§ 2.52 p.m.
The Earl of Caithness
My Lords, I beg to move that the Bill be now read a second time. This Bill is about accountability of local councils. Its central objective is the enhancement of accountability of councils to their electors. This is not a new objective. The search for greater accountability and effective local democratic control started in the 1970s under the previous Government and has continued throughout the 1980s under this one.
827 Bringing home to local electors the true cost of local services and the cost of ever increasing demands for them, has been a continuing theme for this Government as we have tried to make the present system work. We have tried to put more of the responsibility for high spending on local ratepayers. The hope was that authorities would curb unrealistic ambitions rather than penalise their ratepayers. The failure of this mechanism led to rate-capping to protect the ratepayer directly.
I was especially glad to see that my noble friend Lord Jenkin of Roding has put his name down to speak today. His direct experience of these matters will enhance our debate. In 1984, my noble friend announced the establishment, within his department, of studies into the whole of the local finance system. This is what they found.
Broadly half the cost of local government services are met by government grant. Most is distributed in a way which is so complex that only a relative handful of experts can claim to understand it. The distribution of the grant can, and does, vary from year to year in ways which are both unpredictable and often unrelated to changes in local expenditure.
Grant is also distributed so as to reflect differences in rateable values between different parts of the country. The result is that ratepayers in different parts of the country pay radically different amounts for the same local services. Even though his or her local council spends more, a ratepayer in Carlisle last year paid £125 less in rates than a ratepayer in an equivalent house in Luton. The present grant arrangements have become incomprehensible, unsustainable and uncertain. They provide no basis for effective local accountability.
The studies also found that another quarter of local spending—more than half of all the money raised locally—is met by business ratepayers. They have no vote to determine the total cost of, or the nature of, the services provided. In some areas, as much as 80 per cent. of the money raised locally comes from local businesses.
Variations in non-domestic rates also distort the competitiveness of businesses. Business rate poundages vary by ratio of three to one from 354p in Manchester to 117p in Kensington. In 1987–88, a business in Manchester paid 50 per cent. more than the equivalent business in next door Trafford.
Where rate poundages are high, business will choose to locate elsewhere. Where rates are high, they take too big a share of the money available for business occupation costs. Investment returns are reduced and development does not take place. These are just the conditions which contribute to decline in some of our inner cities.
Business rates also vary unpredictably from year to year. This year the average rate increase for businesses has been twice the rate of inflation. But increases of more than seven times the rate of inflation have occurred in Humberside. Last year rate increases of more than 60 per cent. occurred in the London boroughs of Ealing and Waltham Forest. How can business plan for jobs and investment against a background of such uncertainty?
828 My noble friend's survey also found that the final quarter of local spending comes from domestic ratepayers but the match between those that use, vote and pay for local services is very poor. In round figures there are 38 million electors in England and Wales—all of whom use local services—but only 19 million ratepayers, in some areas as few as one in four of the electorate, pay a full rate bill. And even they are prevented by the obscurity of the system from seeing the full cost of the services they use. Changes in grant from year to year can mean that spending goes up while rates go down and variations in rateable values mean that ratepayers have no simple way of comparing value for money in different areas.
Is it any wonder that the turnout in local elections is so low or that they are so dominated by national politics? We want to change all that. We want local elections to be about local issues. We want people to understand those issues and feel involved enough to want to vote.
Furthermore, there is the domestic rating system itself. There is a common but quite unfounded belief that domestic rates are related to ability to pay. In fact, they are monstrously unfair. It is a matter of simple fact that rates themselves, as a tax, bear far more heavily on the poor than the rich. Twenty-two years ago, the then Government produced a White Paper entitled "Local Government Finance England and Wales" (Cmnd. 2923), which set out "the problem" with domestic rates, saying:Those who pay most are by no means always those who can best afford to do so. Under modern conditions the value of a man's fixed property is no measure of his capacity to pay; housing is a necessity, and as with other necessities the poor spend proportionately more on it than the rich … Thus rates are regressive in their impact on those who pay them; yet at the same time many who could afford to pay something make no contribution at all".Those observations were by the then Labour Government and are as true today as they were then. But it is not just the very poorest groups who find rates onerous. Some 40 per cent. of homes with above average rateable values are occupied by households with below average incomes.
I have spoken strongly because like all surveyors who have been involved with rating, I feel strongly that what I have described is a system which is unfair and can never deliver local accountability. It can and has produced local irresponsibility. But it cannot provide the system we need—and local government needs—for the future. The stark conclusion is that we now have a system to which, were we designing it today, your Lordships would not give a second thought let alone a Second Reading.
There is another practical reason why domestic property tax will inevitably be unfair. The fact is that a tax on property can be fair, in its own terms, only if values are kept up to date in the same way as income tax is applied to the latest estimate of income. But history shows that concern about the impact of a revaluation more often than not leads to its postponement. We are supposed to have had eight revaluations in this country since 1948, one every five years. In fact we have had three; in 1956, 1963 and 1973. On each occasion, one outcome of the revaluation was a renewed search for an alternative to the rating system. What is certain is that without 829 this Bill a revaluation would now be inevitable and would lead to such concern with no gain in local accountability that the worries about the community charge would pale into insignificance.
That is why Conservative governments have been active in searching for alternatives. Any change carries with it the risk of unpopularity with those who see themselves as losers. Those concerns in part explain the inertia against change. But we cannot go on running away from that fact. The present system is unfair and increasingly unworkable. Now is the time to move to new and fairer arrangements. This Bill will give us that. The other alternatives we have considered will not. I can therefore commend the Bill to your Lordships. I turn now to the contents of the Bill itself.
Part I introduces the community charges and will be familiar to your Lordships from our consideration of the equivalent Scottish legislation. The key point about Part I is that it involves all 38 million electors and not just 19 million ratepayers in paying for local services. With limited exceptions, all adults will now have an interest in their local council's spending decisions and the value for money that they offer. I see from todays newspapers that this is described as "inherently unjust" by some leading churchmen who want the charge to be related to ability to pay. But around 9 million people on low incomes will in fact pay less than the full amount as a result of the rebate arrangements. Nearly half of these people will pay only the minimum 20 per cent. charge. All will pay something and will have a clear interest in the decisions of their local authorities. But what they pay will be related to their income.
The substance of Part I follows that of the Scottish legislation which is due to come into effect next April. In particular, all the improvements made to that legislation in this House have been carried forward into the current Bill.
Clause 2 establishes the central principle that the personal community charge is to be payable by all those over 18 living in an area, subject to the exemptions specified in Schedule 1 and to the right for those on low incomes to have their charge rebated—as provided for in Clause 133 and Schedule 13.
The principal exemptions are those approved by your Lordships' House for the Scottish legislation. They include those still at school, the severely mentally handicapped, prisoners, those living in long stay hospitals or care homes for the elderly. We have also promised to bring forward provisions exempting monks and nuns. We hope to do this at the Committee stage.
We have been under pressure from some quarters to extend this exemption to all clergy. Most churchmen recognise that clergymen would not wish to be treated differently from their parishoners. We understand, however, their concern about the extra cost which will fall on church funds as a result. We cannot avoid that, but it is a factor which we must bear in mind when considering the Church's capacity to maintain those buildings which are so much part of our national heritage and to contribute to other projects to which we and they attach priority, such as the programme for redundant churches, and in other ways.
830 Clause 3 introduces a standard community charge which will be paid by the owners of second homes and unoccupied dwellings. We shall be bringing forward amendments to exclude caravans from these provisions.
Clause 4 introduces the third of the community charges—the collective community charge. This will be payable by landlords of designated properties where the turnover of occupancy would otherwise prevent effective collection. Landlords will be allowed to keep 5 per cent. of the income from these charges as a "handling" charge.
The remainder of Part I is concerned with establishing the liability for each of these charges, including the provisions for the establishment of the register, and providing for their enforcement. I expect that we shall be looking more closely at these during the Committee stages.
Parts II, V and VII can be considered together. Part II provides for the setting of the personal community charge and details the matters to be taken into account in arriving at that sum.
Part V deals with the financing of the precepting authorities. Essentially it provides for the continuation of present practices, except that precepts will now be expressed as an amount per adult rather than as an amount in the pound of rateable value. Part VII establishes a new system of funds to handle the transfers of money which will take place under the new arrangements. Arrangements in this part differ as between England and Wales to reflect the different circumstances of the two countries.
Part III is the next substantive set of provisions, and performs two functions. It provides for the continuation of the non-domestic rating system—broadly on the same basis as at present, but with two major differences. The first is that Clause 37 requires a new valuation list to be established on 1st April 1990 and each five years thereafter. This will be the first revaluation of non-domestic property to take place in England and Wales since 1973. The fact of this revaluation has been very widely welcomed as has the commitment to a return to regular revaluations for the future.
The second major change is that the rate poundage—now to be known as the multiplier—will in future be determined not by individual local authorities but in accordance with the provisions of the Bill. When fully in place, this will mean that all businesses will pay a uniform rate in the pound on their rateable value. The starting point for that will be determined by the Government, but thereafter there will be a maximum rate of increase for the rate poundage linked to the increase in the rate of inflation. There will, however, be a power for the Chancellor of the Exchequer to increase the rate in the pound by a lesser amount, in any year, subject to the approval of the other place. These matters are dealt with in Clause 48 and Schedule 7.
Clause 51 and Schedule 8 also provide for the proceeds of the non-domestic rate to be pooled centrally and for all the yield to be redistributed by the Secretary of State to all local authority areas in proportion to their adult population. This will be done separately in England and Wales.
831 Part III therefore achieves two major objectives of our reforms. It removes the distortion in competition arising from the wide variation in local rate poundages and it gives business certainty about the maximum increase in their rate bills.
We estimate that the effect of these proposals will be to reduce the rates bill of businesses in the North and Midlands by around £700 million every year. And we estimate that in the 57 inner city programme authorities alone the benefit to businesses will be of the order of £350 million. That is a considerable boost to employment prospects in some of the more hard pressed areas of the country.
I should indicate here, however, that we fully accept that changes of the magnitude I have just described cannot be absorbed by the market overnight. Clause 49 therefore makes provision for transitional arrangements to restrict the rate at which rate bills may increase during the period up to 1995. In another place, my right honourable friend the Secretary of State indicated that the Government will be further improving those provisions, particularly as they relate to small businesses.
A further benefit of Part III is that local authorities will no longer be able to pass on a substantial proportion of the cost of increased spending to the non-voting business sector.
Part IV provides for the continuation of domestic rating for a four-year period in nine inner London boroughs and the City of London, where overspending is currently highest.
Part VI replaces the present complex rate support grant arrangements with the much more simple revenue support grant provisions. Although it is a relatively short part, its rôle in the Bill is crucial. The present grant arrangements seek to ensure that differences in local authorities' costs and demand for services are met from the grant. This "needs equalisation" process will continue under the new grant system. But the other complexities will be swept away, leaving a grant allocation which will be more stable and comprehensible.
The intention is that the distribution of the grant should ensure that all local authorities, despite differences in their needs, are able to provide for a standard level of service by charging the same amount to their community charge payers. In 1987–88, we estimate that that would have been £178 a head.
A major difference between the new and the old grant arrangements will be that grant will not be related to expenditure. The amount of grant to which an authority is entitled will be settled before the start of the year and, except in very limited and specified circumstances, should then remain the same throughout the year.
Taken together with the provisions in Part III, these arrangements will ensure that all authorities can provide their necessary services for a standard price. Any provision above that level will be financed entirely from community charge payers on a pound-for-pound basis. That will give the clearest possible signal to charge payers.
832 Part VI also includes in Clause 90 the provision for transitional grant arrangements—the safety net—to ensure that the changes take place at a pace which will allow local authorities to adjust their budgets and community charges. We intend to phase out the safety net over four years.
Part VIII of the Bill provides powers for the capping of community charges. This carries over from the 1984 Act provisions which have proved to be essential in reducing the burden of rates in some of the higher spending local authorities in England. We have felt it right to carry over these provisions in a modified form since we are making a radical departure, and it will take a number of years for the community charge to be fully operational. We hope that these provisions will never be needed. But in view of the quite extraordinary behaviour of a small minority of local authorities in recent years, we feel we must be able to respond should anything go badly wrong.
Finally, Part IX provides for a new role for the chief finance officer who will have to be a member of a recognised professional body and will have a duty to report to the council if he believes that any planned expenditure is unlawful in its widest sense. This is to give the council the opportunity to consider its position and the auditor an opportunity to consider issuing a stop notice.
The remainder of the Bill is concerned with technical and consequential provisions, including provisions relating to Scotland amending other legislation there. In so far as they are substantive, these amendments are generally designed to bring the law in Scotland into line with the policy in this Bill.
In another place, there was much debate about whether our proposals are fair. I have no doubt that they are. Eighty per cent. of single pensioners and 80 per cent. of single-parent families will pay less than with rates; on average, households with incomes up to £150 per week will pay less than with rates; and no low income household will pay more than a higher income one for the same local services, as many do now with rates even in the same local authority area. What is more, around 9 million chargepayers on the lowest incomes will be entitled to rebates which will ensure that—where it counts—what is paid is closely related to ability to pay. And for the first time, all those who use local services will pay something for them.
We make these proposals after a great deal of careful thought. We believe that they are much fairer than the present system. Some of your Lordships may have other proposals. We will certainly listen carefully to anything positive which is put forward. What this Bill seeks to achieve is a new basis for the contract between local government and its local electors in which those responsible for voting for services can see clearly the cost of those services and can balance explicitly the benefits of the services provided with their cost. With that clear link established, local government will be in a far stronger position to assert its right to decide the quantity and quality of services it provides. Without these reforms, the alternative is continuing and increasing central government involvement to protect those who are 833 penalised by the unfairness of the domestic rating system and to safeguard the interests of businesses, particularly those in high spending areas. The choice is central versus local control.
The Government prefer local democracy on a basis of clear accountability. The Bill provides that and I beg to move.
§ Moved, That the Bill be now read a second time—(The Earl of Caithness.)
§ 3.13 p.m.
§ Lord McIntosh of Haringey
My Lords, the House will be grateful to the Minister for the lucid and conscientious, though hardly enthusiastic, introduction which he has given to the Bill. I believe that we can start from one common point. It is common ground on all sides of the House that the effect of the Bill will be to make the poor poorer and the rich richer. The Government do not deny that. They seek to justify it but it is not denied by them.
I quote from remarks made by the Secretary of State at Third Reading of the Bill in another place. It was on 25th April 1988 and appears at col. 136 of the House of Commons Hansard. He said:it is in principle thoroughly undesirable, and costly and complicated in practice, to have a progressive element in the raising of revenue at the local level".He put it more vividly in his local paper, the Wiltshire and Gloucestershire Standard, on 1st April 1988. He said:Why should a duke pay more than a dustman?I suspect that there are more dukes than dustmen in your Lordships' House. However, I suspect that dukes, like dustmen, will agree with most noble Lords that even if we come out better off as a result of the legislation, there is something profoundly unjust with the idea that a dustman should pay the same as a duke for the expenditure of local government. The effect will be that 1.2 million more people will come within the scope of the benefit system. If ever there was a move towards a more dependent society, the Bill is bringing that about.
The Government argue that that undesirable effect—and it is agreed almost unanimously to be undesirable—is justified for three reasons. The first is that of accountability, as spelt out by the noble Earl in some detail. The second is because of the attempt to make local authority taxation closer to a charge than a tax. The third is because the Government claim that there is a strong progressive element in income tax which pays for a large part of local authority expenditure. I should like to examine each of those claims in turn before turning to the many defects of the legislation.
The first is the question of accountability. The noble Earl said that 38 million people will be eligible to pay the tax. However, he admits that 9 million of those will receive either total or partial exemption or rebates. As regards the present situation, it is true that there are only 18 million ratepayers. However, they have 11 million spouses who, as we well know, recognise that they share the responsibility for the family's expenditure. At Second Reading in another place the right honourable Michael Heseltine made that very clear. I shall not quote him directly, but he 834 said that families pay the rates, rent, telephone, electricity and so forth. They accept family responsibility for that expenditure.
The same is true of the rates. It is a fact people in the family other than those who sign the cheques or take the money to the borough treasurer's office are still paying rates. From opinion surveys we know that three-quarters of our adult population—that is 26 million people—believe that they pay rates. As regards responsibility and accountability, what matters is whether people believe that they pay rates and whether they recognise that it is partly their money which is going towards local authority expenditure. Therefore the accountability argument falls completely to the ground and ought not to be heard again.
Even if we accept the detail of that, the legislation before us will not achieve the desired objective of relating individual local authority expenditure to the individual payments which people are making. For example, the counties in England will be forced to precept on the districts rather than raise their poll tax separately. For some reason the situation is different in Wales. Therefore people will be able to see what the individual counties and districts are spending. However, they will not be able to see how much they are paying towards the expenditure of the county and district. For example, education is the largest item of expenditure, but the grant being paid by government does not go to the counties and so it does not go to those which are spending the most on education.
The second argument used by the Government is that somehow we are coming closer to local authority expenditure and local authority taxation being a charge for services rather than a tax in itself. I do not wish to become involved in the constitutional arguments of what is a tax. We should then raise interminable arguments about the rights and responsibilities of your Lordships' House and I am not qualified to intervene in them. I accept the situation that the Bill is in your Lordships' House, amendments will be accepted and I am duty bound to do my best to improve the Bill as we find it.
However, rates are a local tax and not a charge for services. There is no claim that they relate to the individual ratepayers' use of those services. If that were so parents would pay more for education, those who use the social services would pay more towards them and we should move towards a situation which some members of the Conservative Back-Benches in another place want to reach. It is that everything, including education, should be paid for directly. I do not believe that that is the opinion of most people in the country. Neither do I believe that it is the opinion of most noble Lords in this House.
The poll tax goes no further towards turning the raising of revenue into a charge for services rather than its being a tax. We have heard interminably about the difference between two next-door houses, one with four young children and one with five adults and how unfair it is that the five adults, who have far more capacity to pay, are to pay the same rates as people with young children. However, the family with young children is using far more of the services of the local authority than the five adults. If we were to take this rationally and literally, we should be 835 going in the other direction from that proposed by the Bill.
The third argument used by the Government is that it does not matter that the poll tax does not reflect ability to pay because the national element in local authority finance—that is, that part which comes from the income tax—is, of its nature, progressive. I pass over the fact that since the Budget it is less progressive than it was up to the Budget. However, that is the argument used by the Government. Indeed the 1986 Green Paper, Paying for Local Government, stated at paragraph 3.11 that they are looking for:an approach to local government finance that rests on responsible local spending decisions and a reduction in central Government intervention.I wish to make the point that the very nature of the shift imposed in this Bill is an increase, not a reduction, in central government intervention. The result of this Bill will be that, instead of 46 per cent. of local government expenditure coming from government grant, the figure will now be closer to 75 per cent. In addition to the huge change in responsibilty for the determination of the raising of local government finances and this huge shift to central government since the Report stage in another place, the Bill gives no fewer than 650 additional powers to the Secretary of State by order or in various delegated ways.
than giving people responsibility for their own future. Again, Mr. Ridley did not disguise that fact. He said:whatever level of Exchequer grant is chosen, the principle of accountability is still preserved, because extra spending above assessed need will always be paid by the community charge payer."—[Official Report, Commons, 25/4/88; col. 137.]Mr. Howard, the Minister of State, said virtually the same thing at col. 149:We believe that a standard level of service should cost the same in every local authority area in the country. … We believe that any variations in local spending should be paid for by local communities that benefit from that spending".That is all very well but the two significant phrases in what the Secretary of State and the Minister of State said are "a substantial level of service" and "assessed need". They are saying that the Government will determine the standard level of service and assess the need. They are saying that it is not up to local authorities to have any significant say in what is to be the level of service which they want to provide for their electors and the community. If anybody should doubt that, let us not forget—and we shall come to this in a few moments—that, even with all the claims which they make about accountability, the Government still propose to keep the poll tax capping powers which they introduced in the Rates Act 1984.
I see that the noble Lord, Lord Rippon, is in his place. I believe that he objected to some of the elements of the Rates Act 1984. When he considers that the capping is now to be introduced after the event, after the rate has been set and possibly after an election has been held, I hope he will find that that particular element is exceptionally objectionable.
Therefore, we have no serious argument from the Government which actually stands up against the claim which I make to your Lordships' House that 836 there is no significant increase in accountability, that the taxation which we have under the form of the community charge or poll tax is no more related to the use of services than any of its predecessors and that we have a significant increase in central power as against local authority independence and determination. Sir Ian Gilmour understood this matter very well at Second Reading when he described—and again I paraphrase—the danger which he saw in government being made more powerful by the weakening of the intermediate institutions, because it is those institutions, like local authorities, which provide the buffer between the state and the individual and preserve individual freedom.
There are many matters in the Bill into which one would like to go in detail because, having started from a false premise, it gets itself deeper and deeper into difficulty as we look at the very complicated provisions. In the time available to me I can only race through them and I do so not in order to expound a point of view on every single aspect of the Bill but to indicate as best I can the lines along which we, on these Benches, will be looking for change.
Perhaps I may begin with the issue of exemptions and rebates. I recall that in 1381, which was the last time we had a poll tax in this country—and I shall not bore your Lordships further with the history of the matter which has been very widely and sometimes dramatically expounded—the exemptions were for beggars, the clergy and wives. At that time the poll tax was a matter of three groats, which I understand is the equivalent of about £100 in today's currency. The exemptions are now very much wider. They cover prisoners, visiting forces, international headquarters, those who are severely mentally handicapped from birth—and I am sure that there will be amendments in order to ensure that that is extended to the equally tragic cases of severe mental handicap which arises later in life—children, residents of residential care homes, hospital patients and students who will have to pay 20 per cent.
Very good cases are being made out by large numbers of organisations representing other people who they believe should be exempt. As I say, there is a case for extending the mental handicap exemption to those who became mentally handicapped after birth. There is a case for extending it to monks and nuns. There is certainly a case for extending it to the homeless who clearly have no means of support to enable them to pay the poll tax. There is a case for extending it, for example, to volunteers and those staying in short stay hostels.
The problem with exemptions, and particularly the exemptions already agreed, is that those concerned are not means-tested and that therefore the exemptions go to those who perhaps do not need them so much as to others more in need, because the people most at risk are those immediately above the poverty line. They do not benefit from the income supplement and housing benefits and will find themselves very heavily hit by this tax.
If we cannot achieve a system which generally reflects ability to pay, which is of course what we want out of this legislation, I believe that our approach should be to look for a rebate system rather 837 than an exemption system and to look for a system which goes further in recognising the real difficulties in which some people would find themselves, particularly those most in need.
There are all sorts of other questions which arise; for example, those charities which need some sort of cushion against rapid increases. However, the problem with all of those—and I am sure that the Government will recognise this—is that every time the number of exemptions and rebates are increased, the government argument about accountability is reduced. That is why I believe that the thrust of our argument must be towards basic rebates for low income; in other words, we should move closer to a system which affects ability to pay. That is the way in which justice will be done rather than by tinkering with the Bill at the edges. If we have to, we shall take it case by case, but we hope to be able to do it more fundamentally than that.
The next problem is that this is not called the poll tax for nothing. My honourable friend John Cunningham described it as being a principle of:no representations without taxation".I often wish that in this country we had a constitution which could incorporate the 24th Amendment of the United States constitution which states that the right of citizens of the United States to vote shall not be denied or abridged by reason of failure to pay any poll tax or other tax.
Mr. Justice William Douglas made that even clearer in 1966, when he said:Wealth or fee paying has no relation to voting qualifications; the right to vote is too precious, too fundamental, to be so burdened or conditioned".It is clearly not, in the literal sense, a poll tax; it is not going to be a requirement that a citizen shall have paid the community charge in order to achieve a place on the electoral register. However, it cannot be denied that the single most common and readily-available source for the register of those who are liable to pay poll tax is the electoral register. All the evidence that we have from Scotland and from the fact that the electoral register is already incomplete is that the fear of being assessed for poll tax is going to drive perhaps millions, particularly of young people and those in ethnic minorities, off the register. In effect it is going to deny them the right to vote.
§ Lord McIntosh of Haringey
My Lords, I accept that is not the intention of the Government although cynically, of course, it could be to their advantage. That is what will happen and that is the real risk we run with his legislation. I am interested that the noble Lord, Lord Harmar-Nicholls, says that that will be their decision and I gladly give way to him.
§ Lord Harmar-Nicholls
My Lords, if a citizen does not adhere to the law passed through Parliament in order to avoid paying his proper dues, that is his decision.
§ Lord McIntosh of Haringey
My Lords, I do not believe anyone was talking about breaking the law in the sense that some people in Scotland have been 838 accused of doing so. People will find ways of avoiding being identified. That is what they will do and it will deprive them of the vote. The system which will be established in order to make sure that they do not—again, we already know this from Scotland—is that there will be not one register but probably three. There will be a main register which will be largely secret and maintained by local authorities. It will contain all manner of information; such as whether or not they answer the door and whether the television was on when the canvasser called. There will be an extract which will be published and sold. I am not clear why it is that it should be thought proper that such a register should be sold. It will contain names and addresses and probably dates of birth. The Scottish local authorities say that it will undoubtedly need some unique number of identification so that we shall be into the listing equivalent of identity cards.
There will be a list of changes which is kept for two years after a change takes place, including a death. There is plenty of opportunity for "Big Brother" to know more and more about our population and more and more about matters which people themselves do not wish to have known. People who live alone and who are elderly will, justifiably and understandably, be nervous at having information published about them and about the composition of their household which might make them vulnerable to attack.
The cost of collection will be horrific. It is admitted officially that it will be double the cost of the collection of the rates. It is 2.5 times the cost of collecting income tax; 27 times the cost of collecting oil taxes and 3.8 times the cost of collecting VAT. I pass over the question of Clause 137, though I simply remind the Government that in another place Mr. Chope said that the Government would announce their view in the light of their decision about the Widdicombe proposals. If that is not done in time for consideration by this House we shall certainly seek to table amendments which make them do so.
I listened carefully to what the Minister said about the business rate. The awful conclusion that I reached was that businesses seemed to be having some kind of unlucky dip. They will have a unified rate which will of itself apparently make those in presently low-rated areas worse off than those in high-rated areas who are better off. That is supposed to be cancelled out by the revaluation of business premises. We do not know how; the Government do not know how, but they are preparing for a further transitional period up to and including 1995. If that is so, then clearly the Government do not know either.
The noble Earl criticised the existing position relating to grants. Studying the Bill, all one can say is that the commitment of the Government to any new grant system is a perfect and absolute blank. It is a void in the Bill. It is left entirely to the Government to decide how they wish to impose the grant system. Earlier I referred to the fact that the Government do not believe their own propaganda when they insist upon still imposing a capping system even after having achieved accountability, or claiming to have achieved it.
We come back to the fundamental issue of this legislation and that is the ability to pay. The Odhams dictionary defines poll tax as, 839imposed in primitive communities where it appears impossible to ascertain individual capacity to bear the burden".We are not a primitive community. It is an insult to this country to think that we need to have imposed upon us a system which is universally rejected by civilised countries in Europe. When the Government looked around the world for poll tax examples surviving into the 20th century, even the example that was found of Papua New Guinea did not actually work. This Bill introduces a new tax which, with all the unfairness of the rating system acknowledged, is conspicuously worse than what went before.
§ Lord McIntosh of Haringey
My Lords, it is conspicuously more regressive, more unfair, and is perceived to be more regressive and more unfair than what went before. This was recognised by Mr. Heseltine, Mr. Heath and by large numbers of Conservative Back Benchers in another place who have no particular reputation for being rebels. They were concerned about it because they were concerned about the future of their party. If I were being cynical I would say that the best thing for us from these Benches is to let the Government have their Bill and let them get on with it, because it is going to bring with it the obloquy of a kind which I do not believe we have even yet begun to guess at.
In 1936 Churchill said:Dictators ride to and fro on tigers from which they dare not dismount".No-one would describe the noble Lord, Lord Belstead, or the noble Earl, Lord Caithness, as being dictators, but I suspect that they have mounted a tiger from which they dare not dismount.
§ 3.38 p.m.
§ Lord Jenkins of Hillhead
My Lords, we greatly look forward to the three maiden speeches being made today, all by those who have names honoured in this House and in history. The noble Earl, Lord Lytton, who is to follow me, has, I understand, very considerable expertise in this field as a valuer and surveyor. I look forward to his contribution and to the others.
It appears that there are two issues before us. First, is this a bad Bill? Secondly, has your Lordships' House any right to do anything about it? The first issue I intend to leave largely to my noble friend Lord Ross of Newport who will speak later, except for two matters. First the Bill has been remarkably successful in losing friends as it has gone along. Its parentage, on the one side, is Mrs. Thatcher's rash, shadow 1974 commitment to get rid of the rating system which was subsequently sat on by every Conservative spokesman and Minister who took a look at the consequences of a possible poll tax. On the other side, the parentage was the Scottish rating system which had become grotesquely distorted, far more so than the English. It was thought to be one reason for the collapse of the Scottish Conservative Party. Scotland was therefore treated as a guinea pig. The result of the 840 experiment, as we saw last week, is that support for the Scottish Conservative Party has further collapsed.
The Bill therefore started upon a narrow basis of support and most of that has since been whittled away. The legislation is manifestly not popular among Conservative Members of Parliament, among Conservative local authorities for whose sustenance it is presumably designed, among independent experts or among the public at large. I do not regard any of these as individually decisive arguments against the merits of the Bill. Sometimes, no doubt, people do not know what is good for them, though that is dangerous democratic ground. And some of the best legislation has had to battle against initial unpopularity. Cumulatively, however, opposition from such a wide variety of sources becomes impressive—the more so when another factor is added.
I cannot discover any member of the present Cabinet, apart from the Prime Minister and the Secretary of State for the Environment himself, who is in favour of the legislation. I am experienced and sceptical enough to know that one must not always expect enthusiastic and positive support from other Ministers even when unanimity has apparently been achieved in the Cabinet. Amazing though it may seem in retrospect, my Budgets were not supported with equal enthusiasm by every one of my colleagues. However, the total stand off which this measure has brought forth is something I have never previously witnessed. The Bill has become one of the biggest inverted pyramids ever seen: the narrowest support at the base, the most complicated machinery and the widest opposition on top.
On the merits of the Bill, I confine myself to saying that it is socially unjust, geographically perverse and administratively cumbersome. The Government, who have produced this monstrosity, become increasingly shrill in their denunciations of any alternative. Mr. Mates was denounced for producing, it was said, a complicated scheme and treating unfairly that somewhat small minority whose incomes rose from £22,000 to £22,001 a year. That is rather like those who have built a vast new skyscraper complaining that to erect a warning light on top of it is a menace to aircraft. The truth is that no system of revenue raising— or for that matter any electoral system—is perfect. But some are a great deal worse than others. And the one proposed here is as bad as is easily imaginable.
I agree with the noble Lord, Lord McIntosh. The system is worse than what we have at present. We would prefer a local income tax to what we have now or what is proposed here. There are undoubtedly some problems with which we shall gladly endeavour to deal on a relevant amendment. But the idea Mr. Ridley appears to entertain that shooting off a lot of wild ammunition against a local income tax is a substitute for justifying his own proposals seems to me both odd and irresponsible. The Government must take responsibility for the anomalies and the unfairnesses of their own scheme and not hope to ride off them by shifting the debate on to somebody else's.
I turn to the second question of whether your Lordships' House has any right to improve this bad 841 Bill. A couple of weeks ago I engaged in some correspondence in The Times with the noble and learned Lord, Lord Hailsham. When I wrote my letter it was some years since I had read his Dimbleby lecture on elective dictatorship. I had of course read it at the time, and indeed I believe once subsequently. I have some attachment to the series of Dimbleby lectures. However, two weeks ago I had it only vaguely at the back of my mind that the noble and learned Lord had made some remarks which sat a little ill with his subsequent attitude. I had little idea of the full splendour of his U-turn.
His 1976 thesis was that the elective dictatorship under which we had lived in theory had been made practical and intolerable by the bicameral system turning into one chamber control and by that one chamber becoming the tool of the executive.
The executive [now] controls the legislature and not vice versa",he proclaimed.More and more debate is becoming a ritual dance sometimes interspersed with catcalls".But it is even worse than that. Not only did the Cabinet dominate the House of Commons, he argued. A relatively small group often dominated the Cabinet. And then, horror of horrors, the dictatorship had become,more and more liable to perpetuate itself through the adroit manipulation of the economy, and the firm use of dissolution operated with a careful eye to by-elections and public opinion polls".Such a dictatorship, he said, could even be elected by a minority of the votes cast, but this did not prevent it imposing on the country,a series of unpopular measures, not related to current needs, using the whole powers of the elective dictatorship to carry them through".And the House of Lords just stood aside and let them do it. Was all this justified by the doctrine of the mandate? Certainly not. The new "doctrines of mandate and manifesto" were "wholly unconstitutional". They were just a device for imposing on us,the impossible, the irrelevant and the inappropriate. It is idle to pretend"—he summed up this part of his argument—that this system is rational, necessary, just, or even, to use an overworked and not a very illuminating word, 'democratic' ".I wonder which of these developments excoriated by the noble and learned Lord in 1976—and I agreed with much of what he said—he now considers to have been corrected. It seems to me that in so far as there is change, all have accentuated themselves. The difference is the political complexion of the Government. It was that which made me suggest that the whirring of the noble and learned Lord's statemanship nonetheless allows him to alight quite frequently on a partisan branch.
The House should not feel inhibited from any significant role in relation to this Bill. The constitutional precedents are complicated and were probably best set out in an argument in The Times by Sir William Wade on 4th May. There are certainly relevant precedents for the privileges of the Commons being set aside in a case like this. In the last resort it becomes a matter of judgment, as is so often the case with constitutional matters. It cannot be denied that this measure was given a firm place in the 842 1987 Conservative manifesto. That may have a varying degree of influence upon different ones among us, presumably nil in the case of the noble and learned Lord, Lord Hailsham. Set against that is the fact that the Government lost three-quarters of their Commons' majority on the issue and that with every day that goes by more and more of their normal supporters think they should at the very least be given a chance to think again.
The correct role for an unelected second chamber is never an easy one to determine. It is perhaps not a bad rule of thumb that it should act in such a way, as with enlightened self-interest, to enhance its own medium-term influence. Certainly, the extreme intransigence of 1906 to 1911 inevitably diminished that concept. However, complete acquiescence, against better judgment, could also have the same diminishing effect. I hazard a guess that if the Government were given an automatic immunity by this Chamber on the Bill, a new phase might begin and that the influence and interest which your Lordships' House has recently attracted might well begin to diminish.
§ 3.50 p.m.
§ The Earl of Lytton
My Lords, it is some years since a Lytton addressed the House and many noble Lords have been kind enough to express fond memories of my father. I have the honour of being the first in the batting order foretold by the noble Lord, Lord Jenkins of Hillhead. I am aware of the great privilege of being able to address your Lordships' House. However, I shall try to avoid the example of my forebear, the poet Lord Byron, and to be less controversial. Nevertheless, I ask the indulgence of the House.
I believe that the Government deserve great credit for having grasped the nettle, so to speak, and compiled the Green Paper which foreshadowed the Bill. I think that that document very ably discusses the issues and the statistics. It differs from the earlier report of the Layfield Committee in its conclusion that there is a workable alternative to the domestic rating system and one which is worth the additional cost.
Many of your Lordships will know that I am a chartered surveyor with some knowledge of the rating system; however, I claim no detailed knowledge of the broader financial implications of the Bill. I plead no special case for the rating system in its present form. It has become abused, and a rental basis for the assessment of residential properties is now clearly an anachronism. However, I believe that the problem is not so much with the system itself, but with the fact that there has been no modernisation or revaluation since 1973.
On the community charge, I should like to limit my comments to a few points only. I have noted the criteria by which a local tax is to be judged: principles of fairness, accountability, paying for services used, and so on. I do not dispute the role of central government in the redistributive process; similarly, I do not question the fundamental wisdom of providing an adequate tax base. I also believe that no single tax can satisfy all those objectives. On fairness, I have to say that any local tax which bears no direct 843 relationship to the ability to pay of the poorer members of society and is thus not seen to be fair, invites challenge—never mind that the wealthy can, and do, contribute a great deal more than the average, for so they should.
Local authorities should be accountable to those who fund them. Does it not therefore follow that they ought to be accountable not only to private residents but also to business ratepayers? Having said that, I do not see that the relationship between the quality of a council's services and administration and the vote of local electors is clear cut. Local election turnout is often low and in the past high spending councils have been returned to office.
