madden (Bradford, West)

Is the Secretary of State aware that he has cut a sad and sorry figure today? He has looked and sounded like an old-style ship owner with a leaky old tub on his hands who is not sure how much longer it will stay afloat, how much longer passengers will be willing to pay, how much he is willing to charge them or how he will count them on board. I appeal to the Secretary of State and, more importantly, to the Prime Minister to ease the grief and misery of the British public, sweep away all the commissions, consultative documents and discussion papers and let the people of Britain have a general election so that they can choose between the Tory poll tax mark 2 and Labour's fair rates plans.

Mr. Heseltine

If the hon. Gentleman is pressing my right hon. Friend the Prime Minister to hold a general election so that the electorate may be better informed, I am sure that he will press his right hon. Friends on the Front Bench to provide the basic information needed to enable a proper judgment to be made about the relative merits of both systems.

Mr. Ian Stewart (Hertfordshire, North)

I thank my right hon. Friend and his colleagues for the care and thoroughness with which they conducted the consultations before bringing forward today's proposals. I also thank my right hon. Friend for taking into account the fact that many of us believe that there were not only serious defects in the rating system and the community charge but that by avoiding those and incorporating the better part of those two systems the proposals are likely to command widespread approval in the House and outside. Will my right hon. Friend be reassured about the effectiveness of his statement by the looks of frustration and disappointment on the faces of Opposition Members?

Mr. Heseltine

My hon. Friend has made a discerning observation about the Labour party. It might feel that one of its arguments had disappeared out of the window.

Mr. John Battle (Leeds, West)

In setting out his proposals for the longer term, the Secretary of State said that most people should make some contribution. Until now the Government have insisted that everyone must pay at least 20 per cent. Who will be exempt in the future, and why cannot those categories and individuals be exempt now?

Mr. Heseltine

The hon. Gentleman has obviously not followed the way in which the community charge works. The 20 per cent. was, in large measure, reimbursed through the social security system for those on full benefit.

Sir Geoffrey Johnson Smith (Wealden)

I warmly congratulate my right hon. Friend on his statement. I represent a constituency where average house prices in relation to average incomes are much higher than in most parts of the country. Will my right hon. Friend pay special care and attention to the need to ensure that in those circumstances the new system of local taxation will be fair and reasonable?

Mr. Heseltine

I assure my hon. Friends that we are fully aware of the regional disparity in capital values and the need, therefore, to address that specifically. It will be in the consultation paper. I would go further than that. Like everybody else, I keep an eye on what is reported in the newspapers. I have seen figures quoted for the effect of the proposals that we have in mind for certain parts of the country, principally the south-east, which bear no relationship to reality.

Mr. Harry Barnes (Derbyshire, North-East)

Will there be a new poll tax register for the new poll tax, or will the electoral register be used? Different answers have been given to different Opposition Members. It will be a disgrace if the electoral register is used because it will be a direct tax on electoral registration, and that would concern us all. Even with a separate poll tax register, last year 600,000 people were missing from the electoral register. Will the Government produce figures for the position this year? The problem is that these proposals are simply an attempt to have something to say in a general election.

Mr. Heseltine

I have answered that question several times. I said that under the new system we shall not need a register. I have made that clear. Answers to such quesitions will be clear in the consultation document.

Sir John Wheeler (Westminster, North)

Does my right hon. Friend accept that his statement will receive a broad welcome, not least because of the proposed review of structure and functions? Does he agree that the unitary authorities of the 32 London boroughs provide a good example of successful structures? Does he also agree that it is necessary to consider the functions of local government expenditure, especially with regard to national services such as the police and fire services?

Mr. Heseltine

I am glad to respond to my hon. Friend. The unitary model in London is preferable to that which existed before, especially for the large urban conurbations. There is no question but that the Government's decision to get rid of the Greater London council, the metropolitan counties and, later, the Inner London education authority has been a remarkable success. It clarified matters and saved money and jobs. That is important. In the context of the review, I do not think that we intend to make further changes to the structure of the London authorities. However, the functions that they perform and their internal management would be included in the consultative process that I have described.

