§ 3.10 p.m.
§ Baroness Stedman rose to call attention to the problems currently accompanying the imposition of the community charge as a means of raising local government finance; and to move for Papers.
§ The noble Baroness said: My Lords, I begin by saying that 1990–91 would have been a very difficult year for local authorities without the poll tax, but the change from rates to community charge is only one small part of the change. For most local authorities it is a year of "all change".
§ It would in any case have been a bad year because of the extent of disagreement between central government policy and local authority plans. Local authorities of whatever political persuasion are facing and responding to pressures for increased services. That has been more and more the case over recent years; particularly in education with the Education Reform Act and in social services with the care of the elderly and the run-down of major health service institutions in favour of community care.
§ Overall, the county councils in England and Wales are planning to spend £1–1 billion more than the Government spending assessment. As counties account for about half the total, this implies a national gap of over £2 billion between the standard spending assessments (SSAs) and the budgets. The average gap in England is £48 per adult, or 7–4 per cent.
§ Disagreement about spending needs has occurred under all systems of local government finance since 1980—perhaps even back to the days of Tony Crosland and his famous "the party is over" speech. However, this year makes the disagreement more visible because all the excess falls on the community charge rather than roughly half of it on the non-domestic ratepayer as was the case in the past. As I said, this is also the year of "all change".
§ The SSAs are calculated on a new formula which is equally as complex as the old grant related expenditure assessment. Both claim to assess what an individual local authority needs to spend to meet the Government's idea of standards of service. The changes have been extreme, especially at district level and were impossible to predict in advance. For example, Norwich and Ipswich were supposed to need to spend less than their GREAs in cash terms but rural districts in the same areas were supposed to spend one-third more. Both the GREA and the SSA cannot both be right or both wrong, and neither can such major increases or decreases be achieved in one year.
§ The national non-domestic rate and revaluation is a major administrative change for district councils which affects all councils as ratepayers; for example, Cambridge City has not formerly paid rates on its properties because of an anomaly in a private Act. It now has to pay them. The new capital controls, reasonable in themselves, have meant reconsideration of authorities' planned capital spending and, as is usual, the figures became known much too late in the budgetary process. On top of 877 that, the districts have had to cope with new rules for council housing finance and there is the change to local management of schools and colleges which takes time and effort to get under way. Thus, the community charge, with exemptions, safety nets and transitional reliefs, did not become a clean change of system.
§ In January the Chartered Institute of Public Finance and Accountancy (CIPFA) made a study of the revenue support grant and found that unless local authorities made substantial cuts in the volume of spending they would not reach the DoE quoted average community charge of £278 per adult. It went on to say that the average community charge was likely to be in the range of £330 to £340 per adult, or some 20 per cent, to 25 per cent, above the DoE figure. How right that proved to be!
§ The spending assumptions by Government underlying the RSG proposals implied that local authorities would be able to meet the cost of government policies, the effects of inflation, and allow 3 per cent, for increased planned spending levels. Local authorities learned long ago that the Government do not live in the real world where retail prices are about 8 per cent, higher than a year ago and pay settlements are getting into double figures.
§ If the RSG had been set in line with inflation —by, say, 8 per cent, —the total expenditure figure would have been £31 billion. As it is, the difference between what the Government allow and the right figures means an extra £35 per adult on the community charge. If spending rises to meet the cost of implementing the Education Reform Act, each 1 per cent, of extra spending adds £9 per adult to the community charge. Each 1 per cent, of registered adults who do not pay the community charge adds on average another £3 per adult to the charge of those who do pay.
§ Putting all this together, CIPFA argued that allowing 8 per cent, for inflation, 1–5 per cent, for implementing new policies and assuming only 5 per cent, registered adults failing to pay, the real community charge should be £344 compared with the £278 that the Government have assessed. The Government assessment does not represent an accurate calculation of the cost of actually providing services. It is the Government's "guesstimate" of the amount that they think local authorities should need. They have ignored the fact that every county has a duty to assess the services required in their county, what they cost, what provision should be made for inflation, and then decide those costs against the ability of their chargepayers to pay.
§ In order to keep down the community charge in my county area—but still £21 above the Government figure—the council cut back its budget by £7–8 million. In doing so it hit the most vulnerable section of the; electorate—the elderly, frail and the handicapped —by taking away free community care, home helps and meals on wheels for the over-85s, by stopping concessionary fares for the elderly and by increasing the price of school meals. The changes to the bus subsidies saved £0–3 million and the changes in community care £0–8 million. I regret both those changes.878
§ In effect, the Government have proved unhelpful by guessing the counties' decisions and then offering uninformed comments on issues which are properly the responsibility of the elected authorities who are answerable to their electorate through the ballot box.
§ There is concern about the uniform business rate. That concern is not necessarily over the level of the rate but over the results of revaluation. Revaluation was bound to be painful and there should have been a safety net covering the phasing-in period. We should have preferred a rate rebate scheme for retailers who provide services in village shops. We should also have preferred to see a 10 per cent, ceiling in real terms on increases for small businesses and the phasing in of the system over a longer period; say, eight to 10 years.
§ What the Government have done is to turn the non-domestic rate into a national tax and then replace that part of local government income that used to come from such rates within the central grant. It may be appropriate that non-domestic rates should become a national tax but the Government could have given a higher central grant and the rest could have been raised by local income tax which would have taken account of ability to pay, would be fairer, simpler to understand and easier to administer.
§ The SSA formulae are gravely defective, being based on information which is two years or more out of date. In fast growing counties like Cambridgeshire and Buckinghamshire they considerably understate the current need to provide services. There is no allowance or adjustment for varying local costs and counties just outside the London area but in the commuter belt have to match private sector pay rates to obtain and keep staff. The SSA system makes a crude adjustment in favour of London and the South-East at the expense of counties like Cambridgeshire.
§ The Government have used 1989–90 figures which were especially kept low at the behest of Ministers in order to keep down rates and to return the balances to the ratepayer. However, authorities cannot repeat that "take" from balances and the transitional reliefs have given little or no protection.
§ We have all read and heard of the difficulties and the cost of registration in Scotland where at least 40 per cent, of the 3–9 million entries on the register have been altered in the past year. Strathclyde region has been making 10,000 to 15,000 amendments a week. The Grampian region has made 195,000 changes on a register of 380,000. I checked with my city treasurer in Peterborough. His department has made strenuous efforts to complete the register and it is claiming a success rate of over 98 per cent., but at what cost and effort! The administrative cost, including benefit, will increase by £1–2 million or 151 per cent., compared with the cost of the old rating system. In 1989–90 the preliminary cost was £850,000 of which £157,000 was met by specific government grant.
§ Three or four members of staff have been fully engaged all this time on registration, exemptions, anonymous registrations and the impact of people movement within the area. Under-rating—except 879 for those with benefits and movements within households had no effect at all; it was only the movements of complete households that had an effect. Implementing the new computer software for the new system and for rebates was not helped by late announcements of transitional relief and extra help for pensioners and the disabled.
§ Staff recruitment was another headache but it has been a success. The department anticipates that well over 111,000 bills will go out to households early in April but only because 20 members of staff worked double shifts and at weekends. At present 28,000 bills will be abated by rebates. The authority believes that another 7,000 to 12,000 people could apply who have not yet done so. Last week's Budget announcement raising the limit of savings, which I welcome, could mean another 20,000 to 30,000 people applying for rebates in my city area.
§ A large part of the increased cost comes from the higher volume of accounts—that is, 120,000, as against 50,000—and the need to keep the register up-to-date. That has required 42 extra staff and the necessary accommodation, new computer systems, extra equipment to cope with the increased volume of work and initiatives to help the public. Overall it seems that administration costs for the community charge will be two-and-a-half times that for the old rating system.
§ Many more people can now claim benefit and I welcome that. However, have the Government any idea what will be the ultimate cost in rebates? Have they any idea what this last-minute concession will cost local authorities in yet extra administration and staff costs? Capping has been threatened. What criteria will the Government use? They cannot base capping on the tax levied; they must use the authority's budget What will be the criterion? Will it be the SSA; the increase in the community charge over last year's rates; the percentage change in spending plans from one year to the next, or a combination of all three?
§ Capping can be a very complicated and time-consuming process. It can only end in anomalies and more ill-feeling. Alan Travis, writing in the Guardian recently, suggested that a graph showing how the capping system could work could resemble a four year-old's early attempt with a spirograph set. When will the Government accept that no two counties, districts or parishes are identical or have the same needs?
§ Some time ago the Prime Minister spoke of publishing a list showing the figures if rates had been retained compared with the community charge. When will that information be available? What will the Government do next year and the year after, to make the SSA more reasonable? Will they revert to the old rating system; will they introduce a local income tax; will they put billions of pounds back to local authorities in a grant to lessen the future impact; will they take away services like fire and police from local government; will they cap every authority on the same charge; or will they perhaps take the line of least resistance and abolish local government and run it all centrally? As suggested to 880 me at the weekend, is Marsham Street in a state of confusion? A description I heard likened Ministers and officials to the crew of a train when the brakes have failed and it knows that the buffers will not absorb the impact. My Lords, I beg to move for Papers.