Local government elections are often influenced by national issues and the satisfaction or otherwise with the performance of national government. That seems to me to be a question of attitude. Further, in spite of survey evidence, I cannot see that a flat rate of charge rather than property-based rates should change the situation, especially when so much of local authority funding comes from central government. If, in the end, councils want to spend more because determined individuals are elected into council posts, will abuses not occur in much the same way as before and thus attract much the same criticism?
As a local tax the community charge is expected to increase administrative costs. I cannot comment on the accuracy which can be attributed to the estimates, but from a practical standpoint is there not a substantial risk that evasion may become an administrative nightmare?
My greatest concern lies in the operation of Part III of the Bill, relating to non-domestic rating. The proposal is to abolish the whole of the General Rate Act 1967, and with it many tried and tested principles. However, much of the reality of the old system will remain, preserved on an ad hoc basis under the authority of the Secretary of State. Part III and the schedules contain many instances where the Secretary of State may make regulations by order which cover the content of rating lists, appeals procedures, alteration of lists and phasing provisions. He may decide matters of joint and several liability; govern valuation criteria; confer exemptions and determine the administrative machinery of collection. In short, he will be given extensive powers without the need for recourse to Parliament.
I am told that the financial effects of the Bill, in respect of commercial rating, are unknown. Everything depends on the commercial revaluation currently being undertaken and the results of this may not be known until the latter part of 1989. I have been unable to trace any official impact studies and the uncertainty has fuelled considerable speculation among businesses and their advisers. I have seen some of the comments made and the alternative proposals put forward by the CBI. All conclude that some business ratepayers in London and the South-East can expect to be most adversely affected.
The impact on small businesses is of special concern. My belief is that this situation stems partly from changes in the property market and business practice since the last revaluation in 1973, so much so that that I have grave doubts as to the operation of 844 a single national rate, having regard to the economic differences between, say, the South-East of the country and the North-West. Those problems are tacitly recognised in the phasing provisions of the Bill. However, in the long run the burden of business rates in some locations may significantly increase as a proportion of the total costs of occupation; that is without any regard to the quality or extent of services provided by local authorities to local businesses.
More mobile companies can relocate to cheaper areas; others may be tied in to 25-year leases or to major investments in plant, to personnel and to long-term planning. For those companies there is no escape in either the short or the long term. I question the assertion that businesses simply pass on their costs to others as suggested in the Green Paper. In a competitive world, is this really consistent with the principles of profitability, reinvestment, employment and other factors arising from the incidence of overheads? I feel that that point is especially relevent to the advent of the single European market.
The Green Paper is dismissive of local accountability towards non-voting business ratepayers. While I accept that there are a few practical difficulties, I would question how many spendthrift authorities would have been so had there been a due proportion of business representation on their committees. If there is a current danger that the coffers of local businesses will be raided, surely this can be countered by fixing the proportion of total revenue that can lawfully be extracted from business occupiers.
As it stands Part III of the Bill produces some inequity and several technical anomalies. It removes any connection between local services to businesses and the amount paid. Surely this is at variance with the criteria by which a local tax falls to be judged? Does it not significantly erode the concept of fairness for a substantial sector of the community?
The Bill is highly complex and any attempt to concentrate on some parts only does less than justice to the debate. I shall listen with great interest to what other noble Lords say on matters of administration and funding, of which my knowledge is extremely limited. However, I recognise the need for reform, and my wish is to see that the Bill leaves your Lordships' House in better shape than that in which it arrived. I hope in that context that my comments will be seen as constructive. My Lords, I thank you.
§ 4 p.m.
§ The Lord Bishop of Gloucester
My Lords, it is the wish of the House that I should begin by capping what the noble Earl, Lord Lytton, has just said. He spoke to us with an authority and expertise which if I may say so without impertinence, belie his years, and he combined them with conviction. That is surely a combination which we shall look forward to hearing many times in the future.
Consideration of the Bill will over the days and weeks ahead call for much political wisdom from those who in the House of course are well stocked with it. It will call for much experience of public policy-making and much knowledge of financial administration. If that is right, it may seem impertinent to offer an early contribution from these 845 Benches, where of course those talents do not exist. However, the debate in another place and the widespread public discussion about the community charge in the country as a whole would seem to reveal sufficient disquiet, anxiety and interest on questions of principle and morality to justify an exploration of those topics.
It is widely granted that the present rating system is less than fair. It bears down hardly upon some and allows others to sit too lightly on their obligations to the local community. It may be because the system has been with us so long that we are blind to its defects. However, it may also be because the present system enshrined, in however imperfect a form, the principle which is most frequently cited as a criticism of the community charge. On the supposition that the more affluent one is the more property one is likely to own, it attempts to link local taxation with the ability to pay. Although I listened carefully to what the Minister said about the anomalies in the present system, I still believe that that principle lies, somewhat covered, beneath the surface.
Although there are many other problems connected with the community charge with a distinct moral dimension, ability to pay seems to be the main one. Without being remotely expert in taxation policy, and my untutored mind sees no moral difference in principle between taxing property and persons, I should nevertheless have thought that the onus of proof rests upon those who would maintain that ability to pay should not carry an additional responsibility to contribute to the wealth of the community. It seems such a natural conviction that the onus must lie upon those who would change it.
The immediate response of those who advocate the community charge is that ability to pay is already geared to taxation in the larger part of the tax system, notably in income tax; but if the principle is right there why is it not right here also?
There are other haunting questions—I use the word "questions" deliberately—connected with the Bill. If enacted, will it aggravate the apparently widening gap between the haves and the have nots? The arguments admittedly are hypothetical, and yet the anxiety that the net result of the charge might be a further redistribution of wealth in favour of the already affluent areas and a further impoverisation of the inner cities somehow will not go away. Can it be effectively blown away by the arguments that we shall hear from the Government Benches? I hope so. Will the new system allow, fairly and generously, for vulnerable and comparatively defenceless groups and individuals in our society? How will the pressures within families and local communities to secure the exemption of such people from the charge operate? Will the community charge be a significant factor in influencing a family to hospitalise sooner rather than later an aged relative, or to hasten the exodus of young people from the family so that they are no longer a charge upon the household?
Might the collective charge provisions effectively discourage good people from sponsoring and funding hostels for the homeless and the handicapped? Will the genuinely homeless—subject as I understand it to the charge as presently 846 drafted—even if eligible for some rebate, have to be investigated by yet one more official when they fail to register or pay? Some will find the central register itself potentially sinister—a source, or perhaps a hunting ground, for computerised information, centrally stored, which might change the nature of our society in a direction, and more than we should wish. Then there is that delicate balance between central and local government, now a central issue for our nation. Those are the questions.
Beneath some of the things churchmen and churchwomen have said about the community charge there is above all, a deep questioning. I believe that that is the best interpretation of the events that took place in the General Synod of the Church of England in February when by great majorities it welcomed reform but called upon the Government in drafting their legislation to consider ability to pay; and in a following motion went so far as to describe the Bill as it is at the moment as inherently unjust. Some publicity has been given, I believe this day also, to statements by ecumenical Church leaders.
I dare say that many of us have received correspondence from groups such as the Church Action on Poverty or the London Churches Group. I can assure your Lordships that although the fears and anxieties may in the event prove to be exaggerated, they are not made by wide-eyed idealists out of touch with reality. Many of the people are working in the areas where the greatest anxieties and fears are to be found.
In one aspect at least I wish to endorse what the Minister said. I too believe that the great majority of the clergy, and indeed of their congregations, would not want some special exemption or rebate for the clergy themselves. I am sure that there will be appreciation of any recognition that the extra financial burden which that involves may somehow merit its reward.
When this Bill moves to its Committee and Report stages those of us who are concerned about these anxieties as to principle and ethics will be able to come out more in the open and to vote yes or no on specific matters. I hope very much that if it is not possible to change the Bill in principle, there will be some generous amendments offered by the Government themselves, not only because of the threat which it contains for some of the worst off in our community but in order perhaps to induce and symbolise a somewhat different spirit in the legislation than that which in a sense we seem to have at the moment.
Is it not possible that we can somehow change the general effect of a Bill, which seems harsh, unfeeling and threatening to those who are vulnerable, rather than have concessions, which seem—although I am sure it is not accurately expressed—to be grudgingly conceded inch by inch? Would we not all be better off if somehow we could appear to be glad to help people rather than grudging about it, happy to be generous and not having concessions somehow squeezed out of us? I believe that if some such spirit could be induced, the Bill and the country would be much better off.
§ 4.12 p.m.
§ Lord Mancroft
My Lords, all the advice I received on the making of maiden speeches—and there was quite a lot of it—centres on the need to be non-controversial. Having examined the Local Government Finance Bill from every conceivable angle, I can hardly find a controversial clause in it. It seems to me a most logical step forward.
For many years people of all political persuasions have sought the abolition of the present rating system. It has long been held, quite rightly, to be both messy and very unfair. The difference between charges in neighbouring and similar areas is quite unreasonable. It seems most illogical to politician and voter alike. Similarly, the debate on the relationship between residential and commercial rates is never-ending. I am fortunate to live in Wandsworth, one of the most efficient boroughs in London, with one of the lowest rates. However, only 10 minutes walk from my front door lies the lunatic borough of Lambeth where local government has become a joke, and to the citizen of Lambeth a joke in very bad taste. There is an astronomical rate and appalling services, along with many services that the ratepaying voter, as opposed to the non-ratepaying voter, clearly does not want.
Our American cousins long ago pointed out the unfairness of taxation without representation and pointed it out very firmly. Contrary to what the noble Lord, Lord McIntosh of Haringey, said, I would suggest that the wheel has turned full circle and that representation without taxation is equally unfair. That is not to say that some of these services are not innovative and worthwhile schemes; they undoubtedly are. However, all too often local authorities have come up with ideas, both good and bad, without a thought to the cost, and have spent money that they simply do not have. The results are all too familiar: rapidly rising rates, public outcry, rate capping and ultimately the ludicrous business of central government taking local authorities to court like naughty children to curb their overspending. Is that the way to run a country?
Over the past 10 years the nation has begun to learn the wisdom of earning money before you spend it—a principle incidentally my bank manager repeatedly tries to drum into my head. It is a lesson long overdue in local government. By making everyone pay a fixed charge local authorities will immediately become more accountable. Nothing focuses the mind more than paying bills and when voters find their community charge rising unreasonably, councillors will find themselves out of office, with very good reason. That it may lead to the end of petty political posturing, whereby those who have been elected to hold local office think that they have the right to expound their views on national and international affairs at the expense of local issues, is a bonus we can look forward to with relish.
For too long in Britain we have allowed the principle that the state will provide to hold credence. Following the long overdue reforms to the social security system it is only logical to continue the ethic of self-responsibility into local government. Bluntly, those who use services must learn how much they cost.
848 It would of course be brutal to drop into the deep end those who are only now learning to swim, and it is right that your Lordships should satisfy yourselves that adequate help is given to those who need it. I am not an expert, nor is it my job to detail precisely the level of help proposed. But when 13 million out of a total of 38 million voters will receive assistance of anything up to 80 per cent., I for one am satisfied that the Government have more than adequately cushioned the blow of this revolutionary measure.
It is on those grounds that the Bill stands up so well. It ends for ever a system universally disliked. It introduces a new system of refreshing simplicity, while protecting financially those who are not ready to take their rightful place within that system.
The past 10 years have witnessed the triumph of the individual's rights over the state. The poor man of Europe is learning to pay his way once more. He is out of the red in more ways than one, never, let us hope, to return there.
The accusation levelled against this Government again and again is that they are not a caring government. That they do not care to sell their policies is I am afraid true, as is amply demonstrated by the amount of opposition to this Bill, not least of all from these Benches. Had the Government taken more trouble to present their case with greater clarity, those who remained unconvinced would have seen their worries evaporate. The arrogance that comes from having so large a majority must not, however, be allowed to obscure what is fundamentally a very sound proposal.
Too often what is meant by a caring government is in fact a mollycoddling government, and I would suggest that the years before this Government took office are a perfect example of the hopelessness of that route. We have embarked on a revolution, and the support for that revolution was clearly shown in last year's general election results.
In short we have a system that urgently needs changing: we have a government with both the mandate and the courage to do it; and it ill behoves your Lordships to give this Bill anything but your wholehearted support.
§ 4.16 p.m.
§ Baroness Lockwood
My Lords, I am delighted to follow the noble Lord, Lord Mancroft, and to have the opportunity on behalf of the House to congratulate him on his maiden speech. I should also like to offer my congratulations to the noble Earl, Lord Lytton, on his maiden speech. It is very difficult for Members of your Lordships' House to make a non-controversial contribution in the form of a maiden speech. I think I detected a little controversy in both of the maiden speeches this afternoon. Perhaps we can put that down to the dimension of youth which was certainly more visible from our two maiden speakers than on average in your Lordships' House. We look forward to hearing both of them in the future.
I should like to endorse what has been said about the regressive and unfair nature of the Bill before us today. To levy a personal charge on each individual above the age of 18, with few exceptions, is divisive. 849 The noble Earl the Minister made much play of the fact that of the 38 million people who would be expected to pay the charge, some 9 million would receive some kind of relief. Nevertheless, even those 9 million will be expected to make a contribution without, in all circumstances, having the ability to pay.
I want to talk about the effects of the community charge on that element of the community that constitutes 51 per cent. of the population—that is, women. Although women are not a homogeneous entity, under this Bill they will generally be much more at risk than men. Moreover, there are a number of identifiable groups of women who will be particularly at risk. Women fall into two broad categories: those who work and have an income in their own right, and those who do not work and therefore do not have an income in their own right. Of the 49 per cent. of women who work, a substantial number are married; 61 per cent. of married women of working age are in a job or are economically active.
One might presume that these women could take care of themselves and pay their own community charge. Yet we have to note that their average hourly earnings are only 74 per cent. of men's average hourly earnings. Their gross take-home pay is a very much smaller proportion of the take-home pay of men, so they will have more difficulty in meeting their commitments. Moreover, many women, particularly married women, work part-time. Of the 4½ million part-time workers, 90 per cent. are women and their rates of pay and conditions of work are notoriously bad.
A progressive system such as income taxation, as the right reverend Prelate the Bishop of Gloucester has indicated, would take this into account. However, this regressive community charge treats everybody alike. That would perhaps be defensible if the social security system were also administered on the same principle of a personal basis and if it allowed low paid individuals in their own right to claim family income supplement. But it does not. In the case of married women on low pay, their financial position is incorporated into the total family financial position. Surely there should be unity between the two systems—either a family basis or a personal basis for both systems. But the Government cannot have it both ways, and, for the purpose of one Bill, base it on an individual and, for the purpose of another Bill, base it on the family. In the second category of nonworking wives, married women who, because of family commitments do not work and have no income in their own right, are in an even worse position of dependency than the working wife on low pay.
In these situations, the Government can only rely on the community charge being regarded as part of family expenditure, as at the present time with the rating system; and so it will be, I suggest, in those cases where relationships are happy and harmonious. But we cannot forget that of marriages currently being entered into about one in three breaks down. Marriage guidance counsellors and social workers indicate that financial problems are a major source of family friction. What happens in such a household when each partner gets a separate bill for the community charge and one partner has no money 850 with which to pay it? This will certainly not help towards family unity. It could add to the already very difficult problem of domestic violence with which society has to deal. The women's aid groups are particularly concerned about this.
Women who have to leave home because of domestic violence will be subject to paying the charge, even for a very short period during which they may reside in a women's aid centre. A woman in such circumstances may have gone into the centre simply because she had no money or anywhere else to go; so apart from the futility of asking her to pay, there are also the administrative complications involved for the woman herself, for the women's aid centre and for the local authority.
There is also the deterrent to a woman from leaving a violent home, when she knows that she does not have the resources to meet her commitment. We may be subjecting more women and children to further violence in the home by deterring them from leaving. These are some of the issues to which I hope to return at Committee stage.
Two other groups likely to suffer are those women who are dependent on families for care. The majority of people in care are, first, older women and, secondly, those who care for them are also mainly women. The first group are likely to be elderly pensioners with little income other than the state pension. Such a person is already imposing additional burdens on the family. In the second group, the carers are likely to be the daughter or daughter-in-law or some other female member of the family who has had to give up a job in order to do the caring.
The financial implications for this household are obvious. These strains will be added to the strains that we know already exist in a household where there is an elderly or permanently disabled member. Here again, we see a conflict in government policy. The community charge will not encourage families to provide care within the community for the elderly or disabled. On the contrary, it will work against such a policy.
However, the Bill itself is not consistent. It aims to impose an individual and a personal responsibility for paying the charge; yet it breaches this principle, as I have already mentioned, in relation to married women with little or no income. It also breaches the principle by imposing joint liability where one spouse or partner fails to pay. If a husband or partner refuses to pay his wife's or partner's community charge, in the last resort he is legally responsible. If he fails to pay his own, then she is responsible. Even where a couple have separated, one partner may have to accept responsibility for the community charge debts incurred for the period during which they were living together. A woman who finds herself in such a situation is in the absolutely impossible position of trying to meet her own debts from little or no income, as well as being expected to meet her partner's debts.
The implications of this Bill are far-reaching and they will bear more severely on the different groups of women I have mentioned. It is not within our constitution, as a House of Lords, to reject the Bill outright, but as it proceeds through its various stages I hope that we can at least ameliorate some of its worst effects.
§ 4.29 p.m.
§ Baroness Stedman
My Lords, from these Benches we should very much like to congratulate the two previous maiden speakers. We hope that we shall hear much more of them. We also offer our good wishes to the noble Earl, Lord Carnarvon, expecting that we shall have an equally competent contribution from him. We hope that we shall hear all three noble Lords regularly in your Lordships' House in the coming months.
It has always seemed to me to be important that any laws which are made are likely to be lasting and workable. Anything less is a futile exercise and a complete waste of parliamentary time. However, the proposals before us this afternoon in this Bill have not achieved even the minimum support from any of the Opposition parties. They have not achieved maximum support from the Government. It seems likely that any future Government might well have to tackle the unfairness of the community charge and do something about it. It is obvious that we all accept the need for some reform of the rating system, the fact that it needs to be revised and altered. But in our view whatever is put in its place must be based on ability to pay.
Over the past decade there has been a steady shifting of power towards the centre. I am sure that it is too much to hope that this Government might sit back and take a long look at local government and its functions in the hope of returning to some kind of rapport between central and local government regardless of political control. I believe that this Bill has so little support in another place and in the country that we in this House have a duty to try to make the charge fairer and to see that it is based on ability to pay. No doubt your Lordships will be spending many hours, even weeks, discussing some of these problems as time goes by.
I believe that the Government have demonstrably lost the argument in another place and they really should be asking themselves now whether what they are asking your Lordships to accept does replace the rating system with a fairer community charge. This charge will be expensive and complicated to administer. The public see what is happening in Scotland and they are perceiving it to be unfair. We believe that it weakens local government's accountability for their decisions on spending and on service levels. It is very complex and it is a flat rate for everybody.
We also believe that there should be a longer introduction period before the charge comes to England and Wales. That introduction period should be at least two or three years, so that a proper assessment can be made of the effects of the system in Scotland, thus enabling proposals to be modified before introducing the system completely across the United Kingdom.
This Bill is not just about the community charge. It aims to replace the domestic rates, although the last effects of domestic rates in some parts of the country will be with us until 1994 and 1995. The Bill turns the non-domestic rate—the business rate—into a national tax, the proceeds of which are supposedly to be used for local government; and it also imposes new 852 duties on the treasurers of local authorities and sets up a new grant system.
We are all aware of the growing antagonism between local and national government. Until now local authorities have had at least some discretion over their priorities in spending. Successive governments have tried to influence or control local authority expenditure but penalties, tapers, multipliers and all the other devices that have been tried have not been all that successful. Rate capping has been with us since 1984, and from 1990 there is to be a new system of controls on capital expenditure.
I come from Cambridgeshire where, except possibly in my own city of Peterborough, we expect the non-domestic rate to rise faster than inflation as the revaluation is phased in. Another problem we have is that the basic information of needs on which the grant is based is calculated on out-of-date population figures. That creates special problems for fast-growing counties such as Cambridgeshire. Although we have the university city of Cambridge and the thriving new town of Peterborough within our county much of it is still very rural and there is considerable concern about the effect of the community charge on our village shops and post offices. Where the shopkeeper lives on the premises he will pay a business rate on his shop and the community charge for the occupants of his dwelling. This combined charge may prove to be just too much and more of our village shops and post offices may have to close.
The regeneration and the retention of small businesses in rural areas is very precarious, but when small businesses have to close because of high overheads, present and future employment is removed from that part of the area. In my own county rural businesses and shops have tended to pay lower rates than their urban counterparts because of lower rateable values and the generally lower rate poundages levied by the shire districts. But revaluation will alter all that and the national non-domestic rate is likely to be significantly higher than the current shire district rate poundages. If there is a substantial increase in the rates paid by rural businesses it will reduce their competitiveness relative to urban businesses. I should hope that in Committee we might discuss a possible rural service rebate to help in retaining some of these rural services.
This hope is strengthened by a resolution which I received from the Cambridgeshire Association of Local Councils which represents nearly 250 parish and town councils. It states:In view of the fact that many small businesses, for example village shops and post offices, occupy combined domestic and business premises and are working on small profit margins, this Association fears that many will be forced out of business by the proposed combined business rate and community charge leading to further impoverishment of the quality of life in rural areas. This Association accordingly urges the Government to bear this fact in mind and to introduce measures to ease the situation in these cases.I should have thought that it had become increasingly obvious that the community charge is to be forced through against the people's belief that tax should be an assessment of what is fair. We accept the need for some reform in our rating system, but we should be doing more about integrating tax and benefits and abolishing the national insurance 853 contribution which hits the low-paid workers especially hard. If this were done we could have a progressively banded community charge which is fair, reasonable and which takes account of the ability to pay. If the noble Lord, Lord Jenkins of Hillhead, comes back in Committee with provisions for a local income tax he will have the support of those of us on these Benches.
Turning to Part VIII of the Bill I believe the capping powers should be either withdrawn or significantly curtailed. I might be persuaded to accept some reserve powers to restrain spending—but not charges—in a national emergency or in the transitional period. But there is no justification for the retroactive capping as set out in Clause 104. Capping goes directly against local accountability. It is accountability to the centre and not to the local electors.
The Green Paper originally only referred to capping in the transitional years, thus inferring that after this short period pressure from the local electors would ensure that spending was at a reasonable level. But this Bill goes further than the Green Paper and capping appears to be seen as a permanent feature. If we are to have capping I believe it must be limited to the transitional years at the most. Something like 75 per cent. of local authority income will come by way of grant and business rate and will be outside local government control. If community charges are also capped that will take away nearly all the local authority discretion over its own spending decisions.
There are also difficulties about the collection. The counties will no longer be accountable to their electors. The grants and the non-domestic rates are to be paid into collection funds operated by district councils. The counties will then precept on this fund and there will be a single community charge for each area. As the noble Lord, Lord McIntosh of Haringey, said it will still be possible to compare gross expenditure by each authority, but the real test of what the individual has to pay will be hidden within a single community charge which will be influenced by varying movements in grant, by the non-domestic rates and in the balances held by the two authorities. This means, in my view, a substantial diminution of an authority's accountability to its electorate.
Why is this change proposed? Why cannot it be left as it has been for Wales in Clause 86 where the county is the receiving authority? Is the Minister likely to be persuaded that the cost of collecting the community charge should be borne by the collection fund? Can the interest receipts on the money accrue to the charging authority and not to the fund? If that were done it might just act as an incentive to efficient and prompt collection, and it ought to be available to offset the costs of collection.
Also, why have the Government not taken the opportunity to state the principles governing the rate support grant? We all accept that each authority has differing needs, and the present assessment has been, and is, extremely complex. We will need to look closely at Part VII of the Bill and try to make a more specific framework for assessing need and paying grant. Is it not possible to include in the Bill firm proposals for the operation of a new system of needs assessment? This has been a growing bone of 854 contention between local authorities and the Government; so would it not be sensible to base future arrangements on clearly agreed and fixed principles contained in primary legislation?
The way in which billions of pounds of taxpayers' money is distributed each year should not be a matter for ministerial discretion. Proper account will have to be taken of future increases in pay and prices which are actually incurred by local government. And these will have to be fairly recognised in the indexation of grants and business rates. The Society of County Treasurers also believes that the proposed new powers for treasurers in Part IX are neither necessary nor desirable. The treasurers have both professional and common law responsibilities to their councils. They believe that the new powers will place an emphasis on the policing role at the expense of financial management.
The Bill introduces the concept of a uniform business rate to be set by government and to be collected by local authorities on behalf of government who will then redistribute it. We have heard the argument in this House many times that different rates in different areas have had an impact on the competitiveness of business. Yet in 1985 the Department of the Environment commissioned a Cambridge University study on the effects of business rates in the location of employment. The study concluded that there was no evidence that either the level of rates or increased rates affect the distribution of employment between local authority areas.
The Government have also argued from time to time that rates fall on those who have no vote with which to influence local spending decisions. That argument, like those about accountability to a poll tax, appears to question the whole idea of universal suffrage. Business has no say in the expenditure of national or local government, but at least since the Local Government, Planning and Land Act 1980 local authorities have had a statutory duty to consult business about the level of rates, and most authorities have begun to see that as a regular and useful point of contact with their business community. Under the uniform business rate, as with the community charge, there will be some who gain and others who lose. Various figures have been bandied around but the ones I have seen suggest that the business rates will rise quite dramatically in the South-West, the South-East, the West Midlands and London, although they may fall in the North.
The supposed accountability as applied to the 3.5 million people who are at present fully rebated in respect of their rates is nothing short of farcical. They will now have to pay 20 per cent. of the charge for which they will receive an additional payment from the DHSS based on the average, but not the actual, community charge they have to pay. The local authorities will have to recover that same 20 per cent. They will have to collect it in instalments, which will involve huge administrative costs to recover money paid out by government eventually to be returned to the public purse. I fail to see how such a convoluted system of dispensing and recovering moneys is going to aid accountability at all.
Also, a ratepayer can now pay not less than 10 instalments. A substantial number still pay half-yearly or annually. The proposal is that all 855 community charge payers shall pay in 10 instalments unless they opt out; but the increase in receipts to be sent out is even greater than the increase in the number of accounts. Where council house tenants and others now pay a weekly inclusive rent and rates charge, in the case of a married couple and one other adult, instead of one receipt for rent and rates, there will be one receipt for rent and three receipts for community charge. Who will pay for the extra office accommodation, the computers, the accounting machines, the staff, postage and stationery that will be needed to carry all this out?
All the organisations and representative bodies which have commented on the proposals seem to have found them wanting. The business community has expressed its opposition following the failure of government to respond to their concern about the business rate and the effects of revaluation. Conservative councils have not been alone in protesting about the impact of the new tax on their residents. The voluntary organisations, from Age Concern right through to the Child Poverty Action Group, have attacked the injustice of a tax which hits the poor harder than the rich. The professional officers who have to administer the tax have pointed out how expensive it will be to collect and how difficult it will be to enforce. There was serious opposition to the Bill from the Government Benches in another place.
We would prefer to see a local income tax. I suspect that the Government are unlikely to accept that proposal. What we need now is a form of grand coalition, not only to oppose the poll tax legislation but to argue for a viable and lasting alternative which will restore local government to its rightful role of providing the services its electors want and which they are prepared to pay for.
§ 4.48 p.m.
§ The Earl of Carnarvon
My Lords, I am very conscious of being nervous in addressing your Lordships' House for the first time. One hundred years ago this year my great grandfather was involved in the strong defence of quarter sessions and was in opposition to the introduction of county councils. His view did not prevail, and he was made one of the first aldermen of Hampshire County Council—and I was one of the last. I had the great honour of chairing the new county council and its policy and resources committee. It is a local authority with a budget of over £800 million a year.
My great grandfather prefaced his strong views by saying—and I am reading from Hansard of 31st July 1888—that he hoped his noble friend the Prime Minister would not think that he criticised the Bill "in an unfriendly spirit". Perhaps I should echo those words today.
It is with a quarter of a century's experience in local government that I should like humbly to congratulate the Government on being brave enough to grasp the nettle and tackle the problem of rate reform. Their main aim is to spread the burden of rates among the people who pay for the services they receive. However, I have some reservations about the unified business rate.
856 Throughout the time I served in local government my local authority tried to improve the relationship with the business community and with both sides of industry. That effort was very successful and helped the county council to develop better infrastructure for its expanding towns. Industry was able to understand the problems faced by local authorities and to appreciate the close relationship which was built up. Local government values that close relationship and the discussions on policy which lead to budget decisions.
The services provided by local authorities have a direct impact on the business community. For example, in education local government needs to know the skills required so as to train young people for work in its area. There is a need for consultation and advice on roads and planning to help industry to operate efficiently. And business expansion means providing sufficient land for building and for leisure facilities. The police, fire and public protection committees exist to provide for business and industry as well as for the general public.
My experience in docklands was that the close relationship developed in Hampshire did not exist between the London boroughs and industry. For that reason, as chairman of the South-East Economic Planning Council, I proposed that there should be a new town corporation for docklands. That was not at all well received, but I am glad to see the great success story that docklands is today.
It seems to me a pity to alter the 50|50 ratio of local government finance to 75 per cent. exchequer and 25 per cent. locally controlled. I fear that a change of that nature will weaken the close ties with industry which will feel that central rather than local government is making the final decision.
Local government is badly in need of confidence and support from Parliament. It is vital to have a high standard of elected members working in local government, supported by high calibre and hard working local government officers. The more responsibility central government gives to local government the better it will perform its duties and maintain the very high standard that the public requires from it.
§ 4.53 p.m.
§ Lord Jenkin of Roding
My Lords, I am sure the whole House will join with me in congratulating the noble Earl, Lord Carnarvon, on an outstanding maiden speech. He comes to this House with an already long and distinguished career not only in local government but also in other walks of life. I know that I can say we look forward to hearing him on many future occasions. I hope that he will give the House the benefit of his experienced advice on the provisions of the Bill.
The noble Earl was able to claim—I acknowledge his claim—that he was the progenitor of the London Docklands Development Corporation. He is quite right to be proud of its success. In a not dissimilar way, this Bill and this debate are of some significance to me. Noble Lords may recollect that after the 1983 857 election when I became the Environment Secretary I inherited a manifesto paragraph which asserted:Domestic rates will remain the principal source of local government finance for the foreseeable future".Yet only some 15 months later, in September 1984, I felt obliged to convince first the Prime Minister and then the Cabinet that we had to re-open the argument. After some hesitation they agreed. They hesitated because after all had they not spent many months—indeed many years—agonising over the alternatives only to decide that they had to stick with the rates? They agreed because they became convinced, as I had become convinced, that the existing system of local government finance could not survive much longer.
Successive Environment Secretaries over the years have tried all manner of splints and sticking plaster to try to keep the patient alive but he continued to become steadily more ill. My contribution to the process, referred to already in the debate, was rate capping—a crude but, I have to say as a Lambeth ratepayer, an effective measure which has curbed the extravagances of the most profligate councils. However, rate capping not only added layers of complexity to an already byzantine system of rate support grant; it also exposed the fundamental weakness in the whole system.
I had wrestled during the summer and autumn of 1983 with the rate support grant settlement for 1984–85 and I found the process profoundly disquieting. Do what we could, there seemed little rhyme or reason to justify the wildly different levels of grant and therefore of what were called "local contributions" that applied in different parts of the country. The endless deputations—some of them led by members of this House—the legal challenges, the fiercely acrimonious debates in another place, all tended to underline the doubts in my mind about the validity of the whole system. Then, in May 1984, we started the whole process again for the following year, and my doubts crystallised.
All through that period I had faced innumerable Conservative conferences—national, regional and local—at which the 1983 manifesto statement was simply rejected. The demand was for the end of domestic rates which continued to be seen as unfair, oppressive, illogical and wholly inappropriate in the closing years of the 20th century. They had survived only at the cost of ever increasing central interference, which the noble Earl has reminded us was strongly resented by those in local government, and manipulation. In short, I decided that the system had had its day. It was breaking down and there had to be reform.
I went to Chequers to persuade the Prime Minister one summer Sunday. She gave her assent that I should put in a paper. I told the Cabinet that we faced a choice either to continue to patch and mend, piling complexity upon confusion with ever increasing central control—which would be the inevitable consequence—or to re-open the search for a radical reform so as to restore to local communities (for that is what this is about) the local autonomy and local choice which a system of local government should give them. In short, doing nothing was no longer an option.
858 It took three meetings of my Cabinet colleagues to convince them. In the end they were convinced and I was given authority to set up a series of studies jointly with Scottish and Welsh Ministers to come up with solutions. It is a matter of record that I announced the studies at the Conservative conference at Brighton in 1984. In so doing I headed off yet another resolution calling for the end of domestic rates.
My junior ministerial colleagues, Kenneth Baker and William Waldegrave, got to work with both official and, I have to add, valuable outside advice. They found a fundamental weakness in the system, which has been referred to by many speakers and by my noble friend on the Front Bench in particular: the real underlying cause of the incipient breakdown of the system was the growing lack of accountability of elected councillors to those who paid the rates. First, there is the huge mis-match between those who receive services, those who vote, and those who pay. There are 36 million voters, 18 million households and 12 million people who pay the full rates. Around 60 per cent. of the rates are paid not by voters but by the non-domestic ratepayers who have no vote and do not have to be listened to, though I concede, as some have said, that in some well managed councils they have been listened to; however, in other areas businesses have become the complaining milch-cow for extravagent councils.
Moreover the whole role of government has changed since rates were introduced. It is quite simply an anachronism to levy a tax on property to finance what are now overwhelmingly people-related and not property-related services. The present system dates from the time when only property owners had votes and it is a ludicrous way to pay for education, social services, libraries or recreation.
It is not as though the rates were fair. It has been a source of bitter complaint for decades that a single person, perhaps a widow, living nextdoor to a household which includes three or four earners, should pay the same rates. But the inequity goes much further than that. Because rateable values vary widely from one part of the country to another, different local authorities look to widely differing rate bases for their revenues, so that central government, intervening yet again, have to try to compensate for the inequalities through the rate support grant. I have to say that this process of resource equalisation is profoundly obscure and understood by very few, which itself blunts accountability. If people do not understand, how can they hold councillors accountable?
Of course it also gives rise to further unfairness because it means that all ratepayers, including the poor, in the areas that lose grant subsidise ratepayers in the areas that gain grant, however well-off those ratepayers indivdually may be. The redistribution is not a function of income. It is a function of rateable values, which may bear very little relationship to incomes. Over 40 per cent. of householders living in homes with above average rateable values have below average incomes; about 40 per cent. of those with above average incomes live in homes with below average rateable values.
The more out of date rateable values become, the more intolerable is the unfairness and the more disruptive is the subsequent revaluation. People have 859 sometimes asked why one should not simply have a revaluation. If such a charge comes from the Benches opposite I have to reply that not once since the war have a Labour Government undertaken a revaluation. Every revaluation has had to be carried out by Conservative Ministers. Let us not hear that argument from those Benches.
On top of the levy there is the system that was intended to try to provide incentives to councils to be economical and to impose penalties on the extravagant. As every councillor knows—and certainly very many have told me with a bluntness which I found disconcerting—the amount of the rates that a council levies bears little relationship to the level of services that it provides, its efficiency or the degree of its extravagance.
For all those reasons in many areas accountability has become so blunted as to be almost extinct. The heart of any reform therefore had to be the restoration of accountability. The result is the Bill that is before your Lordships today.
Perhaps one central point must be made, and I direct my remarks in particular to the noble Lord, Lord McIntosh. Those who dislike the Bill or decry this or that feature owe it to their colleagues in this House to say what they would do instead. In the course of a 20-minute speech from the opposite Front Bench—and I make no complaint of its length—there was no linking of anything that the Labour Party would do to replace the rates. They said that, yes, rates were not popular—finish! But the House has heard nothing that would serve as an alternative.
Doing nothing is no longer an option. That is the message. I ask whether they want accountability or not. I have to say that clearly some of them do not. They are happy to scheme their schemes, safe in the knowledge that the present system effectively insulates them from those who pay full rates. That is not a matter of assertion; I have chapter and verse to prove it. During the time that I was at the department—and no doubt my noble friend Lord Bellwin will also remember these events—within the Labour Party there was an influential pressure group called the Labour Co-ordinating Committee. It was a body that led the fight against rate capping and tried to mastermind the co-called "Rates Revolt". It is hardly surprising that the Labour Co-ordinating Committee do not like the proposals in this Bill one little bit. They call the Bill a straightforward attempt to create the conditions for local taxpayers' revolts against councils' spending plans.