Mr. Bob Cryer (Bradford, South)

Does the Secretary of State acknowledge that, had the rate support grant remained at its 1978–79 level, the current poll tax would not be £250, as is proposed, but £150? Are not the Government the biggest robbers from local government funds? The record of the Government's attack on Labour-controlled authorities dates back to the Local Government Act 1972, which was the first to cause chaos, to the attack on the metropolitan county councils and on the GLC, all of which were Labour controlled and all of which were abolished because of a political vendetta carried on by the right hon. Gentleman and his cronies. What safeguards will he provide to ensure that the local government commission will not be a Tory quango with the sole aim—secretly, behind closed Whitehall doors—of abolishing Labour-controlled authorities?

Mr. Heseltine

The hon. Gentleman should not tempt me. The idea would not have occurred to me if he had not put it into my mind. Having considered it—albeit briefly—I reject it. As is customary, the independence of the commission will be secured.

Mrs. Maureen Hicks (Wolverhampton, North-East)

Does my right hon. Friend agree that it is only as a result of the introduction of the community charge that local spending was put under the spotlight by encouraging all members of the community to analyse the quality of services and the calibre of councillors? I have no objection to any of his proposals because they marry two systems. Had he not retained an assessment of the number of people in a house but reverted to the archaic system proposed by the Opposition, this would be an old-fashioned party. I welcome the fact that he will continue to consider carefully the internal workings of local authorities. If not, there could be no guarantees of value for money. We must consider contracting out the management of housing and education. If my right hon. Friend wants evidence of poor housing management, will he please come to Wolverhampton? I could fill a book for him.

Mr. Heseltine

It looks as though I shall be busy visiting my hon. Friends' constituencies, which will be a great pleasure. I support what my hon. Friend said. She has particular expertise in internal management systems. I agree that that issue has not been considered for too long, but it will be considered in the consultation exercise that we have promised today.

My statement reflected my agreement that we must move further and faster towards the concept of enabling authorities to offer choice and have competition and to see the vast baronies of power moved from the public sector to a more competitive sector. The idea of marrying two systems by reflecting the number of people in a household was always one of the preferred ingredients of the package from the earliest days of our review.

Ms. Marjorie Mowlam (Redcar)

How will the Secretary of State's announcement affect one policy which especially concerns the public and which local authorities are already trying to implement—community care?

Mr. Heseltine

I am grateful to the hon. Lady for asking that question. The Government have announced their plans. Local authorities know the timetable, and nothing that I have said today changes the Government's known position.

Mr. Michael Latham (Rutland and Melton)

This is today's shortest question: can we have Rutland county council back, please?

Mr. Heseltine

I am tempted to say, "If you want it", but I must be allowed to define "you" in a very wide compass.

Mr. Peter L. Pike (Burnley)

Much of the Secretary of State's statement was taken up with setting up consultations and commissions to rectify the actions taken by the Government since 1979 and the reorganisation by the previous Tory Government of 1970–74. The words that he used to commend the sanitised version of the poll tax—poll tax 2—were similar to those used to commend the original version. Why should the people of Burnley, which is Labour controlled and has a low poll tax, and the people of Ribble Valley, part of which I represent, which is Tory controlled and has a high poll tax, have confidence that the Government have got it right? How much has this sorry saga cost the nation over the past two years?

Mr. Heseltine

The people of Burnley may like to consider the level of expenditure in the Labour-controlled county council of Lancashire. That might colour their view. The verdict in Ribble Valley is that we shall have a Tory Member of Parliament there after the next election.

Several Hon. Members

rose——

Mr. Speaker

I shall do my best to call hon. Members. Will they please ask brief questions?

Mr. Anthony Steen (South Hams)

Since most questions have already been asked, besides welcoming the excellent statement, may I ask my right hon. Friend about local government reorganisation? Does he intend to give greater powers to parish councils, especially on planning matters? May I also ask about privatisation and contracting out? Does he envisage the contracting out of planning departments and their architects and planners?

Mr. Heseltine

My hon. Friend asks two interesting questions. I have no plans to change the present regimes of the parishes. I do not wish today to be drawn on the question of contracting out planning departments, but there are some interesting ideas about how they could be changed.

Mr. Richard Tracey (Surbiton)

I welcome my right hon. Friend's recognition of the strength of the unitary authorities and the essential factors of comparability between authorities and accountability. If a consensus emerges for the assessment to be based on capital values, will my right hon. Friend consider carefully the idea of capital values being based on rebuilding costs rather than on market values? That might help to smooth out things across the country.