§ 3.25 p.m.
§ Lord Colnbrook
My Lords, I begin my remarks by reaffirming my belief that the idea of raising revenue from local people by a community charge is very much better in principle than the system of charging rates that we have at the moment. After all, every single thing that a local authority does is for the benefit of people, whether it is the provision of schools, roads, street lighting, parks, libraries or whatever. All these provisions are for the benefit of people. It seems right that it is the people who should pay for them.
We have been told that in the system we have at the moment, until now only half the people pay for the services. That cannot be right because it means that the other half of the population who have no responsibility for paying at all but who have the vote, can vote into office people with extravagant tastes knowing that the non-payers will not have to foot the bill at all. If democracy means anything to me it does not mean that. The principle of the community charge for this purpose is very much better than anything we have at the moment. I do not suppose that your Lordships can possibly envisage a government starting from scratch coming to this House, and saying that they were going to invent a new system for raising local revenue by reference to the alleged value of somebody's house 17 years ago and that only half the people would pay regardless of whether or not they could afford to. Such an idea would be laughed out of court.
I believe that the new system is very much better. However, there are difficulties and that is natural with any new system. It is bound to have difficulties. I shall refer briefly to three of them. First, as we have been told, until now half the people have not paid anything at all and now they will have to do so. They are not going to like it. I have not met anybody who likes paying any kind of tax. Somebody who, all his life, has paid nothing at all and is now told that he has to, is going to be disgruntled. I do not think that one can do very much about that, but it is a difficulty.
There are two other matters about which the Government can and should do something. The whole system of local government finance is hideously complicated and I do not pretend to understand it. I believe I am right in saying that I am in a majority in the country in that regard and possibly in a majority with the Members of your Lordships' House. Local government finance is hideously complicated. It must be said that the new system is not entirely straightforward, either.
All these factors give rise to the possibility of misunderstanding. That misunderstanding is now very widespread, particularly as to why the charges in some areas are larger than in others. Perhaps I may give a precise example. I live in Berkshire. The community charge in Berkshire, depending on 881 precisely where you live, is high. It is well over £400. People do not like that very much and so they ask why. Understandably, the Berkshire County Countil says that it is the Government's fault, and, in terms, the Government say it is the fault of Berkshire County Council.
Recently, I watched the "Panorama" programme. The Secretary of State for the Environment, on being asked about Berkshire, said, "The trouble is Berkshire is spending 25 per cent, more this year than it did last year". At almost exactly the same moment, the Berkshire County Council petitioned the other place. The Petition begins like this:The Humble Petition of Berkshire County Council, Sheweth.That its budget for 1990–1 of £411 million is 4% less in volume terms than that of 1989–90.No way can they both be right. I do not know who is right. The truth of the matter is that until the moment, nobody does.
§ Lord Mcintosh of Haringey
My Lords, since the noble Lord has the Petition in front of him, can he confirm that it is counter-signed by the county treasurer?
§ Lord Colnbrook
My Lords, so it may be. I have read it out and I am inviting your Lordships to consider the difficulty that we are in. So what happens? Ordinary people, of whom I count myself one in this regard, say, "I don't know whose fault it is. It must be the Government's fault because the Government brought the wretched thing in". I do not know but I am sure that this type of misunderstanding is widespread throughout the country. The Government owe it to us all to give a great deal more time, energy and trouble to explaining the whole thing than they perhaps have been able to do up until now.
My second point was dealt with at some length by the noble Baroness in opening the debate. There is a good deal of argument about the standard spending assessment. Most authorities disagree with what has been decided. It has been decided, as I understand it, in Whitehall. It smacks to me slightly of the old saying that the gentleman in Whitehall knows best. I am not always convinced that the gentleman in Whitehall does know best. I hope that in the coming year the Government will go carefully, deeply and thoroughly into the whole basis of the standard spending assessment, county by county, and do it on the ground and not in an office in Whitehall. They should go to the areas and see for themselves. If those two difficulties can be got out of the way, this new system —which, as I said at the very beginning, I totally support —will have a much easier ride.
§ 3.32 p.m.
§ Lord Hughes
My Lords, we must be grateful to the noble Baroness, Lady Stedman, for giving us the opportunity to discuss this matter today. I should like to add to that my congratulations on the way in which she presented her case. I agreed with almost everything she said, although I am not so sure about a local income tax.
Today the Secretary of State for the Environment met with local authority officials. He said, according 882 to the one o'clock news, that the poll tax would do two things. It would bring about more accountability and it would increase turnout at elections. He will probably be right if past experience is anything to go by. Events in Scotland during the past two years have shown that the electorate hold the Government accountable, so that is where accountability lies in Scottish terms. The accountability of the Government had this effect. They lost 11 of their 21 parliamentary seats in Scotland. In ensuing local authority elections, unfortunate Conservative councillors seeking re-election also felt the stick across their backs. The figures at last week's by-election, where there was an extraordinarily high turnout of approximately 75 per cent., show that the electors also know where accountability lies.
The noble Lord, Lord Colnbrook, was concerned about fairness. In Scotland, a low paid worker in the health service, living in Edinburgh, with a wife at home looking after two young children, will pay exactly the same amount in poll tax as the Secretary of State for Scotland. Perhaps the Secretary of State thinks that fair. Obviously, the electors in Edinburgh did not think that it was fair.
My next point concerns what was said by the Minister of State for Scotland on 30th June 1987. I told the noble Lord, Lord Sanderson, that I would be quoting him. I was going to say that I warned him, but I do not need to say "warned" because I told him that I would not be quoting him in any hostile way. On 30th June 1987, in reply to a supplementary question at Question Time, the noble Lord, Lord Sanderson, said:However, if refinements are made to the proposals [for England and Wales] we will of course consider whether any parallel changes need to be made to the Abolition of Domestic Rates Etc. (Scotland) Act".I believe that it was his first day as Minister of State. However, he was sufficiently confident of his answer to be able to repeat it. He said:However, as I have said—and I think I ought to repeat it—if refinements are to be made to the proposals we shall consider them in relation to the Scottish Act if and when that is necessary".—[Official Report, 30/6/87; cols. 119–121.]We know from our experience in the House of the noble Lord, Lord Sanderson, that he is an honourable Minister. Unlike some of his colleagues on the Government Front Bench, he frequently gives us answers which we understand and which often relate to the question that has been asked. So this was a good quotation to bring to the attention of the House.
In the Budget debate last week the Chancellor of the Exchequer showed that he was ignorant of Government policy as it had been stated by the noble Lord, Lord Sanderson. It must have been Government policy because the noble Lord was neither repudiated nor were his remarks amended in all the time that has passed. In increasing the savings allowance for a couple from £8,000 to £16,000, the Chancellor of the Exchequer either did not know Government policy on this matter or chose to ignore it. In the result, if the Prime Minister could have made anyone else Secretary of State for Scotland we would have had another one. Instead, the Prime Minister had to stand up in the House of Commons and make a U-turn.
883 What other lessons can those on this side of the Border learn from the experience of the poll tax in Scotland? I live in the Tayside region of Scotland. It was obviously not possible for me to obtain figures for the whole of Scotland but I thought that Tayside was unlikely to be very different from other areas. I am told that at the beginning of February 26,000 people had either paid nothing or were seriously in arrears. They account for 9 per cent, of those who had registered for the poll tax. Of those 26,000, 15,000 had paid nothing. In other words, six people out of every 100 had paid no poll tax.
I wanted to find out whether a comparison could be made with the previous position under the rating system. In the last year of the rates non-domestic ratepayers who paid their rates directly to Tayside region accounted for 2 per cent, of the number. Tayside could not give me a figure for those in council houses who paid combined rent and rates to the local authority but it is probable that this would account for another 2 per cent. The figure for non-payers or reduced payers was 4 per cent, in the last year of rates. The figure is 9 per cent, in the current year. This must add to the difficulties of local authorities and does not bode well for how much the poll tax will be next year. I suggest that those South of the Border would do well to do what the Government have not done; look to Scotland to see what will happen to you.
§ 3.38 p.m.
§ Baroness Robson of Kiddington
My Lords, I am grateful to the noble Baroness, Lady Stedman, for introducing the debate. But in view of the limited time we have to speak on this important subject I shall confine myself to one of the most unfair aspects of the poll tax legislation. Noble Lords will not be surprised to know that it deals with the position of student nurses.
When the Bill passed through this House I tried on three occasions to amend it. At Report stage I obtained support from your Lordships' House so that my amendment was passed with a majority of 20. The Bill went to the other place but the amendment was turned down. It came back here with a government amendment to replace my amendment. I was not happy with it so I tried to amend the government amendment. But, unfortunately, I was intimidated by arguments on the constitutional position. I now understand that I could have insisted on my amendment, and I wish I had. As a result, we have to deal with the problem as it now stands.