I should like to quote from a paper they published last January entitled Labour Councils in the Cold:Ordinary local people will foot the entire bill on any local spending above the government norm. When the local council wants to carry out a programme of service expansion, local people will no longer be cushioned by increased business rates and rate support grant. They will want to know that increased expenditure is well spent".To that I say "Hear, hear". In other words, accountability is to be restored. All who cherish the diversity and diffusion of power which local government represents must applaud that restoration because without local accountability how can real local government survive?
860 It has been said that the community charge is unfair, as it is unrelated to income. That is simply not true. There are 9 million people—one in four of all those who are entitled to vote—who will pay reduced charges, many as little as one-fifth of the basic charge; some will be exempt altogether. Of course it is right to debate the details of those charges and they will be debated; but in the face of those figures, how can anyone say that payment is unrelated to the ability to pay?
However, the matter does not stop there. The community charge will account for about one-quarter of local spending, the remaining three-quarters of which will come from the grant, the new single revenue support grant, and the proceeds of the new national non-domestic rate redistributed according to population. When one calculates where the full burden of local spending falls, it can be seen that the top 10 per cent. of households by income will pay around 15 times as much as the bottom 10 per cent. of households. I point out to the noble Lord, Lord McIntosh, that that calculation takes into account the tax cuts in the recent Budget. With 9 million people paying reduced charges and the rich contributing 15 times as much as the poor, I am bound to say that it does not sound to me like the tinder that will spark off the Peasants Revolt of 1990 and set them on the road to London!
I shall support the Bill with enthusiasm. Accountability by local councillors to those who foot the bills lies at the heart of a healthy, efficient and responsive local government.
§ 5.9 p.m.
§ Lord Graham of Edmonton
My Lords, it gives me considerable pleasure to follow the noble Lord, Lord Jenkin, for whom I have a great respect in view of the positions that he has held and the service that he has rendered to local government. I should like to begin, as no doubt will most of your Lordships, by emphasising how this debate has been illuminated by three excellent maiden speakers. I enjoyed all three speeches but in particular the one by the noble Earl, Lord Carnarvon, who illustrated his remarks from his experience of local government. Those who have had experience in local government will have the edge on those who simply talk about it. While the latter may very well understand it, there is a difference between being a practitioner in local government and being an advocate for a point of view.
The Minister opened this debate by saying that it was about accountability. I accept that. He then illustrated his arguments with the example of the disparity between the rates that were paid in Carlisle and Luton. The other theme of accountability was that businesses which pay a proportion of the cost of local services are disproportionately represented in the forums that take the decisions.
Let me return to the disparity between Carlisle and Luton. Perhaps we may argue that they are two different places in 1988 with two different environments, totals of unemployment, totals of wage rates and levels of needs. We are then in some difficulty. Of course there are disparities between one part of the country and another. But in the future there will be no disparity. The poll tax—the community charge—will be exactly the same. If those 861 who support this Government want uniformity, not equity, they they are setting about achieving it in the right way.
Let me answer the charge that local businessmen feel aggrieved that they have not been able to make an input into local decisions. I served on a local authority for a number of years. One would not have convinced the local bank manager, production manager, shopkeeper, insurance manager or the small businessmen that local business had no input into the decisions of the council for the London borough of Enfield. One would have had difficulty in persuading Councillor Alan Young—who was the leader for 18 years and recently left that post—who was employed in local industry, that he had no knowledge, or that the people to whom he spoke had no input. One would have had difficulty in persuading Councillor Lindsay, who succeeded him, or the new leader of the Conservatives—there were three leaders in two years—that they had no knowledge, or did not listen to or take account of local businessmen.
As the noble Baroness, Lady Stedman, said, it is to the credit of this Government that they have given greater consultation on rates to local businessmen than to any other group. Local councils listen to many groups, but before the rate is levelled local businessmen have their right to be consulted written into statute. It is a myth, therefore, that local businessmen are not consulted. The other myth that can be perpetuated is that the level of rates in one way or another is a major inhibiting factor in the decision whether businesses remain in a community or do not come to a community. Again the noble Baroness, Lady Stedman, was able to point to impeccable evidence: that of the study that the Department of the Environment commissioned, which stated that there was no evidence to that effect.
I am sure that we shall be told that it is not the role of your Lordships' House to alter a Bill of this kind. This is a Bill that started in the other place with 100 pages and left it with 150 pages. It is a Bill that was altered almost out of recognition, mainly by Government amendments in another place. I am absolutely certain that there is a raft of amendments that will be brought forward in this House by this Government and that the Bill will be altered. Therefore do not let us continue the argument that we are not entitled to consider changes.
When the noble Lord, Lord Jenkin, quite fairly told the House that he believes that this measure is better than the old system, he may very well be right. But I tell the noble Lord this. Without a three-line Whip in the other place the Government would not have got the Bill through in its present shape. There were many unhappy Members on the Government side who trooped into the Lobbies against what became known as "the Mates' amendment". To their credit a great many went into the Lobby with Mr. Michael Mates. Therefore do not let us run away with the argument that this is a popular alternative. Having decided two or three years ago that we must have an alternative, this is what the Government have come up with: any alternative. It is neither the best alternative nor an improvement on the present imperfect system. The Government will tell us that 862 they are bringing this forward having listened to a great many people. They did not listen to their own Back-Benchers, the CBI or the associations that represent local government. To whom did they listen? They considered a store of their own prejudices.
We have heard the charge that some councils can be accused of profligate expenditure. An earlier speaker gave the illustration of Lambeth. One has the hypocrisy that Mrs. Currie, the Minister in another place, lambasted Lambeth Council because it failed to provide enough money to support. St. Thomas' Hospital. St. Thomas' Hospital is in Lambeth. Lambeth Council already spends £7 million more than is allocated to it in order to sustain the social services. On the one hand, one has Lambeth Council being lambasted because it is spending too much; on the other hand, it is lambasted by the Minister because it is not spending sufficient in that case.
One has to be realistic about the Government's plea that this is a Bill in which there are some gainers and some losers. There are some amazing illustrations. I come from the North-East. In the North-East, in County Durham, one has this situation. Referring to households that are gaining and losing, in Chester-le-Street there are 41 per cent. of gainers and 51 per cent. of losers; in Darlington the figures are 39 per cent. gainers and 60 per cent. losers; in Derwentside there are 28 per cent. gainers and 71 per cent. losers; in Easington the figure is 26 per cent. gainers. Every district in Durham has more losers than gainers. It is said that that is the luck of the draw; that is the rub; one has to accept it. However, one is talking about people who will have very real difficulty in carrying the additional burden.
Is the Minister prepared to say anything about the impact on student nurses? This is one of the most worrying aspects with which we have to deal. The impact on student nurses is very real. In the metropolitan area the community charge for a student nurse will be £4.44. That is 6 per cent. of a student nurse's income. In inner London the charge will be £11.10. That is 13 per cent. of a student nurse's income. In Camden the charge will be £15.4; that is 17 per cent. of a student nurse's income. Before we are told that there is some disparity between some student nurses and others, can the Minster persuade those who feel hard done by that this is a right and proper position?
With regard to greater London, I mention an interest. I am the president of the Association of London Authorities. Arising from this Bill will be serious detrimental impacts on the people of London, in particular on the black and ethnic minority, and young manual workers bearing in mind that young manual workers earn only 77 per cent. and non-manual women 87 per cent. of their male counterparts. We are not talking about large sums of money. These are people who take home less than £100 per week. There will be those who will be worse off, and one must consider the impact on a range of services that can be provided by the council.
Let me give another illustration. In Hammersmith and Fulham 74 per cent. of domestic ratepayers will be worse off and 24 per cent. will remain the same. In Islington 84 per cent. of households and 91 per cent. of residents will lose as a result of the poll tax 863 compared with current rates. Over 50 per cent. of residents will lose more than £200 a year. That is in the face of the impact to come, never mind the need or the acknowledged disparities of the past. I respect very much what the noble Lord, Lord Jenkin, told us about the agony, the real dilemma, of dealing with an ongoing problem. His colleagues now in the Cabinet—if they were led to do so by himself, he has some responsibility—have produced a change which, whoever else it might benefit, will not benefit a large range of people whom I deeply respect.
Let us consider what the Chartered Institute of Public Finance and Accountancy has said, if indeed the Government ever listen. CIPFA says that the poll tax is:an expensive and complicated tax to administer … [is] seen as an unfair tax by many taxpayers; and … in conjunction with the other parts of the package [it will] weaken rather than strengthen local accountability for decisions".Noble Lords opposite are telling us that in a local community 75 per cent. of the money that is spent is provided and over that sum the local council has no say. We should not be surprised if more and more councils in the future ask why they should listen to the businessman. Why should they listen to anyone? They have a say only over raising 25 per cent. We should consider the range of matters in which they are involved. These include the quality of education, the quality of the roads, the quality of environmental health and training. A local council provides many services for the benefit of local industry.
I wonder whether the Minister will have anything to say about the importance of keeping records and the right of access. My noble friend Lord McIntosh referred to the registers. My concern is about the major granters of credit, consumers of credit and credit bureaux. These are individuals who are out to protect those who, in 1988, may find themselves in credit difficulties. Can the Minister tell us whether there is any intention to inhibit the provision of that information, particularly to those involved in giving credit and in the credit industry?
In my view, as it unfolds the Bill will provide many difficulties, anomalies and great distresses to people outside this building. As the Bill proceeds, we on this side of the House will be doing nothing less than our duty if we seek to improve and revise it in the best interests of the people of this country.
§ Lord Wolfson
My Lords, before the noble Lord sits down, may I ask: has he not made one of the central points of the Bill, namely that high spending local councils will charge more to the ratepayers? They in turn will then wish to examine the policies of the councils.
§ Lord Graham of Edmonton
My Lords, the noble Lord is absolutely right. In our constitution we have a democracy which every four years provides local people with an opportunity to turn councils out. If one examines the latest illustration, which was only last Thursday in Cambridge—where lives the noble Baroness, Lady Blatch, who constantly gives us information from Cambridge—one discovers that there, where the poll tax was a big issue before the elections, Labour was not in overall control, but 864 afterwards Labour was in overall control. I am very grateful to the noble Lord for providing me with the opportunity to make that observation.
§ 5.25 p.m.
My Lords, in 1970 I wrote my last, my eighth, election address. I was so bold as to say that this country was a nation in decline. Nobody commented and nobody criticised; perhaps nobody even read it. That is perfectly possible. However, since then we have had a revolution and we are on the up and up. Inflation has been brought to heel, income tax has been slashed, the unions have been reformed and home and share ownership are thriving. There is a thriving capitalist economy backing a far higher international standing. We have come out of our nosedive. It has been a miracle. There will be ample time too to tackle some of the deplorable side-effects, some of which were surely avoidable.
My criticism of the poll tax Bill is not related in my mind to any other government policies, past or present. I wanted to make that clear. I am told I am a rebel. I may look like one—I do not know. I certainly do not feel like one. It is not in my nature or my upbringing. The only time I can remember rebelling was when your Lordships supported me in preventing the killing, the shooting of the curlew and the redshank—and we won our game of ping-pong with another place—and they were indeed protected. But I cannot remember any other occasion.
I should like to make it clear that Colonel Mates, who moved the amendment in another place, is someone whom I had not had the pleasure of meeting until last week, nor Sir George Young. I say that lightheartedly, because accusations have been made that there is an eminence grise behind the whole matter. The last time, apart from a few brief words a couple years ago, that I met the right honourable Member for Henley was birdwatching in Tobago five years ago. So this is all my own work. It is a bit scary finding myself out front concerning the amendment. But I was comforted when I looked at my family calendar this morning to see these words:A good scare is worth more to a man than good advice".I have had plenty of good advice and a pretty good scare.
I said a week or two ago—and The Times for some reason quoted me—that I thought that your Lordships' House provided a more accurate reflection of public opinion than another place does today. As I have only a life sentence in this noble House, and very proud of being here I am, my roots are along the corridor. The Government at the other end of this building were elected by a mere 42 per cent. of those who voted, which was the lowest proportion of the poll attracted by any Conservative Government since 1922. They lost three-quarters of their majority when they voted on the Mates amendment, leaving them representing little more than one-third of those who went to the polls in the last election. That is a quirk of our electoral system which I shall not question today. But it must surely be borne in mind when Parliament is deciding a matter which touches every household in the land.
Something that is widely agreed is that the tax base for rates—not the scale of course, because that would be impossible—should if humanly possible be a 865 matter for broad accord between the Government and the Opposition if the system is to be stable and stand the test of time. To achieve that may be difficult. It may even be impossible, but a supreme effort surely should be made.
I wonder whether the fact that we do not have a built-in Conservative majority in this House is perhaps one of our strengths and the fact that we have so many Cross-Benchers. It is one reason perhaps for the high regard in which our opinions are held at home and abroad. If this is some sort of heresy, ascribe that to a little rising damp—the phrase used some time ago by my noble friend Lord Thorneycroft—though not, please, to dry rot, which has not yet set in me.
Perhaps our collective views weigh more heavily in the balance than our marginal powers that we are rightly reluctant to use and shall certainly not abuse. Were we to overstep the mark and get too big for our boots, as the noble Lord, Lord Beloff, stated in his Daily Telegraph article, Mr. Speaker is obliged by Standing Orders to rule an amendment out of order if it is "intolerable"—in the words of Erskine May—and therefore offends against Commons privilege. About that there is no doubt and I believe that it should be clearly understood.
I should like to turn to deal with two final main points. I must say something about the manifesto because I should like to put the record straight. Our last manifesto stated that we would replace rates with a fairer community charge. We then had the colossal Green Paper, Command Paper 9714, which is as white as a snowgoose, in which the Government proposed to phase the replacement of domestic rates with a new community charge. Then we had the child's guide to the same Green Paper. It is even more succinct in saying:Alone of the options, it satisfies all three of the main tests for a local tax.That is the poll tax. However, I must not forget to mention the Layfield Report, which took two years to produce. Therein one will not find one word about a poll tax. No doubt the committee gave thought to the matter, but it does not rate a full stop.
A poll tax of any magnitude was dismissed in Command Paper 8449 of 1981, entitled Alternative to Domestic Rates. It stated that it would:almost certainly not be a practical proposition".Incredibly that was republished in 1986 just after the publication of the fat Green Paper that I have shown to your Lordships. To go back for one moment, in July 1982 the Environment Committee in another place recommended that:a Poll Tax, even at a low level, should not be introduced".That was stated in paragraph 40. A few months later the Government stated: in Command Paper 9008:The Government agree with the Environment Committee that this option should be rejected".That takes one up to 1986 when, as my noble friend Lord Jenkin of Roding told us, furious thought was given to introducing a poll tax. However, the fact remains that for 12 years, from 1974 to 1986, the party was committed to introducing a tax which bore a direct relationship to people's ability to pay. It has been only in the past two years that there has been a sudden and complete somersault and we are asked to 866 agree instead to a flat rate poll tax which is now apparently the answer to a maiden's prayer. There are other quotes which illustrate the same points.
I conclude that the Bill is virtually friendless. Root and branch it is regarded as being unfair and perhaps unworkable by the Association of Municipal Authorities, the Association of County Councils, by my own county council of East Sussex, by the National Union of Ratepayers, of which my noble friend Lord Ellenborough is president, by the Chartered Institute of Public Finance and Accountancy, by the Inland Revenue Staff Federation and perhaps one may say by Uncle Tom Cobbleigh and all. They all wish to reject it outright because they do not like its unfairness and the fact that it does not take proper account of people's ability to pay above and below the rebate level.
Among all the represented bodies that have written to me only the Association of District Councils is not opposed to the Bill in principle. That applies to my own local district council, the Wealden Council. However, it is thoroughly unhappy and wants a further tapering from 15 per cent. to 10 per cent., or even rebating up to average wages. I believe that the Government will be most reluctant to do that because it will drive a second coach and horses through accountability.
My noble friend Lord Jenkin of Roding asked what we, the party opposite and I would do instead. I would not do anything instead. I want the Government to do something instead. They have the whole of the Civil Service behind them and they have been studying this matter for years. For 12 years we believed in a poll tax which took account of people's ability to pay. There must be a Bill which my noble friend has tucked away in some pigeon hole, or perhaps he has taken it home with him covered in dust, which provides for exactly that. I want to see the Bill. One cannot believe in such matters for 12 years without producing a Bill. I suppose that one could, but it would be pretty dotty.
The Bill cocks a snook at public opinion. I believe that it has in-built inequities. It departs from centuries of precedent by taking too little account of ability to pay. It is complicated to such an extent that many people will not understand it. It is inconsistent with some of the Conservative principles on which I was brought up. I beg the Government to take it away, think about it and bring it back again.
§ 5.36 p.m.
§ Lord Wyatt of Weeford
My Lords, the noble Lord, Lord Chelwood, said that the Bill has no friends. I believe that he is already finding that the Bill has friends in this House. Whatever may have been the moral victor in the argument in another place, it certainly will not be the victor here. Indeed I do not believe that it was a victor in the other place.
The community charge has not yet been born but already it is surrounded by myths. The noble Lord, Lord Jenkins of Hillhead, produced a new myth today. He said that we must not pass the Bill because even the Government do not support it; only the Prime Minister supports it. I do not know from where he obtained that piece of political gossip, but the noble Lord, Lord Jenkin, (without an "s") completely dispelled it with his account of his 867 conversations and discussions with the Government during his time as the Minister responsible. He said that he convinced them that this was the only possible course. I do not know whether the noble Lord, Lord Jenkins, was trying to persuade the right honourable Peter Walker to rise to his feet and make a solemn declaration of loyalty, but I believe that even he is satisfied with it because Wales is doing rather well out of it.
A major myth is that the Government will fix the community charge. It has nothing whatever to do with the Government; it is the business of the local council. Inefficient and extravagant councils will inflict a community charge higher than will well-run and thrifty councils. If the community charge had been in full operation on figures published last June Labour-controlled Camden would have had to charge each adult £782 or reduce its spending. However, Birmingham council is also Labour-controlled. Its community charge would have been only £186. It is the difference between lunacy and sensible councils. Why cannot all councils be sensible as is the Labour council in Birmingham.
The services are basically the same in all council areas. Where they are not adjustments are made in grants from central government to deal with any necessary expenditure. On last June's figures a community charge of £178 per adult would have been sufficient to cover the same standard services everywhere when the community charge is in full operation. That is slightly less than Birmingham's £186 but there is not much difference. Many thrifty councils would need less; many profligate councils, run by the Napoleons of Notting Hill who love to spend other people's money, would need more. Taking all councils together, the average community charge would have been £224.
An essential provision of the new scheme is that one will receive a bill with the community charge and alongside what one has to pay will be shown what one would have had to pay had the council not charged more than was needed for the standard services. Those who live in inner London would have seen on their bill that £252 per annum of the community charge was attributable to overspending by the ILEA; that is apart from any other overspending by the local council. When the ILEA is abolished that £252, or much of it, has a chance of disappearing from the community charge bills of inner London, assuming that the new education authorities cut out waste—and I am sure that they will not be anything like as extravagant as ILEA. That is the beginning of real accountability in local government.
Until 1944, as the noble Lord, Lord Jenkin of Roding, said, only ratepayers had a vote in local elections. Now there are 35 or 36 million local electors; only 12 million pay full rates; 6 million receive rate rebates; and the remaining 17 million pay nothing. Therefore, they are not particularly interested in careful housekeeping by councils. However, they will now have an interest. Even the poorest person will have added to his or her social security payment 20 per cent. of the national average community charge; the other 80 per cent. will remain a rebate. Out of that increase to their social security 868 payments, they must personally pay the balance of their community charge. In areas with a well-run council the whole 20 per cent. will not be needed. They can keep the change which will be a nice little bonus. However, in areas where there are badly-run councils 20 per cent. will not be enough and that will cause them to pay £1 or so a week more than they have received in actual cash to the council.
For the first time that arrangement has a fair hope of interesting people in what their councils spend and why. Noble Lords may believe that a £1 or £2 a week is meaningless but it is not. Many people on very low incomes watch every penny and will be extremely annoyed with councils which force them to pay over the 20 per cent. which they have received to top up their 80 per cent. rebate. That has nothing whatever to do with central government.
The next myth is that the community charge is not related to ability to pay. The charge is the most closely related to ability to pay than anything that could possibly be devised. As we have been told, 50 per cent. of council spending will come from the Government out of general taxation; over 25 per cent. will come from the new non-domestic rates; and less than a quarter will come from local residents. As the noble Lord, Lord Jenkin of Roding, said, that means that the top 10 per cent., even after the new 40 per cent. top rate of tax, will be paying 15 times as much for the same services as the 10 per cent. with the lowest incomes. They will be paying infinitely more than those whose rebates leave them paying nothing.
An amendment moved in another place that those on the 40 per cent. income tax rate should pay one and a half times as much by way of community charge would then have been absurdly unjust. £1 above a taxable income of £19,300 for couples would have led to a surcharge of 50 per cent. That could amount to £800 a year in areas with badly-run councils. That would have produced enough money only to reduce the standard community charge by £5 a head. That would not only have been unjust but almost pointless, except for indulging the spiteful and envious in their prejudices.
The proposal that those not paying income tax should only pay 50 per cent. would have been equally absurd. That would have meant sudden leaps when income tax started to be paid from 50 per cent. to the 100 per cent. standard charge. That would require an elaborate system of rebates to alleviate the consequent injustices. There is already such a scheme for those on lower incomes under the Government's plans; it covers 9 million people.
It is true that some people will pay more than they do under the present rating system, and so they should when they can afford it. Why should a couple living on retirement pensions pay the same as four working adults in a similar house next door? The four adults next door must have much more in their dustbins than the retired couple. Well over half of those earning up to £150 a week will gain from the new community charge and half the losers will lose less than £1 a week. The average couple with two children where the community charge is at the national average will not pay the full charge until their income reaches nearly average earnings; that is not onerous.
869 Another aid to the poorest will be the new national non-domestic rates. That will shift £700 million a year from the better-off to the poorer regions. That means that in areas of high unemployment the business rate will be substantially less and more firms will be attracted to them. That will create more employment just where it is needed.
The ability to pay under the new system is covered upwards, downwards and sideways. It needs no more tinkering with. Everyone agrees that the old rates system was unfair and ineffective and did not produce genuine local democracy. Councils were not accountable in any real sense to their voters. The Labour Party suggests a combination of local income tax and a revaluation of domestic properties. We did not hear much of that from the noble Lord, Lord McIntosh of Haringey, because the proposition is completely untenable. A local income tax would create 402 chancellors of the exchequer and they would not all be as prudent as was the noble Lord, Lord Jenkins of Hillhead, when he was Chancellor of the Exchequer. They would have to be informed by the Inland Revenue of the income tax affairs of the ratepayers to make sure that there was no cheating. That is not a very pleasant thought, particularly in the light of the nature of some councils.
Local income tax would produce much wilder disparities than today's system. For example, on current spending in Camden local income tax of 26p in the pound would have to be added to the ordinary income tax. In neighbouring Barnet the council could manage with a local income tax of less than 6p in the pound. Those disparities would occur throughout the country causing sudden shifts in the population as people sought tax exile in a cheaper council area.
Revaluation would cause terrible hardships. A retired couple who live in a part of a council area where neighbouring houses had been gentrified would have a fearful shock, even if they had not improved their house since they paid perhaps £10,000 for it 30 years ago. On revaluation they could find that it is revalued at £250,000 to £500,000. Their rates would rise correspondingly and alarmingly. They would have to move and leave their friends and roots. I believe that that would be an extremely cruel situation.
I congratulate the Government and my noble friend Lord Jenkin of Roding on working out a scheme which is the fairest that can be devised.
§ Lord Wyatt of Weeford
My Lords, it certainly is. The opposition to it is mainly anecdotal. Examples are given where some people will be adversely affected. The majority who will be favourably affected are never mentioned nor is the desirability of trying to make local democracy work.
The beauty of the new arrangement is that for the first time everyone will realise that the council's job is basically to provide local services such as schools, meals-on-wheels, the police, roads and footpaths, street lighting, museums, art galleries, waste collection and so on. Local councils are not supposed to be the mini-governments that some have become, operating all kinds of fancy policies like nuclear-free 870 zones or having their own expensive schemes to deal with the problems of race or non-heterosexuals.
The Government should mount an information campaign, and an essential feature of it should be that it is the local council which decides the level of the community charge and not the Government. Those who believe that their local community charge is too high, even after all the rebates, should use the ballot box to do something about extravagant and inefficient councils. The Government are not responsible for the excesses of Camden and Liverpool; the people of Camden and Liverpool are. I hope that your Lordships will pass this Bill mainly as it is and not be seduced by the irrational fears and inaccurate, emotional and alarmist arguments of those who oppose it. It is a great and badly needed reform. When it is working everyone will wonder what the fuss was all about and why it had not been done years ago.
§ 5.51 p.m.
§ Viscount Watkinson
My Lords, after the Bill's passage through the other place it was not very surprising that the parties opposite in your Lordships' House should have what good clean political fun they could get out of it. I am quite happy to leave the rebuttal of their arguments to the noble Lord, Lord Wyatt, who has just sat down, and who better to do it than he?
I wish to put four points to your Lordships which I believe are not subject to argument by fair-minded people and which I hope noble Lords will bear in mind during the long course of this Bill through its Committee stage. Before I reach them I do not believe that it is improper to say that we have listened to three very distinguished maiden speeches today. I heard them with very great pleasure and I should like to congratulate the noble Lords very sincerely. I hope that we shall hear them again before long.
I turn now to my four points and the first is commitment. This is something of an answer to my noble friend Lord Chelwood. The Bill derives from the clearest manifesto commitment that I have ever seen in rather a long political life. What is said in that commitment is exactly what the Bill in front of us expresses, so let us be quite clear about that. The second point, which is glossed over by the opponents of the Bill, is that if we do not have this Bill we face an extremely painful alternative. Without the Bill there must be a revaluation of all domestic properties. Many dwellings would double or treble in value, resulting in the hardship and unfairness that must inevitably follow from that enormous rise in price. Incidentally, such an increase on the rateable base would be a spendthrift's charter for many local authorities. Again, and as my noble friend Lord Jenkin said, I believe the Government had no alternative but to go ahead with a fundamental revolution.
My third point relates to the question of graded charges. As other noble Lords have said, when the top 10 per cent. is paying 15 times more than the bottom 10 per cent., it is a fairly graded measure. It is certainly not unjust as the noble Lord, Lord McIntosh, maintained.
My fourth point is that it is of course a revolutionary change and it does not pretend to be 871 anything else. It is a fundamental restructuring of the whole of local government expenditure. From that point of view I believe that it would be wrong of your Lordships' House to try to fudge the issue. The objection that I have to my noble friend Lord Chelwood's speech and to the points made by his supporters in the press and elsewhere is that they are trying to fudge the issue. They are trying to pretend that there is some easy way out of evading the Bill's main principle; namely, personal payment for personal service. If one starts blurring the basis of the Bill, one is in effect attempting to destroy it. I very much hope that we shall not confuse ourselves into issues like local income tax, capital value rating or a banding system, all of which would destroy the Bill, blur the issue and make it quite impossible to bring forward a measure which I believe solves a problem that from my personal knowledge has been around in the Cabinet for more years than I care to think about.
As my noble friend said in opening the debate—and again I believe this to be irrefutable—governments of all complexions over many years have accepted without any challenge that the rating system was outmoded, impossible of operation and progressively immoral in many ways in its application. My noble friend Lord Jenkin told us very clearly in a speech which deeply impressed me of a man who was clearly forced to take a very difficult decision which he knew would be unpopular because he felt it was right. That is not a bad principle to go on in government.
At last we have a Prime Minister and her colleagues who have had the courage to replace an outmoded, unfair system with one properly fitted to the situation that we now face. Individual payment for individual services for only a quarter of the total cost is not an unnatural burden. I strongly support the Bill and its broad concept.
There will be matters that we wish to discuss at Committee stage. For example, I believe that there is a need for much greater clarification as regards the universal business rate. However, these are details and they are not really important. They do not detract—I say this again—from the courage of this Administration in bringing forward a Bill which they knew would be difficult and open to a great deal of attack on largely specious grounds from, I regret to say, some of my old friends and colleagues who ought to know better as well as from Her Majesty's Opposition and all the rest.
I urge your Lordships not to nullify the main purpose of this Bill and to pay some tribute to the courage of the Government who have brought it in.
§ 5.57 p.m.
§ Lord Wilson of Langside
My Lords, I was intrigued by one point in the noble Earl's introduction of the Bill when he understandably said, after describing the present rating system, that if we were starting again we certainly would not start with that. It occurred to me that if were to embark on radical reform of our constitutional arrangements it is very unlikely that anyone would come up with something as odd as your Lordships' House. I 872 mention that just as matter for reflection in the context of these discussions.
I hope that the noble Viscount, Lord Watkinson, in listening to anything I have to say on this matter will not regard me as indulging in what I believe he called political gamesmanship. It will be nothing like that. I am much too old for that. At least for 20 years I do not believe I have been consciously guilty of it. Like everyone else, I may have been unconsciously guilty of it. In any event, some months ago I drafted a Bill for the repeal of the Abolition of Domestic Rates Etc. (Scotland) Act of last year. I did that not as a political gimmick but because I was seriously concerned, like most of the people in Scotland with whom I spoke, about the damage that the measure which is coming into operation there was causing to our social cohesion. I know that there are those who believe that society does not exist and do not regard social cohesion as very important. However, most of us on this side of the House and many on the other side see its importance to the continuance of social and political stability.
After discussion with my friends in the Social Democratic Party I launched the Bill in the Public Bill Office. The officials took it in and thought about it for a day or two. I was then told, as was the case, that it offended against the financial privileges of the other place. Therefore I thought it would be too much like a political gimmick to go on with it. However, I am bound to say that my picture of the damage to our social and national cohesion that will result from this measure has become a little blacker during that time. It is reflected, the pundits say, in the not insignificant increase in the vote for the Scottish National Party. The Government should be thinking about that.
In any event, like the noble Lord, Lord Chelwood, I find myself wishing that we had the power to send this measure back to another place, perhaps with a schoolmaster-like report saying, "Try again. You can surely do better. This will not do". However, we cannot do that. As a legislative Chamber, this House is the victim of its own history, and in the context of this Bill we are virtually powerless. That is a pity. The House has a funny old history. Only 10 years after the start of the century the argument was about whether we were the watchdog of the constitution or Mr. Balfour's poodle. Now, 10 years before the end of the century, we have to sit quiescent before Mrs. Thatcher's elective dictatorship. That is a great pity too. There it is; we have to live with it.
Of my many reasons for thinking the Bill should be sent back to the other place (if we had the power to do that) I propose to mention only two. The first is a general one. I appreciate the force of the speech of the noble Lord, Lord Jenkin of Roding, in support of the Bill. I shall deal with that just before I sit down. When I reflect on the background to the Bill, on the history of local government finance and on the immense scale of the problems which have accumulated under successive governments, culminating, if my recollection is correct, in the Layfield Report of 1976, I find it mind-boggling that the Government should plump for a poll tax as the solution to the domestic rates side of the problem.
After all, the history of the poll tax as an instrument of taxation is a pretty disreputable one. It 873 is usually an instrument used by autocratic governments. That is significant as things are today. I am thinking not only of the Peasants Revolt in England in the 14th century, which was referred to so often in the other place when the Scottish Bill was under discussion. In a different context, the poll tax in the southern states of America was abolished only in 1966. It was conceived in Russia by Peter the Great. It was not abolished when the serfs were emancipated. Only later on in the 19th century did it finally go.
With my mind in this boggling state, I was curious about who had started it. I could not think who it was. The noble Lord, Lord Jenkin of Roding, has perhaps added to our knowledge of that. I wrote to my local Member of Parliament, Mr. Michael Forsyth, a junior Minister in the Scottish Office. He had spoken a great deal during the discussions on the Scottish measure. I asked him whether he could tell me why he had not said more about Layfield. In presenting his point of view to the House he had said nothing at all about it. In a courteous reply he said nothing about Layfield but told me that he was, if not the only author, one of the authors of the poll tax. He sent me a copy of a pamphlet published by Conservative Central Office entitled The case for a poll tax and hoped that I would be interested.
After reading it I wrote back and said that, while I had been very interested and thought he had made the case very effectively because it was well written, I judged that it was a bad case. I said that I had more respect for a politician who called a poll tax a poll tax that for one who called it a blooming community charge. I did not of course say "blooming". I thought it would be inappropriate to say "bloody" in your Lordships' House. I mention this apparently trivial matter because it seems to lend force to the view widely expressed in this House, particularly from the principal Opposition Front Bench, that the measure for Scotland was the product of panic at the time of the Scottish Conservative Party conference about the revaluation in Scotland, which was a startling affair.
That is my first reason for believing that the Government should be asked to look again at this issue. I come to my second objection. My answer to the powerful speech of the noble Lord, Lord Jenkin of Roding, is that his remarks are all very well if one looks at the Bill in isolation. If there were nothing else but the Bill for people to think about it may be that we would accept his approach. This Government have done a great deal of good. There was much in what the noble Lord, Lord Chelwood, said. I do not dispute that. But when one comes to look at their handling of this side of government business, it is rather shocking.
I see the Bill as the last of a series of straws, the first of which was the crisis in the National Health Service. Although one must not be rude about how they deal with such matters in the other place, I must confess that when it broke I could see, during the exchanges between Mr. Kinnock and the Prime Minister, the force of the Government's argument that they were throwing far more money at the problem than anyone else had ever done, including any of their predecessors. Furthermore, they said, "What was wrong with that?" Were they not a caring 874 government by spending all that money in order to solve the problem?"
I pass on to the next straw, which was the Budget. There were all those magnificent handouts to top people. Of course I know that excessive, punitive taxation can be counter-productive. There is no doubt about that. However, that was not the end of the matter. We then had the reorganisation, the restructuring, of the social security system and the appalling mishandling of such restructuring by the Government in their presentation of it.
One could perhaps to some extent laugh off much of the aforementioned because we have suffered from incompetence in government for a long time. However, I think that this Bill is the last straw. It will gravely damage the social and national cohesion. For that reason I think that the Government ought to have thought more deeply before they committed the incredibly foolish political act of imposing the legislation on Scotland as a trial.
§ 6.12 p.m.
§ Lord Pym
My Lords, the reform of local government finance is long overdue. A radical change has been necessary for a long time. I wish to make it clear that I am absolutely in favour of such a change. Further, I certainly pay tribute to the contribution made by my noble friend Lord Jenkin of Roding who spoke earlier in the debate. Of course there are many ways in which that reform can be carried out. Now we have to consider this particular solution.
It was always recognised that it would be extremely difficult to switch from a tax on property to a tax on people. That is why in the 1979 Parliament the Government came to the conclusion that they would not attempt to implement such a change. For such a big change to be successfully achieved two requirements are necessary: that the change itself is generally advantageous to the individual and the nation and that there is broad public consent for such change—by which I mean a genuine acceptance, rather than just a manifesto commitment.
The first point—the unfairness of the rating system—is not in dispute. Indeed, it is the most powerful reason for having a radical reform. There was a case for retaining an element of the rating system, but no more than that, in a reformed system of local government finance because it was cheap to collect; it could not be evaded; it had been established for a long time and people accepted it. However, we are long past that stage now and domestic rating will be abolished under the Bill.
Moreover, there is no dispute about central government providing something in the region of half of all local government expenditure. There is of course, and always will be, argument about the precise level of government support, but the general principle, with regard to the government providing half, is not in issue either within the confines of the Bill or outside it. The remaining half of local government expenditure will be provided by the business community and the community charge on the population in roughly equal proportions—that is about the state of the division as it now stands.
However, unlike today, the Bill enables the Government to set the unified business rate, which 875 means a considerable diminution in the options available to local authorities in raising money and a substantial increase in the powers of central government. I know that there are plenty of examples where local authorities have abused their present powers by raising exorbitant sums through their rates on businesses, regardless of the consequences for employment or anything else. However, there are also many examples where local authorities have deliberately pursued low-rating policies to attract new businesses and create new jobs. That is very much in line with the Government's own policy. Unfortunately, that will no longer be possible under the Bill. Therefore there will be less accountability between local government and business. Furthermore, the consultations now taking place between local government and business, which are most valuable in many cases—indeed we had a good example from the noble Earl, Lord Carnarvon, in his admirable maiden speech—will be rendered pointless because local government will have no say in the unified business rate. I think that that is a pity.