Mr. Heseltine

I am aware that there are many ways of assessing capital values, one of which is by reference to building costs. I ask my hon. Friend to wait for the publication of our consultative document, which will set out a range of options. We can then hold detailed discussions.

Mr. James Cran (Beverley)

On the structure of local government, my right hon. Friend will be aware that in an interim report the Boundary Commission has already decided to recommend the abolition of Humberside county council. When the final report is published, can he assure my constituents in east Yorkshire that that will suffice to get rid of the county and that it need not be re-examined?

Mr. Heseltine

I fully understand my hon. Friend's eagerness. However, he will understand that I am in a difficult position and that I cannot comment on his question.

Mr. Richard Holt (Langbaurgh)

Given the enormity of his task, may I, too, congratulate my right hon. Friend on coming forward so quickly on the restructuring and refinancing of local government? If my right hon. Friend listens for a moment, he will probably hear the cheers ringing out from Cleveland at the echo of the fact that that authority is about to go. In the meantime, may I ask my right hon. Friend to watch carefully the activities of that local council? It is currently spending £680,000 on a brainwashing exercise for the people. The council may try to spend similar sums over the next two or three years to save its own rotten neck.

Mr. Heseltine

My hon. Friend, as a former local authority leader, has a great insight into the things which local councils occasionally get up to. I am sure that he would not have played any part in such things himself.

Mr. Roger Moate (Faversham)

May I warmly congratulate my right hon. Friend on the Government's approach to local government reform? It will compare favourably with some of the more lunatic proposals for regional government and the like being peddled by all the Opposition parties. On local government taxation, does my right hon. Friend understand that many of us still feel that the burden being imposed on local government is too great? Having started the shift from direct local government taxation to indirect, centralised taxation, will he confirm that he will not preclude the possibility of continuing that process in the course of his consultation?

Mr. Heseltine

It would be only realistic of me to tell my hon. Friend that my right hon. Friend the Chancellor has been more than generous. He has not only made a significant shift, but he has committed himself to preserving broadly the balance that has been struck. It would be unrealistic to imagine that that will be changed.

Mrs. Teresa Gorman (Billericay)

Will my right hon. Friend accept my congratulations, especially on the earlier part of his statement in which he rightly identified the cause of the problem to be the uncontrolled appetite of local government for more spending? We now face the problem of how to curb that. Will he assure us that he will pay special attention to the true alternative to the community charge—which, incidentally, will be mourned by my constituents who thought that it was a valiant attempt to do the right thing about local government? The alternative is to consider whether services need to be provided by local government or whether they could be carried out more effectively through a competitive marketplace.

Mr. Heseltine

My hon. Friend raises important issues. I wholly support what she says about the need to control spending and to get value for money. It is possible to marry together the provision of local services by enabling authorities with the fact that they do that by contracting out services.

Mr. Andrew MacKay (Berkshire, East)

Although I readily acknowledge that this afternoon my right hon. Friend has made great progress in the reform of local government finance and structure, may I assure him that in densely populated counties, such as Berkshire, there is a great desire for unitary authorities? Unitary authorities mean boroughs and districts, and not counties.

Mr. Heseltine

I am grateful to my hon. Friend for stressing the popularity that could flow from the concept of unitary authorities. We must now wait until we have a chance to test that in practical terms on the ground.

Mr. Teddy Taylor (Southend, East)

On the concept of a property tax based on capital values, will my right hon. Friend explain whether the general principle is that a family of three on average earnings living in a £200,000 house would pay twice as much as a family of three on average earnings living in a £100,000 house? Will he also explain what on earth will happen to water rates if we move from rateable to capital values? Will we now pay for our water on the basis of how much the house is worth?

Mr. Heseltine

My hon. Friend will know that we have in mind over a period to move away from water rates, and the water companies are now considering that matter. It is for the complexity of reasons to which my hon. Friend has drawn our attention that the Government have decided not to adopt a property tax.