At present we have 2,000 student nurses training under Project 2000 and therefore they receive an 80 per cent, rebate. However, we have between 58,000 and 68,000 student nurses who receive no rebate. What has added to the feelings of student nurses and to the unfairness with which they feel they are being treated is the recent announcement that some RAF apprentices, and probably in the future various MoD apprentices, have been granted an 80 per cent, rebate. This has been done in the Aylesbury Vale district with RAF trainees from Halton and also with apprentices at Fillingley in the Doncaster area.
884 They will only have to pay 20 per cent. These are apprentices who earn between £4,000 and £9,000 a year. No wonder the nurses feel badly done by.
The RCN held its annual conference this week in Brighton. One of the student nurses who comes from Lambeth challenged the Minister, Mrs. Virginia Bottomley, about this anomaly. She pointed out that she would have to pay £580 per year community charge as a student nurse. In The Times on 27th March it was reported that the Minister replied that there was no relevance in the comparison with those in the armed forces because they have a different employer. Since when has it become relevant to one's liability to pay the community charge who one's employer is? In my innocence I thought that it had something to do with one's ability to pay. I believe that the student nurses have a grudge with which the Government should deal.
What can we do? The Government are already nervous about the reduction in the recruitment figures for nursing. The figure was down by 13 per cent, last year and the Government have launched a £5 million advertising campaign to increase the intake. However, it will not help if student nurses are being treated in the way that I have just described. But the anomaly, even at this late stage, could easily be resolved. Under Section 30(1) of the Local Government Finance Act 1988 the Secretary of State for the Environment has the power to define the student category by regulation. He could simply issue a regulation under that power to allow all nursing students to pay 20 per cent, of the poll tax. Moreover, such an action would not be an openended financial commitment as the number of students pursuing the non-Project 2000 courses will be limited and rapidly shrinking in the next few years. Therefore it seems unnecessarily rigid not to treat them the same as students studying under Project 2000.
Therefore if the Government concede—which they do—that all nursing students in the long term will pay just 20 per cent., why penalise now those students whose period of education, through no fault of their own, falls by chance into the phasing-in period of Project 2000? I ask the Minister to use his influence to persuade the Secretary of State to exercise the powers that exist under Section 30 of the Local Government Finance Act and resolve this very unfair discrimination against student nurses.
§ 3.44 p.m.
§ Lord Monson
My Lords, it is of course highly desirable that the link between representation and taxation should be strengthened at local government level to the degree that already exists at national government level. Therefore, it is right that every adult should pay something towards the cost of local government services and that that something should vary according to the prudence or extravagance, as the case may be, of his or her local authority so as to encourage thrift and value for money. However, the present formula is not right and is widely resented, as those of us who supported Lord Chelwood in principle forecast. It is resented for a good reason.
885 The current agitation over the poll tax is not as the Government suppose a nine-days wonder. It is highly anlikely, as Ministers claim, that in a year's time everyone will be wondering what all the fuss was about. The reason that that will not happen is that the nickname given to the community charge —namely, the poll tax —by the public and the press is an accurate one. The so-called charge is by and large a tax and not a charge in the normal sense of the word. No one is compelled to pay for a road fund licence unless he has a car which he uses at least once a year. Similarly, no one is compelled to pay for a television licence unless that person has a television set in working order which is supposedly used, if only spasmodically.
The community charge does not fall within that category. Every citizen benefits from the theoretical 24-hour seven day a week protection afforded by the police and by the fire services. Moreover, every citizen benefits from street lighting, street cleaning, refuse collection, road and pavement maintenance and, arguably, parks and other open spaces. By no means does every citizen benefit from local authority housing, social services, adult education, libraries or sports centres, let alone those projects rumoured to be favoured by loony-left Labour-controlled councils; for example, educational visits to such bastions of democracy as Cuba and Albania, or the legendary lesbian and Rastafarian theatre workshops. Further, not every citizen benefits from expenditure on education. Most bachelors and spinsters and, by definition, all childless couples are incapable of so doing.
Therefore, the community charge is for the most part indeed a poll tax. It is also a direct and not an indirect tax. Direct taxes in this country—and indeed in every other country I can think of—are traditionally broadly proportionate to the taxpayer's income. The current non-progressive nature of the poll tax means that it bears with particular harshness on those just above the rebate limits. Many of these people, incidentally, are skilled blue-collar workers who voted Conservative for the first time in 1979 and may now be regretting that decision. It may well be that the poll tax absorbs 7 or 8 per cent, of their gross income, and possibly even more in some places.
What then is to be done? First, I suggest that we should remove the petty unfairnesses which infuriate everyone. I refer to, for example, the imposition of the poll tax on beach huts and also the unfair treatment of student nurses to which the noble Baroness, Lady Robson of Kiddington, referred. Secondly, I suggest that we should make the funding of education, as opposed to the control of education, a central government responsibility. That could be paid for partly by limiting tax relief on mortgage interest to the standard rate of tax and partly—because in my view there is a case for taxes on property which to a large extent is exempt from taxes and which has every sort of tax break—by restoring stamp duty on property transfers to their previous level but making this payable by the vendor and not by the purchaser. In that way first-time buyers will be greatly assisted and at the same time it will mean that affluent middle-aged couples on the verge of retirement, who are selling large houses 886 so as to move into smaller ones, will be able to contribute modestly to the Exchequer.
Can the poll tax, shorn of its responsibility for education, be made more progressive? The answer is: only with the greatest difficulty. It would make a tax which is already complicated, as pointed out by the noble Baroness, Lady Stedman, still more complicated. Local income tax also raises many problems which are too numerous to enumerate on this occasion. Surely the right answer to the non-progressive nature of the poll tax is to make national income tax somewhat more progressive. The present 25 and 40 per cent, tax bands could be abolished, not least because a marginal starting rate of 25 per cent, is already far too high, especially taken in conjunction with national insurance contributions of 9 per cent. Instead three rates should be introduced: say 15, 30 and 45 per cent. This would be considered a fair solution by most people, I suggest. It would greatly help those earning between £5,000 and £10,000 per year and incidentally greatly improve the Government's chances at the next general election.
§ 3.50 p.m.
§ Lord Taylor of Gryfe
My Lords, this is an anniversary. I am sorry that the late Lord Ross of Marnock is not here to listen to the debate. It is almost three years to the day since this tax was introduced into the House by the noble Lord, Lord Glenarthur. He said at col. 1324 of the Official Report for 17th March 1987:The benefits which the new system will bring to these deserving sections of society… as well as the greater degree of fairness … make this Bill one of the most… worthwhile pieces of… legislation",that has come before this House. The noble Earl, Lord Caithness, supported this when the English tax was introduced by saying at col. 829 of the Official Report for 9th May 1988:Now is the time to move to new and fairer arrangements". I emphasise "fairer".This Bill will give us that".Since we have had the experience of the tax in Scotland it may be worth while to check whether this advice has been fulfilled. Strathclyde University has just conducted a survey of the impact of the tax on the Strathclyde region. It revealed that wealthy households in three of the most expensive residential suburbs of Strathclyde are making substantial financial gains under the community charge at the expense of poll tax payers in the remaining 16 parts of the region. That does not suggest that there is any degree of fairness in the tax. If there is one thing wrong with this tax it is that it is taking from the poor and giving to the rich. Basically that is what is wrong with it.
So we continue. The noble Lord, Lord Glenarthur, said on 17th March 1987 that the ratepayers supported the Bill; it was good for democracy; good for local accountability and good for Scotland. One would think that the Scots would all be lining up to pay the tax, but that is not quite the case. They usually recognise a good thing in Scotland but latest figures on payment of the tax in Scotland suggest that to say the least, there is a certain reluctance. I 887 checked the figures and published them in The Times and they have not been challenged. The position is that 3.8 million Scots are liable for the tax, which was introduced in April 1989. Of those, 800,000 have paid nothing or are more than three months in arrears. Included in that figure are 375,000 non-payers against whom sheriff warrants have been issued. The banks and the Department of Social Security have indicated that they cannot handle the recovery based on that number of sheriff warrants.
Thus the tax is not welcomed by the Scots. There is reluctance to meet the requirements of the legislation. I do not support the people who say that they should not pay the tax. I believe that if the law is passed people should obey it and try to change it. I have little time for people who choose which laws they will support. However the figures I have just given to the House indicate that there is a large-scale gesture of protest.
The cost of collecting the tax has already been discussed. It costs more than twice as much to collect the same amount of money. No business could justify a policy that costs twice as much to collect the same amount of revenue. One of the problems is that, because of the new demands on local authorities under the new care in the community legislation, local authorities have additional burdens to carry. On top of that, they will only be refunded for the excess in costs of the poll tax collection in Scotland to the extent of 50 per cent. Local authorities are suffering from the fact that people are not paying. There is a considerable cash flow problem for local authorities, which are hard pressed to fulfil their obligations in many social services.
I am glad that the debate has been so well introduced because, while we shall not change the law, under this Government at least, we should emphasise the iniquities of the law that has been passed.
§ 3.55 p.m.