I know that the Government are committed to the unified business rate, but it appears to be a contradiction to their self-chosen principle—a perfectly sensible one, if I may say so—of better accountability. So, as I have already said, there is a contradiction there. I must add—and this may seem to some people to be only a detail—that having represented a rural constituency for over 25 years with 135 villages I am concerned about certain aspects of the Bill on the rural community, especially the village shop, which will have to pay both the business rate and the community charge. It will be most difficult to persuade those people that such a proposal is fair. Therefore I hope that my noble friend on the Front Bench, when he comes to wind up, will have something constructive to say about the needs of the rural areas, the important relationship between business and local government, and how it can continue in a meaningful way under the provisions of the Bill.
The second point is the obtaining of a broad and genuine acceptance of the change. Here I should like to have seen a wide, public debate about the changes precede the Bill. Such a procedure was carried out in the case of the European Communities Act, with the establishment of the welfare state and also in many other instances. However, it has not happened in this case. I believe that that is one of the reasons for the controversy which has arisen in regard to the community charge. Yes, it was in the manifesto but it was not one of the issues uppermost in the minds of the electorate at the time of the election. The electorate was indeed aware of the pledge to abolish the rates which would be replaced with a fairer community charge; however, the electorate was not aware of the details or the implications involved, because it was not fully informed about them.
However, now that such details have been spelt out many people—the majority it seems—are of the opinion, at least thus far, that they are not fair. That is true even though the community charge has some good features. For example, a household where several members of a family are earning will contribute more in future than they do today. By 876 definition, such a household has the ability to pay an increased contribution. No one can deny that that situation is fairer than the existing arrangement and that indeed such a household ought to pay more.
That brings one to the question of registration and the complexity of the task of maintaining an accurate and complete register of some 35 million people. I cannot find anyone who thinks that even 90 per cent. accuracy is likely to be achieved; the average is likely to be somewhat different than that and lower than 90 per cent. Therefore not everyone will contribute. That factor adds to the perception of unfairness, indeed the actual unfairness, which is perhaps the worst aspect of the system itself.
There are other types of household and a number of categories of people who will be adversely affected by the community charge. They are the people about whom we must worry. The ones I should like to mention are those who live on small fixed incomes; that is, those just above the line where an exemption, a rebate or assistance of some kind will be forthcoming. They are people who have almost always worked hard and skimped their own needs in order to save something for their old age. They are people who have stretched their resources to become home owners and thus independent—the very people whom this Government are rightly trying to encourage. Many of them will find their weekly budgets, which are in any case tight, completely upset. They are worrying about it already, as I think your Lordships' mailbags will be indicating just as is mine. How will they find the extra money? I acknowledge at once that the Government have introduced amendments to ease the hardship of a number of categories of people, but those on small fixed incomes, just above the line where support is available, will be hurt. We should help them. That is why I think that more consideration should be given to the ability to pay than has already been given.
My party has traditionally taken care of people in those circumstances, and in my view it is right that we should continue to do so. Those who served with me in another place will vividly recall the doughty champion of those who lived on small fixed incomes in the person of the late Dame Irene Ward. I am certain that she would have added her authority and weight to this cause. I think that she would have led a campaign to try to persuade the Government to think again.
As I say, there are advantages in the Bill. It will improve accountability, although not to the extent for which the Government hoped. My concerns about the Bill are: that the system will be complex and expensive to administer; that the community charge will be evaded to an uncomfortable extent; that the universal business rate severs, or at the very least weakens, the link between the business and local community; and that the community charge creates hardship for a number of people whose resources are already stretched. Those defects are of a fundamental nature and most of them are not capable of being corrected by amendments to the Bill; but the defect that can be altered, or at least ameliorated, is the one that affects those living on small fixed incomes, just above the line where help is available. It seems to me 877 wholly proper for your Lordships to address that issue.
In expressing those views, I want to make it absolutely clear that I am in full support of all the Government's objectives over the whole political field and indeed of most of their methods for obtaining those objectives. But in a few areas of policy I believe that their objectives could be better achieved by other means; and in some areas of policy I do not believe that they have been radical enough. In the last Parliament I tried to urge my colleagues in government to prepare the way for a change of some kind in the National Health Service, which the improvement in medical technology makes inevitable, and, similarly, for a change, which in due course I am sure is inevitable, in the social security system.
In those cases, as with local Government finance, where major changes are to be made, it is vitally important to obtain the broad consent of the people. To achieve that in the case of this Bill will not be easy, but your Lordships can make a constructive and helpful contribution to the process if you decide to revise some of the details. If your Lordships can make the Bill more popular, Her Majesty's Government would be extremely grateful.
§ 6.24 p.m.
§ Lord Jay
My Lords, I notice that those noble Lords who have supported the Bill this afternoon have spent a good deal more time pointing out imperfections in the existing rating system than in making a case for the Bill. It is of course one thing to point to the undoubted flaws in the present system; it is quite different to make a convincing case for the proposals now before the House.
If one looks, not at the past, but at the proposals, one sees that this is the most unfair and unjust tax introduced into this country for a great many years. If it is enacted, we shall have an overall tax system in which over many levels of income the poorer one is, the more heavily one will be taxed.
If one introduces a new charge of this kind, one should look at the position, in tax terms, from which one starts. It is of course a platitutde, but it is a platitude often ignored nowadays, that a tax fixed at an equal amount for everyone takes a higher proportion of the income the lower one's income is. That is why all indirect taxation tends to fall heavily, and often too heavily, on those with smaller incomes. As long ago as the 1920s, the famous Colwyn Committee on national debt and taxation produced a report that showed, taking indirect as well as direct taxation, that those on middle incomes were in total paying a much smaller percentage of their incomes than those at the bottom of the income scale. Many people in the middle income bracket were shocked, astonished and could hardly believe the figures when they were shown them. Since then of course we have had a huge increase in indirect taxation, notably from VAT, which was raised from 8 per cent. to 15 per cent. in 1979 by the present Government.
In addition, there was also introduced to this country in the 1970s a heavy and vicious form of taxation on food; the food import levies imposed on all consumers by the common agricultural policy. A tax on food is probably the most socially unjust of all 878 taxes, because it falls on food, on which the people with the lowest incomes spend the highest proportion of their income. It is especially insidious in this case because the tax rates are hidden from the public. Present CAP import levies run from 60 per cent. to 100 per cent. in the case of grain, to 200 per cent. to 300 per cent. in the case of dairy products. Statisticians now agree that so far as that form of taxation goes, the total levy per head on the ordinary consumer in this country is about £3 per week which, as the noble Lord, Lord Wyatt, said just now, is not a negligible sum. That is where we start.
Recently the Colwyn Committee's calculations of the 1920s, rather appositely I think, have been brought up to date in a most illuminating report by the House of Commons Library Research Division called The Burden of Taxation 1978–1987, which was published last December. Those figures include all taxes, direct and indirect, local rates and national insurance contributions; but they omit the EC food taxes, so that they would not overstate the burden on the poorer taxpayer even if one omitted the insurance contributions as being not strictly a tax. They also omit this year's budget tax changes.
Those figures show, first, that the total of all taxes paid, as a percentage of all gross earnings of the British public, rose slightly between 1978–79 and 1987–1988. They also show that income tax, which we all agree is most suited to ability to pay, declined over those 10 years from being rather more than 50 per cent. of total revenue to being rather less. But in 1987–1988—that is the last financial year—all taxes paid by a single adult, receiving only 75 per cent. of average earnings, were 60 per cent. of his total earnings. At 100 per cent. of average earnings (that is, the ordinary earner in this country) they were 45 per cent. of total earnings; and for earners at 150 per cent. of average earnings, the tax taken was a little less, at 40 per cent., but nevertheless that was an astonishingly high proportion for people on modest incomes. In order to complete the picture is the case of a married couple with two children. Counting child benefit as negative taxation, the couple receiving only 75 per cent. of average earnings pay 45 per cent. of their total earnings in tax; those receiving 100 per cent. pay 40 per cent.
Therefore before the poll tax is imposed, as a result of looking at each item separately and not taking everything together, we have evolved a tax system which takes 40 per cent. or 45 per cent. of the incomes of the average earner in this country and an even higher proportion of the incomes below the average. Interestingly, in all these cases the total tax taken from these people is a higher proportion of their earnings than it was in 1978–79. We have arrived at this situation by piecemeal change, and taxes have been steadily falling more and more heavily on those with lower incomes. As a result, without counting in the 1988 Budget or the EC food taxes, we now have a tax system which falls more heavily on those earning less than the average earnings than on many of those above it. What is really required now is a lightening of the tax on the millons of people at low income levels.
Therefore to load on top of this the gross inequity of the poll tax, which will be a heavier tax at the lower end of the income scale, would be to give this country 879 a more regressive system of taxation than exists in almost all countries in Western Europe at the present time.
I gave some general statistics earlier, but since the noble Lord, Lord Jenkin of Roding, said that the whole thing was based on ability to pay and was extremely fair and reasonable, I shall quote one other individual case. These figures were given to me by a retired high civil servant living in a comfortable country house on a comfortable pension. This civil servant pays £900 a year in rates which, under the new system advocated in this Bill, will fall to £250. In the cottage next door lives an agricultural labourer with a wife and one working son. They will find their rates bill rising from a negligible figure now to £750 a year. I do not quite see how that example, which must be repeated in a very large number of cases can be described as fair or as having anything to do with ability to pay.
As has been said, quite apart from the merits of the case, this Bill is acutely unpopular throughout the country and supported wholeheartedly by very few—even in the Party opposite, as we well know. In addition to all the other authorities we have heard today who have criticised this Bill from the chartered accountants to the churches, even The Economist and the Financial Times have condemned it out of hand. Indeed, The Economist says that it has "neither equity nor efficiency". Even Mr. Michael Heseltine described it as "expensive, inflective and unfair".
We have heard a good deal about the Conservative manifesto today. The 1974 manifesto—the year when all this started—called for a local tax based on "ability to pay". The 1987 manifesto called for a "fairer charge". But almost nobody really thinks that this is based on ability to pay or can possibly be called a fairer charge. It would be truer to say that it is based on ability not to pay. I believe therefore that it is certainly the duty of this House so to improve this Bill as to make the charge, in accordance with the Tory Party's own election manifesto, a fairer tax instead of a grossly unfair tax. I also believe that it will greatly enhance the respect felt for this House in the country if it makes substantial changes in the Bill.
§ 6.35 p.m.
§ Lord Harris of High Cross
My Lords, I congratulate the noble Lord, Lord Jay, on using this occasion to advertise the burdens arising from the common agricultural policy. They are criticisms which I wholly share and it concerns policies in Europe far more deserving of the noble Lord's indignation than the Local Government Finance Bill with which we are concerned.
I am pleased to follow other speakers from the Cross-Benches in commending the Government strongly on their resolve over the community charge in the teeth of a great deal of powerfully orchestrated opposition. I share with my noble friend Lord Carnarvon misgivings over the unified business rate, but as for the rest, I am prepared to go along with the splendid speech we heard from the noble Lord, Lord Jenkin of Roding.
880 The Labour Party is paid, and constitutionally charged, to oppose these measures, and sometimes it makes a rather poor job of it. On this occasion it has been greatly assisted by the extent of ignorance or misunderstanding extending even to the Tory Benches. We had a whiff of that from the noble Lord, Lord Chelwood.
I must tell your Lordships that until this weekend when I dug into the formidable mass of explanatory papers I had not appreciated the full beauty of the proposed arrangements. Unless I am wrong—and I shall resume my seat to be challenged—the notion is that by fixing the central grant to take care of varying local needs, the new tax offers the prospect of essential local services being adequately provided for a modest uniform tax or charge of, say, £4 a week from every adult citizen. The fact that Linda Bellos of Lambeth can knock £60 million off a budget of £200 million over the weekend suggests that there is a great deal of scope for economy and the reduction of the burden when this tax comes into operation.
I am not as sensitive as the Government about the description of the charge as a poll tax, but I am not paid, like Ministers, to argue that any tax is particularly fair, much less that it is desirable. I had pleasure in agreeing last week with a former Treasury Chief Secretary, the noble Lord, Lord Boyd-Carpenter, that all taxation is bad, though some forms of taxation are worse than others. The rates are especially bad because they are neither a dependable measure of ability to pay often very large sums per year, nor are they remotely related or intended to be related to the use made of local, largely personal, services.
Local income tax turns out to be even worse. Not only does it lack any pretence of a link with consumption or control of local services; far more seriously, it offers no prospect whatsoever of checking the wilful extravagance of councils at other people's expense. What the critics call a poll tax at least has some resemblance to an average charge towards the cost of local services. Why should not every adult individual pay something for the local police, fire brigade, transport, environmental and social services?
My objection to these arrangements is that the new tax remains far inferior to direct charging for many private, personal or commercial services which local authorities currently provide, often rather badly, on a free or subsidised basis. More than a dozen years ago, with my colleague Arthur Seldon, I gave evidence to the Layfield Committee on the scope for pricing in place of taxing to pay for local services which do not correspond to the economist's definition of public goods. The list of candidates for pricing was, and in my view remains, extensive, including libraries, swimming pools, refuse disposal, some forms of pollution, car parking, planning permissions, leisure and sports facilities. In our evidence we even proposed a charge towards schooling, with a voucher to top up low incomes. I cannot help reflecting, and inviting noble Lords to reflect, how much better at least some of these services would be provided if, like Marks and Spencer or even the dear old Co-op, councils had to rely for their revenue on attracting voluntary payment from satisfied customers.
881 So the new tax is a long way from my ideal of directly charging, wherever possible, for local personal services. But I think that the most misguided objection from the critics is that it is not progressive. I should like briefly to try to explode this bogus principle for anyone whose mind is not wholly closed by the Animal Farm incantation, "regressive, bad; progressive, good; and re-distribution, best of all". The truth is that in every nation every tax regime is a mixed system.
Thus half the local spending that is financed and will be financed by central government comes from moneys partly raised by a progressive income tax, partly by proportional VAT and partly by regressive excise and other duties. Since when has anyone taken seriously this baloney that all taxation must be progressive? Another quarter of local spending will come from the uniform business rate, to which I take objection, leaving only one-quarter to be financed by the new charge, which even then, as we have heard, has a substantial element of progression built in where it counts, at the lower end.
When we come to redistribution, on which the noble Lord, Lord Jay, was rather eloquent, I believe that the argument fails again. Even if this partial charge were strictly uniform in its initial impact, the net incidence would have to take account of the additional benefits derived from some local services by poorer people. If all taxes were flat or proportional, as I would strongly prefer, there would still be plenty of scope for redistribution in the way that those tax revenues were spent on social and other benefits.
Turning from these dubious economic and social obfuscations, I commend the new charge on the far more weighty and wider grounds of politics and even of morality. The Government go on and on about improving accountability. I do not complain but prefer to emphasise the old-fashioned virtue of responsibility. The present system whereby a majority who do not pay can vote for increased spending and higher taxes on a minority who do pay has bred irresponsibility among both councillors and local electors. The danger runs far wider than the militants of Liverpool who bought power blatantly by distributing favours to organised lobbies of employees, council tenants, trade unions and assorted minority cranks.
I must tell the House that there is a growing academic literature which points to the danger of democratic government being swamped by the pervasive pressure of organised special interest groups. One symptom is the politicisation of national life, as governments are drawn deeper and wider into placating lobbies which seek to manipulate the democratic process to their own advantage. In a quite exceptional signed article in The Economist two weeks ago, Sir Karl Popper argued that the practical case for democracy was not that it gave good government. That, he thought, was too much to hope for. The real case for democracy was that it was a way of preventing bad rulers from doing too much harm.
That is precisely the rock on which this Bill is founded. The community charge is on this test a principled effort to bring responsibility back into local government by strengthening control by the electors. It will reinforce councillors who truly wish 882 to do a good job serving the community by providing efficiently those services for which the majority are prepared to pay. I believe that it should see the end of ILEA schools, which are dominated by the NUT, costing 25 per cent. more per pupil than the first-class private schools.
The Government have a long way to go in making their case clear and plain to ordinary people. But I believe that just as the growing movement in most communities of the neighbourhood watch enables households to protect their property, this new tax will provide at least the prospect of giving citizens the information and incentive to protect the quality and the cost of local services.
§ 6.45 p.m.
§ Lord Bellwin
My Lords, the problem of speaking in a debate where there is a long list of speakers is that the longer the debate goes on, the more speakers use up all the good points which one had carefully prepared and the more they use the statistics which one was going to quote. Today the problem for me is even greater because there have been so many distinguished speeches by those who support the same point of view as I do. How, can one put one's case in a way that is different? Yet I shall have to try.
The noble Lord, Lord Graham of Edmonton, said that the views of the practitioners in local government should have the edge. That is why, as one who can certainly claim to have had quite some service in that capacity, I hope that it is right and proper that I should stand up to be counted and that my views should at least be known.
Let there be no equivocation about it. I positively support the proposals in the Bill. I have spent well over 20 years looking into alternatives to the domestic rates. Pausing for a moment, I wonder how that compares with the time spent by my noble friend Lord Jenkin of Roding. It is all that time ago and even longer that everyone with whom I worked in local government was saying that there had to be a change. It was not just those of us on the Conservative side: it was all around. The inequities and unfairness were worsening and had become too great. I shall not quote again the case of the single person living in proximity to the many who are earning. To me that is a very obvious example. One could not go on justifying that kind of thing for ever.
Under the system as it is at present poor people living in areas of high rateable value subsidise rich people living in areas of low rateable value. There is not much fairness in that. My noble friend Lord Jenkin also said—it is so important that it is worthy of repetition—that 41 per cent. of households in homes with above average rateable values have below average incomes. Yet 40 per cent. of those with above average incomes live in homes with below average rateable values. There is not much fairness, not much equity or concern about the ability to pay in that.
I have to smile when I hear the criticisms on the subject of ability to pay. Where was the concern in the past for ability to pay when Livingstone was levying horrendous increases and precepts through the now happily defunct GLC, or when Left-wing authorities were punishing—that has to be the word—local people and local business by massive rate rises? Where were those who now express such concern 883 over ability to pay? It did not seem to trouble people quite as much then; indeed the silence was often deafening. But now that the system is to affect nearly everybody suddenly the caring takes on a new dimension. I respectfully submit that that in itself is a major plus for this Bill.
Another major factor which caused us to look for alternatives to rates was what was happening to accountability. As both rates and social security payments kept rising so the numbers of those who paid for them became fewer. Thus we reached the stage where now in many authorities the percentage paying little or no rates is over half and in some cases up to 80 per cent. of the populace.
The more authorities increased the burden the fewer became the number who paid. No wonder the high rating and usually Left-wing authorities were re-elected to office. We used to be told again and again that that was the democratic process at work, but who would not vote for something that somebody else would have to pay for and for which he himself would never have to pay? So much for accountability!
As has been said earlier, even the Labour Party realised that the rating system was not right. Indeed it was the Labour Party which set up the Layfield Committee. Their solution was local income tax. Much has been said on that already today and I shall not take the time to talk about it other than to make a quick comment in a moment.
My noble friend Lord Chelwood referred to the 1981 Green Paper which set out the alternatives to rates. I was deeply involved with that and I remember it so well. The Green Paper did indeed turn away from a poll tax but not, as was said in another place, because it was unfair, but because at that time it was not seen how it could be put into practice.
At the later stages of the Bill we shall doubtless be talking about the valuation of properties, capital values, local income tax and other such matters; but the only thing that I wish to say tonight—the noble Lord, Lord Wyatt of Weeford, touched on this point—is that, all else apart, the great danger is that those measures would drive away from the cities the very people whom we are trying so hard now to attract. That I think will be brought out when we come to discuss those matters again.
For today, in what I hope will not be a long contribution, I wish to concentrate a few more remarks on the distortions about which we read and hear so much. It is no wonder that opinion polls indicate that the proposals are unpopular. That is precisely the reaction that we had with other like legislation. I remember so well that we were told when we were having the discussions on the abolition of the metropolitan councils, the GLC, rate capping and other such matters that such measures would be unpopular. We were told again and again that this or that organisation were against such measures.
That fact is that events proved in the end that those suggestions were wrong. Now most of those measures have gained general acceptance and people wonder what all the fuss was about. In fact some people ask whether the initials were GLC or some other sequence. They ask what they stand for.
884 I gather that a letter was printed in a number of newspapers, although I only saw it last week in the Evening Standard, from a Professor Alice Coleman which was headed Poll tax scaremongers. It stated:Some people seem to be going out of their way to scare prospective poll tax payers unnecessarily. An average charge of £178 per year sounds a lot but if it is expressed as £3.42 per week it is far less threatening.Furthermore, nine million people with below-average incomes will have most of it paid by the Government, leaving only 68 pence to find themselves. The best-run councils will need to charge even less: £2.58 per week, or 52 pence for those to be helped.Of course, spendthrift councils will try to extract much more, but voters can make sure this never happens. There will be local government elections before the rates are abolished and people will be free to reject councillors who complain how heavy the charge will be in favour of those who see ways to make it less burdensome.In all the consideration of the anxiety about the ability to pay this point is as significant as any. At the present time the very poorest groups—I address my remarks on this point especially to the right reverend Prelate the Bishop of Gloucester who was so concerned about them—those with incomes of up to £50 a week face rates now of 4.1 per cent. of net income. Yet the community charge for those people would amount to only 3.4 per cent. of net income or less than that. How can the poor be worse off under the new system?
Furthermore, it has already been expressed that 80 per cent., eight out of 10 single pensioner households, and 75 per cent. of other single adult households, will all be gainers under the community charge. Are not they the people about whose ability to pay we should be concerned? I remind your Lordships—nowhere have I seen reference to this, although I believe the noble Baroness, Lady Stedman, touched upon it—about the element of rates contained in council house rents today. The whole of that will no longer have to be paid by council tenants. The Government might be well advised to give greater publicity as to the sums that will be saved by those people.
I shall not talk about the national contribution by those at the highest end of the scales. I believe that that point has been very well made by those who have spoken before me. But I feel that, if nothing else, it illustrates the lack of necessity for banding levels or such things. The equity must be that those paying most should be those who are earning most. The case for the proposals in the Bill is overwhelming in that that is achieved.
When the charge is fully in place the gainers will amount to 53 per cent.—that is over half of all households in England. They will include households with net incomes of less than £150 per week. They will include the other categories of pensioners and others living alone. That takes in nine out of 10 one-person family households. If those gainers are not those in need, who is? If that is not all about equity then what is?
I have already illustrated the extent of those who will lose under the new system. I do not think that it helps the case to try to distort the number of people who will be worse off. It is certain that the true likely rate can only be calculated with accuracy as we get nearer to councils making their own decisions on what their spending will be. But the fact is that there will be another dimension in the dialogue. It is not just a case of what councils spend, but what they achieve for what they spend. All too often we hear the 885 case argued that one authority is better or worse than another in relation to the amount it spends. The criteria should not only be what is spent but what is achieved for that money. That is all about efficiency.
In the recent Local Government Bill which has just been passed we heard given in this House many examples of the opportunities which existed in that regard. I believe that the Audit Commission for example said that £500 million could be saved out of three services alone if they were put out to tender. That is just a flavour of the opportunities that exist. I submit on that point that when the time comes and when the chips are down and each council has to make its decisions as regards what the community charge will be, each council will be entitled to take into account the opportunities for carrying out services more efficiently. If that is the case then the Bill will have achieved a great deal of what it sets out to do.
Once the Bill is on the Statute Book and comes into effect not just 20, 30 or 50 per cent. of the people will be paying charges and will want to know what their local authorities are providing, but just about everyone will be paying something and will want to know what they are getting for that money. That is what local accountability is all about.
What with the exemptions, the safety nets, the phasing in proposals and other safeguards the poorest households stand to be major gainers from the community charge. As this becomes more and more apparent as the debate goes on, I hope that so much greater will be the acceptance of it. Each and every time that there has been opposition to controversial and radical legislation, at the end of the day when it has gone through and the benefits have been seen for those who are on the receiving end, there is acceptance and approval of it. That is why I am delighted to support the Bill.
§ 7 p.m.
§ Lord Houghton of Sowerby
My Lords, for some years now local rates and your Lordships' House have shared a common danger. I think we would both have been abolished years ago had there been any agreement on what should take our place. When rates go, we in this House will occupy a very exposed position in the dwindling collection of the national institutional antiquities. I think that should encourage us to apply our minds to our own reform.
I think the speech of the noble Lord, Lord Pym, was most impressive; it contained a good deal that the Government will have to think about. My noble friend Lord Jay produced what I could describe as "the statistician's brew", which contained some frightening ingredients in regard to the proportion of tax that rests upon those with smaller incomes. But I must remind my noble friend of our mutual colleague of many years ago, Hugh Dalton, who, with his cynical smile and booming voice, said that the great virtue of all indirect taxation is that it is purely optional, and if you do not like to pay the tax on a television set you can easily escape it; you do not buy a television set. His remedy for tax avoidance was; Don't buy goods that carry a tax you are not willing to pay. Of course his type of citizen would finish up living in a little shack in the woods, dressed in newspapers and every morning, in Britain's rainy 886 conditions, he would go out wearing long trousers and he would return home in shorts.
What I wish to do is to utter the gypsy's warning, but before I get to the warning let me dispose of rates. Rates are done for, and it is not the slightest good thinking that we can keep them, revive them or use them in any modified form. I heard a suggestion—I think it was in the delightful maiden speech made by the noble Earl, Lord Lytton—about the adverse effect upon the reputation and the efficiency of the rating system of the absence of regular revaluations. But revaluations are virtually impossible, because the whole basis of assessment of land values has been distorted and disrupted by rent control, by famine prices and by the remarkable changes there have been in the value of land. Indeed, the last valuation was so long ago that I cannot remember when it was; but I know that when it took place there was no such thing as revaluation on current letting values. How could there be? There has been no free market in the letting values of domestic properties for years. There have been capital prices, and indeed capital values were thought of. The Labour Government thought of replacing rates by a levy on the capital cost of construction of a dwelling, leaving aside the value of the site; but they did not go on with that.
There have been various other thoughts about local taxation but there is no convincing alternative in the political field at the present moment which will enable us to grasps some straw in the wind and say, "We've got it: there is something which is different from the community charge and we can take that as the alternative to the rating system." I do not think such a thing at present exists.
Nevertheless, we have to face the fact that the dilemma to be resoved is: how can we run our central and local services with the present division of financial responsibility between local authorities and central government, without either overloading local authorities with a tax burden they cannot meet or the Government assuming responsibility for a proportion of local expenditure which many people would say robs them of a degree of independence?
This is the dilemma. Whatever we have, whether it is rates or anything else, I believe that the growing burden of expenditure on services which we now regard as applicable to local endeavour—education being the principal one—is getting so heavy that I do not think that the services can he borne on the present allocation of financial responsibility between central and local government. That dilemma will exist whatever system we adopt, because I do not think local government will be able to foot the proportion of the total bill which they would like to do and which the Government would wish them to do.
We start off with that, and I do not think there is any immediate escape from it. As regards an alternative to rating as a form of local taxation, if we are going to look at the community charge as the going thing at the present time, then I believe that my gypsy—the tax gatherer of yesteryear—will come forward and ask the Government: "Do you really know what you are doing?"
I would lay down certain conditions for this tax. I am not bothered about it being a flat rate tax. I think that probably in present circumstances there is little alternative to a flat rate tax for local government 887 purposes. I will come on to the suggestion of a local income tax in a moment, but the first condition is that the total burden of the tax should be tolerable to all citizens without dilution of the principle by too many discounts and concessions. This means that the amount payable should be within the means of the people with average incomes—the working people—and those of similar economic status. It must be within their range to bear this community charge without discounts and without concessions, if it is to be tolerable to the community as a whole. That is the first condition.
The other condition is that it should be for services, and seen to be for services, which are supplied by local authorities to the generality of the public. I think that people's attitudes to taxation depend to some extent on how close the benefit is or how close they are to the expenditure of the money. If they can see the money being spent wisely or if the benefits are visible to them, they are prepared to bear a tax which hypothetically might be regarded as somewhat regressive.
I do not think we should underestimate the desire of the British people to pay for things; it is really innate in the whole history of the rise of the working class movement and of the participation of people in the affairs of the nation. The pure theory of taxation cannot always be applied to statistical examination anyway. I believe, for example, that if we had had a national health service levy at the time we had the Beveridge Plan the likelihood is that it would have been a flat rate. We are not against flat rates. We have flat rate benefits and flat rate contributions, and it just depends on what it is as to whether a flat rate is applicable or not.
The next point I come to—and this is where the gypsy's warning comes in—is whether the methods of payment will enable the tax to be levied without very serious problems of enforcement. On the whole ratepayers have felt under an obligation to pay their rates, although a number of them have been unconscious of paying their rates because they paid them along with their rent. They had not noticed the separate charge; the landlord had been responsible for accounting to the local authority for the money. On the whole ratepayers have had a sense of responsibility and did not want to be chased by the local authority or to appear in the local court for default for non-payment of rates. So I think that in most cases rates have been paid—probably above an equitable level—but they have been collected because people felt that they must fulfil their obligation.
Now we have a wider franchise. I think that it will be necessary to study the psychology of the new constituency of taxpayers. Let me remind your Lordships that there is nothing in our taxation system today to compare with the effort that will have to go behind collecting money from individuals without, as far as I can see, the assistance of pay-as-you-earn or other deductions which are presently the very basis of our taxation system. We no longer dig into the pockets of the taxpayer; we get the money before he sees it. The taxpayer pays his taxes out of money he never sees. However, under this system it will have to be dug out of his pocket. It will be a horrible prospect if we are to have local papers full of the proceedings 888 of summary courts for recovery, arrestment of wages or restraints for recovery of the rates. That is a serious danger.
I cannot direct local authorities to any source of experience or expertise in debt collection on the scale that may be necessary in connection with the community charge. That is a very sobering thought. It means that the charge will have to be more than acceptable; it will have to have co-operation. I think that the tax gatherers in the local authorities will wonder whether there will be resistance. The local authorities do not want to be regarded with horror and loathing because they are the debt collectors of tomorrow. That is very serious danger.
I want to ask what the Government are thinking of doing about constructing schemes for deduction of the community charge at source. It has either to be done through local employers, or it could perhaps be done by hitching the community charge to the tax deduction scheme in particular areas where that was thought desirable. All I can say is that there must be schemes for deduction. Otherwise many people will prefer to go to court and obtain an arrestment of wages and an instalment scheme which they find acceptable and will be able to honour—and there is a danger if local authorities are going to be sticky about allowing payment by instalments. Even so, instalments have to be sent each time. How are they to be collected? I warn the Government that they have a very serious problem to resolve concerning the collection of the community charge and the difficulties of enforcement. That is really the end of the gypsy's warning.
I offer no views on the community charge in principle. On the whole tax gatherers do not look at principles; they do not think that there are any in taxation. They do not look at the morality of taxation because they do not think that there are any morals in it either. What they want to know is, is it workable? Can we do it? Can we make a success of it? Will there be any pleasure in it or will life be unhappy for us all when we see people coming into the office scowling and threatening us? It will be worse than the Department of Health and Social Security. Tax gatherers want to be liked. They cannot achieve that by offering to reduce taxes in the way that the DHSS can offer higher benefits.
The Government must keep the local authorities on the right side of the local community and take steps that are not yet in contemplation in order to do so. The gypsy's warning is there. The Government will see what happens with experience.
My final word to the Government is, you will have to put this over in a very big way, and you will have to take that wretched epithet "poll tax" out of the language. It is not a poll tax; poll taxes are coercive. Poll taxes are the alternative to slavery; they are to compel people who work in plantations and in the fields to pay the tax which is being levied upon them.
That brings me to the Prime Minister's counsel in this matter—if you cannot afford to pay, work harder and then you will.
§ 7.16 p.m.
§ Lord Carr of Hadley
My Lords, the noble Lord, Lord Houghton of Sowerby, nearly always has something of interest to say that is a pleasure to hear.
889 I certainly feel that his gypsy's warning needs to be taken seriously if not literally in every aspect.
I have for years wanted a government who would have the courage to tackle the problem of the unfair and ineffective system of domestic rates. So I genuinely congratulate this Government on having the courage to tackle it. I strongly support their objectives in doing so. However, I am afraid that I have to say that I also strongly object to some aspects of the methods they have chosen to try to achieve those objectives. As the 21st speaker in the debate I assure the House that I shall not dwell upon those in detail.
My first general criticism is one that has already been made by many noble Lords, namely, that the proposals will in a number of ways lead to a further increase in the centralisation of government power in England and Wales. I have for long believed that this country was over-centralised. I have particularly thought that it was the duty of Tory governments to decentralise because I feared that it was inevitable that Socialist governments would centralise. It hurts me particularly to see a Tory Government adopting the centralisation measures that they are, I fear, not only in this Bill but in some others as well.
In the end he who pays the piper calls the tune. To my mind, 70 per cent. or 80 per cent. is too high a proportion of local government income to come from central government. It is too high because of the power that it gives to central government and because that in turn discourages, as the noble Earl, Lord Carnarvon, said in his excellent, very short maiden speech, too many of the most able people from going into local government. That is of immense importance.
In all my work in recent years trying in various ways to tackle unemployment—originally just youth unemployment and then more generally—in many of our most difficult areas, including the inner cities, I have come to realise that one succeeds by building from the bottom up and not from the top down. If one is to build from the bottom up it is vital in every community to get the best, most constructive people involved, whether it be from local government or in other forms of local partnership.
§ Lord Jenkin of Roding
My Lords, will my noble friend kindly give way? I apologise for interrupting, because I have had my say, but does he not recognise that the essence of the scheme contained in the Bill is that every additional pound of expenditure which a local council incurs above the standard amount falls upon local voters? Therefore, accountability is 100 per cent. to the local voter and not through central government.
§ Lord Carr of Hadley
My Lords, I do not object at all to that interruption. In so far as it goes my noble friend is quite right, but that is not as far as it goes. There is still the fact that when 70 per cent. of one's income (or 80 per cent. as I believe it is in Wales) comes through central government, it introduces whole fields of responsibility over which one has too little control.
As I and other noble Lords see it, the cause of the disproportion arises from the introduction of the 890 uniform business rate. I do not like it. Without going again through the arguments I shall simply call in aid the observations of my noble friend Lord Pym and the excellent maiden speeches of the noble Earls, Lord Lytton and Lord Carnarvon, and I shall not amplify them. I cannot help being cynical about central government. I cannot envisage any central government of the future who are in desperate need of revenue having any greater ability to listen and take into acount the views of the business world than councils do at the present time. At the moment if one is unfortunate enough to have one's business in an area controlled by a bad council one can at least move away to somewhere else, but if central government are the culprit, there is nowhere to go except to leave the country, which may not be practicable even if thought desirable.
As a vice-chairman of the English National Opera I have come across one side effect of the uniform business rate and the effect it has on local government's ability to look after its community. In practice it will make it impossible for the Westminster City Council to continue at least its present scale of grants to both the English National Opera and the London Festival Ballet, which was a task that it took on at the request of and by arrangement with the Government when the Greater London Council was abolished. This is not a matter to be pursued this evening. It may be pursued at a later date, but it is an example of how this measure reduces the scope of local government to work for its community as a whole.
The centralisation of which I complain does not simply occur in the balance of expenditure. There are also written into this Bill a great number of specific powers for Ministers to act. I must confess that I was appalled when I discovered that the power of rate capping is to be continued. I think it is wholly objectionable. I accept that it was right and necessary to introduce it as a temporary measure, the Government being faced, as they were, by the problems caused by some wholly irresponsible councils throughout the country. I should be prepared to accept that it might be necessary to maintain it for something like five or eight years during the transition period, but in this Bill I find it very difficult to accept as a permanent power without determination of the period for which it is to exist.
I want to move to my second criticism, which not surprisingly, concerns the inherent unfairness of a flat rate community charge. It cannot be denied that a flat rate charge or tax of any considerable sum is inherently unfair. As regards real hardship cases, I am delighted that the present system proposed by the Government, which offers rebates for those below a defined hardship line, takes care of that problem reasonably well. I welcome that move. The problem no longer worries me as much as I thought it might and indeed I believe that the proposed system is quite good. However the community charge will still cause severe financial stress to many of those who are some way above the line of defined hardship which qualifies them for rebates. Moreover it is seriously unfair among those who are above the present defined line of hardship.