Mr. David Martin (Portsmouth, South)

Does my right hon. Friend accept that there will be a wide welcome in Portsmouth for the opportunity once more to run its own affairs 100 per cent. in Portsmouth rather than having to rely on Hampshire county council—and the sooner the better for Portsmouth?

Mr. Heseltine

I must dampen the enthusiasm of some of my hon. Friends who already assume that we shall set up the local government commission and shall make judgments such as they wish to see within a short time. We must go through a proper process of local consultation once we have set up the commission, and we must test people's mood of what they want.

Mr. Ian McCartney (Makerfield)

Will metropolitan authorities be included in the review, given that the unitary principle for local government has been working well in metropolitan authorities, despite Government attempts to sabotage it? Will he give a commitment to the Association of Metropolitan Authorities that the current metropolitan authorities at borough level will continue after the review?

Mr. Heseltine

In reply to an earlier question, I said that I did not anticipate changing the structure of the metropolitan authorities.

Mr. James Pawsey (Rugby and Kenilworth)

Is my right hon. Friend aware that his statement today will be seen as good news by the majority of the British people? They will see his proposal as a far fairer method of funding local government. His statement, which included a reference to the fact that local people will be able to choose, the form of local authority that they prefer, will also be widely welcomed. What impact will his statement have on rate-capped authorities such as Warwickshire?

Mr. Heseltine

I have explained our position on rate capping for the current year. I have no changes in mind as a result of anything that my right hon. Friend the Chancellor or I have said during the past two days. I have explained clearly that we shall look for restraint in local authority expenditure next year, especially in view of the considerable additional money which has been put in to reduce the community charge to its lower level. To ensure that, we shall have to anticipate the rigorous use of capping powers.

Mr. Patrick Nicholls (Teignbridge)

My right hon. Friend deserves great praise for coming forward with a system that should answer many of the points of unfairness that are perceived in the present system. One of the flaws of the present system is the seeming inability to control local authorities that seem hell-bent on levying at a rate greater than they should. Capping has proved an imperfect instrument for achieving that control. There are some councils—regrettably some are even Conservative—in which the councillors seem to be incapable of resisting the money-spending propensities of the officers who run them. Will it be possible to bear those factors in mind in the review?

Mr. Heseltine

My hon. Friend makes an important point. The awfulness of some of the high levels of expenditure is that they often go hand in hand with some of the least effective deliveries of services. There is no doubt that the capping regime has had its effect and that it will be a necessary part of our controls as we introduce our new system.

Mr. Robert Banks (Harrogate)

I congratulate my right hon. Friend on his proposals for consultation with local people about the future of their local government. On the local tax, will he tell us whether he is taking fully into account the cost and the whole operation of valuing properties with the consequent disputes, appeals and fluctuating values, which will have to be taken into account? Will he keep his ears open to alternative suggestions, such as the measuring of property, which would be a far simpler and more accurate way to deal with the matter?

Mr. Heseltine

My hon. Friend begins already the process that will flow from the publication of the consultative document. We have ideas, and colleagues may feel that some are rather more effective than the necessity to value every house precisely, although that is one option that we must consider. However, I do not wish to be drawn on that today in advance of the consultative document on the options that we are about to put forward.

Mr. Ian Bruce (Dorset, South)

My right hon. Friend will know that the devil is always in the detail. He will not be surprised to know that in a low-spending area such as south Dorset people were pleased when the community charge was sold to them on the basis that they would pay 25 per cent., business would pay 25 per cent. and the Government would pay 50 per cent. They were less pleased when they found out that they were paying 45 per cent., business was paying 45 per cent. and central Government were paying 10 per cent. My right hon. Friend has announced today that the local tax percentage will be about 22 per cent. Will that apply to people in south Dorset, or will they subsidise people in other areas? Can my right hon. Friend, as the Minister responsible for England, assure the House that English local taxpayers will pay the same percentage as Scottish and Welsh local taxpayers?

Mr. Heseltine

My hon. Friend represents a beautiful part of our country. He will realise that other areas have wider and sometimes deeper problems. Therefore, there are equalisation processes and the figures that I have given are average figures from across the country. That will remain the position. There will be a variation within those, depending upon the characteristics of the local areas.