§ Lord Jenkin of Roding
My Lords, I had not realised that I would follow the noble Lord, Lord Taylor of Gryfe. I informed myself of the exact position in Scotland about the non-payment of the tax. Noble Lords may be interested to have the answer. Contrary to what one has read in certain press reports—some of which have been totally misleading, based on entirely false information —the vast majority of people in Scotland are paying the community charge. I understand that 98 per cent, have now paid in many areas.
Even if one takes the region with the highest rate of arrears—which I think is Strathclyde—and compares the figures with the arrears of rates under the old system, the figures are comparable. I beg the noble Lord, Lord Taylor, not to base his arguments on figures which have appeared in the press but which bear little relation to reality.
A point has to be made about this. I shall come back to Scotland in a minute but the people in Scotland realise that those who do not pay simply oblige everybody else to pay more. There is great resentment in Scotland as it has become known that 888 people are trying to argue that they should withhold the poll tax. Some demonstrators are saying, "Can't pay, won't pay". I make that point clear.
My noble friend Lord Colnbrook reasserted the principal arguments for the community charge, indeed for the whole reform of local government finance. I entirely support them, I believe that as the tax beds down so the advantages will become clear.
As regards switching costs from the rich to the poor, the simple fact remains that if we take the totality of local authority spending and ascertain who is covering it, both through the community charge and other forms of payment, the top 10 per cent, of households pay by income something like 15 times as much as the bottom 10 per cent, of households by income. That statistic remains broadly true. It is a larger differential than applied under the old system. It seems to me to be the key point in regard to the rates system. My noble friend made clear that the rates system was wildly unfair and that is why it ceased to be operable and had to come to an end.
What has gone wrong—if I may put it that way—for there to be such an enormous uproar? I now refer to England and Wales. The answer lies in the substantial increase in expenditure which local authorities have chosen to undertake this year. It is a familiar pattern: no county council elections this year, so up goes the county council budget. That has happened in previous years and it is happening this year. I feel sorry for many of the little district councils which are the bodies that issue the community charge demand notice. They add their own charge to that of the county council and they have tended to be picked on in the press.
If we examine the problem, local authority spending is now £3 billion above what the Government estimated needed to be spent. The key point is that if that had happened without a change in taxation there would have been a 30 per cent, increase in the rates. People are comparing their poll tax figures with the sums that they paid last year. However, they should compare them with the sum they would have paid on the same expenditure this year. That would have meant a 30 per cent, increase. It is important to recognise that point. Furthermore, if the former system had been maintained, there would have been a revaluation. My noble friends from Scotland will remember the horrors that that caused some years ago in Scotland. One must make comparisons realistically.
Further, people do not yet know what their rebates will be. They have not yet had any rebate notices. One in four people will be entitled to a rebate. Many people are badly frightened that they will be unable to pay the full amount that they have seen quoted in the press. When they receive their rebate notices, that aspect of the matter will begin to put itself right.
I shall return to the situation in Scotland. Although this is the first year that the community charge has operated in England and Wales, it is the second year for Scotland. In Scotland in the first year of operation there was a substantial increase in spending. As a result, in the first year of operation the community charge was far higher than people had expected. But 889 what has happened in the second year in Scotland? Local authorities in Scotland are planning to increase their expenditure by nearly £400 million. That is an overall increase of 9–6 per cent., or under 10 per cent. The Actual increase in expenditure for the previous year was nearly 12–5 per cent. Therefore, there are grounds for saying that the high increase in spending in the first year of the community charge —local authorities thought then, apparently with some justice, that they could blame the Government—is perhaps slackening off in Scotland in the second year of operation.
Now people are beginning to realise, as they make comparisons between the community charges set by different local authorities, that it is the local authorities that spend responsibly and keep their expenditure under review that impose a lower community charge. I advise noble Lords to take heart from that situation. This matter will iron itself out. There may be some anomalies that need to be dealt with, but the second year of the operation of the charge in Scotland is a good deal better than the first year.
§ Lord Hughes
My Lords, the noble Lord said that there tended to be lower taxes in a year where there are elections. I should say that there will be elections in Scotland in May.
§ 4.2 p.m.
§ Lord Stallard
My Lords, the noble Lord will not be surprised to hear me say that I shall not follow his line of reasoning. I recognise that the noble Lord claimed authorship of the whole policy when he spoke on the Local Government Finance Bill when it went through your Lordships' Chamber in May 1988. The noble Lord claimed that he had invented the poll tax and had persuaded the Cabinet to adopt it. Therefore, he was bound to come out with some propaganda in favour of it. The noble Lord said that no one yet knows who will be entitled to rebates, or how much they will get. But in the next sentence he said that one in four people will be entitled to rebates. How does the noble Lord know who will be entitled to rebates if no one else knows that? That puts the whole matter into context.
It has already been said that this tax is unfair and is unjust. Furthermore, it is extremely complicated. It is for those reasons and for the reasons given in the ex:ellent opening speech of the noble Baroness, Lady Stedman, on the difficulties that local government have faced, that I have continually opposed the community charge ever since it was first proposed. As I said, it is unjust because the poor will pay more than the rich. We all know that. We all know that the Duke of Westminster, for example, will pay a lot less than many pensioners in inner London. That must be unjust.
I do not have to remind noble Lords of the original poll tax of 1379 and 1381. However, in that poll tax there was some consideration of people's ability to pay. There was some kind of rough justice. The poor paid one groat while the rich paid 50 groats. There were riots because of that tax. What I am about to say has nothing to do with the present situation of the Archbishop of Canterbury; but in former times the Archbishop and the Chancellor were executed 890 by the mob who were protesting about the unjust poll tax. To reintroduce a measure that has such a long history of unfairness is typical of some noble Lords opposite. We only have to look at the record to know that. The community charge is also unfair because it imposes on deprived inner London boroughs and other inner city boroughs the payment of subsidies. Those boroughs have to subsidise wealthy Tory boroughs.
Figures have shown—they are not my figures—that deprived inner city boroughs are having to subsidise wealthy Tory boroughs by means of the safety net. Camden, for example, is subsidising Wandsworth to the tune of £75 per head. That does not make sense in anyone's language, except if one's whole policy is based on spite, vindictiveness and personal electoral gain and has nothing to do with accountability or fairness. In that case, the community charge would make sense; but it does not make sense for the inner London boroughs.
It is unjust that the blame is being laid on Labour councils. The whole justification that the Conservative Party uses for the community charge is the profligate spending of Labour councils. However, Government figures themselves show that many Tory councils are levying poll taxes that are just as high as those levied by Labour councils.
The noble Lord, Lord Colnbrook, said that he did not understand the community charge as he did not have much local government experience. However, he then went on to explain it. He obviously did not understand that as many Tory councils are levying high community charges as Labour councils. I came across some figures which showed me that the local councils of—these include the councils of nearly every Cabinet Minister's constituency—the Prime Minister through to the Leader of the House, the Chairman of the Conservative Party, the Defence Secretary, the Chief Whip, the Social Security Secretary, the Chief Secretary to the Treasury and the Agriculture Secretary, are all imposing a higher community charge than the Government's assumed figure. The lowest overshoot is about 8 per cent., while the highest is 38–7 per cent. The highest overshoot occurs in the local council of the Secretary of State for Agriculture.
The local council of the Chancellor of the Exchequer is overshooting by 29 per cent, the Government's figures. Where are all those profligate Labour councils that the Government blame for overspending? If people studied those figures, they would come to the conclusion that I have reached, which is that the community charge is unfair and unjust. It is also unworkable because it is so complicated.
The rebate schemes and the transitional payment schemes have been mentioned with some pride by some Ministers. The noble Lord who spoke before me mentioned the rebate scheme. However, the rebate schemes are not what they should be either, because rebates are not worked out on community charge figures. They are not even worked out on rate figures. Government documents state that the calculation does not necessarily depend on what a person actually paid in rates or what his local community charge is. It depends on assumed rates, 891 averaged out by the department and on an assumed personal community charge based on the figure that it would have been had everything been all right and had the council concerned done what it was told and if the Government had agreed that the council was spending properly.
However, the charge payer has to pay any difference. In some cases the difference is as much as £300. A 30 per cent, increase in rates has been referred to. I should say that a lot of people would have been happier with that situation than with the increases that have been imposed on them through the community charge. I know shopkeepers in the inner London boroughs of Camden and Hampstead who would have been delighted with a 30 per cent, increase.
My time is up. I could speak for another hour on the community charge. I shall merely repeat that it is unjust, unfair, complicated and unworkable. The Government will be sorry that they ever introduced it.
§ 4.9 p.m.
§ Lord Harmar-Nicholls
My Lords, I am sorry that the noble Lord used a particular phrase because I am certain that noble Lords will completely disregard any case which is based upon the premise that a government have been deliberately vindictive. That approach to a problem such as this puts the whole matter out of court regarding our attention. The Motion is a good and fair one. It is the kind of Motion that we should have in mind at the beginning of the imposition of the community charge with the idea of returning to it as the measure progresses. The speech of the noble Baroness in support of the Motion was 90 per cent, acceptable to all sides. However, she could not help herself in speaking with a certain prejudice as regards 10 per cent, of her speech.