891 The Government's own figures indicate that the largest number of losers from the imposition of the community charge will be households of three or more adults; they also show that the largest number of gainers will be households of three people or more. A tax or charge, whatever one calls it, which bites so arbitrarily among different households of the same size has something seriously wrong with it and needs correction. I cannot help looking back to my old constituency for which I sat as Member in another place for 25 years. I can picture the rows of houses in roads at one end of that constituency which will be composed largely of losers and the smaller number of houses at the other end which will contain a lot of the gainers who will at the same time be receiving the reduction in the higher rate of income tax to 40 per cent.—a reduction of which I approve strongly. But if one considers the need to carry opinion with one and the perception of what is fair to the majority of people, then when those two benefits for those with higher incomes happen at the same time it is difficult for very many people to feel a sense of fairness.
I repeat that I strongly approve of reducing direct taxation to these reasonable levels and believe that it is a measure of immense benefit to this country for reasons which I believe it would be wrong to go into now. However I believe that in this Bill there is something wrong which should be put right.
How should we have proceeded? What should be done about this Bill? Perhaps I may refer to the detailed commitment published in the Conservative Party's manifesto for the general election in the autumn of 1974 in which it was said:we shall abolish the domestic rating system and replace it by taxes"—not "tax" but "taxes"—more broadly based and related to people's ability to pay".I believe that the relation of the charge to an ability to pay is sacred and I cannot deny it. But no one has concentrated very much on the point that at that time we did not propose a single new tax; we referred to "taxes" in the plural.
I was very much concerned with that proposal as I happened to be the Shadow Chancellor at the time. My right honourable friend the Prime Minister then happened to be the Shadow Environment Secretary and was also concerned with it. If my memory is correct, I believe that she first announced that commitment to the public in a broadcast. I think that it was the noble Earl, Lord Lytton, in his maiden speech who drew attention to the difficulty of managing with one tax. All taxes have unfairness in them. The more money one tries to raise from one tax the more apparent become the unfairnesses and the more they bite.
Why do we have to move from a tax wholly on property to a tax wholly on people? Surely we ought to have kept a tax on property, but raising very much less than it does at the moment, and a tax on people, though raising very much less from them than is proposed in this tax. Although I do not like it, I believe that if the community charge were set significantly lower, the effective unfairness, however arguable in theory, might well be acceptable. At the level presently proposed I do not think it is.
892 At this stage I fear that it is not possible to think of introducing a new tax and certainly this House could not do it. Such a measure may have to wait for a future date and perhaps some future government, But if such an option is ruled out there are still three possibilities open to us.
First the size of the community charge might be made smaller. I have suggested how one can most effectively make it smaller; namely, by having more than one tax. One could however also make it smaller by transferring to central government some of the cost that is at present borne by local authorities. I do not all that much like such a proposal because of the low ratio of locally raised income that is already envisaged; but if the proposed 25 per cent. were to be reduced to 20 or even 15 per cent, I do not think I would quibble. One may have gone down too low already but if one has to bear that, at a pinch one could bear a little more. In the Conservative Party's manifesto for 1974 it was specifically mentioned that we would:transfer to central government in the medium term, the cost of teachers' salaries up to a specified number of teachers for each local education authority. Expenditure on police and the fire services will qualify for increased grants from the Exchequer.I am not pressing for those particular measures but they are one way in which, by making the community charge smaller, one could reduce the bite of unfairness.
Another way would be to have the charge founded on and developed from what has been called the Mates amendment in another place. I do not want to go into that matter in detail. I do not believe that the proposals would work as drafted, but with determination they might be modified into something better.
Finally I want to raise another possibility. If it is easier for the Government to think in terms of giving rebates on a uniform charge than on varying the charge itself, we could surely raise the basic charge to a higher level than that which is proposed while at the same time raising the level of income at which rebates begin to be granted. In that way one would overcome the problem of an unfairness to the people whom my noble friend Lord Pym mentioned and the constituents whom I picture in my mind in my old constituency.
I feel most strongly that we must ask the Government again to consider modifying the impact of this present charge. I do not believe that it is fair. I am certain that it is not perceived to be fair by the public at large, including the great majority of those who vote Conservative, above all because it is seen not in isolation but as part of a package of taxation changes.
§ 7.30 p.m.
§ Lord Flowers
My Lords, as Vice-Chancellor of the University of London, which has over 40,000 full-time students, I am naturally concerned at the impact on students' welfare, and therefore on their ability to study, of various government measures, including the recent changes in housing benefits. However, the proposed so-called poll tax causes me the greatest concern, partly because of the inequity that is likely to result and partly because of the complexity of the administrative arrangements that are now in prospect.
893 These are general themes in this debate which I should like to illustrate from my experience. At present the position is simple. Rightly or wrongly, most students have no direct involvement with rates. For the minority living in college accommodation, the rates payable on that property are accounted for by a separate grant which in effect goes directly from the University Grants Committee to the local authority. However, if they are living in rented accommodation students are entitled to full rate rebate under a well established scheme.
If this Bill is enacted, some students may be liable for the full amount of the poll tax for their college area, probably up to £800. That seems to be the Government's intention with respect to postgraduate students and any student receiving company or other sponsorship. At a time when the Government are trying to inculcate enterprise values into academic life and trying to increase the amount of training and research work undertaken and funded by industry, the proposals on poll tax appear exquisitely designed to frustrate those very desirable objectives.
One may ask: what of undergraduate students? How will they pay for their residual 20 per cent. of the poll tax for the area? In some cases that may be £40; in others £160. We know the Government's answer to that: we must wait for the outcome of the Walden-Jackson review of student support. They have said it many times before. It is generally assumed that there will be some addition to the modest student grant to compensate for the new poll tax burden. But perhaps we should not so assume. There is so far no sign that there will be any increase in the student grant in Scotland to compensate for the poll tax payments there.
Even if the student grant is increased, however, it is most unlikely that each student will be compensated for the liability for his or her specific area. That would be administratively far too complex. It is more likely that the Government would opt for a flat rate addition which would leave most students as net losers. That would be entirely consonant with the present strategy of cutting the cost of student support by attrition—a benefit removed here, a new charge not fully reimbursed there. In this way the value of the student grant has decreased in real terms by about 20 per cent. since 1979.
However, the reason why the poll tax would be inequitable for students is that they would then have to find a varying amount of, say, £35 in Durham, £45 in Bristol, perhaps £70 in Haringey, even up to £160 in Westminster or Camden, from a flat rate grant settled nationally. That is a significant change from the present position, where rates have no impact on students, who, by and large, are but fleeting users of local services.
Again, at a time when the Government have stated their intention to increase access to higher education, it seems that they are doing all they can to frustrate their own policies. Perhaps it is simply that the Department of the Environment and the Department of Education and Science do not discuss their various policies together.
894 My second point concerns the administrative arrangements for poll tax as they affect universities, polytechnics, colleges and students. It appears that every college will have to designate a certification officer. In most cases, a new and costly administrator will have to be employed to issue every student at the college with proof of student status: in effect, a student identity card.
Of course the college should be expected to behave as any other landlord in respect of students in college accommodation. However, the Bill goes much further than that. The certification officer must supply the local authority responsible for poll tax collection with a list of names and addresses of all the full-time students registered at the college and resident in that local authority's area. One sees that matters are beginning to get complicated. The local authority will then demand the poll tax from the students, I presume in full, and students will be able to commute the payment to 20 per cent. on production of the identity card. Otherwise there would be no need for the identity card. I predict that this system will be inefficient and expensive. Students often move. They often share space on a fellow student's floor. In any case, we do not always know where they live. In vacations they tend to live elsewhere or to travel. If one finally finds their front door and knocks on it, they are often not in. I predict that before too long the Government will be considering having colleges as tax collection authorities with grant cheques being paid to colleges, colleges deducting poll tax contributions and handing on the residue to the student—rather like PAYE, which makes the employer a tax gatherer.
Quite simply, when I contemplate some of the details of this apparently simple measure I conclude that it is as yet the product of too little thought and less understanding of the real world. I hope that we may return to it in Committee.
§ 7.37 p.m.
§ Lord Mountevans
My Lords, we are only half way through the list. I therefore should like to concentrate on one element of the Bill—Clause 32—rather than get involved in a long general discussion of the Bill's merits. While doing so, I must put on record that I am inclined towards those who have addressed themselves to the banded option.
When the metropolitan counties were abolished, the view was wisely taken, not only by Government but also at local level, that provision of certain services still required a county-wide view. Hence, police, fire services, the Civil Service and passenger transport authorities (PTAs) remained in place. Their function was to provide a county-wide service; a wider area service. Their composition was of members nominated by the relevant districts. Their funding was by means of precepts levied on those districts.
As recently as 22nd January last, while the Bill was in another place, this status quo seemed likely to remain. Indirectly elected though they were, and with their precepting ability limited annually by the Department of Transport, the PTAs were doing a good job not only in terms of a changing legal 895 framework, but by making the most of their inherited assets and looking to investment in the future.
However, on 22nd January last the Minister wrote to the PTAs suggesting that their precepting ability should be replaced by an ability to bill the district councils directly. Past history and past performance were to be sacrificed to that strange device, accountability. The extent to which a nominated councillor—one nominated by the council to which he as been elected to serve—is less accountable than one directly elected bemuses me utterly. But the Government have the bit between their teeth. The amendment moved in another place on 20th April last, just two months between the initiation of the consultation procedure and the legislative change, deprived the passenger transport authorities of their ability to precept.
It seems to me that a number of things were notable about the proceedings. First, I wonder why what is, to those concerned, a major piece of transport legislation—those concerned are not only the Government but all of us who pay towards the provision of metropolitan public transport or who use it—was conceived so rapidly and why it finds itself as a substantial piece of transport legislation in an environment department Bill. Accountability hardly seems to be the right note, so something more political must have been the root cause.
Secondly, we are talking about several hundred million pounds' worth of precept—but precept that is to a considerable extent regulated by the Government. Less than two months elapsed, as I have said before, between the Government's invitation to comment on 22nd January and the Government putting forward an amendment.
Lastly, it is rather disappointing that when the Minister of State moved the amendment he did not introduce it by justifying it. Instead he sat back and awaited the attack which in due course came from both sides of another place. I have a great deal of admiration for Mr. Mitchell. He gives up a great deal of his non-parliamentary time to visiting the transport industry. He uses his working time too but I know that on many occasions he has given up his weekends when he could be resting, nursing his constituency or whatever. But he has forgone that to visit the transport industry. I wonder why he found himself unable to be aggressive and dynamic in introducing the amendment. I wonder whether he wished not to be held, as the saying is, accountable for a damaging piece of legislation relating to transport but packaged in another department's Bill.
If we do not reverse the abolition of the PTAs' right to precept, a number of consequences will flow from our inertia. Two seem particularly important to me as a hardened, dedicated and committed user of public transport. It will become impossible for the authorities to fulfil their statutory obligation to provide forward plans to the Department of Transport as they cannot be certain that they will have either the funds to match the service level or the investment levels which will be required in the future. If, when directly billed, a district council challenges provisions on grounds of perceived benefits to its 896 area, who is to be the arbiter? What will the ground rules be?
Neither point is clear, but neither is even stated. The one thing that is clear is that subsidised public transport requires planning. That was recognised not only by Members on this side of the House but by the Government in another place on a number of occasions. It requires planning if it is to be efficient and economic. I support the Government in their wish to see that subsidised public transport should be economic. Even private business plans ahead, but whoever or whatever one may be, one will have the utmost difficulty in preparing meaningful forward plans without knowing that the funds are available or knowing the rules governing the collection of those funds.
Direct billing may also encourage district councils to secede from the relevant PTAs. To date no council has exercised that right. That is hardly surprising because one notices that in Stockport, which has a Conservative MP but a hung council, in the elections last Thursday the Conservative Party ran on the platform that it would give serious consideration to secession if it won control of the district council. It seems to me that the voters decided that that was not desirable and that that may help to explain why the Conservatives did not win control of Stockport District Council last Thursday.
The power to secede is there and district councils may feel that the policies adopted by the PTA, or the funding required to execute the policies, conflict with the district council's policies and its means. Again the Minister is the arbiter, but one has no knowledge of the factors which he will consider when reaching his judgment. I hope that country-wide consideration will be of prime importance, because I believe that that is a cornerstone of transport, but I fear that accountability will have the last word.
If a district council seceded, there would be greater accountability. I am increasingly inclined to put that word in inverted commas. There would also be greater expense, as the district would inevitably have to set up its own transport administration. Does that really square with the value-for-money aims that to an extent underlie the Bill and with which I have a certain sympathy? I do not believe it does.
There are many other aspects to direct billing, such as the effects on concessionary fares, on integration of timetables and on the provision of that central information service which is essential to any metropolitan transport network or indeed to any transport network, especially if we want value for money. But these are elements which a district might deem to be irrelevant. On a wide area basis it will inevitably tend to look only to its own narrow interests. But wide areas—we agreed before we abolished the metropolitan county councils—require certain services which are better provided on a wide basis. As the metropolitan counties have been abolished I fear that I cannot use the words "county basis".
This holds true of the police, with whom most of the public—indeed, most of us—I assume have relatively little contact. It is true of the fire service, whch I am sure most district electors, even non-electors and non-voters, would hope never to have to call into use. No, I believe that in the metropolitan 897 areas passenger transport is the most visible and the most used of the public services. I repeat that it is wrong that it should be singled out for negative treatment in terms of the abolition of the ability to precept. Why leave that ability with the fire service? Why leave it with the police authorities? Why, indeed, leave it with civil defence?
The present system of authority and precept has, I feel, that level of accountability which the public wants. In emphasising that fact, I urge the Government to think again.
§ 7.48 p.m.
§ Lord Ellenborough
My Lords, I was one of the few English speakers from this side of the House who spoke on the Second Reading of the Bill for the abolition of domestic rates in Scotland just over a year ago. I did so with a sense of some foreboding. I recall saying that I had considerable misgivings about the legislation on grounds of fairness and practicability, although I congratulated the Government on their courage in tackling at long last the problem of getting rid of our domestic rates.
In the aftermath of the electoral disaster suffered by the Conservative Party in Scotland at the general election, and the not very good results last week, I should have thought that the Government might be inclined to reflect on the consequences of the legislation as it stands for England. In England the argument and its implications are only just beginning to be understood, even by Back-Benchers in Parliament, as a leaked ministerial minute indicated a short while ago. But in Scotland it has been a real live issue for a couple of years and it was certainly a contributory factor to the loss of seats there.
I suggest that it would be in the longer-term interests of Her Majesty's Government to try to devise a tax, or to amend their present proposals relating people's ability to pay, while there is still time to do so. That would avoid endless rancour and friction in the future.
The temptation will be to do nothing. There is no electoral test in the offing and the hope is that once the legislation is safely enacted the problem will fade away. So it may for a year or so. However, in 1990—the worst possible time because of the run-up to the next general election—the consequences of the poll tax in England could explode in the Government's face.
The Government have worked out a complicated statistic which has been quoted by several noble Lords. It is that under the community charge the top 10 per cent. of households will pay 15 times more towards the cost of local services than will the bottom 10 per cent. If I was a canvasser trying to put across that statistic I believe that I would need an actuary to help me.
It will be more easily understood that income tax payers and higher income tax payers will pay exactly the same amount of income tax under the community-charge system as they now pay under the rating system, assuming that their income remains static and that there are no changes in income tax. But, although contributions through the tax system 898 will be the same, the overall percentage contributed by the better off—that is in both income tax and community charge together—will be less because their contributions paid locally will have decreased. Generally the community charge paid by the better off will be less than they now pay in rates.
In a fairly average outer-London borough which I know, there are roads in one part where married couples live in houses with an average rateable value of approximately £1,000 and they are currently paying an annual rates bill of £1,760. As a result of the introduction of the community charge, estimated to be £262 on the basis of the current year's expenditure, in that borough those couples will benefit to the extent of £1,236 per annum. In other parts of the same borough there are married couples living in houses with rateable values of 170 and they pay an annual rates bill of just over £300. Such people will have to pay £225 per annum more than they pay in rates. I invite noble Lords to visit the people who will pay £200 more and quote the statistic about the top 10 per cent.
I cannot understand how this widespread discrepancy can be justified or put across to people. I fear that we shall lose the support of many people who have come over to the Government in the past two or three general elections. There may be young married or retired couples just above the social security net in receipt of relatively slender incomes. They may have recently bought a house—perhaps a council house—and will now find their local tax by way of a poll tax is a significantly higher proportion of their income.
What can or should the Government do which is more in keeping with the famous pledge, made by the Prime Minister, and which has been quoted this afternoon, in October 1974 when she was Shadow Environment Secretary, and the more recent reference made in the last general election manifesto to replace rates with a fairer community charge? My right honourable friend the Secretary of State in another place has repeatedly said that he is prepared to consider anything. Somehow nothing else but his scheme will work and everything else is fatally flawed which, at the moment, is a favourite ministerial expression. I thought that only four years ago the proposal of a poll tax set out in the White Paper was rejected by the Government because it was fatally flawed. The difficulty is that some people still believe that this poll tax is fatally flawed.
My noble friend Lord Chelwood said that it was up to the Government to decide on an option, and so it is. However, perhaps the Government need help. There are some people who advocate the transfer of part or all of the costs of education to central government on the grounds that education has become a national responsibility as has defence. The advantage is that that would lessen the impact of a community charge but it would weaken accountability. Nevertheless, it is an option.
In previous debates I ventured to suggest that a form of local income tax with appropriate safeguards may be the best way in which to proceed. Certainly the National Union of Ratepayers' Association of which I am president, is in favour of such a scheme. I have little doubt that eventually that will come 899 about and that it will be introduced by a Conservative government; just as it is a Conservative government which are at long last abolishing the rates and which deserve all credit for that.
Local income tax was advocated by the Layfield Committee as the only feasible source of income as an alternative to rates. Other countries operate such a scheme and have been known to survive. An increasing number of professional bodies are in favour of it, as are most local authority associations. The lack of accountability argument is wearing rather thin because surely there will be many more income tax payers once married women are separately assessed. Approximately only 75 per cent. of the public will be paying the community charge in full, allowing for rebates, and it is pretty doubtful that those people receiving rebates will be greatly aware of accountability. I believe that the figures for those people paying income tax a year ago were just below 60 per cent. Allowing for married women, I do not know what the figure will be, but I suspect that it will be approximately 70 per cent., which is much the same. It would be necessary for a local authority to levy only a single percentage rate of tax on net income. As a safeguard there will need to be a strict upper limit with a maximum amount payable by an individual perhaps relating to the approximate level at which the higher rate of tax begins to operate. In that way the better off in places such as Camden will not be unduly penalised.
Speaking entirely for myself, I am a great believer in politics being the art of the possible. Even though opinion polls and other indicators may point towards the public moving nearer some form of local income tax, the fact remains that at present the Government are most reluctant to move far that way. It is feared that such a policy will conflict with their overal fiscal strategy. I do not understand why because I believe that local income tax could be quite separate from national income tax. But there it is.
In the light of all the circumstances and of all the options open, and in the context of the legislation before us, I suggest that the Government may be wise to look again and at the least devise some form of banded community charge on the lines of the three fixed-payment proposals similar to the amendment so ably moved in another place by my honourable friend the Member for Hampshire East and which was so narrowly defeated. It has come to be called the "Mates amendment" and it was supported by almost 40 Conservative MPs of all strands of opinion in the party, including a number of Right of centre Members. I have always considered myself to be—slightly at any rate—Right of centre of the Conservative Party. There were many others who would have liked to support the amendment.
From the Government's point of view, it had a great advantage of keeping in the poll tax system (although at only half the standard rate) those above the social security net but who were not yet payers of income tax. I believe that its defects have been greatly exaggerated and as the mover of the amendment pointed out, the Government had conceded that such a tax could work and was practicable. It could be improved upon, finely tuned and made more 900 sophisticated if the political will were there. Above all, it would take the sting out of this legislation which, as it stands at present, levies the same rate for all, rich and poor, and simply does not fulfil the manifesto which promised fairer rates. The Government have several options and I fear that to do nothing could prove disastrous.
§ 8.1 p.m.
§ Earl Russell
My Lords, the task of ringing the House dinner bell seems to have fallen to me and I believe that there is a certain appropriateness about that because in these days when a Conservative Government use the word "revolution" with approval to describe their programme the mantle of Edmund Burke may well be said to have descended on this side of the House.
It also seems to have fallen to me to take my seat in this House in exciting times. Therefore, I should like to preface my remarks by saying something uncontroversial, because I should like to prove that I can. Should this Bill become law, I shall pay any charge that it may impose. I shall complete any forms involved to the best of my ability, though having listened with care to the noble Lord, Lord Swann, last week, I cannot say more than that. Any efforts that I shall make to remove this charge will be devoted solely to its repeal by the authority which imposed it. That, however uncontroversial in this House, is sadly necessary in the world outside. I believe that those words give me my title to oppose this Bill.
In offering this Bill I believe that the Government have perhaps confused two principles of taxation: one is the principle of progressing redistributive taxation associated, for example, with the name of Sir Stafford Cripps. That is a legitimate matter of party disagreement. People speaking from this side of the House may have strong views about what the Chancellor of the Exchequer has done in another place. However, it is an altogether different matter when we look at the basic principles of graduation of taxes, and to me that is not a party matter; that is a basic British principle of fair play.
When I first heard that this Government were contemplating a flat rate tax in place of rates I felt a shock as if I had gone to Lords—not to the House of Lords—to watch a test match and had seen a bowler throwing baseball pitches. I do not mean using the sort of questionable action which over the past 20 years we have learnt to associate with certain bowlers who I shall not abuse parliamentary privilege by naming; I mean baseball pitches. If I were an American opposing such a Bill in the United States, I would say that it was unconstitutional and, moreover, I should be quite right to do so. Speaking in this country, I cannot say more than that this proposal is not cricket.
Naturally as a historian, I have asked myself how far this sense of shock was justified; it seems to me that it is. I speak with care because I have a Question tabled for Written Answer asking on what occasions Parliament has approved a flat rate tax since 1265. That Question has been tabled for 13 days. Your Lordships may draw your own conclusions from the absence of an Answer.
901 It is possible that I may have overlooked something and that the numerous colleagues that I have consulted may also have overlooked something, but so far as I can see, the principle of graduation is not a recent principle but goes back behind the origins of Parliament. It goes back to the very beginning of direct taxation itself; it goes back behind the limit of legal memory, to the coronation of Richard I; back to the danegeld, whch is the first direct tax of which we have anything approaching a record.
So far as I am aware there are just two exceptions: the poll taxes imposed in rapid succession in 1378 and 1380. With your Lordships' leave I should like to quote from the volume on the 14th century of the Oxford History of England:in 1380, beyond a vague stipulation that the rich ought to help the poor, no provision was made for grading. …. The result was gross unfairness in the incidence of the tax. In villages where there was a resident man of means, his poorer neighbours were dependent on his generosity; in others, … the poorest labourer might find himself compelled to pay 2s. for himself and his wife. Most objectionable of all was the conduct of the collectors. A poll tax, being based on something in the nature of a census, necessitated inquiries into personal circumstances which could hardly fail to provoke resentment; and the officials were not delicate in their methods. The result was evasion on a large scale. If we were to take the poll tax returns as our evidence we should have to deduce a fall of one-third in the adult population between 1377 and 1381".There is perhaps some proof of the view that those who do not know history are compelled to repeat it. With the leave of the House, I should like to explain what is meant in this case by the officials not being delicate in their methods. Before the House calls me to order, I should like to say that I am quoting a monastic chronicler. The age exemption for children in practice worked on the principle that girls were exempt if they were virgin. A certain John Legge, Serjeant at Law, insisted on discovering this by physical examination conducted in public. When the peasants revolted the next year, Serjeant Legge was executed on Tower Hill. Your Lordships will now understand why I felt the need to preface my remarks by saying that should this Bill become law I will pay the tax.
I am not saying that a convention can never be broken. Someone who inherits his title to sit in your Lordships' House from the man who drafted the first Reform Bill could not say that. I am saying that if one breaks a convention one must, as the lawyers have it, "show cause". My strongest reservations come when I look at the poverty of the causes which the Government have shown. First, they say it is not a tax. I shall come back to that but the last major financial levy that was excused on those grounds by Ministers of the Crown was ship money; the precedent is not encouraging.
They then say that it only applies to 25 per cent. of the payment and they say that a certain number of people will receive a rebate. Both of those are the proverbial maid's baby excuse, it is a very little one. It is the excuse offered by those who know that their offspring is illegitimate.
They also tell us that it is to deal with profligate local authorities. I know about profligate local authorities; I am a resident of the London Borough of Brent. I am bound to obey Brent Council for the same reasons as I am bound to obey Her Majesty's 902 Government. There are times when one task seems as difficult as the other; there is also a natural remedy against the local authority.
Last Thursday there was a by-election in one of the safest Labour wards in Brent and my party won it. It seems that there is something important here: it is the right of a local authority to be profligate; as it is the right of the Government to be mean. We live in a plural society and the argument put forward recently by the noble and learned Lord the Lord Chancellor about delegating power to the people in practice becomes an argument for an assault on all the plural centres of power with which the Government have to do business.
I have asked myself which was the last government that threatened both the autonomy of local government and academic tenure at the same time. The answer I have come up with is the ruler whose departure we intend to celebrate by a Loyal Address later this summer.
The argument that this is not a tax is one with which I must grapple. Ministers describe it as a service charge, which is why they believe they are entitled to use the precedents of the vehicle excise duty and the TV licence. I hope noble Lords opposite will correct me if I have got it wrong because I have tried to understand. I believe the picture they have is of the electors of a particular borough contracting for a specific package of services with a specific price tag when they vote. It is a pretty picture and I can understand its attraction. The trouble is that it does not work. First and foremost, it is because the electors of Brent, unlike the council, are not a corporation. They cannot enter into a free market contract. Also, there is no direct relationship between the payment and the consumption of the service. This is not only the proverbial point made by the Hampstead alderman in the old days; "Do you mean to say our ratepayers are paying rates to provide public conveniences for people from other boroughs?" It is also the fact that not every local taxpayer consumes every service. One cannot have a contractual free market relationship until that is changed.
If the Government are really insisting on a service charge paid by the consumer they must make homelessness a charge on the homeless; chronic sickness a charge on the chronic sick and meals-on-wheels a charge on the old and, as I believe it has been suggested tonight, refuse collection in proportion to the volume of dustbins. Members of the Palace of Westminster will have to pay extra. That will not work. We have to say to noble Lords opposite,There are more things in heaven and earth, my LordsThan are dreamt of in your philosophy".On 30th April the noble and learned Lord, Lord Hailsham, said on television that all our politics are a matter of convention. No-one who has so recently enjoyed your Lordships' courtesy to maiden speakers can fail to be aware of the importance of convention. The question is, who is breaking convention? I think of the doctrine that used to be recognised in the divorce courts in the old days of the matrimonial offence, that of constructive desertion—behaviour such as to cause a spouse to desert. The legal locus classicus is a case where a woman petitioned for divorce for her husband's desertion and the court 903 upheld the husband's counter petition of constructive desertion because she kept 52 cats.
Is it a bigger breach of convention for this House, just once in a blue moon, to exercise its right or to break a political convention that all taxes are graduated which has been, so far as I know, inviolably accepted for the past 608 years? I leave the point for your Lordships' consideration.
§ 8.15 p.m.
§ Lord Rippon of Hexham
My Lords, I fear that the noble Earl, Lord Russell, is rather easily shocked. I do not know why he should be surprised at going to a cricket match these days. He could see someone throwing something, whether it is verbal abuse or a ball, probably at the umpire. I have a feeling that in this regard the Government are in the position of the umpire who, at the time of the appeal, cannot be popular both with the batsman and the bowler. I cannot conceive of any circumstances in which a measure involving the restructuring of local government finance could be received with wild enthusiasm. It will only be really popular among those who pay less. That is the test of fairness. The Government must be sure that more people pay less, and then it may be all right.
§ Lord McIntosh of Haringey
My Lords, perhaps the noble Lord will allow me to intervene. Does he believe that there is a single Member of this House who will pay more?
§ Lord Rippon of Hexham
My Lords, I have no idea; nor, I suspect, has the noble Lord. We do know that reform of the rating system has been the subject of discussion and dissension for more years than he or I can remember. It perhaps goes back to the report of the Royal Commission on the Poor Law in 1834. It found that the Poor Law was raising 14 shillings per head of the population and said that the nation looked on,in a kind of paralysis at the inordinate growth of moral abuses, of industrial disaster, and ruinous expenditure".That led to the Act of 1836, government grants and exemptions from which all the present problems flow.
I believe that the noble Lord and I can recall making speeches on local government financial reform in all kinds of places and on all sorts of occasions. I made one at the AMC conference at Torquay in 1948. I remember saying that the government should bear in mind the words of George Canning, that those who resist improvement because it is innovation will find themselves facing innovation which is not improvement. I used much the same speech and the same quotation in my maiden speech in 1955 in another place on the Rating and Valuation (Miscellaneous Provisions) Bill.
I can repeat that today, but with a difference. I believe that we have now reached the point when we have to bite the bullet. As many noble Lords have already indicated, the rating system might well have survived intact if we had been prepared to keep it in good order; if we had been prepared to have regular revaluations and if perhaps we had been willing to switch from rental to capital values a good time ago. 904 I am sure that the noble Lord, Lord Underhill, will respond to the reference which my noble friend Lord Jenkin of Roding made about the failure of successive Labour Governments ever to have a single revaluation. Perhaps he may redress the balance by indicating what proposals the Labour Party can bring forward.
I have not been uncritical of Government measures in the past, as the noble Lord, Lord McIntosh, indicated. I was fascinated by the description given by my noble friend Lord Jenkin of Roding of the discussions that went on in the Cabinet. What he said convinces me that I was not as wet, not as rebellious nor perhaps as wrong as was indicated at the time.
I have not been uncritical of government measures in the past, as the noble Lord, Lord McIntosh, did not have to make a U-turn but a simple change of direction. As the successor of Winston Churchill in his old constituency of Wanstead and Woodford, my noble friend may remember how the great man responded when somebody said he was inconsistent. "Not at all", he said, "my thoughts are a continuous and harmonious process". I am glad to say that, quite evidently, that process has been beneficial for my noble friend.
What we have done over the years, as he indicated in his admirable speech, is to clear the system to become increasingly discredited. To make matters worse, we have attempted to buttress it with an Exchequer grant system which, as he said, has become increasingly complex, erratic and incomprehensible as we have staggered, as he set out, from expedient to expedient with no clear philosophy and no sense of direction. Of course, having been involved in these matters myself, I accept my share of responsibility for what happened in my time. However, I recall saying that if we had fed into a computer all the information that had come into Whitehall and asked it what the rate support grant should be, the answer would have come back, "First sacrifice a goat".
I must declare an interest. It is not a pecuniary interest, except in the sense which the noble Lord, Lord McIntosh, has suggested, but an interest in that I am president of the Association of District Councils. I share the anxieties which it and noble Lords have expressed about the Bill. I also share the view that, whatever opinion we have of the doctrine of the mandate as defined by the noble and learned Lord, Lord Hailsham, we have a duty to try to ensure that a manifesto commitment is translated into law in the most workable and efficient way. The approach of the Association of District Councils, which has been a moderate one, is that we must work towards achieving a system that is workable, reasonably efficient and best serves the interests of local government within the Government's overall objectives.
There have been so many Green Papers and White Papers on local government finance that it is impossible to recall them all. However, I was interested in the reference of the noble Earl, Lord Caithness, in his opening remarks, to the White Paper on local government finance brought forward by the Labour Government in February 1966— Cmnd. 2923—which pointed out not only that rates 905 were regressive, albeit mitigated by the rebate system, but moreover that they secured no direct or adequate contribution from people who were not householders, particularly affluent young persons. So this problem has been recognised for some time. Indeed, since that 1966 White Paper almost every conceivable alternative means of raising local revenue has been considered with no consensus in favour of any of them.
Rates are regressive, but they are easy to collect and more difficult to evade. Consequently, my own first reaction to the concept of a community charge was that it would be about as popular as the window tax and just as easy to evade. Certainly the community charge is regressive, but so are many other taxes. It is not true to say that there are no other flat rate taxes. What about licence fees, vehicle excise duties, the tax on petrol and VAT? The community charge will be more costly to collect and easier to evade than rates but, as has been suggested, it can, like the rates burden, be mitigated by rebates and exemptions. The case for the community charge rests on one argument alone, and I think it is a strong one. It will make local councils accountable to more voters in a situation in which we have moved too far towards representation without taxation.
I listened with great interest to the speech of my noble friend Lord Ellenborough who raised many points of detail which will have to be considered in Committee. However, of one thing I am certain. It would be quite wrong to have a banded community charge. All the concerns that have been expressed about the cost of collection and the difficulties of administration would be redoubled if a banded rate were to be substituted for a flat rate. Here again the Association of District Councils has argued, I think correctly, that this would be unwise. A banded charge will cost more to administer because, operating as a crude form of local income tax but without its merits, it will be necessary to collect information on income. The process of determining an individual's liability to pay a rate could extend beyond the end of the year for which tax is due. Self-employed people sometimes take quite a time to negotiate with the Inland Revenue what their rate of tax should be. It would, as the Government have argued, also introduce pernicious tax traps, as individuals moved up from one band to another.
I listened with great interest to the excellent maiden speech of the noble Earl, Lord Lytton. Having been for a long time in favour of some measure of derating for industrial and commercial premises for the reason that we have been shifting the burden for too long to too great an extent from the voter to the non-voter, I still have grave doubts, as he has, about the concept of a uniform business rate as it now stands. Apart from the practical considerations, it will tend to separate business from involvement in local affairs. Similarly, local authorities would feel no direct accountability to their own business communities. I am inclined in any event to be suspicious of sources of revenue which depend upon national assessment, collection and distribution.
I follow the noble Lord, Lord McIntosh, in repeating also, as he invited me to do, my doubts about rate capping. In what we are proclaiming to be a major reform of local government finance, I do not 906 like the idea of continuing in any form what my noble friend Lord Jenkin of Roding admitted was the expedient of rate capping.
Many other practical matters, some of which have been raised this afternoon, are best considered in Committee. Whatever happens, I do not believe that the Bill will be the last word on the subject of local government finance. I doubt very much whether the community charge by itself will be a sufficient base for local government revenue. We shall still have the problem of local government being dependent on central government for its money if it has only local revenue to raise a quarter of expenditure. We may have to consider again combining it, as the Government themselves originally thought might be necessary, with some other source of local revenue, whether a property tax on a new valuation (perhaps on capital values) or, as has been suggested, by new sources of revenue from charges and so on.
What really concerns me, however—this is common in the discussions we have these days on local government—is that we still have no clear philosophy about the relationship between central and local government. I and many noble Lords on both sides of the House have always regarded directly elected local government as one of the twin pillars of our constitution. Those of the radical Right like myself, who have hitherto and very properly regarded Professor F. A. Hayek's great work The Road to Serfdom as the cornerstone of their political philosophy, should remember his declaration:Nowhere has democracy worked well without a great measure of local self-government".By that he meant responsible local self-government. He came from a Europe which understood that one found dictatorship ultimately, and perhaps even at the beginning, on the destruction of local and regional government.
Local government does not mean merely local administration. It means local responsibility for local administration—the right to decide locally upon the administration of the law in that locality. No one suggests that local autonomy can be absolute. There has to be guidance and assistance from central government. Indeed a partnership between central and local government is essential. However, it must be a real partnership, and not a relationship of master and servant, or a nominal consultation of the kind which many people in local government feel, rightly or wrongly, is all they have at present.
Therefore I say only this in conclusion. It is my firm belief that if, in the long run, the policies contained in the Bill are to have any chance of real success, then central government must learn anew to work with, not against, local government.
§ 8.30 p.m.
§ Baroness Fisher of Rednal
I think the debate which has taken place this afternoon and this evening has been most interesting; interesting primarily because we have had such a large contribution from ex-members of Her Majesty's Government, and the different points of view which have been expressed by them are proving most useful. They were both interesting and useful because in the main they were 907 part and parcel of the general type of local government finance as we knew it before the advent of the Bill. I think it will be most interesting to see when amendments are tabled in Committee how the discussions will develop at that stage.