Mr. Michael Irvine (Ipswich)

Will my right hon. Friend take it from me that the poll tax has been intensely unpopular in Ipswich, among most of my constituents, and that there will be widespread rejoicing at the comprehensive and well-merited butchery job that he has done on it this afternoon? However, while the unfairnesses of the poll tax have been resented, there has also been a widespread acknowledgement that the old domestic rating system was unfair. One of the great merits of the proposals that my right hon. Friend has announced this afternoon is that they are directed towards putting right the unfairnesses not just of the poll tax but of the old domestic rates system.

Mr. Heseltine

My hon. Friend is right to remind us of the unfairnesses of the old rating system, to which the Labour party is now committed. However, I would not accept the graphic language that he used in describing me as having been involved in a process of butchery. I feel that I have been curing the joint.

Mr. Tim Janman (Thurrock)

I congratulate my right hon. Friend on seemingly retaining some elements of the community charge and on giving a welcome added impetus to the need to contract out more local government services. When he publishes his consultation document, will my right hon. Friend clarify which of the different criteria that will now have an effect on what a household pays will be more important? In other words, will two people living in a house worth £100,000 pay more than four people living in a house worth £50,000, all other things being equal, or vice versa?

Mr. Heseltine

My hon. Friend will immediately recognise that that depends entirely on the weight that we put on the two elements of the new local tax. This will be one of the many matters about which we shall be consulting. I support what my hon. Friend said about contracting out.

Mr. Barry Field (Isle of Wight)

Did my right hon. Friend hear the Liberal Democrat spokesman, the hon. Member for Berwick-upon-Tweed (Mr. Beith), say on Radio 4 that he expected that the natural drift of the reform of local government would be to the district or borough councils? Does my right hon. Friend agree that that will be good news for our borough councillors as they go into the borough council elections? Does he understand that, with 43 county councillors, 64 borough councillors and 29 parish and town councils on the Isle of Wight, my constituents will be ticking off the days until 1994? Can he confirm that it is no accident that he promised us that the new system will be in place by April 1994, just before the county council elections? County councils have been the pick-pockets of community charge payers throughout this whole transaction.

Mr. Heseltine

I have had the privilege of visiting my hon. Friend in his constituency, and those points have been put to me on earlier occasions with equal eloquence.

Mr. David Blunkett (Sheffield, Brightside)

I understand that it is the Secretary of State's birthday. I hope that he has happier birthdays in future. I apologise for blowing out his candles.

Does the Secretary of State understand that, in announcing that he has rid us of the poll tax and in telling the hon. Member for Southend, East (Mr. Taylor) that he is not adopting a property tax, he has invented a hybrid donkey tax which stands on sand and is kept alive by being fed carrots? The Secretary of State has suggested this afternoon a tax that he is not willing to spell out, a tax without a valuation system, and a tax that retains the 20 per cent. contribution, some form of register and the proposals for water metering while not solving the basic problem of ability to pay.

Will the Secretary of State concede that any new valuation system will take at least two years to implement from the day that legislation is completed? That means that, if the Conservatives stay in office, apart from those who live in Wandsworth and Westminster—the only people who have seen their poll tax abolished-the country will have to suffer the poll tax until April 1994. We will suffer the chaos, the cost and the confusion for the simple reason that the Government refuse to accept our fair rates proposal because they are hooked on the idea of numbers rather than on income and fairness and are determined at all costs to get through the general election before announcing what they mean to do.

Mr. Heseltine

The hon. Gentleman has raised matters that have been covered exhaustively in the past two hours. I can only say that, if he thinks that his system will stand scrutiny alongside ours, I am happy to compare them detail by detail. I am happy to put his system to the local authority associations for their views so that it can be compared with ours. The hon. Gentleman and the Labour party talk as though we have caused chaos for local government, but I can think of nothing more likely to do that than to introduce two totally different systems of local government finance in two consecutive years. That Labour party policy is unacceptable. It is unacceptable in its own right, but when its plan means that one of those years will see a return to the discredited rates system, it is doubly unacceptable.

I do not confirm that a valuation should take the time envisaged by the hon. Gentleman. Valuations can be carried out much more expeditiously, and we will discuss ways to do so in the consultation document.

The overwhelming view of the House has been a broad welcome for what I have announced today. It has given local government a new sense of opportunity. We are determined to build on that and to develop it. I commend our proposals to the House.