Everyone knew that there would be problems when we moved from the old rating system to a new system. The Motion states that, as expected, there are problems. Let us start looking at those problems and see how we can alleviate them for as many people as possible. That was the main burden of the speech of the noble Baroness. There was no vindictiveness there. That was common sense. That is how parliamentarians ought to do their work.
We also have a responsibility beyond debating with one another. We have a platform, and what we say is usually taken up by others. It either makes people outside uncertain and worried or it puts them on the right track. At the end of the day, in the other place in particular, we are given power of attorney to think such matters out on behalf of the electorate.
Where we make a mistake, even in this debate, is in suggesting that it is the community charge alone which covers the cost of local government expenditure on projects which are shared by everyone. We ought not to approach the matter from the point of view of the community charge meeting all local government costs. We owe it to the people who are not in the same position as we are regarding the calculation of the figures, to say exactly what the expenses are and where the money comes from.
892 When we talk outside the House on the matter, we ought to ensure that we explain that half of local government expenditure is paid for from government grant in any case and has nothing to do with the individual. If we are to be fair, we ought to point out that one quarter of the remaining half comes from the business charge, which has nothing whatever to do with the individual. It is only the remaining quarter that the individual is called upon to pay. Yet the individual gains almost all of the benefits that arise from local government expenditure. I am sorry that the noble Lord, Lord Hughes, who is usually very fair and sensible, should use the example of a person in the position that he described who pays the same community charge as the Secretary of State for Scotland. Then the noble Lord dragged in the poor old Duke of Westminster.
§ Lord Harmar-Nicholls
I have not heard one single argument without the Duke of Westminster being brought into it. What does the Duke pay towards the cost of local government expenditure from which everybody benefits? We all have our little machines, so we can work it out. We have access to the Blue Book which will tell us whether or not the formula that we work to is the correct one. I should like to put on record one or two figures which could answer the noble Lord, Lord Hughes, if he is prepared to listen. However, I do not believe that the noble Lord, Lord Stallard, will accept them, whatever I say.
The position is that if someone has an income of £300,000 a year, they pay £105,271 in tax. Of that £105,271, £20,000 goes to local government in the form of the government grant. He is left with the standard charge of £572 for two people in one house. Therefore the total contribution towards local government expenditure made by the £300,000 a year man —and I do not know many of them —is £24,824, which is 25 times as much as the average wage earner with £12,000 a year.
Now I come to a more reasonable figure, which is probably in the area of that for the Secretary of State for Scotland. If someone has an income of £50,000 a year, they will pay £13,471 in tax. Of that, £2,694 is the proportion which goes towards local government expenditure. Add to that the £572 standard charge, making a total of £3,266. That is three times as much as the £12,000 average wage earner.
All of those figures, and other graduations, are to be found in the Blue Book. Noble Lords will see that all the nonsense talked about local government expenditure being paid for not by those who have the money but by ordinary people on low incomes is not true. We owe it to everybody—and we are in a position to work it out for ourselves—to see that people outside understand that when forming their judgments.
Having said that, of course there are problems and there will be problems. The Government made an additional £2 billion available, on top of what they thought would be the cost, in order to answer the points mentioned by the noble Baroness about inflation and the additional responsibilities of local government. The Government made that sum 893 available in the belief that it would cover those factors. They still believe that it will cover them if there is not too much extravagance. If it is not enough, we must use our power—as the noble Lord did at Question Time this afternoon—to see that individual problems are sorted out. In the meantime, I do not believe that we ought to frighten people outside by misrepresenting the facts.
§ 4.15 p.m.
§ Lord John-Mackie
My Lords, many of the arguments which have been put forward today, particularly by the noble Lord, Lord Jenkin of Roding, have been based on estimates. I propose to put forward the actual figures as they affect the 15 people who live on the farm which I occupy in Essex. There are seven houses on the farm. Three of them are let That is because of the increased efficiency in agriculture over the past 30 years or so since I built the houses and because of the reduction in production. If my noble friend Lord Stallard has his way, the other three will also have to be let in a few years' time.
The rent of the houses which are let includes the rates. The total rates for the three houses are £1,418. There are seven adults living in those three houses. Their rents will be reduced by the amount of the community charge because I believe that to be only fair. They will each pay £381 (which is what Epping Forest District Council has fixed as the community charge) making a total of £2,667. They are therefore £1,249 worse off—that is £179 each. They are not people with large incomes; the houses are let to working people.
The houses of our two employees are rate-free to them. If we increase their wages by the amount of the community charge, in the case of the foreman tractor driver that will amount to £656. He will have to pay tax on that of £164 and his share of national insurance and social security. He and his wife will pay poll tax of £762. Therefore they will be approximately £300 worse off.
Much the same applies to our other employee, who is retired stockman. He works half time. His rates are £727. Noble Lords may consider those figures high, but they are very good houses. They are not the kinds of houses which farmworkers are presumed to live in; they have all modem conveniences such as central heating, and so on. His rebate on his rent will cost him tax of £182 —again with increases in national insurance and social security. There is also a difference of £35 between the rates and the community charge. He and his wife,who are both pensioners, will be worse off by £220.
My son, who manages the farm, lives in the other cottage which is rated at £747. He will be only £15 worse off as a result of the poll tax, but he will have £170 more to pay in income tax plus national insurance and social security charges. Therefore he will be more than £200 worse off.
My wife and I live in the farmhouse. Of the 15 people living on the farm, we are the two who are most able to pay our taxes —not too able, I should like to emphasise. Our house is rated at £1,146. So 894 we are better off by £384. That does not strike one as being fair. The community tax for the 15 people is £5,715. There is a little over £1,000 difference between that and the rates. There is a Conservative council in the area. I wonder whether the Government think that that is a fairer tax than the rates.
I was intrigued by the plan for taxation of the noble Lord, Lord Monson. I should like to read a little more about it. I notice my noble friends on the Front Bench looking at me. Perhaps I might manage to persuade them that people have ideas other than those of the main gist of the party. Something which has a relation to the local council and what it levies should be added to income tax in the area. I am sure that that would be a better system than this one.
§ 4.20 p.m.
§ Lord Ellenborough
My Lords, I have always supported the abolition of the discredited rating system. It is over and done with and it is no good harping back any longer on how frightful it might have been under the rates system. The Government now stand and fall—at the moment they are stumbling pretty badly—on their very own community charge or poll tax. That is what people will vote on in the May local elections.
I have always opposed the concept of a flat rate tax. It is unfair and dangerous. I strongly supported the late Lord Chelwood's amendment at the start of the Committee stage of the Local Government Finance Bill two years ago. That in effect asked the Government to think again and to take account of people's ability to pay. I was a teller in the Division which ensued and had the rather depressing task of counting no fewer than 317 of my noble friends through the Government Lobby. I often wonder how many there would be now.
Perhaps the message is getting home. One can read today that a senior Cabinet Minister and former Leader of the other place —Mr. Biffen —has made it clear that he thinks it is time the Government should put aside the flat rate principle and relate the charge to a graduated system.
In the meantime, whether we like it or not, the tax is now the law of the land and those of us in particular who support the Government had best try to make it work. The Government also have a duty to make it work. This Government a Conservative Government should not be in the business of allowing the tax to become a recruiting agency for the Labour Party.
The difficulty is that the tax will never work until and unless the Government recognise that a universal flat rate tax, which is what this tax is over and above the rebate levels, will be politically acceptable and tolerable only if levied at a low rate—not £350, £450 or £550. I disagree with my noble friend Lord Harmar-Nicholls. We cannot expect the tax to finance the same share of local services as the rates. If the burden on local authorities is too high, whatever form of tax is used to raise local government finance, whether it is rates, community charge, or local income tax —I shall not mention the roof tax—people will resist the tax and it will almost 895 always be the Government, not the local authorities, who will be blamed.
As it is a flat rate tax and far too high in most places, the list of those who need relief grows longer and longer and the accountability element becomes less and less meaningful. Yet those worst hit by the charge will be the very group of people likely to decide the outcome of elections—the skilled workers who earn too much to qualify for rebates and who live in flats and houses which were relatively low-rated, and who are now coping with sky-high mortgages.
One thing that must surely happen is that the cost of the safety net be borne by the Exchequer, now, in year one. That at present makes a complete fiasco of the so-called accountability of the tax.
Even more important and fundamental, if the tax is to have any chance at all of being politically acceptable, the Government must grasp the nettle and either substantially increase the revenue support grant by £3 billion or £4 billion or transfer a major item of local authority expenditure to the Exchequer. I ask my noble friend the Minister to press hard for a reconsideration of the substantial case for a transfer to the Exchequer of at least the cost of teachers' salaries which are determined at national level but paid for by local authorities.
My noble friend will be well aware of an Early Day Motion in another place which has been signed by some 70 of his honourable friends, including a vice-chairman of the 1922 Committee, and which calls for the transfer of the cost of education. Action on that front would dramatically reduce the burden on local government and completely transform the position.