All noble Lords who have spoken thus far from all sides of the House have based their main opposition to the poll tax on the fact that it is a flat-rate charge and therefore hits those in the lower-income bracket harder than those with higher incomes. The noble Lord, Lord Rippon, made the point that it is important to see that one does not hit the lower income bracket any harder.
I should like to give some figures from the Birmingham area. The Birmingham City Council has carried out a great deal of work regarding the collection figures and how the charge will affect individuals and householders. It has broken those figures down into parliamentary constituencies as well as wards. If one breaks down the figures in that way, one sees how the gainers are the people who are living in what we call the more desirable parts of the city and the losers in perhaps the not so desirable areas. Therefore there will be an effect on those who represent such people, whether they are Members of Parliament or local councillors, and on the party of which they are members.
In Sutton Coldfield—which many noble Lords will know is a very desirable place and which was brought into the borough of Birmingham much against its will—the number of households which are gainers will be the highest in all the Birmingham constituencies. The gains per household will average £221 and a few pence. Conversely, the biggest losers will be in Small Heath. Everyone knows the Small Heath constituency represented by my right honourable friend the former sports Minister. Households there will be the losers in the sum of £113. Again, if one looks at adults, as opposed to households, in terms of adults Sutton Coldfield will have gainers of £108 each as against £56.23 losers in Small Heath.
However, if one looks at wards in the city one observes two most interesting points. Sutton Four Oaks, which is held by the leader of the Tories in Birmingham, will have household gains of £348 per year. The leader of the Labour Party in Birmingham represents Sparkbrook. Households there will be the losers by £153 per year. Again, if one looks at adults in the same two wards, in Sutton Four Oaks they will receive £169 as the gainers and in Sparkbrook they will lose £75.
That example shows clearly the great differences which will arise in many parts of the country. However, it is interesting to recognise that those large areas such as Birmingham took note of the poll tax quite seriously in the recent elections. When parliamentarians talk about people not understanding the poll tax, I think it was quite evident from events of last week in those elections, in what are called the large cities, that that is not so.
I was most surprised in this afternoon's debate that noble Lords on this side of the House gave examples of losers. I was hoping that some noble Lords—although perhaps this will follow after me, as I am only just over the half-way line would show 908 examples of how they feel and whether they have a twinge of conscience in regard to the people that they employ. I am thinking here especially of directors. I think there must be many directors who sit in your Lordships' House. It may be that the director will pay the same amount as the junior clerk whom he employs—of course, it might not be a twinge of conscience in that perhaps he never sees the junior clerk.
I am also thinking that there may be some noble Lords who live in highly desirable places, which people sometimes visit to see their gardens or furnishings. Of course, that is all very nice. However, I ask this: do the benefits of the poll tax apply to those people? I should have liked to have heard some noble Lords say, "Well, you know I am very concerned because I have half a dozen tied cottages; I have the gamekeeper in one and the woodman in the other. Their cottages are tied and they live there because it is part and parcel of their employment. I think it is pretty awful. I shall have to pay that poll tax for them." That means to say that, if the workers are living in a tied cottage entirely free of charge, the employer will pay the poll tax not only for the man but also for the woman. Otherwise employers must increase the wages if the people they employ are not to be much worse off. I should have liked to hear certain noble Lords express the promptings of conscience on this aspect.
However, it may be that the employer will be able to put the community charge that he pays for his workers on his claim form for tax purposes as a business expense arising from the fact that he has to employ those people. Should that happen, of course, the expense will go on to the employee's tax form as a taxable perk. I do not know the answer to that point, but perhaps noble Lords will be able to assist me. Nevertheless there are people who are living in a tied cottage who must be seriously considered.
Last night when I was thinking what I would say in the debate today I wondered whether I had woken up from a dream when it came to my mind that perhaps local authorities would have to go around and collect the poll tax from homeless people. I am sorry that my noble friend Lord Stallard is not here at present because he knows "cardboard city" in London very well indeed. Is it proposed that the local authorities will knock on the outside of the cardboard box and ask people when they will start to pay the poll tax? If that is so, and they are included—we understand that they are, according to the Bill—will those people who are living in the "grace and favour" apartments pay poll tax? We know that there are many people who are privileged in that way, not only in the Palace of Westminster but also in historic buildings such as the one which was recently burnt down—I think it was Hampton Court. Will they have to pay the poll tax?—because if the cardboard box people have to, I am sure that your Lordships will agree that they should. I am talking about fairness, which is why I mentioned those two categories.
As a magistrate, I am interested in how the local authority will decide which people are living together as a man and wife when determining joint and several liabilities. It is easy to do that with a married man and his wife; it is much more difficult with what is called a common law man and wife. We often have cases 909 before the domestic court where it is not just one common law man and wife; there may be two men with a common law wife. I do not know how the local authority will work that out. I understand—I stand to be corrected—that the liability will cease on the day a couple separates, whether it is a common law or a married couple.
I can hardly think that on the day one's husband walks out, or the woman decides to walk out on him, one of them will pick up the telephone and say to the local authority, "I have left the property at 666 Barrier Road and you can forget about me paying any more there". That is the last thing people do when they are separating from each other. Most of them, especially the women, will be more interested in getting down to the social security office to find out how much they will have to live on once the husband has left them and in going to the local authority to ensure that they keep the house. Those will be their prime considerations. They will not be notifying someone that somebody has left the property.
We are also looking at unfair taxes. Other noble Lords have spoken about the tax on community care. It is a paradox for us to be charging carers in the community who are putting care in the community into operation. They are taking the people out of mental hospitals and preventing elderly people going into old people's homes. It is unfair—in the main it is women who are doing the caring—that they should have to pay a community charge when, if they allowed their elderly relatives to go into homes, they would not have to pay.
DHSS benefit levels are another concern to me. It seems unfair that the compensation level will be based on a national average. That means that if one lives in an area where the charge is higher than the national average one will not be fairly dealt with.
I turn to one of the main points that I wish to point out. Local authorities will be faced with considerable expense in collecting the poll tax. I understand that at present 43,000 rate bills are sent out in Birmingham each year. Under the poll tax, 1,020,000 bills will have to be sent out. Obviously the more bills sent out the more evasion there will be pro rata, and the more staff will have to be employed to deal with that 140 per cent. increase in bills. Birmingham has worked out that it will need an additional 350 staff. The cost of collection will more than double the present cost. I do not wish to repeat what other noble Lords have said. The poll tax is not about accountability; it is about a further cutting back of local authorities, of the services they provide and of their independence. I finish by saying:Hear all and then let justice hold the scales".
§ 8.45 p.m.
§ Lord Bruce-Gardyne
My Lords, I am afraid that I shall have to disappoint the noble Baroness because unfortunately I do not employ a gamekeeper and my garden is not as yet open to the public. I work hard on my lawn every weekend. When it has reached an acceptable level, I shall ensure that she is sent an invitation to the opening when it occurs, which might be some years hence.
910 I must confess that I suffer a little from what I believe the French call nostalgic de la boue. I have some nostalgic sadness about the passing of the rates. I sometimes thought that they were a rather over-maligned tax. However, I listened with great interest to the powerful speech of my noble friend Lord Jenkin of Roding. He demonstrated pretty conclusively the mess that we had got into with the rating system. The most important point is the one which the noble Baroness rather dismissed—the issue of accountability—and I do not agree with her over that.
As my noble friend Lord Mancroft in his splendid maiden speech said, paying bills concentrates the mind. If your Lordships look back at what has happened with public expenditure generally—I am talking about central government public expenditure—over the past 10 years, I submit that one of the reasons why we contrived to call a halt to its dangerous profligacy and irresponsible growth that marked the 1960s and the 1970s was the gradually dawning realisation in the other place, of which I was then a Member, that the technique of seeking to draw in votes through public expenditure by the transfer of resources from a small minority of probably captive Tory voters at the one end and spending it on the large majority of voters who might be persuaded by the benefits that they enjoyed from sharply rising public expenditure had run its course merely because the transfer no longer exists, and what we are perceived to be doing is trying to bribe the electorate with its own money.
That is true, has become increasingly true and has been perceived to be the case with central government. It has not been true in the case of local government for all the reasons which many of my noble friends and the noble Lord, Lord Wyatt, pointed out during the debate. In practice, in the case of local government, unlike central government, those who were receiving the services were not also receiving the bills. On accountability, I am sure that this change, with all the criticisms that have been made about it on both sides of your Lordships' House, must represent a move towards greater responsibility in local government.
I share some of the criticisms that have been voiced, notably again in admirable maiden speeches by the noble Earls, Lord Lytton and Lord Carnarvon, and several other noble Lords, including my noble friend Lord Rippon, about the business rate. One cannot but agree that to some extent it cuts across the concept of local accountability and goes in the opposite direction. On the other hand, it is reasonable to acknowledge, as several of my noble friends have pointed out, that the measure of accountability which local firms can achieve with local government representatives under the present system is, to put it mildly, somewhat limited. Nevertheless, I share some of those worries.
I should like to plunge briefly and with some trepidation into the vexed area of constitutionality. I have not only listened with great care to the comments of a number of noble Lords who have spoken on the role of your Lordship's House in these matters this afternoon, but I have read with great interest the contributions in the public prints by my 911 noble and learned friend Lord Hailsham, the noble Lord, Lord Jenkins, and my noble friend Lord St. John of Fawsley. On the question of your Lordships' involvement in issues of taxation, whether local or national, in the light of the somewhat conflicting advice we have been given by these great authorities I am tempted to recall the response of the idle divinity student who found in his exam that he was asked to list the major and the minor prophets respectively and simply wrote, "Who am I to differentiate between such great and good men?".
I must say that I feel rather like that on the issue of your Lordships' involvement in the taxation aspects of this Bill. However, I admit that I wonder about the manifesto commitment about which there has also been a fair amount of discussion today. My noble friend Lord Carr, I think, referred to it as just a manifesto commitment. I am rather inclined to agree with those who sometimes argue, as Charlotte Corday said of liberty, that great crimes are committed in the name of manifesto commitments. I accept that. I do not think there is anything necessarily beautiful or perfectionist about them. I agree with my noble friend Lord Rippon that it is part of the constitutional duty of this Chamber to put manifesto commitments into legislation effectively and efficiently. I apologise if I have not given his precise words, but I think that was the sense of what he was saying.
On the other hand, I wonder a bit about the suggestion of the noble Lord, Lord Jenkins, who advised that our attitude on this should be to ensure that your Lordships' House extended its influence in the medium term. I wonder about the stance of the main Opposition party in this connection. I can well understand that a number of noble Lords—for instance my noble friend Lord Chelwood and presumably the noble Lord, Lord Jenkins, himself would like to see the extension of your Lordships' influence in this context. However it seems to me that that might cause some minor qualms for the main Opposition party. I am glad to see that the noble Lord, Lord McIntosh, is nodding his head. I feel that while manifesto commitments are not by any means holy writ, if they are to be effectively demolished or changed out of recognition, it is a task which is more suitably performed by the elected House than by the non-elected House.
§ Lord McIntosh of Haringey
My Lords, nodding one's head is not an adequate response to the noble Lord. Certainly we on these Benches would not seek to extend in the medium term, or in any term, the powers of this Chamber against the powers of the legislative Chamber. But I do not think that he can go on from that to say that we feel that this particular manifesto commitment, and all the different ways in which it has been put before the electorate at different times, and with the qualifications about the ability to pay made on various occasions by the Conservative Party, deserves a great deal of respect from us.
§ Lord Bruce-Gardyne
My Lords, I shall study what the noble Lord has said with great interest in Hansard tomorrow. It seemed to me that it was a somewhat devious approach to the issue. This was, as he knows 912 very well, a clear and specific manifesto commitment in the last manifesto of the elected Government. It is not for me to say, but if the noble Lord and his friends decide to assist in substantially demolishing the enactment of that commitment, they may conceivably have installed a rod in pickle for their own backs if the moment should ever come at which they are in a position to take the reins of power themselves.
I should like to pass on very quickly to the gypsy's warning of the noble Lord, Lord Houghton, about the problems of the collection of the tax. I have a gut feeling that there may be some problems in that respect. I would only say to your Lordships that it is worth recalling that similar comments were made about VAT when it was first introduced, which on the whole has proved in practice to be an efficient revenue raiser. The difficulties of collection have been nothing like as great as were expected. Nevertheless, I would take some notice of the gypsy's warning.
In conclusion I should like to murmur a tiny word of encouragement or caution—I am not sure how one should put it—to my noble friends. My noble friend Lord Carr, rather to my surprise, having made some stringent comments about the scale of transfer of the burden of expenditure from local to central government, 70 per cent. to 80 per cent., then suggested that there might be a case in due course also for shifting the cost of services such as education to central government. It seems to me that that would be a most unwise way to proceed and is in total contradiction to what my noble friend was himself calling for.
I hope that whatever else we do during the passage of this legislation, my noble friends will resist any temptation to try (if I may put it very crudely) to buy off criticism and opposition by pledges to transfer services from local to central government or indeed to raise the proportion of finance which is coming in the future from the rate support grant. Either of these steps would lead to a far greater erosion of the principle on which this Bill is based—the principle of local accountability. Those are not ways in which we should proceed.
§ 8.58 p.m.
§ Lord Moran
My Lords, I should like briefly to make two points, one a point of detail and one more general. I start with the point of detail. In his notable speech the noble Viscount, Lord Watkinson, described the proposed arrangements as personal payment for personal services. The noble Lord, Lord Pym, called it a switch from a tax on property to a tax on people. The noble Lord, Lord Houghton of Sowerby, for his part said that rates were done for.
The truth is that some rates are going to survive. The Bill, in what has been described as a distortion of the reform, proposes the continuation of rates based on property in respect of country cottages, empty property and hereditaments. These hereditaments are listed in Clause 54 of the Bill. They are a rather curious collection—coal mines, the right of fowling, killing rabbits or fishing, when severed from the occupation of the land. It is about fishery rates that I want to say a brief word. These are often quite substantial and, unlike domestic rates, no services are received for them. They just go into the general pot.
913 We now have a unique opportunity which may never recur. The Government are bringing in legislation abolishing most rates and they will shortly bring in legislation which, among other things, will establish a National Rivers Authority which will be badly in need of proper funding and will be responsible for matters like the control of pollution, which are very important to fishery owners.
Can the Government not take this opportunity to arrange for fishery rates to be paid henceforward to the NRA by taking them out of Clause 54 and including them in the future Bill? It is the course of obvious common sense and such a move will be warmly welcomed, as I believe the noble Earl, Lord Caithness, may be aware, by all those interested in freshwater fisheries. I urge the Government to consider this seriously.
My second point is a more general one. I think that the Government are right about the unsatisfactory nature of rates. At first I was attracted by the idea of local income tax; it works elsewhere. But, given the politically extreme and bizarre policies of some of our local councils, I am persuaded that it probably would not work in this country without driving people out of high-spending areas and creating something of a refugee problem. So, not very happily, I accept the principle of a community charge.
However, if we are going to make a radical change, I think we ought to get it right once and for all. Every time any of us receives a rate demand, it brings it vividly home how much of local government expenditure is determined nationally. First and foremost this means education and I do not think that any noble Lord will need reminding of the fact that education policy is determined by the Government and Parliament. Coupled with that is teachers' pay and then there are the police, fire services and civil defence.
Would it not be better for matters decided nationally to be paid for nationally out of taxes paid to the Inland Revenue and for matters determined locally to be paid for locally, as was very tentatively suggested by two noble Lords, Lord Carr of Hadley and Lord Ellenborough? This would have two great advantages: first, that payment for these expensive items, especially education, would vary with the ability to pay; secondly, that the community charge would be far more modest and consequently far more acceptable. This might, I suggest, be the answer to the plea of the noble Lord, Lord Pym, that a way should be found to make the community charge more popular. It would fit in with the statement of the noble Earl, Lord Caithness, that "We want local elections to be about local issues". It would certainly, in my view, be much more logical and sensible. So I commend it to the Government.
§ 9.3 p.m.
§ Lord Beloff
My Lords, I wish to return to a point which has been raised by my noble friend Lord Bruce-Gardyne, which concerns the responsibilities of the House in relation to legislation of this kind. I have to take issue with the noble Lord, Lord Jenkins of Hillhead, but I told him that I proposed to do so. Although he is not in his place, I intend to make the remarks I have in mind.
914 I think that too much has been made of whether or not this is a manifesto commitment. I do not regard party manifestos as part of the constitution. We have had them for, I suppose, a little more than a century and a half, but in a Constitution which is as old as ours this is a relatively recent development. The important thing to me is that if the House, is to exercise its revising power—and it has no other serious reason for existence—it should do so within limits which are set by conventions of the Constitution which were until very recently, I think, generally accepted. The most important of these is that taxation, the imposing of charges and burdens upon the people, is a matter for their elected representatives, and for their elected representatives alone.
I think that the noble Lord, Lord Jenkins of Hillhead, somewhat exaggerated the extent to which Sir William Wade accepted the possibility of the House of Lords departing from that precedent. He pointed out the strength of the precedents—and I am not referring merely to the famous events of 1910–11—against the House of Lords participating in the imposition of taxes. I think that I could summarise the position of Sir William Wade in a limerick, and perhaps at this time in the evening a certain frivolity may be permitted in your Lordships' House:The Master of Gonville and CaiusIs frequently found on his knees.He prays that the peersWill pay heed to his fearsAnd not think they can do as they please.They cannot and should not.
My noble friend Lord Bruce-Gardyne has referred to the position of the official Opposition with its well-known views about the House of Lords. He has been answered, I think informatively, by the noble Lord, Lord McIntosh. However, I was very surprised at the pronouncements of the noble Lord, Lord Jenkins of Hillhead, because his party—whatever it comes to be called in the end—claims to be the current embodiment of the great tradition of Liberalism. Speaking as a former Gladstone Professor, perhaps I may refer him to the recorded views of Mr. Gladstone on this subject. Noble Lords will remember that in 1860 the House of Lords took upon itself the task of refusing the Government's Bill repealing the paper duties—the taxes on knowledge, as they were commonly called at the time. This was described by Mr. Gladstone as a:gigantic innovation on the Constitution".That is to say that as early as 1860 an attempt to frustrate the House of Commons in dealing with a matter of taxation was already regarded as a gigantic innovation. Mr. Gladstone described it as the House of Lords favouring:the establishment of a reviewing power over the House of Commons in its most vital function long declared exclusively its own and of a divided responsibility in fixing the revenue and charge of the country".His final entry on the subject ran:I see no way of ultimate hope or safety except in some plan of action founded on the principle that the Lords are not to tax the people without their consent".That principle, as I said, was already regarded as something in existence and I am surprised that anyone should advocate that we depart from it now.
915 Clearly this does not relate to the whole of the Bill before us. It was declared and enshrined in the Parliament Act that matters purely of a local concern and local taxation are not subject to these restrictions. But noble Lords opposite and I fear the population at large refer to this provision not as a local charge but as a poll tax. If they agree that it is a tax then I cannot see how they can believe that the House of Lords would be right to interfere with the level at any rate at which it is levied.
This I think means that we are perfectly right in looking, for instance, at the administrative problems which are raised. They are important but they can be exaggerated. The noble Lord, Lord McIntosh of Haringey, felt that the register might be used by burglars to discover the number of adult inhabitants in a house which they might wish to plunder. My acquaintance among burglars is not very great, but it seems to me that if they wished to find out how many adults there were in a particular house or property they could do so from studying the electoral register as it stands.
However, there are real problems in administration and it would be perfectly proper for your Lordships' House, with its wealth of experience particularly in local government, to examine those points. What I think should be excluded and, if we intervene, what I think would be rightly resented by the House of Commons would be anything comparable to what has come to be called the "Mates amendment" or anything like it. The effect of any amendment of that kind would inevitably be the socially desirable one of lessening the burden on the more hard-up, but it would have the effect of imposing higher rates of tax upon others than the House of Commons, in settling for a uniform tax, had agreed. Therefore I believe myself that anything of that order which affected the distribution of the burden would violate the constitutional conventions which it is our duty as well as the duty of another place to uphold.
The noble Lord, Lord Chelwood, who indicated that he is the great protagonist of this kind of thinking in your Lordships' House, referred to a remark of mine about the House getting too big for its boots. In his absence I have to say that I did not write that in the Daily Telegraph but in The Times. I was sacked from the Daily Telegraph by its new editor presumably on the ground that I am a Conservative.
However that may be, I think that there is a little danger here. I have been very impressed by the number of people who write in the public prints or write to us individually saying that it is our duty and our business to affect a major issue of policy in this way. I am sure that one effect of television which none of us thought of at the time has been to give people an exaggerated opinion of our constitutional powers and I think that it would be very bad for this House if we allowed that exaggerated opinion to be held by your Lordships as well.
§ 9.14 p.m.
§ Viscount Hanworth
My Lords, with this list of speakers it would be difficult to raise many matters 916 which have not already been covered. My primary object, therefore, in a brief speech is to reinforce some of the points which have already been made against the poll tax. The Government's faulty argument in favour of the new tax is that everyone should pay for what they get from the local authority; but of course they do not all get the same benefits. For example, education expenditure applies only to younger persons, and if one does not own a car much of the expenditure on roads is irrelevant.
The poll tax does not take into account the general principle of most taxation: that those who are better off should pay more. That is a principle which applies even to VAT, because the rich buy more expensive products and services. Most certainly, those in large and expensive houses should pay more, as they do at present.
For these reasons, I do not think the present property tax is as unsatisfactory, at least in principle, as the Government would like us to think. Somehow the case of the old lady living in a large house with a high rental is often the only argument which some government supporters seem able to produce. It is of course a fairly isolated case, and some old ladies living alone in smaller accommodation are going to be worse off with the poll tax. Most certainly, in these times of housing shortage hanging on to an unnecessarily large house is not the national interest or really in that of the incumbent.
Once again the Government have decided what to do without looking at the results in detail: nor have they looked on the undesirable side effects. Once again they are not frank and do not tell us, or at least they do not emphasise, the fact that a major reason for their policy is that it makes control of local government expenditure so very much easier. All this is cloaked by talk about "accountability" and the importance of the local population being involved in decision-making, presumably through their duly elected representatives. Largely, in practice this is simply eyewash.
Having said all this against the poll tax, I am in principle not wholly opposed to it, if it formed only part of how local government funds were raised. If your Lordships refer to Annex K on the penultimate page of the Government's Green Paper on this subject, Cmnd. 9714, you will see there is a list of how other countries provide local funds. By far the majority use two and sometimes three types of taxation, mostly based on income and profits and on property, taken together in varying proportions. None of the 23 countries listed apparently has a poll tax.
It is only too easy to give practical objections to the Government's proposals and their unfortunate side effects. I am sure others will do so and, for example, cover the expected rises in house prices consequent upon this legislation. I will therefore mention just one. We have the cost of collecting the tax, which will be double that of the present system. This would certainly pay for an up-to-date neutral assessment of many properties. Much more importantly, tax evasion will often result in splitting up families, giving us a roving element in the population. Greater bureaucracy and snooping will be inevitable consequences.
917 I would remark that although a change to local taxation was included in the Government's manifesto, the 60 per cent. of the electorate who did not bring them into power and probably even many who did, were not specifically in favour of a poll tax measure. They certainly did not give the Government a blank cheque to do as they liked.
It may be that we can bring forward an amendment, as was done in the other place. That seems to be a matter for debate. I would suggest that at this stage there are two practical alternatives. The first is to put forward an amendment to relate the poll tax to a level of income tax, as was proposed in the other place. That has some obvious objections, but if it were agreed in principle the Government could propose some other measure more acceptable to themselves on the same lines. A second alternative would be to keep an element of the existing property tax. The additional cost of having two methods for obtaining local funds would, in my view, be acceptable provided that it gave a fairer system. As I have said, other countries do just that.
The Government's Green Paper is a very well written document, but it bases its analysis and conclusions on principles which in practical terms do not have the weight ascribed to them. Once again I see a spectre of a divided nation with the hates and envies it produces. This Government have done nothing to bring the nation together. In that respect this legislation is divisive even if it has some merits.
§ 9.20 p.m.
§ Viscount Massereene and Ferrard
My Lords, I do not agree with the noble Lord who has just sat down. I support the Bill.
One or two noble Lords have mentioned the saying that came from America—"No taxation without representation". In relation to local government we shall now have representation and taxation. I am all for that, provided the ability to pay, and how that is decided, is quite fair. I think that everyone will agree that the present system of rating—which we have had I suppose for almost all my life, or a large part of it—is very unfair, especially as regards domestic rating.
I do not know why everybody calls this a poll tax. It is a community charge, and I think that it ought to be so called. The poll tax takes us back many hundreds of years— to the 14th century. We do not want to go back as far as that. In my opinion the proposed community charge will be no hardship. We want to avoid hardship, and it will be no hardship if we can find the correct method of deciding whether certain people have the ability to pay.
The gross amount paid out last year by local government was £45,000 million. That is a very big sum. So far as I remember, before the war the whole Budget was no more than that. That money was spent on providing services for 35 million adult electors. Of those 35 million electors there were 20 million who did not pay anything towards the services. To be accurate, there were 3 million of that number who paid but then received a refund, so the actual number is 20 million electors who did not pay towards those services.
918 As one or two noble Lords have also mentioned, all the Government are trying to do is to see that the community charge is a personal payment for local services. I feel that once the electors have this extra responsibility they will take more interest in local government and in electing their councillors. It is not that I want to decry the efforts of any councillors in local government, but the electorate should be very careful about whom they elect. As we all know, the turnout at local elections is in general extremely poor compared with that for general elections. I believe that it has never been higher than 40 or 42 per cent., which is not very cheering news for democracy.
I hope that my remarks will not annoy any noble Lord on the opposite Bench but I should like to consider those 20 million people who pay nothing towards the wonderful local services that they receive. As regards the issue of ability to pay, I understand that there are now over 30 million private cars in use in Great Britain. How many of those 20 million people own a car, I wonder? Surely people who run a car—and use it fairly regularly, as otherwise there would not be much point in owning it—have the ability to pay the community charge.
One difficulty is that one cannot yet know how much the community charge will be. Obviously, in different areas it will vary just as rates do at present. In some areas it may be that the charge will not come to more than £3 or £4 per week, which is a little less than the cost of a couple of gallons of petrol per week. I imagine that most people can afford such a sum. I realise that this may not be a new line of discussion and I do not wish to repeat the arguments of other noble Lords.
The variation that occurs over different areas applies to our present rating system. There are some areas in which the average householder pays £400 a year but perhaps receives services to the value of £650 a year, while in another area an average rate bill of £130 may bring with it local services much greater in value. The whole system seems unfair. It will of course take time, but I believe that the community charge will be fairer to all the population provided that an ability to pay is taken into consideration and approved. It may be difficult.
The collection of the community charge may also prove difficult. The Inland Revenue has always had its own way about the collection of revenue, which has been made very easy since in many cases, if not in every case, much of the work is done by employers. The employer deducts his employees' tax liabilities and works out how much is due and then hands it over to the Inland Revenue. That can mean a great expense for an employer if he has only a few people in his workforce. I should have thought that if someone is able to exercise his right to vote responsibly, he would be responsible enough to be able to deliver his tax to the Inland Revenue. The Inland Revenue on the other hand does not agree.
The cost of collection will be very great. That is certainly a drawback. Although I have lived in cities and towns a great deal, I come from a rural background. In rural areas, some shopkeepers and such people may be badly hit. Not only will they have to 919 pay the community charge but also the business charge. Something will have to be done about that. It will take three or four years for the position to settle. However, I support the Government because the domestic rating system that we have has been a nightmare.
People do not understand the situation. The media have been bad about this: they have frightened 920 people. The national taxpayer—the Government—will pay for 50 per cent. of the expenses of local authorities; the community charge will pay for only 25 per cent. There will be various rebates. The remaining quarter will come from businesses. I consider that the provisions will be a success when people become used to them. I apologise for having spoken at some length. However, I support the Government.
§ 9.32 p.m.
§ Lord Hayter
My Lords, I find myself in a curious position. Apart from a reference by the noble Baroness, Lady Fisher of Rednal, I seem to be the only person to say a few words on this Bill in relation to the voluntary organisations. Many noble Lords will have much experience of the valuable work performed by the non-statutory and non-profit-making bodies. There are over half a million such organisations in Britain today. Over 150,000 of them are registered charities. Over half the population performs some kind of voluntary work over the year. From Age Concern to the World Wildlife Fund important work is done every day. However, in spite of the range and support for such work, this Bill does little to take account of these activities.
In the year that the national representative body for voluntary organisations, the National Council for Voluntary Organisations, celebrates its 60th birthday, many of the provisions in this Bill threaten its work. We shall discuss these in more detail at later stages of the Bill, but I feel it worth while to put on record some of the major concerns at this stage. They fall into two broad categories: concerns for the clients of voluntary organisations; and concerns for the future work of the voluntary organisations. The link throughout is the reliance of the voluntary organisations, the charities and the people with whom they work, on the funding, structure and resources of local government. We all know that from past experience.
Let me, first, address the issue that caused such a stir in the other place and to which many noble Lords have referred today: the failure of the community charge to take account of the ability to pay above the rebate level; and the inadequate nature of the compensation element for those on income support. It has one obvious implication for voluntary organisations. The work of the advice centres is likely to be very much increased by any further strain placed on family finances. The advice centres must be supported by the Government.
Disabled people do not want exemption from community life, but MENCAP, RADAR and the Spastics Society frequently point out that disabled people are disproportionately concentrated at the lower end of the income scale. In this light the burden of a flat rate charge will fall disproportionately on the disabled. The remedy lies in the provision of protection for them, not by virtue of their disability, but as a consequence of their financial circumstances. The extension of the rebate to allow for a full 100 per cent. rebate of the community charge would allow the poorest disabled people to emerge unscathed from the introduction of this new system.
A further group with whom voluntary organisations and charities work is the homeless, living rough in parks or under bridges. The Bill places a duty on local authorities to seek them out and exact community charges from them. Your Lordships will appreciate the prospect of squads of local authority employees demanding payments in the dead of night from residents of park benches. It is quite impractical, not to say faintly ludicrous: which is a polite way of saying that it is damn silly.
922 My concern though is not primarily for the impracticability of the scheme, but rather with the effect on individual homeless people. Very few, if any, of them will be in a position to pay any bills at all. I hope that the Government will not rely on disobedience of the law or lack of enforcement to protect the homeless from community charge bills, but instead will come forward with their own amendment to correct this anomalous situation.
I should now like to alert your Lordships to some rather more direct effects of the proposals as they stand on the voluntary organisations and charities. Let me first shed light on the position of volunteers, with whom many of your Lordships work through links with various charities. These volunteers work in what look to me to be two definable situations: either on an individual basis with, for instance, a disabled person, helping them to live a full life in the community, or in a residence with other volunteers where groups of children, elderly or disabled people come for short periods of respite care. These volunteers are generally young people keen to perform some form of community service. They do not have access to social security benefits, but are often paid a little pocket money, say, £12 or £16 a week. Under the community charge system they will face bills for the full local charge, which they will obviously be unable to pay. It will therefore fall on the charities and voluntary organisations which organise the scheme to pay those bills. A noble Lord who is not here tonight was telling me that it will cost a comparatively small trust with which he is concerned an extra £6,000 a year. Such an imposition is surely not the intention of the Bill. I hope that the Government will bring forward amendments to correct the error.
A second worry concerns the operation of the collective community charge as it applies to landlords such as the Salvation Army, providing temporary shelter for homeless people on a short-term basis. The Bill quite rightly accepts that it will not be feasible to charge a personal community charge to residents of such hostels, moving as they do on a regular, say, weekly basis. Unfortunately the system proposed in its place is not much less onerous and complicated because charities and voluntary organisations are bearing the brunt of these difficulties. Groups running the hostels will be faced with a choice of demanding payment from their residents, being ready to refuse entry should payment not be forthcoming, or paying the individual charges themselves and thereby directing valuable resources away from service provision.
The collective charge was devised to spare local authorities the administrative nightmare of collecting individual charges from short-stay residents. However in sparing local authorities the Government have substituted a moral and financial nightmare on the hardpressed voluntary organisations and charities. This is surely not a fair trade off.
The third issue of major concern to the whole charitable world concerns the rate bills which charities pay on offices, more particularly on high street shops. Although the Government promised to continue current arrangements whereby rate relief of 50 per cent. is granted on a mandatory basis with a further 50 per cent. granted at the discretion of the 923 local authority, the effect of rates revaluation will be to increase dramatically the absolute costs faced by charities. As an indication of the difficulties many organisations may face, I hear that a sample of charity shops run by Help the Aged indicates that absolute-cost increases of 100 per cent. and very much higher can be expected. In those circumstances it would not be an exaggeration to talk of charity shops being driven off our high streets unless suitable changes are made to the legislation. In case some noble Lords are not familiar with such charities, I should like to point out that the charity shop is one of the main forms of obtaining money.
I had intended to apologise to the House for covering such a large variety of concerns but I do not believe that I should. However, I consider that the breadth of coverage of outstanding concerns indicates the failure of the Bill to recognise that the charitable and voluntary sector world is dependent on the decisions which your Lordships will make in respect of the Bill. In almost every area, including charitable rate relief, where although the Government have promised an amendment none has been forthcoming, it appears that the difficulties posed for voluntary organisations and their clients may have been overlooked. That is a charitable way of saying so. I hope that by addressing some of the issues—and there are others that I have not mentioned—I have jogged the Government's collective memory. Without some response in the form of amendments tabled at later stages I fear that the Bill will place unwelcome burdens on the most disadvantaged in society and, at the same time, hinder a burgeoning and important sphere of local initiative and activity.
As regards the people, I ask the Government to think of the many thousands of volunteers and recipients of help from charities and voluntary organisations. Dare I point out that almost all are voters? They do not seek favouritism; they seek fairness.
As regards the voluntary organisations, the same is true. The Government have quite rightly extolled the virtues of private philanthropy and private charity, but if they showed an equal amount of public philanthropy and public charity they would gain enormously in general respect and esteem.
§ 9.43 p.m.
§ Lord Sandford
My Lords, I have been involved in these issues twice in my Parliamentary career: first, between 1970 and 1973 as a Minister in the Department of the Environment, and second from 1980 to 1986 as President of the ADC, before I was succeeded there by my noble friend Lord Rippon. I do not wish to introduce any fresh subjects at this late stage. I should just like to stress a few points that have already been made.
In 1970 the reform of local government finance and indeed of local government as a whole was already badly overdue. That point was first mentioned in the debate by the noble Earl, Lord Lytton. Nothing could be done about finance at that time because, having inherited the Redcliff-Maud Report, we were engaged in reforming the structure and functions of 924 local government. However, in 1974 it was possible to take action. As Shadow spokesman for the Environment at that time, my right honourable friend the Prime Minister committed my party to the reform of the domestic rates. The Labour Party, which was then in office, appointed the Layfield Committee.
We all listened to what was said by the noble Lords, Lord McIntosh and Lord Jenkins of Hillhead, who, as Home Secretary at that time, was a member of the Labour Cabinet, to give us an account of why the Labour Party, having appointed the Layfield Committee then did nothing further about reform. Labour had three more years in office. Perhaps the noble Lord, Lord Underhill, will enlighten the House about that when he winds up the debate. So far as I can recall, the Secretary of State, Mr. Crosland, made a famous speech about "the party being over", but I do not recall what he did to stop it going on. Anyway, I congratulate Her Majesty's Government on having at last grasped the nettle of reform, albeit 14 years after the commitment to do so was first entered into.
I believe that the failure to grasp this nettle until now has been the source of almost all of the ills which have beset local government. I mention three of them. The lack of accountability, which has been fully expounded by my noble friend Lord Jenkin of Roding, has opened local government to the most dreadful abuses by extremists such as the militant tendency but more serious and pervasive has been the general apathy, evidenced at local government elections, which also results from that lack of accountability.
The failure has also led to the growing interference by central government in local government affairs, again fully expounded by my noble friend earlier. I recall criticising at the time in your Lordships' House one piece of legislation after another and criticising it to the point of rebellion, not that those pieces of legislation were not necessary but because in my view it was so much more important to come to terms with the need to reform local government finance.
The worst effect of the failure to reform is that mentioned by the noble Earl, Lord Carnarvon, in his maiden speech; that is, the increasing difficulty of recruiting and retaining good men as councillors in local government while this flawed financial system continues. I look forward more than anything else to seeing a change in that sphere.
We have heard much about fairness and unfairness and far too much of it as though the present system had something to commend it on the score of fairness. The present system is grossly unfair and this system is far better. It is impossible to devise any system of charge or taxation which is entirely fair but one in which 9 million people are cushioned so that the least well off have only to contribute 20 per cent. of one-quarter, that is to say, one-twentieth, of the total cost of the services provided for them by their local council cannot be too bad.