At any rate, there must be an end to the miserable dribs and drabs of minor concessions wrung out of the Government, each one looked upon as a sign of weakness, never as a sign of strength. The point to grasp is that something fundamental must be done. The Government should take a hard look at the problem, not take too long and then take decisive action. The best decision of all would be to relate the charge properly to an ability to pay which is increasingly recognised as the only and final solution.
§ 4.26 p.m.
§ Earl Attlee
My Lords, perhaps I may start by apologising to the noble Baroness, Lady Robson of Kiddington, as I started a coughing attack right behind her while she was making her speech and then had quickly to leave. I also apologise to the House for the fact that having left, I did not come back until just before I was due to speak. There is nothing more off-putting than trying to make a speech on an important subject and hearing someone coughing and spluttering behind. Luckily, my wife was here and she suggested that I take a sip of port —unfortunately not vintage port —and breathe it in. That seems to have done the trick. I am not sure how long my voice will hold out, but, if I make a short speech, I am sure that it can only be to the gratification of noble Lords.
896 There was a nice little story in The House Magazine about a dear old lady who said, "I don't mind paying the community charge, but I do object to paying the poll tax". That is a typical statement which shows that people are not sure what is what. I wondered to myself why it was called the community charge, not the poll tax. One of the obvious answers is that the last time we had a poll tax in this country was under Queen Elizabeth I and anyone who disagreed with her had his head cut off. In the end, the peasants revolted and the poll tax had to be withdrawn.
I thought that I should check my facts so I went to the Library and consulted the Shorter Oxford English Dictionary. Having done so, I realised why the Government called it the community charge rather than the poll tax. Referring to the word "poll", the dictionary states:To plunder by or as by excessive taxation; to pillage, rob or fleece; to despoil a person or place of anything".I could not have asked for a better quotation.
Everyone, apart from most noble Lords opposite, says that everything about the community charge is wrong. But that is not true. To quote only one instance that I know of, my mother-in-law is a widow and the tax she pays, by whatever name it is known, has been drastically reduced.
What I should like to mention particularly is the uniform business rate. I live in a small community in north Hampshire, in Church Crookham; and when we talk about "our boys" we mean the Gurkhas. We covered that subject fairly well at Question Time; but just down the road is a village shop which is open from fairly early in the morning until fairly late at night. It is very easy to get there. How can that small shop hope to survive with this tax? The owners charge a little more for all their goods but I think that the community charge will kill their business together with a great many other small shops.
It is fine if you are a multinational company because if you have thousands of branches you may pay heavily in one area and possibly pay less in another area. Therefore you can even things out and it is not so bad. If you have a small shop which has an empty flat above it, you then have to pay the tax on that. On the other hand, if you let that flat be used by people who are homeless and do not charge any rent, they will not pay the poll tax because the council will actually pay them for it. There is an anomaly there, and I think we need to think very carefully to see how we can change the tax to make it more equitable to everyone.
I know that the noble Lord who spoke before me mentioned education. It seems to me that it would be a very good idea if the cost of education were to be taken over by central government. A great many people who are paying a large amount of community charge for education have grown-up children and therefore it would be far better if the whole cost of education came from central government, where it could be more equitably spread everywhere. There was a recent case quoted in one of the newspapers—perhaps in many newspapers—where someone who lived on one side of a road under one 897 council was paying twice the community charge of another person who was living across the road under another council. That must be very annoying. My Lords, my voice has lasted, and I will now sit down.
§ 4.33 p.m.
§ Viscount Mountgarret
My Lords, have we changed names, or changed sides? Your Lordships will remember that there was a certain Baron Frankenstein. He was a kindly man who created a monster. As he was a kindly man I am sure it was a kindly monster he was trying to create, but things went wrong and the monster got out of control. Eventually he was engulfed in flames and the creator of the monster was brought down.
I fear that that is what we have in this excellent principle and idea of changing the rating system to the community charge, which is all too often referred to as tile poll tax, which does not sound very good to many people. I urge the Government very strongly to reconsider the administration by which they propose to allow the charge to be inflicted upon people throughout the length and breadth of this country.
I want to direct my remarks at this stage principally to the tied cottage system, in which I must declare a vested interest in that rather like the noble lord. Lord John-Mackie, I have a number of employees, who are in tied cottages. This situation applies not only to agriculture but also to the police, firemen the clergy and a host of other people up and down the country whose jobs necessitate them living in cottages and whose rates are paid by their employers: a fact taken into consideration with their emoluments.
The 1st April falls next week, and those people will find that they have a charge, a personal tax, to pay in contributing to the community charge. This has changed the goalposts for the employer, who engaged his staff on the basis that they would live in cottages that were rent and rates free. I am not sure that this point has been thoroughly thought through by the Government, to see what should be done as regards people in that situation. The recent increase awarded by the Agricultural Wages Board to an average agricultural worker—and by average I mean a married man with two children—means that his basic pay is £120 a week and that will in fact result in him receiving net pay of some £5,760 a year. Out of that, he and his wife might well have to find some £700 a year, leaving just over £5,000 a year in his pocket. Last year the basic wage was £112 a week. Taking tax into consideration, he would take home pay of something like £5,460. That person will be £400 a year worse off.
While being a totally dedicated supporter of the Conservative Party, I am not prepared to accede very readily to something which is very unjust and unfair. Those who are able to pay more ought to pay more and those who are not in a position to pay as much should have great consideration shown to them. For that reason I strongly support what was said by my noble friend Lord Ellenborough on the basis of ability to pay. It is very easy to get confused with rates of income tax, allowances and so on but let us ignore them for the moment. If we could just 898 try to administer the charge on the basis of people's earnings, taking into account the benefits they may have, such as the occupancy of tied cottages and so on, that would be fine by me.
My noble friend Lord Jenkin said that we do not know what our rebates will be; but we do know. The pensioners know that they will get an 80 per cent, rebate. I would say, thanks a bundle. Let us take a married couple—pensioners on a meagre income—who have to pay 20 per cent, of an average community charge of something like £370 each. That means £3 a week out of their rather low income and it seems to be a substantial amount of money for people in that kind of situation. In my view there should be a sliding scale. It is not possible within six minutes to go into full details, but let us suppose, for example, that out of an income of £100 a week people were obliged to pay 5 per cent, of the current rate for the area in which they lived; those who pay 25 per cent, income tax had to pay the full rate; those who earn, say, £40,000 to £50,000 a year had to pay 150 per cent; and those who happened to earn £80,000 or £100,000 or more a year pay 200 per cent, of the standard rate. That would be fair and equitable in my view. One final point is that although husbands and wives are currently being assessed for their savings and earnings jointly, as from 5th April this year husbands and wives are being treated separately for income tax and are being separately assessed. Therefore they should be assessed separately for the level at which they, and they alone, pay their community charge, which is an individual tax. I hope very much that the Government will listen sympathetically to what I have said because if they do so they will enhance their reputation and restore their standing in the country very substantially.
§ 4.40 p.m.
§ Lord Donoughue
I am second time lucky, my Lords! This subject has received some public airing of late and we must be careful not to keep ploughing the whole field. We must also be gentle on the Minister who will be answering. He has been pitched in at the deep end of the Front Bench with the dead weight of the football identity scheme. He was rescued from that, and now has been handed this subject. As a good Northamptonshire man he deserves better.
I am concerned with only two aspects: the fundamentally unfair principle underlying the community charge and the role of local government in setting the charges.
The point of principle cannot be stressed too often because it is the main source of discontent with the tax, stretching across all parties. It is an example of a massively regressive tax bearing little relationship to ability to pay and running contrary to what, until a few years ago, had been the main drift of modern taxation in most civilised countries. Although its impact is mixed, and some examples can be found—and no doubt will be quoted—of poor people who are better off", the broad thrust is most helpful to the most prosperous. I am significantly better off, and I imagine that most noble Lordsopposite are also. That cannot be right and I believe 899 that many prosperous people who are beneficiaries, including many supporters of the Conservative Party —among them some of my best friends —share that view. It would be a mistake to assume that the opposition comes only from those who suffer under this tax.
I refer to the local government aspect. I should like to give support to the very authoritative arguments made by the noble Baroness, Lady Stedman, in her excellent opening speech. In particular, what concerns me is the attempt to switch all the blame for the high poll tax charges onto local government. I confess that I find myself in a slightly uncomfortable position defending local authorities on financial matters. For a quarter of a century I lived in Camden and saw at close hand some of the extravagant lunacies that used to characterise some local authorities.
I have sympathy with the Government's attempt to establish a line of accountability between those who spend and those who pay the rates, or this tax. I believe that there was a time when some local authorities were profligate. But the present campaign of denigration is broadly unfair. It seems to be one more attempt by the Prime Minister to switch the blame for her failures onto others.
When considering the poll tax charges and increases, noble Lords should be aware of certain important factors when adding up the numbers. First, the Government insist on comparing the new charges with previous and forecast notional expenditures. The percentage increases will in most cases be less when compared to actual out-turn expenditure for 1989–90 which is not yet completed.