Finally, there is the question of alternatives. The White Paper entitled Paying for Local Government was published some two years ago. It was entirely possible then, and had been entirely possible for many years before that, for any of the parties opposite, any of the local government associations to 925 come up with their proposals and for CIPFA—the Chartered Institute of Public Finance and Accountancy—to come up with its proposals for reform. Not one of those has produced, sustained and developed any alternative to what is before us.
I am very glad to support this legislation wholeheartedly. I believe, as does the noble Lord, Lord Wyatt, that in 10 or possibly even five years' time, we shall be asking ourselves how on earth we could have gone on as long as we did with such a bad system, and what on earth all the fuss was about when we came to change it.
§ 9.48 p.m.
§ Lord Hatch of Lusby
My Lords, a great deal has been heard in the House this afternoon about the gross overspending of local councils run by the Labour Party. I wonder whether your Lordships realise that the record increase in expenditure by an inner London education authority took place between 1967 and 1970. Among the members of that authority were Jeffrey Archer, Christopher Chataway, John. Selwyn Gummer, Timothy Raison, Lord Howe and so on. No prizes are offered for guessing who was in charge of that authority during those years of record increased expenditure.
I wish to spend all the time I have at Second Reading on the principle that lies behind the Bill. We have heard again that there is a mandate for this Government that gives validity to the Bill; that they have a mandate because the Bill was forecast in the Conservative Party manifesto at the election last year. These are the relevant words from the manifesto:To abolish the unfair domestic rating system and replace it with a fairer community charge".What is this Government's conception of what is fair? I take a random selection of the dictionary's definition of the word. We can use the words "just", "equitable", "equal" and "even-handed". Do the Government consider it to be fair to charge a person earning £100 a week the same as a person earning £1,000 a week? If so, I suggest that that is nothing less than semantic sophistry. To any ordinary person the word "fair" means fair according to one's means.
The noble Lord, Lord Sandford, said a moment ago that no alternatives have been offered. It is not our responsibility as an Opposition to offer alternatives. In this debate it is our responsibility to ask whether the Bill that the Government are putting forward is fair or unfair. However, I suggest to the noble Lord that members of his party in another place put forward an alternative which they as Conservatives considered to be fair. That alternative was in very sharp contrast to the principles that lie at the heart of this Bill.
Secondly, the manifesto refers to a community charge and not a poll tax. Let us take the words of the Government at their face value and argue on those grounds. This is to be a community charge and it is to put the services offered by local authorities into the market place. The charge is not going to be a fair charge but a charge as it is understood by the market place. For one moment I should like to examine what in practice this means. I refer your Lordships to an important study made in relation to this Bill at Bristol University by the School for Advanced Urban Studies, in this case led by Glen Bramley and Julian 926 Le Grand. They carried out a survey for the Cheshire County Council and these are some of their findings.
The Cheshire County Council spends £40 million per year on sixth form and further education and that is the largest single item in its budget. On an examination of whose children attend sixth form and further education classes it is seen that the professional and managerial households gain three-and-a-half times as much benefit as the households of semi-skilled or unskilled manual workers. Is that the kind of fair charge for services that will lead to an equitable society? Is that fair? Does it come within the Government's definition of fairness?
The second item in the budget of Cheshire County Council is roads. Twenty-nine million pounds a year is spent on roads. But those in the top social class use their cars on the roads three times as much as those in the bottom social class. Twenty-nine million pounds is spent on roads for the use of those who own cars. How much is spent on subsidising public transport and the bus system? The answer is £6 million, compared with £29 million.
The report goes on to refer to the use of libraries, museums and country parks. All of those are used many more times by households of the professional and managerial classes than by the manual workers. In total the researchers estimate that the top social group receives nearly twice as much as the bottom social group even when the benefits claimed by the lower social group are taken into account. At present—perhaps it is a coincidence—the rating system in Cheshire roughly represents this different use of the amenities provided by the county council.
I am not defending the rating system, but at the moment it roughly reflects the payment for those community services. However, when the community charge replaces the rates there will be a gross distortion in the payment for services. This is not surprising. A couple of weeks ago during the Second Reading debate on the Education Reform Bill I said that that Bill represented one element in a coordinated campaign designed to alter the cultural base of British society. This is another element. In each case, whether it is the Education Reform Bill, this year's Budget, the changes in social security or the so-called community charge, the basic principle is that the poor are now subsidising the rich. Each Bill increases the contribution of the poor towards the rich. What is more, because most of those with small incomes are either young or old, it is also the case that the community charge will bear most heavily on the young and the old who will subsidise those who are wealthy and middle-aged. Is that the way to create one nation? I suggest that it is divisive, unjust and is destroying the fabric of our society.
§ Viscount Massereene and Ferrard
My Lords, before the noble Lord sits down I must point out to him that the top 10 per cent. of the income bracket pay 16 times more towards the social services than the bottom 10 per cent. Therefore what he is saying, with all due respect, is, I am afraid, nonsense.
§ Lord Hatch of Lusby
My Lords, if the noble Viscount will look again at the figures, he will see that during the lifetime of this Government the gap between the top 10 per cent. and the bottom 10 per cent. of the population has widened considerably.
§ 10 p.m.
§ Baroness Carnegy of Lour
My Lords, the noble Lord, Lord Hatch, has made a speech which is consistent with the points of view which he has so often expressed in this House. We have listened to him with great interest but I think perhaps he has forgotten that local government will not be financed solely through the community charge: 50 per cent. of it will be paid for by the taxpayer and a further 25 per cent. through the business rate. I think that slightly alters the balance of the argument that he put forward.
I should like to remind your Lordships that last year we spent many hours in this House considering the Scottish equivalent of this Bill. We improved that legislation in many ways. We looked especially carefully at the community charge and I must say to the noble Lord, Lord Hatch, that we looked most carefully at at least one alternative that was proposed at the time. Nevertheless, in the end we agreed with another place that the best and fairest way was indeed the imposition of the community charge. That decision is now the law of the land; the register is being compiled and the Act is in the process of being implemented.
At the time of the passage of the Scottish Bill the position was unsatisfactory, in that the new social security arrangements had not been formulated. Therefore the Government could not tell us precisely how the rebates would operate or what people on lower incomes would in fact be expected to pay. Incidentally, I should say to the right reverend Prelate the Bishop of Gloucester that I suspect that that was the position when the General Synod of the Church of England, of which he spoke, passed its motion roundly condemning the whole package. Of course it had not seen the present figures either. Members could not, and did not, know what would actually be the effect of the Bill on individual people. As regards that aspect of the Bill, the Synod was also voting in the dark. Since that time matters have been greatly clarified. I am even more convinced today than I was a year ago that the Bill's proposals, taken as a whole, will indeed achieve electoral accountability and, at the same time, be closely linked with the ability to pay at all levels of income.
I believe the gipsy's warning is quite right: the community charge will be comparatively expensive and clumsy to collect. It will take a few years for people to become accustomed to this new social obligation. Indeed, few people who have previously paid nothing will welcome the obligation to pay something and misleading figures are at present alarming such people about what they will in fact have to pay. However, once the system is under way I believe that people will accept the package as a fair and sensible one and that the cost of collection will prove to be well worth the time, trouble and money expended.
If what the people in Scotland, or at any rate in my part of Scotland, are saying is anything to go by—we have just had our district council elections so the public's reaction to this and other issues is known—it appears that much of the anxiety about the community charge arises from considerable misunderstanding of how it will operate, plus 928 misrepresentation of just what individuals will have to pay and how they will pay it. For example, council tenants currently pay rent and rates together. Many of them are under the impression that they will have to go on paying all that with the community charge on top. Of course their rates will disappear, but that is not properly appreciated.
Likewise, people are told that almost everyone will have to pay at least 20 per cent. of the community charge, even the poorest whose only income is income support. What is not made clear—I do not believe that the noble Lord, Lord McIntosh, made it clear either—is that people on the lowest incomes will receive 20 per cent. of the average charge added to their benefit. They will be able to contribute like everyone else and be no worse off.
In Committee we shall need to ascertain whether the grants which are students' sole income will be treated in the same way. I am anxious to hear what the Government have to tell us about that matter. Despite the fears that some people have expressed, my experience, borne out on the doorstep at election time, is that many parents with two or three children living at home and working, or even living at home and unemployed, are not unsympathetic to the idea of young people having to pay the charge. Young people themselves are also beginning to see the point. A young man who lives at home near me and works for a local builder was discussing the community charge the other day. He asked me what it would be paid for. I said that among other things it would pay for the roads. "You mean the people who repair the roads", quoth he. "I'll fairly grudge £200 if they carry on like those lads up the hill this morning. Did you see them—two shovelling and two watching?". He was seeing the point.
It is interesting to note that the people who are expressing the most worry around where we live are those who are better off. I believe that my noble friend Lord Chelwood reflected that point in his speech. To their great credit, they feel that they have an obligation to seek a system which reflects ability to pay. Once they see how the various aspect of the Bill come together as a whole, they are very much happier. When they see that 9 million people will have their community charge taken down by rebate from 100 per cent. to nothing, according to income; when they see that 19 million people will be paying the full charge plus, according to their tax level, part of the 50 per cent. support grant which will go to local authorities from central Government; and when they see that in addition if they are shareholders, small business owners or people whose salaries are related to profit, they will be paying their share of the 25 per cent. of local government spending through the business rate, the better off ask, "Why has no one explained that before?"
Alas, many people, for whatever reason, fail to clarify those points. Perhaps my noble friend Lord Pym was suggesting that the Government are not explaining properly.
Certainly in our area the registration officer, who is required to ask someone in each household five simple questions, has sent out a complicated and ambiguous form without any attempt at clarity, and with the kind of notes that even the Inland Revenue 929 has discarded. It certainly confounded me. I could not even take it to bits and put together the envelope in which one returns it, which is part of the form. I can only suppose that it is confusing others.
Despite lack of information, confusing information and misinformation, I believe that the community charge will be accepted. It will work providing your Lordships do not weaken the accountability element too much. There are plenty of details of the Bill that need to be looked at, but I believe that the broad strategy is right and I support it.
§ Lord Hatch of Lusby
Before the noble Baroness sits down, she has given one or two anecdotes suggesting that the people in her area support the community charge as it is about to be applied to Scotland. Would the noble Baroness not agree that the disaster which beset the Conservative Party in the local elections last week in Scotland was some reflection of the opinion which Scottish people have of the community charge?
§ Baroness Carnegy of Lour
It is very difficult to tell. It was not a disaster for the Conservative Party. The vote went up slightly. The great increase was in the vote of the Scottish National Party, and that has to do with the very sort of talk which I have just been describing. There is no question about that.
§ 10.13 p.m.
§ Lord Monson
My Lords, I realise that I am in a minority in this Chamber tonight, but to my mind it is the greatest of pities that the Government were not prepared to wait and see whether the extensive curbs which they have already and rightly imposed upon local government profligacy, where it exists, actually do the trick, before hastening to abolish the rating system and substituting the community charge in its place.
As the noted political commentator and former adviser at No. 10, Mr. Ferdinand Mount, wrote 17 days ago,For every virtue the community charge can claim, there is a matching defect".One important defect is that it will be extremely expensive to collect, as even the most fervent apologists for the community charge readily concede, and as the noble Baroness who has just resumed her seat has pointed out. Not only will it be excessively expensive to collect, but there will be massive evasions, as I think the noble Lord, Lord Pym, suggested. There will be evasion not least in those London boroughs which have a large shifting transient population and where expensive properties are bought by shadowy individuals from overseas as bolt-holes and are then kept empty for most of the year.
The most criticised feature of this tax is its non-progressive nature. There is nothing intrinsically wrong with the flat rate system of funding local government, provided that—and this is the important point—the personal tax system taken as a whole incorporates a reasonable degree of progression. By the tax system as a whole I mean income tax, rates, national insurance contributions, 930 VAT, excise duties, tax on petrol, capital gains tax, inheritance tax, and so on.
Unfortunately this Bill is being debated at a time when the tax system taken as a whole is probably less progressive than it has been for 70 years or more. If nobody paid more than 5 per cent. or 10 per cent. of their income overall in direct plus indirect taxes, this absence of progression in local government funding would not matter. However, alas, nowadays almost everybody pays a much higher proportion than that.
In order to illustrate what I mean about the current minimal degree of progression, perhaps I may point out that a man or woman earning £105 a week pays income tax-cum-national insurance at a marginal rate of 34 per cent. A man earning no less than 249 times as much, in other words £26,135 per week, pays tax at a marginal rate of just 40 per cent. The £26,135 a week equates to £1,359,000 per year, which happens to be what the chairman of the Burton Group earned in the year to 29th August 1987, and this excludes his investment income.
Given his low marginal tax rate since 5th April this year, many people who are not in any way vindictive or envious will think it not unreasonable that he should pay a higher community charge than someone on average earnings or below: unless the average charge is pitched at such a level that it costs about the same as an annual road fund licence, in which case I believe that the absence of progression would be acceptable. This would incidentally meet the condition made by the noble Lord, Lord Houghton of Sowerby.
There are, I suspect, three ways in which the modestly paid can be protected from a sharp increase in their annual fiscal burden as a result of the introduction of this tax. By "modestly paid" I mean those earning below the national average but above the level where they would be entitled to a rebate. Let me say at once that I fully endorse the proposal that virtually everybody should pay at least 20 per cent., while pointing out to the noble Earl, Lord Caithness, that since 1986 the 20 per cent. minimum is already provided for under the existing rating system.
The first way of protecting the modestly paid is by some more subtle and finely tuned variation of what we all know as the "Mates amendment". The snag here would seem to be that it would surely make the tax even more expensive to collect than it is already—I think that is the point made by the noble Lord, Lord Rippon—to say nothing of making cheating more likely.
The second possibility is by introducing some proposal on the lines of that made by the noble Lord, Lord Carr of Hadley, which, if I understood him correctly, entailed raising the standard rate of poll tax but granting wider and more extensive rebates to those on below average pay.
The third way is that proposed by the honourable Member for Kensington, Sir Brandon Rhys Williams, who, as it happens, used to be my MP many years ago, before the boundary changes. This way would involve transferring education, the police, the fire services and civil defence to central government which, for a number of reasons which I have no time to go into now, is an extremely logical 931 thing to do. I am glad that my noble friend Lord Moran seemed to support this idea.
How could such a transfer be paid for? Obviously some compensating adjustment would have to be made elsewhere in the taxation system. Writing in The Times earlier this year, the distinguished economist, Professor Sir Alan Peacock, who is, let it be noted, neither a Socialist nor even Left of centre, suggested the reintroduction of Schedule A tax. Undoubtedly there would be a certain logic in this, not only because property ownership has become so profitable in recent years, but because much local government expenditure relates to property rather than to individuals. I think that the noble Lord, Lord Jenkin of Roding, asserted that most services are people-related rather than property-related, if I remember what he said correctly. That is largely so, but not entirely. For instance, the large five or six-bedroomed house lived in by the proverbial old lady on her own, to which the noble Lord, Lord Bellwin, referred, is just as likely to catch fire or be burgled, and perhaps more so, than a house of similar size lived in by four or five adults.
However, I think we must concede that Schedule A is politically a non-starter, although I thought I detected a hint from the noble Lord, Lord Rippon, that he was not entirely averse to some form of tax on property, even if not in the form of Schedule A. But before we leave the question of property taxes and subsidies let us return again to the chairman of the Burton group, whom I have absolutely no wish to pillory—apart from anything else I have a number of shares in his company! However, his financial situation serves as a very good illustration. One has no idea whether or not his house is mortgaged, but if it is he, like all other higher rate taxpayers, will be receiving an additional subsidy of £8.50 per week at current interest rates over and above the subsidy available to standard rate taxpayers. This subsidy is effectively being paid for by people on much lower incomes.
So one way of paying for the transfer of certain expenditure from local to central government would be to limit mortgage interest relief to the standard rate of tax. If this change raises insufficient revenue, then consideration could be given to abolishing the upper earnings limit for employees' national insurance contributions. This would incidentally remove the absurd anomaly whereby the effective marginal rate of tax falls from 34 to 25 per cent. on incomes of over approximately £16,000 per annum.
But of course such matters cannot really be decided in detail by this House. The important thing is to demonstrate that the impact of the poll tax should and could be made to bear much less harshly upon people of modest means than is envisaged by the Bill as it stands. If we succeed in such amendments we shall not only be helping the lower paid but, whether they acknowledge it or not, we shall also be helping the Government and the Conservative Party by preventing the alienation of tens of thousands, perhaps hundreds of thousands, of their recently acquired supporters.
§ 10.21 p.m.
§ Lord Harmar-Nicholls
My Lords, with the possible exception of the noble Lord, Lord Hatch of Lusby, this Second Reading debate has been delightfully free of viciousness and spleen. It has been constructive and noble Lords have expressed views which are quite out of keeping with the fire and brimstone which the media said would be glowing in this House when we debated this Bill. Let us hope that that continues. I see no reason why it should not.
One of the conventions of this House which used to be adhered to very meticulously but which is not adhered to quite so meticulously today is that if a point has been made by a speaker it is not repeated by others. It was taken for granted that it was on the record, that it would be taken into account by the Government of the day and that would be it. We do not keep quite as rigorously to that convention now. In another place of course it is quite different. If someone makes a good point, everybody repeats it in the hope that their local newspaper will print it as their idea in the first place. But there is no need for that in this House and I hope that we can keep to what was the old convention.
On the basis of everything having been said, those who have followed the debate on the Bill in another place will have to recognise that during the past eight hours that we have been debating it nothing new has been said that was not said in another place and answered very effectively. At the end of that debate the other place showed as a House that it thought that the Bill met the problems that it was intended to meet.
I do not want to enter into the constitutional argument as expounded by my noble and learned friend Lord Hailsham or the noble Lord, Lord Jenkins of Hillhead, who think differently about it. However, what we can and ought to accept is that this Bill, whether or not it comes within the constitutional understanding, is and ought to be looked upon as a House of Commons Bill. The subject matter is a House of Commons matter. It may not have been dubbed as a money Bill by Mr. Speaker and so under the Constitution it cannot be ruled out: we accept that. It is not a money Bill in that literal sense, but it is a Bill which is so near to being a money Bill—the raising and spending of taxes—that we must keep that in mind when we are putting our points of view in this House.
We have nobody to answer to, but the people in the other place have. If they do the right thing and it is recognised as being the right thing they are the only ones who can benefit in parliamentary or electoral terms. It has nothing to do with us. If it is a mistake and if the forebodings which have come from various quarters turn out to be true, they are the ones who will suffer as a consequence of the grievous mistake. That is as good a reason as any I can think of for them to see that they are not rushed into this, that they do nothing without recognising the consequences that may follow and that they recognise in attempting to change this system of rate collection that in the sense of electoral popularity or unpopularity they are taking great risks.
933 The one factor that we all ought to recognise is the high standards involved in their taking that risk. I have spent 38 years as a Member of the other place and of your Lordships' House, and I have never seen a Bill on which there was such unanimity on the need to achieve something. The Socialist White Paper in 1966 made it quite clear that the existing system was unfair; it was wrong and ought to be dealt with. The party opposite did nothing about it. I do not blame it for that: I understand it. It is not an easy problem to tackle. It is automatically an unpopular move. The people who will benefit from what you do will take it for granted, but those who may be at the other end of the scale will find it rather more painful and may make a noise and rightly so.
But in this Bill we have an answer. Let us hope it is the right answer; I think it is. There is recognition on all sides that without any shadow of doubt what was going on in the past was wrong. That ought to be taken into account. The Benches opposite have not been able to suggest any alternative. They merely accepted the situation, for whatever reasons, possibly because to see this matter through its various stages towards the statute book was unpopular, possibly because it was too difficult or possibly because they did not have, as they thought, a sufficient majority. This House ought to take that very clearly into account.
Whether or not the change was forecast in the manifesto is a strong or a weak argument depending on how you view it. The last election that I fought was the 18th and I doubt whether many have had to go through that hoop on more occasions. But I have never seen the purpose of a Bill made more clear. It was in the manifesto and it was the subject of innumerable debates and forecasts.
What this Government did before the election was something I have never seen done before. The intention was not only put in the manifesto, but they set up a prototype of what they thought would happen so that people would have a model on which to form a view. Not only did the architects submit the plans but also a model, because not everybody can understand plans. I have never known that to be done before on this scale, and so there is no question about the Government not having a mandate. They did that and they fought and won the election with quite a substantial majority. What is the point if having obtained that majority one does not give effect to what one said one wanted to do? This Government obtained their majority and they are carrying out the promises and undertakings that they gave in asking for it. The other place has to recognise that this is its Bill. The Members there are the only people who can be made responsible by the people who will be affected by it.
I am a great admirer of your Lordships' House. I believe that in carrying out its normal remit it is far superior to any other government or semi-government organisation. I am in a position to have a view on that. I am told that I am the only person in the United Kingdom to have sat as head of a local authority, to have sat for 25 years in the House of Commons, for 14 years in your Lordships' House and for five years in the European Parliament. Having seen the way that those institutions work I 934 believe that the way that this House normally carries out its remit is superior to any of them. Our general impartiality and the quality of those taking part in our debates have put us in a position which makes this House quite unique. But on this occasion—and there may well be other occasions—we in this House ought to recognise that it is what the other place wants that ought to stand.
Having said that, I hope that if new points are raised or second thoughts have arisen in the interim between the Bill leaving the other place and our debates they can be incorporated or amendments tabled. Perhaps when he comes to reply my noble friend will be able to indicate that they will. I hope that we can have an understanding, as we have in the past. We have to have sufficient faith that the government of the day, whatever their party, want to arrive at the best conclusion for the people they represent. At the end of the day, in the other place in particular, one is given power of attorney to act for the ordinary citizen. In doing so one must act as if one were acting for oneself.
Therefore I hope that the atmosphere which I think I have detected during the past eight hours in this Second Reading debate will be continued at Committee stage. Perhaps I have to look particularly at the Opposition Benches when I say that because they have a contribution to make. They now want to preserve this House. That was not always their view, but now I think that we can take it that they recognise the value of a second Chamber pretty much as it is now constituted. That being so I hope that when we reach the Committee and Report stages we shall not merely have a repeat of precisely the amendments which were tabled and answered in the other place and have them pushed to a vote. By all means let them produce the arguments, but to push them to a vote would reflect a perversity which in the present circumstances would not be good. There is a grave risk—and this can sound like an exaggeration—if we are not careful of creating a division between the other place and your Lordships' House.
I have noticed a trend which bothers me very much. I noticed it particularly in the European Parliament. People are now elected to the European Parliament. While there I discovered that even colleagues of mine who were sitting on the same benches in that Parliament said, "We have a mandate and because we have a mandate we are the ones who ought to decide European policies. We ought to do that, not Westminster. We are the elected European Members".
There have been far too many examples in local government of councillors saying, "We have a mandate. We are the ones who ought to make these decisions. Westminster cannot know as much as we do". That is why, for example, although Westminster decided that it was right to sell council houses, so many councils said, "We ought to make this policy decision"; and we know how they tried to frustrate the sale of council houses by removing the recognised mandate or claiming that they had a stronger one than the other place.
The House of Commons is and should be the powerhouse of our parliamentary democracy. It is 935 the only one. I do not think that we ought to add a claim to have the authority to frustrate something for which the other place has a clear mandate. Nobody else has been able to produce anything like an alternative, and I believe the Bill ought to be given a chance.
Perhaps I may say to my noble friend that although I should like to be proved wrong, I am certain that neither this Government nor another will get an alternative to the rates right the first time. We shall try hard—mainly at the Committee stage, as was done in the other place—but we will not find the perfect answer but an answer that will eventually become the basis of a system to replace one which has existed for so long. The legislation will have to be amended once or twice, like everything else that is concerned with social conditions. I am under no illusions about that. But we are breaking the log jam with this Bill. There is every reason to believe that the Bill is as nearly right as we can achieve at this stage. Because of all the abilities that are to be found in your Lordships' House, and all those vital interests that have been set out in the speeches that have been made today, I hope that we can show ourselves to be partners in bringing about this achievement, in the recognition that on this occasion, if never before, we really are the junior partners.
§ 10.37 p.m.
§ Lord Cocks of Hartcliffe
My Lords, I am glad that my noble friend Lord Ponsonby is on the Front Bench. Had he not been, I should have felt obliged to draw to his attention the remarks of the noble Lord, Lord Harmar-Nicholls, because so detailed was the advice on how the Opposition should conduct itself, that I felt he might well on reflection consider co-opting him as an unofficial member of his Whip's Office.
I am accustomed to batting low down in the order, and others will testify as to whether this is a reflection of my ability or my innate modesty, but when one goes in at No. 40 there is not a great deal fresh left to say. I shall therefore not weary your Lordships for very long.
It was in 1946 that in company with my father I attended by first public meeting in a local election. We went along to a meeting in Bristol organised by the Citizen Party. I shall not dwell on the Citizen Party; your Lordships will understand when I say that once the Citizen Party ceased to put up candidates in Bristol, the Conservative Party candidates appeared. The whole object of that meeting concerned the rates and the diabolical increases imposed by the Labour council which was then in office. I do not think that the anomalies of the system have been in dispute throughout the course of this debate.
The only general points that I should like to make are to endorse the remarks of the noble Lord, Lord Hayter, about voluntary organisations and to reinforce the point made by my noble friend Lady Fisher about people who care for elderly and disabled relatives. It seems to me that people who fulfil their family obligations and look after relatives who are sick or disabled or for various reasons care for them 936 in their own homes and do not consign them to the social services or the health service, should be encouraged and not be subjected to a further financial impost or burden for undertaking such responsibilities. I hope that the Government—who have nailed to their mast over the years the idea that they support the family—will very seriously consider at a later stage whether or not some concession may be made on this point.
The noble Lord, Lord Carr, struck a chord in my mind. He pictured his old constituency and the various roads and streets. He thought of the impost of this tax on the various localities. This point was also pursued by my noble friend Lady Fisher. She gave some examples from Birmingham where the local authority had made a study.
In the city of Bristol, the city council at a meeting on 19th April passed this resolution, from which I quote briefly:This Council notes with alarm the findings of the Labour Group Study 'The Effects of the Poll Tax in Bristol' … believes that positive support should be shown for reform which is related to ability to pay, such as a local Income Tax".The study was quite an elaborate one. The contents ranged from the financial effects in Bristol, rebates, exemptions and evasions, civil liberties and local democracy, administrative nightmares, and uniform business rate.
I shall quote briefly from only one section of this document because I do not wish to weary the House. The only section which can be regarded as entirely objective and free from political influence is that on the financial effects in Bristol. This was prepared by the city treasurer and his department at the request of the local authority. They studied the financial effect in the following way. They analysed a random sample of 3,117 properties and compared the actual gross liability of domestic ratepayers of 1987–88 with their estimated gross poll tax liability for the same year. Two figures were taken. One was a figure of £237 per adult, at the bottom end of the range of estimates. This was selected because it was the level suggested for Bristol recently by the Department of the Environment in a publication to illustrate the effect of the poll tax. Another estimate was made by the city treasurer of a figure of £293 per adult which he felt was a more realistic one because of the effects of such factors as under-registration, the cost of collection and other items.
The analysis was done on the basis of electoral wards, size of household, housing tenure, the rateable value, and the rateable value and household size. Bearing all these factors in mind, the following results were obtained. On the basis of the figure of £237 it was found that 52 per cent. of households in the city would be worse off. Of the 34 wards in the city, there are 20 in which more than 50 per cent. of the households would lose, and three in which 70 per cent. of the households would lose. However, on the higher figure of £293 per adult, it was found that the number of households worse off was very much greater. Of the 34 wards, 29 would be worse off.
It is instructive to look at those 29 wards. Twenty of them are wards in which 70 per cent. of the households would be worse off. On examining the wards in my former constituency of eight wards, all 937 eight would be included in that list. In some nine wards 50 per cent. to 69 per cent. of the households would be worse off. In only five of the remaining wards would more than 50 per cent. of the households gain. In only two of the five wards, Stoke Bishop and Westbury-on-Trym, are there more big gainers than losers.
I have mentioned Stoke Bishop and Westbury-on-Trym. I should like to refer to a debate in your Lordships' House on 24th February of this year which was introduced by my noble friend Lord Cledwyn on opportunity and income and social disparities. In the course of that debate I drew attention to the fact that in the city of Bristol there is a microcosm of the disparities we now see between different parts of the country. On the southern side of the city, in what is a relatively prosperous city, there are very grave disparities and deprivation. In that speech, too, I mentioned Stoke Bishop and Westbury-on-Trym. I mentioned them in the context of an example I gave to the House of direct grant school free places being taken up when that system was in operation in Bristol. There were 92 primary schools feeding the system and yet, out of the hundreds of places awarded, 56 per cent. of them went to only five primary schools. Among those primary schools were Stoke Bishop and Westbury-on-Trym.
What the Government are in danger of doing is to make worse the disparities in society. I do not know that they are doing that deliberately. In fact I am sure it is something which probably had not occurred to them, but again I urge them to reconsider the Bill, because it will make worse these disparities, and that cannot be good for the social fabric and wellbeing of our country.
My final point is this. I have spoken before about my old constituency and how it has never had any facilities offered to it. But with all this talk about the gypsy's warning, I was reminded today of one facility which was offered to my constituency in my time as a Member of Parliament. Very strenuous efforts were made by the local authority to put a gypsy site in my constituency along Airport Way. Fortunately, at a public inquiry I and others of my colleagues and constituents were able to defeat that scheme. But apart from that we have had the thin end of the wedge in Bristol South for such a long time.
I urge the Government to think again and to find some way in which this apparent compounding of the incidence of deprivation and hardship in some areas, especially inner city areas, can be alleviated, because a tax will be accepted if it is felt to be fair. People know that services have to be paid for, but if a tax is thought to be basically unjust then the Government will have very great difficulties.
§ 10.48 p.m.
§ Lord Teviot
My Lords, at this very late hour I shall be even more brief and come to the point with which I have great concern. By and large I am now more in favour of the Bill at this stage of the Second Reading than I was at the beginning. To develop my theme I shall fall into the trap of being repetitive.
My deep concern is entirely with another aspect of the Bill. When it had its Third Reading in another 938 place the Government introduced an amendment which, on the face of it, had nothing to do with the main elements in the Bill. The aim of the amendment was to take away the right from one of the metropolitan county joint authorities, the passenger transport authorities, to charge a precept on their constituent districts. Instead they will have to send an account to the individual districts with which the councils could agree or disagree. If they disagree, they may consider seceding from the passenger transport authority.
In introducing the amendment, Ministers argued that it would increase the accountability of the authorities and their members. I completely fail to see the logic of this. If it is such a good idea it should also apply to other joint authorities responsible for the police and fire departments. The Government argue that police and fire authorities are accountable locally because the Home Office controls much of their expenditure. I must confess that I also fail to understand the logic of that. In any event by using the Rates Act, the Department of Transport has the means to control PTA expenditure if it wishes to do so. PTA members are appointed by the constituent district council under the Local Government Act and are already accountable.
This proposal has been universally recognised by the PTA, its passenger transport executive, many transport operators and the district councils to be unnecessary, potentially harmful and bereft of benefits. Above all the proposals will introduce into PTA and PTE financing of public transport another element of uncertainty which they can well do without. They have done an excellent job coping with bus deregulation and it is unreasonable to impose further complications.
It is important to note that almost all those consulted by the Department of Transport were against the proposals. They have many other drawbacks. On 20th April my noble friend Lord Brabazon gave the House an assurance that the conurbation-wide decisions on public transport were not at risk. However, despite that assurance I am far from convinced. Regardless of whether a district council applies to secede from the passenger transport authority, which is the only point at which my noble friend and his colleagues will become involved, the whole approach is likely to result in decisions being more parochial and less strategic.
The proposal for billing instead of precepting has another serious disadvantage. It will be difficult to make it work in practice. Perhaps noble Lords can imagine the time and resources involved in the six areas getting between five and 10 separate district councils to agree on expenditure proposals which will affect the extent to which they may be penalised for over-spending. If such a provision were eventually applied in London, 32 boroughs would be involved.
Finally, the bill for public transport will be hidden within the community charge instead of being separately identified as it now is. That runs counter to one of the most important benefits of the community charge. It is that it should be easier to make comparisons between areas. Indeed, it will shroud accountability.
939 I shall not dwell on the issues but return to them in Committee when the House has had the opportunity to consider the Bill in detail. As I stated earlier, I do not oppose the Bill in principle but, in view of my concern about its effects on public transport, I shall listen with interest to all the arguments from all sides of the House and I shall reserve judgment.
§ 10.53 p.m.
§ Lord Strathclyde
My Lords, it is always a little intimidating to speak at the end of such a long debate and after so many eloquent and experienced speakers. Noble Lords will be pleased to hear that I shall not take a long time because there is little new to say, and I shall limit myself to talking about the community charge.
I believe in consistency and because I spoke to support the legislation to abolish domestic rates in Scotland it seems sensible to support this Bill. I am just as convinced now as I was then that community charge will rescue us all from the corruption into which local government has fallen. The game played between the ratepayer and the non-ratepayer and umpired by local authorities will be no more because everyone, apart from the poorest, will pay the same.
At a stroke councils will be obliged to run their areas in the most prudent way possible because any profligate spending will be as hurtful to their supporters as to anyone else. Any abuses of local power should be virtually obliterated. Can any noble Lord believe that a situation such as that which occurred in Liverpool in the earlier part of the decade could have happened under community charge? The disgraceful excess of spending by the Labour council, which knowing that there were never enough ratepayers to oust it from office used literally to bribe its supporters to keep it in power, will never happen under community charge. So many ratepayers left the city of Liverpool that the council was able to argue that the city was sinking into poverty and that there were no private ratepayers to pay the bills. Of course there were not; they had all been chased out and businesses had closed due to the high rates bill. That was the so-called fairness of the rating system.
In 1984 I fought a European election on Merseyside. While canvassing, I was approached by a man who said that he would not vote Conservative until the Prime Minister kept her promise to reform the rates. This is the answer to that promise. I believe that this is the most far-reaching and radical legislation ever attempted by this Government.
This Bill will bring power back to those who deserve it and should have it, back to local voters and away from the power blocks that have maintained the parasitical shackles of local government for so long. At last this ridiculous tax on property will be laid to rest and the business of effective, responsible local government can recommence. I support the Second Reading of this Bill.
§ 10.56 p.m.
§ Lord Ross of Newport
My Lords, from the comments made in this debate it appears to me that too many noble Lords reside either in Lambeth or Camden. The exception is my noble friend Lord 940 Russell, who lives in Brent. Constant comments on local government overspending make me very sad. I must say to the noble Lord, Lord Strathclyde, that I resent the word "corruption".
The Director General of the CBI was formerly chairman of the Audit Commission. When the commission was set up he was appointed by a former Secretary of State, Michael Heseltine, to oversee local government expenditure. Some three years ago Mr. Banham was asked to make a presentation to Cabinet: the gist of it was that in nearly every case local government has kept its financial affairs in far better order than had departments of state.
When the same presentation was made to my party—and I am sure it was also made to the Labour Party, because it was offered to us—I particularly asked whether this point had been made clear to the Prime Minister. I was assured that it had been. There are some 450 local authorities in England and Wales. Probably over 430 of them have continuously tried to keep their expenditure down to levels requested by central government, despite many calls on their services imposed by legislation emanating from the Palace of Westminster.
When I was the leader of our council I can remember that I tried to stop the appointment of a historian to preserve our records. As the leader I went to the sub-committee and said that we could not afford it, whereupon the county librarian stood up and read a speech from the Secretary of State, Michael Heseltine, imploring us to take on this additional post and saying that he would fund it for one year and it would then be up to local government. That is another example of local government suddenly finding itself having to meet extra expenditure imposed by central government.
Contrary to the views of the noble Lord, Lord Sandford, fewer and fewer worthy citizens will want to serve on their local council. At present there are few enough and there will be fewer in the future. Very few businessmen stand for election to their council; they cannot be bothered. That is yet another nail in the coffin of local authority autonomy. The noble Lord, Lord Carr, made the point better than I that to reduce the power of local authority discretion to 25 per cent. of its income is far too low a figure. It should be over 50 per cent. and preferably higher than that.