Secondly, a substantial percentage of the increased local authority expenditure has been imposed by central government. That is especially true in the staff area. Roughly three-quarters of local authority expenditure is on wages, and roughly three-quarters of local authority wage increases for the coming year have been imposed on the local authorities by central government negotiations and by external formulae. The teachers, police, and firemen are obvious examples. Again, central government have imposed on local authorities new responsibilities, especially in the various social services, without providing the extra resources to operate them.
The costs of collecting the poll tax are much higher than those of collecting rates. Some examples have been quoted. I have seen a figure of 300 per cent, higher cost in Newcastle and 500 per cent, higher in Oxford. Underlying that is the Government's hopelessly inadequate inflation assumption of 3–8 per cent, when actual inflation is heading for 10 per cent, in the coming months.
The final point relates to local authority balances. I have spoken to friends who are treasurers for Conservative local authorities. They claim that they ran down their balances very loyally in 1987–88 to assist the Government in the general election year by keeping down rates. They expect to run down their balances in 1991–92 to help the Government in the election in that year. It is a little ungrateful to attack them now as profligate. After all, when are 900 they expected to build up their balances so that they can run them down again?
I do not say that no local authority has set its community charge higher than it should. It is a fact that historically every reorganisation of local government has been accompanied by a suspiciously large increase in expenditure. But it is quite unfair to blame local authorities for many of those increases which are not their fault. In fact, they have often been imposed by central government.
§ 4.46 p.m.
§ The Earl of Onslow
My Lords, the row over the poll tax was predictable, is predictable, and has turned out to be even worse than those of us who predicted it said it would be.
I said in my speech in this House on an amendment put forward by my very great friend, Lord Chelwood, that this is one thing that could lose the Conservative Government the next election. There was a general rumble from my noble friends saying, "You don't know what you are talking about". I wish to God that I did not know what I was talking about. It is a deeply unfair tax. I shall give noble Lords three examples of its unfairness.
A tenant of mine, who is a widow, lives in a cottage of mine. Last year, because her husband had saved and she was above the rebate level, she paid £280 a year in rates. It is a nice little cottage, with two bedrooms and central heating, and it is in good condition. It is an attractive house. This year in poll tax she will pay £405 a year. As a Government did we introduce a tax to increase it on widows and the childless?
A hardworking couple have a 19 year-old daughter who works. They live in a council house that they have bought. They paid £280 or thereabouts in rates last year. Their bill will be £1,215 this year for a family of three. Is that fair? I suppose that they could reduce their bill by £405 by booting their daughter out. Is that what the Government or the family wants? Of course it is not. I shall be £1,000 a year better off. Is that what the Government want? I hope that it is. I am seriously open to any fom of bribery they might give. I shall take it. But that is not good government.
On the whole, the Government have been the finest government this century. It is reasonable to say that when the finest government this century make what is in slightly less polite circles called a cock-up, they will make an Olympic gold medal cock-up. I suggest that the poll tax falls into exactly that description.
It is possible to suggest a reasonable alternative. I quite accept the Government's argument on accountability has great validity. I suggest the following. I suggest a little mea culpa on one aspect of their policy. I suggest that they go back to a property tax. If it is called a roof tax, somebody will call the poll tax a head tax, and one is better off without a roof than without one's head. I suggest therefore that the Government give a discount for a house occupied by only one person and a surcharge for a house occupied by more than two people over the age of 18. That would be fair. It would introduce 901 an element of accountability, and it would be a property-based tax which is a very rough and ready method of discovering how comfortably off or poor somebody is. After all, if you live in a big house, it is assumed that you can afford to do so. If you live in a small house, you probably do so either because you car not afford or do not want to live in a bigger house.
During Committee I said that the tax had been introduced by the more drunken of Turkish sultans, the mo re incompetent of Mogul emperors and the more effete of Plantagenet kings. I suggest that if my right honourable friend the First Lord of the Treasury follows the taxation policies of Selim the Sot, she will become just as unpopular. Unfortunately she does not have any janizaries to put down any ensuing rebellion. She must do so and my noble friends on the Front Bench must change their minds because it is a blot on an otherwise excellent record of one of the finest governments this century.
§ 4.50 p.m.
§ Lord Stoddart of Swindon
My Lords, in his admirable speech on the Second Reading of the poll tax Bill, my noble friend Lord Mcintosh of Haringey quoted an item from the Wiltshire and Gloucestershire Standard dated 1st April 1988. Mr. Nicholas Ridley, the then Secretary of State at the Department of the Environment, was there quoted as saying of local taxation:Why should a duke pay more than a dustman?".The Tory Dukes, Earls, Viscounts and Barons had their say when they all trundled in from the backwoods to defeat a very reasonable amendment intended to relate poll tax to the ability to pay as proposed by the late and sadly missed Lord Chelwood.
Now it is the turn of dustmen and millions of other ordinary folk from all walks of life, trades and professions to have their say. Indeed, they are doing so loudly and clearly. They are saying that they hate the poll tax and its progenitors alike. They said it in mid-Staffordshire last Thursday and they will say so again at the local elections in May. They will say so again and again after that until the poll tax is repealed or amended beyond all recognition, or until the Government are defeated at the next general election.
The mind boggles at the sheer incompetence of a government which introduced a tax which would always hit hardest their supporters. It was bound to cause even more bitter antagonism when voters in Tory areas realised that they were being required to pay more in poll tax in order to help Labour areas which, quite wrongly and over a long period, the Government had accused of being profligate spenders.
The whole poll tax system devised by the Government is full of anomalies and unfairnesses. According to my noble friend Lord Stallard, it even militates against heterosexual relationships because the rebate system favours people in a male or female homosexual relationship. Perhaps in reply the Minister can confirm that homosexuals will receive 902 better treatment than husbands and wives or common-law partnerships betweeen men and women. He had better speak to his officials in the Box about the matter.
I return to the incompetence of the Government in relation to their supporters. I should like to examine the position in Reading where I live and where I shall pay the poll tax. There are two Reading parliamentary seats which at present are both Tory. In the borough 83 per cent, of households will be worse off by paying poll tax than under the old rating system. As we have already heard, the Berkshire County Council is so incensed by the Government's treatment —and unfortunately there are no Labour MPs in Berkshire—that it had presented for it a petition in the House of Commons. Another example is Oxfordshire which has only one Labour MP, the rest being Tory. There the poll tax has struck like a bolt from the blue. In one district it is more than £450 per person. My eldest son, who lives alone in a small one-bedroomed house, will pay more than two and a half times more in poll tax than he now pays in rates. There is a fat chance of him voting Tory at the next election! Indeed, many people in South Oxfordshire are having to cancel holidays and even having children because of the poll tax.
In addition to the damage caused to poll tax payers, the Government have caused enormous damage to the effectiveness and independence of local government. Not only has poll tax been foisted upon it but the ability of local government to levy local taxation on businesses commensurate with local services provided has been eliminated. Under such circumstances, local government is neither free nor independent. Indeed, the Government may just as well appoint gauleiters or commissars because democratic control and decision making by properly elected local people has been virtually ended by the actions of the Government. One is almost tempted to call upon local councillors up and down the country to resign en masse in protest at the Government's despicable treatment of them.
The tragedy is that it was all so unnecessary. Local rates based on property values were a perfectly respectable tax, easily administered, easily collected and difficult to evade. However, it was necessary to ensure that local rates financed only local services and not national services. That is why the rates system fell down; the local taxation system was expected to finance great national services such as education. Rateable values could be raised in accordance with the cost of living index so that the local taxation system retained some dynamism. They could have been topped up with a small additional tax on, say, petrol.
Even at this late stage, I trust that the Government will listen to us and to their own supporters who this afternoon have, to their credit, raised their voices loudly and clearly against this iniquitous and obnoxious system.
§ 4.57 p.m.
§ Lord Ross of Newport
My Lords, I must begin by saying that I shall be £400 a year worse off when the poll tax is introduced; my rates are only £200 and my poll tax will be £600. I tremble at the ankles at 903 the thought of the unified business rate because I do not know how I shall pay that. I also offer my congratulations to the noble Baroness, Lady Stedman, for her most informative exposition of the true problems facing local authorities, and of the deficiencies of the old rate support grant or the SSSAs, as they are now called. I hope that everyone will read her speech with care because it is the truth.
One of the worst aspects of the past 10 years of this Administration has been the sad deterioration in co-operation between national and local government. The constant attacks, emanating principally from the Prime Minister at Question Time and constantly aped by her Ministers, accusing Labour or Liberal councils and district councils of gross overspending must have brought relationships to an all time low. I suspect that that, more than anything else, led to the recent resignations of Tory councillors in different parts of the country. They know the truth of the matter.
There is only a 3 to 4 per cent, difference between Tory and Labour councils when tables of comparisons are produced. Nevertheless, the accusations continue. I do not believe for one minute that the public are fooled by the accusations, and it is time that they stopped.
The vital and early task for the next incumbent of 10 Downing Street must be to mend fences and do so quickly. In the recent by-election, Staffordshire County Council was constantly portrayed as being the villain of the piece. However, over the past 10 years that council closed or amalgamated no fewer than 130 village and local schools. That is one definite way to save money on the education budget but is certainly not a popular policy to pursue with the general public. The Government have not helped by the introduction of opt-out procedures.