The turnout in local government elections has also been mentioned by many contributors. I fought three local government elections and never experienced a turnout of less than 65 per cent. It may be that I was seen as the enemy and they wanted to be rid of me, but the average was over 40 per cent., which compares quite favourably with presidential elections in the USA. I do not believe that the introduction of the poll tax will make any difference to local government voting levels; in fact, they will probably go down. Of course, proportional representation is the answer, but I shall not pursue that argument this evening.
When I was in opposition I attended meetings of county council associations and urban district council associations. Conservative spokesman continuously promised to delegate more authority for local determination. In fact, what they have done 941 ever since they have been in office is to take more and more central control. One day—I pray it will be soon—we shall come to appreciate in this House the damage that has been done in recent years to relations between central and local government. I trust that we shall do something positive to restore pride to our great provincial cities and rural counties.
Local government reorganisation in 1974 started the rot and the slide has been rapid since then. I was unexpectedly elected to the other place at the end of February 1974. By 1981 I had decided that there was nothing that I could do in that place to help my constituency over its economic problems. I returned and stood for the county council and was elected. I led the county council for two years and they are two years in which I take some pride. I was able to do something about the unemployment situation when we had a major closure. I spent money for the county council and, with other entrepreneurs, we took over a derelict shipyard and we restored employment. I do not believe that any local authority could do that today. That is why I feel so strongly about the continuing decline in local authority autonomy. In the meantime, unless this House, and in particular the government supporters, is prepared to do what it knows in its heart it really ought to do and to emasculate this Bill, we shall be faced with a bureaucratic nightmare and widespread evasion. The evidence for that is already to be found in Scotland. The authorities of Lothian and Strathclyde have taken on hundreds of extra full-time and part-time staff to ensure that they can collect the 25 per cent. of their income.
We heard from the noble Lord, Lord Jenkin of Roding. I believe that it was he who rate-capped the one and only Conservative council to be ratecapped—Portsmouth. Yet I understand that there is general agreement that Portsmouth City Council has done a very good job in once more getting Portsmouth off the ground. Today Portsmouth is a city which is beginning to thrive. A few years back it was run down and a very poor relation to its neighbour, Southampton. The change was brought about by the local authority mixing with local businessmen and getting things moving. The council had to spend money, and it was rate-capped in the process. Even in Sheffield, which is a heavy-spending authority, we know from what we have seen on television and heard elsewhere that businessmen and the city council have been getting together for the benefit of Sheffield. I suggest that this Bill will stop all that.
As we have heard continuously in this debate, the so-called community charge will bear hardest on those least able to bear the burden. Moreover, the situation is even worse when the actual payment for services received is compared with the present rating system. The evidence of Cheshire County Council was given earlier. Families with incomes of £500 or more will pay only about half as much under a poll tax system as they have done under the rates system. That is the Government's own forecast.
Students, including nurses, the homeless, charitable organisations and those on low incomes face horrendous increases in house prices and rents. 942 Rents will rise substantially when the Housing Bill goes through. We were told today that house prices are likely to rise by another 15 per cent. when the rates are removed. Everyone will pay more and some will pay very much more. It is time this House understood the problems facing the younger generation who have not been able to buy a council house on the cheap, who are setting up a family and perhaps earning £10,000 a year. How on earth are they going to buy a property these days? if they are to face increasing expenditure with the community charge I feel desperate for them.
Ireland did away with domestic rates some 10 years ago and now it bitterly regrets having done so. The latest proposition is to bring back a property-based tax. Self-assessed income tax seems to work well enough in Canada, Sweden and other states. It was certainly recommended by Layfield for serious consideration but the report seems to have been totally disregarded by government.
I remember vividly the late Graham Page, who was a Minister in the Department of the Environment in the early 1970s, continuously bringing in Ten Minute Rule Bills in the other place to replace domestic rating by a local income tax. No doubt he had access to statistics and support from the department at that time. I take ill the kind of criticism that comes from the present Secretary of State.
While domestic rating based on rents may well be flawed, it would be much better left alone if the only alternative really is the poll tax, particularly at a time when, strange to relate, the present rating system would make more sense with a move to free up the rented sector when evidence of actual rents paid will become more readily available. I agree with the Government's attempts to bring back more rented accommodation.
The maiden speech of the noble Earl, Lord Lytton, should be studied in Hansard and taken to heart for he has had experience in rating in both the public sector—through the Inland Revenue—and the private sector. Like the noble Earl, Lord Caithness, and I, he is a chartered surveyor, but he, who is in practice as I am, will certainly be busy next year when the valuation lists of commercial and industrial sectors are published. Some small businessmen will have a terrible shock. I am practising at the moment and I am staggered by the rents now being paid for high street shops by people who I know cannot possibly afford to pay them.
I am also staggered by the key money being paid to get into rented accommodation. Here too the whole pattern of centralising the distribution of the uniform business rate is open to a great deal of criticism. On this point I believe that the House should take action. This has been expressed by a number of speakers, notably the noble Earl, Lord Carnarvon, who was a very progressive leader of Hampshire County Council, with which the Isle of Wight has had very good relations. We have had our police on the cheap for a number of years and have not charged too much for it. We regard Hampshire as a progressive county. The noble Lord, Lord Rippon, referred to the same thing.
943 Yet again, far too much in the Bill is being left to regulations, presumably by affirmative resolution in a one-and-a-half hour debate in the other place, probably very late at night. As the noble Earl, Lord Lytton, pointed out, the Bill as presently drafted replaces the General Rate Act 1967 and thereby wipes out centuries of case law in commercial and industrial property. Do the Government really mean this to happen? What about the arts? If we are to have a centralised system, it is true that places like Westminster, which are generous to the arts—and to opera in particular, as the noble Lord, Lord Carr, pointed out—will not have that ability to subsidise English National Opera and others. Will the Minister comment on that tonight?
There are problems over appeals and over the rating of empty property where no provision is made to bring us into line with Scotland. There is not even a six months' discretion. What about the rating of statutory bodies, including those about to be privatised? What about the hardship cases, where I gather some concession may be made? Surely most of those matters could be left to the local authorities. The rights of landlords when proposals to amend the list are made by tenants and time limits where a change of occupation occurs appear to be in some jeopardy. I want to know about the composition of the new tribunals. Who will sit on them? What will be the qualifications of those people? It is a matter of some concern. Will there be a further appeal to the Lands Tribunal? I have looked through the Bill and I cannot find that.
There is the effect of the rate on new properties occupied after the coming into force of the new list and which may miss altogether the transitional relief. These are matters for our serious attention in Committee and at the Report stage, but the House should know of the great apprehension in the business community, particularly as it affects smaller businesses and small shopkeepers of whom I claim to be one. One glaring omission is the absence of any provision to bring into rating land ripe for development but left idle by its owners while its value soars and which at the same time totally blights the whole neighbourhood. As Chancellor of the Exchequer, the noble Lord, Lord Barber, did something about that in the 1973 Finance Bill but unfortunately it was thrown aside. We talk about formulae, but what would be the formula for redistributing the uniform business rate? We do not know about that. However, we know that the present rate of RAWP grant formula is badly flawed. For example, one of the councils which has been criticised for a 42 per cent. rate increase this year is Gillingham. A year ago that same council had an absolute bonanza. It had so much money that it did not know what to do with it and therefore imposed no rate increase. So I do accept that the present rate of RAWP grant formula is badly flawed and should like to know how the formula will be devised when we redistribute uniform business rate.
In conclusion I should like to quote a few press comments on the Bill which have appeared over the last few months. The Observer said:Mrs. Thatcher has lost the poll tax argument".944 The Financial Times said:It is a tax that lacks support";and even the Sunday Times said:Poll tax should not pass".Mr. Maurice Stonefrost who is a former GLC financial controller, writing in the Independent, explained why the poll tax will not work. It is a very good article. I take the point made by the noble Lord, Lord Carr, because he took a line rather similar to that of Mr. Stonefrost and I therefore suggest that his article might be studied. I do not say that it is the right answer but what he said was:The Government's objective over the long run—and this should be what really matters—leads more logically to a local taxation system based on both domestic rates and a local community charge on adults—but tempered by a test of ability to pay. This discipline on the local electorate would reduce dependence on central government grants".I think that was indeed the point being made by the noble Lord and in my view he got it right.
We had Sir John Hoskyns, also writing in the Independent, explaining why rate reform would be bad for business. Nevertheless, the Government plough on. Even at this late hour they should think again and we in this House should assist them to do so. I suggest that we ask the Minister to go back and give further consideration to the Layfield Report.
Why governments set up committees of inquiry, appointing many able people to sit on them—the noble Viscount, Lord Ridley, was one of them—and then totally ignore their findings is quite beyond me. Further, to say that the Labour Party should have implemented the change is also crazy, because the report was undertaken in 1976 and that was the time when we went into the Lib-Lab Pact and an economic crisis. Therefore I do not think that anyone can blame it for the fact that it was not implemented at that time.
Why, when we have instructed people who really know the subject and when we have people who take the trouble to give evidence which results in various recommendations, do we totally ignore those findings?
§ 11.5 p.m.
§ Lord Underhill
My Lords, one matter upon which I think most people will generally be in agreement is that outside Parliament this Bill has few responsible friends. The noble Lord, Lord Wyatt of Weeford, said that most of the opposition was emotional and alarmist. However, when one looks at the list of responsible organisations which are opposed to the Bill's principles, frankly such remarks, with all due respect to the noble Lord, are just nonsense.
Indeed, we heard today from the president of the National Union of Ratepayers' Associations, the noble Lord, Lord Ellenborough. He echoed the opposition of that organisation to the principle contained in the Bill. We have heard from various noble Lords about the history of the change in the system. In 1981 we had the Green Paper Alternatives to Domestic Rates. That document not only rejected the principle of the poll tax but in paragraph 2.9 it said: 945Any local tax … must be capable of being collected reasonably cost-effectively. It must not impose an unacceptable burden of administration".Few people accept that that will be the position with the poll tax or community charge, call it what you will. Even the Secretary of State on Second Reading in the other place on 16th December said that it would probably cost twice as much to administer as rates.
I ask noble Lords to take a look at the Explanatory and Financial Memorandum to the Bill which concerns its financial effects:Local authorities will be responsible for the establishment and operation of the community charges system. It is estimated that the total additional cost to local authorities in a full year will be in the range of £160 million to £200 million".And there will be another £70 million to £90 million in 1989–90 in setting up the register and the general system for collection.
The Bill does not fulfil even the requirements that the December 1981 Green Paper laid down. The same Green Paper said that there would be difficulties over evasion:Evasion and mobility would also present difficulties if a separate poll tax roll were to be compiled".It would be extremely useful if noble Lords would read some of the 14 schedules to the Bill, which include the various administrative measures that must be followed, including attachment of earnings. Provisions for the attachment of earnings are laid down in the Bill.
Two years passed, and we had the White Paper in August 1983, which as noble Lords have already said, condemned the principle of a poll tax. We heard from the noble Lord, Lord Jenkin of Roding, the history, as he saw it—he took part in it—which led to the January 1986 Green Paper Paying for local government. Ministers have admitted that there was general objection to that Green Paper, but, as with most other consultations that the Government have followed, they took no notice. Time after time, I, as president of the Association of Metropolitan Authorities, have had to refer to the consultations with local authority associations. We were ignored time and time again. The word "consultation" means, "We tell you what we are going to do", not, "We will listen and find out what is the best thing to do".
I was pleased that the noble and learned Lord, Lord Wilson of Langside, gave the history of the events in Scotland. It reminded me of what I have described as the devastating speech of my noble friend Lord Ross of Marnock. We regret that circumstances prevent him from being here this evening, and we send him all our best wishes. I remember his devastating speech on the Abolition of Domestic Rates Etc. (Scotland) Bill. He described how it was an uproar at the Conservative conference and nothing else which led to the community charge Bill for Scotland. It has not done the Conservatives a lot of good in the parliamentary elections or in last Thursday's district elections.
I sat through practically all the debates of the various stages of the Scottish Bill because we knew that it was a try-on before the Government introduced a Bill to cover England and Wales. 946 Scotland has obviously not liked the Abolition of Domestic Rates Etc. (Scotland) Bill. This Bill shows all the signs of being hastily cobbled together. As problems arose on the abolition Bill so the Government tried to find answers to deal with them. We have had Local Government Bill after Local Government Bill since 1974. all of which, we were told, would settle the problems of local government finance. They did nothing of the kind. We are now faced with another Bill which will attempt to solve them.
The Bill is somewhat of a shambles. My noble friend Lord McIntosh referred to the fact that there are no fewer than 649 places in the Bill where matters have been left for orders or ministerial decisions. That figure was also quoted by the Labour spokesman for the environment in the other place. His points were not answered when he asked why there were so many places in the Bill where decisions still had to be made.
The noble Lord, Lord Harmar-Nicholls, said that there had been debates on the Bill and that all points had been answered. The points about why there are 649 places in the Bill where decisions on the nature of the orders and regulations are required have yet to be answered.
Surely, after today's debate there will be general agreement that, while most people accept that there was some degree of unfairness in the system of rates, one of the basic criticisms of this Bill is its appalling unfairness. The noble Lord, Lord Strathclyde, said that everyone but the very poor will pay the same. Will they? Surely we have heard of enough instances to the contrary today? As anyone will see from reading Hansard for the other place, constituency member after constituency member has drawn attention to the hardship and the disparity that will occur amongst their constituents.
I frankly admit that I have just looked at the figures. I think that myself and my wife are going to gain £200 as a result of the poll tax. I recall that my noble friend Lord Ross of Marnock challenged the Government Benches in this way: "How many of you will get up and say what you are going to gain by the Scottish Bill?" No-one got up to say.
Even Annex C of the 1981 Green Paper states in paragraph 22:A poll tax is assumed to be levied on all adults in the household irrespective of income.It then says:Replacing rates by a poll tax will mean that higher-income households gain more or lose less (in pounds per week) than the lower-income households of the same type.That was said by this Government in the Annex to the 1981 Green Paper.
Of course there will be gainers and losers, the figures concerning which depend on whether one refers to individuals or couples or households. The CBI have pointed out that the poll tax will lead to a 40 per cent. increase in taxation in households in deprived areas and a 34 per cent. cut in the prosperous areas. I do not think that the CBI would wish to be described as emotional and alarmist in making those comments.
947 There are obvious inequalities in the proposals in the Bill. I shall not go into many of the details that have been mentioned. When noble Lords read the Official Report of these proceedings they will see the instances given, and nobody can say that they are equal in application. Terrible disparities will occur between people with much wealth and households with less wealth. The worst problem will involve those who are just above the poverty line who will not be entitled to the various grants. They will be the ones who will suffer most.
I was very pleased that the noble Lord, Lord Hayter, and my noble friend Lord McIntosh stressed the concerns and worries of the voluntary bodies about the disabled and those who are caring for and helping these people. I hope that when we come to Committee stage the Government will look very carefully at the problems put forward by the voluntary organisations and that they will do something about them.
We have heard a great deal about an increase in accountability. The 1983 White Paper in paragraph 2.15 said:The Government recognise that rates are far from being an ideal or popular tax. But they do have advantages. They are highly perceptible to ratepayers and they promote accountability. They are well understood".A massive turn round has occurred since that was written in 1983.
Can the Minister explain why people living in larger houses, with substantially larger incomes, are somehow to be made more accountable by paying less? Those in houses and having smaller incomes must pay more so as to become more accountable. That is a riddle which I cannot understand. Perhaps the Minister will attempt to answer it.
Another justification to which noble Lords have referred and which is advanced by the Government is that out of the 35 million registered electors, only 18 million are ratepayers and 3½ million of those are fully rebated. My noble friend Lady Lockwood pointed out that this ignores the fact that spouses are affected by the size of the rate bill. The up-to-date figures given to me are that 19½ million households receive rate demands; 12 million of them involve spouses. I argue that some 31 million people contribute in some way to the rates. My wife and I went together to vote before I came here on Thursday last. My wife would be very upset if she were told that she had no accountability. We have a joint bank account and she knows exactly what I pay in rates. It is nonsense to suggest that the only people who are responsible are those to whom the rates bill is sent. This excludes such people as grandparents and others over 18 who make contributions to household expenses.
Some people, listening to noble Lords, would imagine that families are not families at all. I have three children and eight grandsons. Those over 18 have contributed to the household expenses, and that includes rates. Therefore it is nonsense to suggest that the only people who are accountable are those who are actually on the list as ratepayers. In addition, of course, non-working women will be liable. I think I am right in saying that they cannot get housing 948 benefit in any way. Under the Bill, we have the point which was brought out very significantly again by my noble friend Lady Fisher about spouses being made jointly and severally liable with their partners for the payment of the community charge. I hope that the Government will take careful note of what she said on that point.
Then we have the problem of compiling the community charge registers. I have already referred to the additional charges and the additional costs which are mentioned in the financial memorandum to the Bill. First, some 3 million eligible adults are not included in the registers of electors, despite the fact that there is a penalty for failure to register. The annual turnover of about 15 per cent. is a common feature of most electoral registers. We know that some 3½ million people change their addresses each year. The costs and the administrative effort to build up this separate community charge register will be fantastic. Problems are already arising. Local authorities will do their best, they always do. As we already know, local authority officers are busy working on this problem. My noble friend Lady Fisher mentioned the figures for extra staff and extra accommodation which have already been worked out for Birmingham. We read in reports of other local authorities having to do the same in order to cope with the additional responsibilities arising from the community charge.
The Government say in addition that the Bill proposes a simpler grant system. I again suggest that noble Lords should read all the relevant clauses. I am sure they will. What are the details for the determination of the new revenue support grant? Where are the criteria laid down in the Bill? I can see nothing. I think we need to have some information about that.
Various noble Lords have pointed out that under the Bill there will be unprecedented central government control over three-quarters of the local authority finance; that is with the introduction of the national business property tax. The community charge will be an authority's only independent source of income. Initially it will be about 25 per cent. Again I reminded myself of what the Green Paper of 1986 said:The main role of local government is to provide services in a way which properly reflects differences in local circumstances and local choice".How can one do that unless one enables the local authority to incur what expense it considers desirable to carry out that section in the Green Paper and to levy also what will in this case be the community charge in order to pay for it?
I also ask noble Lords to look very carefully at the Financial Memorandum to the Bill. In Part VIII they will see that there is power there for the Secretary of State to:designate precepting and charging authorities where he considers the amounts calculated … to be excessive or to be an excessive increase on the previous year".He may specify the maximum sum to be allowed with consequential reductions to the relevant community charge.
I believe that the noble Lord, Lord Wyatt of Weeford, said that there was nothing in the Bill 949 whereby the Secretary of State would interfere with the community charge. Noble Lords should look at Clause 108, because this states that power will be given to force local authorities to reduce the level of the community charge and also power to intervene after the budget has been set. The Secretary of State can force a reduction part way through the year. Frankly this is a fantastic way to carry on local government finance.
I shall say a few words on the non-domestic rate. Again the noble Baroness, Lady Stedman, referred to the study which looked at the period from 1974 to 1981 carried out by the Department of the Environment. The Green Paper in 1986 to which reference has been made stated in paragraph 2.9:Hard evidence of the effects of rates on business is scarce. A recent study commissioned by the Department of the Environment concluded that…rates could not be shown to have had a significant overall influence on manufacturing employment".In paragraph 2.10 it continued:How far business rate increases do affect the location and viability of businesses in particular areas must therefore still to a large degree be a matter of conjecture".That is stated in the Government's Green Paper of 1986.
We all know that there again will be gainers. There will be businesses which will gain, but the local authorities know that there will be areas which will suffer by the drop in their income. There will be other areas where businesses will not gain. We have had the position of the small businesses outlined to us in a communication which many noble Lords will have received and which has been mentioned by a number. It mentions the problems that will face local authorities.
I am glad that my noble friend Lord Mountevans—I may call him my noble friend because we engage so much on transport matters—raised the question of the change, which very few people have noticed, in the passenger transport authorities where they are changed from precepting authorities to billing authorities. That was supported by the noble Lord, Lord Teviot. I shall not go into details now but I referred to this matter during the debate on transport problems. No one can understand why these amendments were left so late and brought in on Report in another place. No one can understand why the question of accountability does not arise because the members of the PTA are elected members appointed by their district councils to serve on the PTA. But we shall have more to say on this in Committee.
My last words have been echoed by one or two noble Lords. I wish particularly to follow up what the noble Lord, Lord Ross of Newport, said in his closing remarks. The Bill is an indication of the sorry state into which the relationship between local government and central government has fallen under this Government since 1979. We have referred to this time and time again. If there is one issue on which there needs to be consensus, surely it is local government financing. We should not be in a situation where the responsible local authority associations are in complete opposition to government proposals on the financing of local government.
950 We are dealing with the Bill. At the right stage we will deal with Labour Party policy; but I remind your Lordships that when we were debating the 1984 Rates Bill, on Second Reading, the Opposition proposed an amendment that a complete survey should be carried out of the whole of local authority financing. That was rejected by a substantial vote by government supporters. That is what is required. The noble Earl, Lord Caithness, I believe, said that the issue was whether there should be control by central government or local government. He may have wondered why Members on this side of the House cheered that remark. That is the real issue here. Will there be proper local government or will there be central domination on the various points contained in this Bill?
§ 11.36 p.m.
§ The Lord Privy Seal (Lord Belstead)
My Lords, I should like to congratulate the three noble Lords who made three maiden speeches today. The noble Earl, Lord Carnarvon, among his many interests, has been closely involved in county council work and spoke with experience and indeed with some feeling about the importance of local government. I am sure the whole House is delighted that we now have his added expertise on this Bill from the Cross-Benches.
The noble Earl, Lord Lytton, I believe includes do-it-yourself repairs among his interests in the reference books. I hope we are not going to need any running repairs on this Bill as it goes through your Lordships' House, but I am glad that the noble Earl has spoken for the first time in the House today. In fact, he is very well qualified to take part in today's debate, and he spoke with considerable authority, on which I congratulate him, on Part III of the Bill.
All of us on these Benches were delighted to see the name of Mancroft on today's speakers' list. In his speech the noble Lord has maintained the standards for incisive debating which were set by his father in this House and I should like to congratulate my noble friend on a very entertaining maiden speech. I express the hope that all three noble Lords will be heard frequently in future in your Lordships' House.
It was interesting that all three noble Lords, in making their maiden speeches, agreed that the present arrangements to pay for local services really cannot continue. I am not entirely sure, from the speech of the noble Lord, Lord Underhill, that he agreed with that but I think there was a pretty general agreement in your Lordships' House today that there is discontent with the rating system. It has been going on for some 20 years or more, and there really is a national consensus now that change is inescapable. Indeed if anyone either inside your Lordships' House or outside it did not agree that this is so, then the very powerful speech of my noble friend Lord Jenkin of Roding was a conclusive argument that, in his own words,to do nothing is no longer an option".But what should replace the present arrangements? I must say I was surprised that we heard no answer of any kind to that question from the Front Bench opposite. Perhaps it is not entirely surprising—as always, I thoroughly enjoyed the speeches of the noble Lords, Lord McIntosh and Lord 951 Underhill—that they did not mention their own party's policy, because the fact is that if one looks back to, say, a year ago the Labour Party have got no further than chopping and changing views about whether they are in favour of a local income tax or capital value rates, or indeed whether they have a policy at all. I must say that I thought the saga was actually going to come to an end when I noticed in the newspapers that the right honourable gentleman who is the Deputy Leader of the Labour Party had made a speech last month announcing firmly that the Labour Party was now committed to both capital value rates and local income tax. With customary courtesy, my right honourable friend the Secretary of State immediately picked up his pen and wrote a letter to the right honourable gentleman asking for more details so that the effects of the policy could be exemplified. Sadly, my right honourable friend so far has had no reply.
I have to say for myself from this side of the House that I should be surprised if the general public would see capital values as an improvement on the present rating system. Surely any capital value system would either lead to great turbulence, both regional and local, in rate bills as values changed to reflect market values or, more likely, would bring great unfairness because the great upheaval associated with revaluation would in practice prevent such revaluations ever taking place at all.
Another main alternative has been a local income tax, about which the noble Lord, Lord Ross of Newport, in particular spoke. It is true that the Social and Liberal Democrats and their forebears have been consistent in supporting that proposal. Again I submit that the idea is unlikely to gain much popular support. That is what it would need, because to operate such a system effectively would as I understand it require a recasting of the national tax arrangements to an end-year self-assessment basis.
I do not see much popular support for a tax which undoubtedly would produce some very much bigger bills than the community charge. That is because, contrary to what my noble friend Lord Ellenborough thought, although at present there are some 15 million income taxpayers in this country, even after separate tax of married women is brought into effect there will be no more than some 20 million income taxpayers. So only just over half the adults in this country will be taxpayers. Under local income tax there would therefore still be a major part of the electorate voting for local services knowing that they would pay nothing towards the costs—hardly the way to achieve local accountability.
I was interested that the noble Lord, Lord Wyatt of Weeford, pointed out that in addition to all those points there would be some extraordinary local differences in the levying of local income tax among local authority areas. He said that it would almost certainly lead to local brain-drains from some authority areas, leaving an increasingly polarised society behind.
The noble Lord, Lord Jenkins of Hillhead, criticised the Bill which we are introducing on social, geographic and administrative grounds. However, I 952 have to say to the noble Lord that I think that on none of those grounds does local income tax even begin to stand up to examination.
Many of your Lordships have spoken today in one way or another about the need to assess ability to pay. The noble Baroness, Lady Stedman, and my noble friend Lord Ellenborough both spoke in favour of a banded community charge. But a major stumbling block to banded charges are the earnings traps between the bands.
As my noble friend Lord Watkinson said, there is no easy way out of the problems posed by the outmoded system of rates in this country. The truth is that there is no short cut to linking the community charge to income. The only way to achieve that would be through a local income tax. The noble Baroness, Lady Stedman, said that that is what she would support. With respect, I do not think that many of the payers of such a tax would thank her for that.
It is for those reasons that there is very great difficulty with the criticism levelled by a number of noble Lords that the flat rate community charge does not of itself take account of ability to pay. However, the Government are providing through the Bill for the better-off to pay more, indeed, much more, than people who are poorer. Of course to achieve that, one has to look at the total funding of local services and the system of rebates which will be in operation.
I should like to say firmly from this side of the House that I have not the slightest doubt that the arrangements that we are proposing in this Bill are both necessary and fair. They are necessary for the reasons of accountability about which my noble friend Lord Strathclyde spoke so clearly and briefly at the end of the debate. They are fair in that those who argue that they are not, invariably seem to base their arguments on a substantial misconception, which is the belief that everyone will be paying the same amount toward the provision of local services. That is simply not so. Those on the very lowest incomes will pay only 20 per cent. of the community charge for their area and the level of their income support—the successor to supplementary benefit—will be increased to reflect the cost of an average community charge.
For those on low incomes but above the income support level, about which noble Lords have spoken with a considerable concern that I quite understand, there will be rebates which are tapered so that the amount of the community charge to be paid will increase gradually as income rises. It will only be when income rises to a sufficiently high level that all entitlement to rebates will cease.
My noble friends Lord Pym and Lord Carr of Hadley expressed the concern that the level is not high enough, but 9 million people will be eligible for rebates and 5 million of them will be above the income support level. It was as a result of my right honourable friend's recent announcement in another place that the number of rebate recipients increased by 1 million, many of whom will be on small, fixed incomes, as indeed will be many of the 4 million who will now get a larger rebate as a result of my right honourable friend's announcement. No doubt we shall debate rebates again, but for the moment 953 perhaps I may just express the hope that noble Lords will accept that in devising and refining the rebate system we have tried to take very careful account of the needs of people on small fixed incomes.
So what is certain about this continuing debate about an ability to pay is that everyone will certainly not be paying the same for local services. But there is an additional factor. I mentioned the importance of looking at the total funding of local services, as did many of your Lordships. A quarter of the money needed for local services will come from the community charge; a further quarter will come from the business rate; but half of the cost of providing for local services will come from Exchequer grants, which are funded through central taxation to which the rich pay, quite properly, more than the poor. So it is possible to calculate that through national and local contributions the top 10 per cent. of households by income will pay around 15 times more toward the cost of local services than do the bottom 10 per cent. of households by income—and quite right too.
Perhaps I may just try to answer as many questions as possible in the time left to me. Following on immediately from what I have just said, the noble Lord, Lord McIntosh, said roundly at the beginning of his speech that the community charge will make the rich richer and the poor poorer. With respect, that is not the case. Many of the poorest households will be better off under the new system. In fact the top 10 per cent. of households by income will pay relatively more compared with the bottom 10 per cent. than under the present rating system. I ask noble Lords, and indeed my noble friend Lord Chelwood who spoke feelingly on this subject, to reflect on that point in particular.
My noble friend Lord Ellenborough and the noble Lord, Lord Cocks of Hartcliffe, talked about gainers and losers, and the noble Lord opposite spoke about how the evidence seemed to be coming out so far as concerned his former constituency. My noble friend Lord Ellenborough was one of those who quoted the government statistic that the top 10 per cent. of earners would pay around 15 times as much toward the cost of local services than the bottom 10 per cent., but he then complained that the figure included the contribution from national taxes. Perhaps I may offer to my noble friend another statistic which he may find more persuasive because it relates to the community charge alone: with rates alone the top 10 per cent. of earning households today pay five times as much as the bottom 10 per cent. With the community charge tha ratio will be six times. That hardly squares with a system which will be more unfair to the lower paid.
The right reverend Prelate the Bishop of Gloucester argued that on the assumption that the present rating system is based on ability to pay, the onus should be on those advocating a flat rate payment to explain the justification for such a change. Perhaps I may make three quick comments. First, the right reverend Prelate's view is based on a not altogether correct premise. It is not true that the richer one is the more one pays in rates. I quote a familiar example. A widow may continue to live in a house which she bought many years before when her husband was alive and working, and may find herself still in the house and paying far more than several 954 wage earners next door. Secondly, the community charge, as I have explained, is not a flat rate charge for the 9 million people on the lowest incomes. Thirdly, the fact that some taxes are progressive, as they must be, does not logically mean that all taxes need to be so.
On this argument, no government would be allowed to have any flat rate duties or charges. Surely what is crucial in this case is the total effect of the community charge on people combined with national taxation, which in this case has the effect of the higher income households, quite rightly, paying relatively more compared with the poorer households than even under the present rating system.
Both the right reverend Prelate and the noble Lord, Lord Cocks, spoke of the problem of elderly relatives, suggesting that the community charge might be the cause of people putting their elderly relatives into homes rather than ensuring that they were cared for in the community. With respect, I doubt whether this would be the effect. For elderly people on low incomes, the community charge will be paid at only 20 per cent., and then that 20 per cent. will be reflected on average in an increase in the income support level. Therefore there ought to be very little in it between the elderly person staying at home, and somebody on full rebate in a nursing home who is exempt.
The noble Baroness, Lady Lockwood, also spoke about old people being cared for by families. She mentioned the case of an old person depending on the state retirement pension who is cared for by his or her family. What the noble Baroness did not say is that a person dependent on the state pension would be entitled to the rebate of 80 per cent. and then there is the 20 per cent. which is taken into account as well when uprating the income support system. It is the same point again, and I am giving much the same answer to the noble Baroness.
The noble Lord, Lord Graham of Edmonton, asked whether the Government propose to limit the supply of community charge information, in particular for credit purposes. The noble Lord will know that the Bill confers on the Secretary of State the power to provide for the sale of an extract from the community charges register. That extract will consist of a list of names and addresses. My right honourable friend has made it clear that he has not yet decided whether or how the power governing the sale of the extract should be exercised. Before doing so he will consider carefully the representations that have been made both for and against the sale of the extract. I am sure that he will give full weight to the views which were expressed today by the noble Lord.
The noble Lord, Lord Houghton of Sowerby, spoke about the deduction of community charge at source. Perhaps I may simply make two comments. We do not believe that a general system would be justified. We believe that it is important for people to be given the responsibility for paying the charge out of their own pockets because this will bring home to everyone the costs and the benefits of local spending. On the other hand, if people refuse to pay, local authorities will have a range of methods for enforcement, including distraint of goods—as they 955 have at the moment with the rating system—and also the new proviso concerning attachment of earnings and direct deduction from social security benefits.
Finally, perhaps I may say a very brief word about business rates. The noble Lord, Lord Underhill, in his speech quoted from the 1986 Green Paper about business rates. Unfortunately the noble Lord left out a passage. Paragraph 2.10, to which the noble Lord, referred, continues:'Employers' organisations, both in the private and public sector, report that their members have been influenced by rates in making decisions on employment".That is absolutely basic to Part III of the Bill.
The noble Earl, Lord Lytton, in his very impressive maiden contribution, was most concerned about the business rating proposals. He was particularly concerned by the extent to which the new rating system will be dependent on secondary legislation. I think that is a matter of balance. Not everything can appear in primary legislation. If it did the system would soon become far too inflexible. We think we have the balance right. I am sure we shall be able to return to this matter soon. Arising from the noble Earl's remarks, may I also give an assurance that statutory consultation between businesses and their local authorities we intend to be written into the Bill, if your Lordships agree, as the Bill goes through the House. That, contrary to what the noble Lord, Lord Ross of Newport, said, will mean that, as in the example that the noble Lord gave of Sheffield, where apparently the local businessmen and the authority are planning well ahead together, that will be underpinned, if your Lordships agree, by a provision which will go on the face of the statute.
The noble Baroness, Lady Stedman, raised a large number of issues about Part III which will put us on notice for the matters she will wish to pursue. But she, together with my noble friends Lord Pym and Lord Massereene and Ferrard, revived the problem of rural shops and post offices. I recognise the concern of my noble friends and of the noble Baroness, but it is perhaps to some extent exaggerated. We do not, of course, know what the outcome of the revaluation will be, but there is no basis on which to expect that rateable values of village shops will increase by more than the average. If that is the case, then there is no reason to expect any increases in rate bills. Indeed, where the value of a shop is affected by deteriorating economic circumstances there will be no reason why the value and the rate bill should not decline. Finally in this connection, I should say that where part of the shop property is occupied as a domestic property that part will be excluded from the rating assessment. So I believe that that part of the arrangement will be fair also.
The noble Lord, Lord Moran, made the suggestion that we should remove liability for fishing rates under the national non-domestic rate and pass the benefit to an old friend of mine, the new National Rivers Authority. Fishing and other sporting rights have been rated for many years and we had not intended to make any change. However, the argument that the noble Lord makes is an interesting one and I shall ensure that it is considered by my right honourable friend.
956 Finally, I should say one general word about Part III—
§ Lord Mountevans
My Lords, I am grateful to the noble Lord for giving way. I have listened to much of the debate this evening and I think the noble Lord has answered almost all the questions put to him, but he has not answered mine. May I ask him possibly to shuffle through his papers, or perhaps say that he will write to me?
§ Lord Belstead
My Lords, I apologise to the noble Lord. Among a large sheaf of papers I have a spendid answer to both the noble Lord and to my noble friend Lord Teviot. If the noble Lord will forgive me for just one moment—
§ Lord Belstead
My Lords, I apologise to the noble Lord and to my noble friend, because this is an important point. We are particularly concerned about the proposals to require passenger transport authorities to raise their funds by making a levy rather than a precept on their member district councils. I assure both my noble friend and the noble Lord opposite that all we are proposing is recognition of the fact that the PTAs are effectively a joint venture by the individual boroughs. The precepting arrangements would allow them to continue to distance themselves from the PTAs. The levy arrangements will ensure that the boroughs become clearly accountable for their share of the costs of the PTAs, and we hope that that will make them more accountable for the decisions of their representatives on the PTAs.
I know that behind many of the remarks which have been made today noble Lords may have had the thought no one can be entirely sure exactly what will be the effect on business rates after revaluation. Before the House goes into Committee in two weeks' time, I should like to remind noble Lords that there will be generous transitional arrangements in the form of ceilings on the rate increases that any business can face in any one year. Although there is no evidence that small businesses will face larger increases, we accept that they may be less able to absorb any increases. Therefore we are taking power in this House to set a lower ceiling on maximum percentage increases in a year for small businesses. I hope that noble Lords will agree to that power.
I was particularly interested to note that two former Secretaries of State for the Environment, my noble friends Lord Jenkin and Lord Rippon, put their finger on the issue of the need for accountability as being the most compelling argument for reform. Both noble Lords, and the two former environment Ministers who have also spoken in the debate, agree that the Bill is necessary. I believe that today there is substantial agreement that the rating system must be replaced. I believe that that will be achieved effectively and fairly by the Bill before the House. I now ask your Lordships to agree that it should be read a second time.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.