We are now being threatened with charge capping. I beg the Government to be very careful and very certain of their facts before they pursue that line of action. When rate capping was introduced, one Tory authority was included; namely, Portsmouth. Yet I believe that the policies of that council at the time were fully justified and can now be seen to be so. Hit desperately by dockyard closures, it has spent public money to good effect and is now reaping the benefit. Of course, the council could be more generous towards its cathedral appeal particularly on the date that its bishop takes his seat in this House. However, that is another matter.
The stupidity of constantly pretending that it is all the fault of overspenders can be simply illustrated by comparing two adjoining counties: Powys, in Wales, with Shropshire. The current rate in the pound is 233.9 pence in the Radnor district in Powys while it is £231.5 in the South Shropshire district. In other words, it is less in Shropshire than in Powys. However, the poll tax in Powys will be £175 while in Shropshire it will be £307.3. Therefore, if you happen to live in my local market town of Knighton on the wrong side of the River Teme you pay a poll tax nearly double that of your neighbour. In 1974 those people were asked if they wished to transfer from the parish of Stowe into Wales and voted against that. They now regret it.
904 I do not believe that even our Prime Minister or the Chairman of the Conservative Party would have the gall to accuse either county council of being overspenders. We are constantly given the example of Wandsworth and Lambeth but what about Havering and Barking? There the Tory council has a higher poll tax than the council in Barking. Of course, the truth on Wales is that Mr. Peter Walker achieved a much better deal from the Treasury than did Mr. Christopher Patten for England. It is certainly not equitable when services are the same.
It is not just the poll tax that should concern us. The unified business rate is going to cause untold harm to small shopkeepers many of whom are already in considerable financial difficulty due to high interest rates. I suspect that your Lordships thought, as I did, that in the first year the increase could not be more than 15 per cent, higher than what was paid last year. That is not the case because the rate of inflation at 7–59 per cent, is added. In my case, the rates on the small shop which I have in Knighton have increased from £789–71 p to £976–87p and finally to over £1,000.
In 1981 when I was a Member of Parliament for the Isle of Wight my constituents wanted to know what I personally was doing about local unemployment which was then running at over 18 per cent. I tried to respond by borrowing a lot of money. I converted an old slaughterhouse into an arcade of small shop units and a bakery. I have only just moved into profit after nine years of operation. My rates are now to increase from £3,000 to £10,000. If they are not substantially reduced it will not be worthwhile carrying on. My advice to all shopkeepers in that position is that they should lodge their appeals straight away because I believe that many assessments are way over the top.
Whose fault is it? Of course, it is the Government's fault because they allowed the terrible property explosion whereby people paid silly rents and premiums in order to obtain properties.
When governments set up learned committees which take evidence, earnestly consider and then advise administrations, it is quite beyond me why their good advice is ignored. A commission set up by the late Tony Crosland studied the problem of the rating system for two or more years and duly pronounced upon its decisions; namely a property tax based on capital values operating between bands using a divisor to reach rateable values coupled with a local income tax. My own party has adopted that policy. We should like to see the old idea of site value rating, now land value taxation, replace the business rate.
I have much to say and unfortunately I have nearly run out of time. I would remind the House that when this matter was debated previously I said to the noble Earl, Lord Caithness, that the Government were about to commit suicide. Unless they take drastic action to relieve the general public of these ever increasing burdens—for example, 13 per cent, on water rates, increases in electricity charges, and so on —then they will soon be out of office. The sooner the better.
§ 5.5 p.m.
§ Lord Mcintosh of Haringey
My Lords, this has been a fascinating and very well informed debate. The noble Baroness, Lady Stedman, is to be congratulated both for having introduced it and for the way in which she introduced it. It has been particularly fascinating to hear the balance of opinion in the House. If one looks at the party affiliations of those noble Lords who are to speak, one finds that there are six Conservatives, nine from Opposition parties and one from the Cross-Benches. Yet, when I look at the speeches made, of those 17 speeches, 14 have been almost unequivocally antagonistic to the poll tax, one—if the noble Lord, Lord Colnbrook, will forgive me—could best be described as a "don't know", and the noble Lords, Lord Jenkin and Lord Harmar-Nicholls, were the only noble Lords who dared to come out in support of the poll tax. If I have misjudged the conclusion to which the noble Lord, Lord Colnbrook, has come, then I apologise to him. He was certainly expressing substantial doubts in the course of his speech even if he came down on the other side.
Both the noble Lords, Lord Jenkin and Lord Harmar-Nicholls, managed to defend the poll tax with spectacular own-goals. The noble Lord, Lord Jenkin, has claimed fatherhood of the poll tax. I understand from what he is saying that he is not repudiating it. In these circumstances other men would be asking for blood tests and genetic fingerprints; but the noble Lord, Lord Jenkin, goes on despite the evidence in the public polls and in public opinion generally about the maintenance charges which are to be imposed on the fathers and mothers of this iniquitous tax.
I say that the noble Lord, Lord Jenkin, scored a spectacular own goal for several reasons. First, he seemed to blame what is happening now on what he calls "uproar". I commend to him the word "turmoil". That was the word used by the Chinese leadership as a justification for cracking down on the brave attempt by students in Beijing towards democracy when the tanks were ordered into Tiananmen Square. It may come to that.
If the noble Lord, Lord Jenkin, thinks that what we have now is simply turmoil and not a reasoned and heart-felt objection to something which can be seen to be wrong, then his political judgment is less keen than I thought it to be. Also, the prospects of his party remaining in office are less secure than he believes them to be.
His particular own-goal was when he referred to his estimate —and it can be no more than that —that one in four poll tax payers will receive rebates. Notice that that is not one in four of the adult population but is only one in four poll tax payers. After the last election, I carried out an opinion poll in which I asked the following simple question: "Do you pay rates?" That was a question asked of a cross-section of the adult population. Seventy five per cent, said that they paid rates. By that they did not mean that they signed the cheques themselves or took the money into the rating office, but that they recognised that they contributed to the rating 906 system—that is, that somebody in the household was paying rates and they were contributing to that through their share of household expenses.
They recognised that their landlord—whether private or council —was paying rates to which they were contributing through their rent payments. In other words, if there is a position where 75 per cent, of the adult population feels that it is accountable under the rating system, and the noble Lord, Lord Jenkin —the father of this scheme —is telling us that 25 per cent, of those on the poll tax list will receive rebates, where is the accountability? What has happened to the basic argument put forward for the change in the local taxation system? The reality which we are now seeing is that accountability is being lessened rather than increased by the poll tax because of the perceived injustice.
The own-goal of the noble Lord, Lord Harmar-Nicholls, was more interesting in some ways. Presumably based on Conservative Party information, he referred to the combination of income tax and poll tax in the total contribution made by dukes and dustmen, to stick to Mr. Ridley's example. He based that on the assumption that the Prime Minister was right when she said to the Conservative Party local government conference in 1988 that only 25 per cent, of local authority expenditure would be levied by the poll tax. That has not proved to be the case.
The standard spending assessment alone, which is the government estimate of what the poll tax should be—£278—will result in poll tax payers paying 30 per cent, of the total local authority expenditure because of the levels of grants and business rates. I remind the noble Lord and the House that the actual poll tax exceeds the standard spending assessment by almost the same amount in Conservative and Labour councils, so it is not Labour overspending that we are discussing. The actual poll tax to be paid will account for 37 per cent, of the total of local authority expenditure. I gladly give way.
§ Lord Harmar-Nicholls
My Lords, my figures did not come from anybody's headquarters. They came from the Blue Books, which are open to the noble Lord and any other parliamentarian. They were worked out by machines and confirmed by my own accountant. If the noble Lord looks at the figures I think that he will change his mind.
§ Lord Mcintosh of Haringey
My Lords, I shall be delighted to look at the figures. I was not querying the figures, I was querying the basis on which the noble Lord drew political conclusions from them. They are based on a false presumption both with regard to what the Government intended and, even more, with regard to what is happening on the balance between the poll tax and other sources of local authority expenditure.
The second major fallacy in what the noble Lord says is that the figures are based on an assumption that there is some change in the income tax system to compensate for the fact that the poll tax —as he tacitly admits—is less fair because it is a tax which falls equally upon duke and dustman.
907 While the poll tax system has been introduced our taxation system has become less progressive and not more progressive. The noble Lord, Lord Monson, very clearly saw that point and argued that if we were to stick with the poll tax, we should need a more progressive income tax system. That is not what this government have been doing. They decreased differentials in income tax at the same time as they introduced an undifferentiated poll tax in which the dustman pays as much as the duke. Under those circumstances the charge that we made when the Bill was introduced, that it would make the rich richer and the poor poorer, still stands.
The Motion refers toproblems currently accompanying the imposition of the Community Charge".As Other noble Lords generously kept to their time I have a few more minutes before the Minister is due to speak, and I should like to refer to some of the points made by other noble Lords in the debate.
There are clear examples of the anomalies coming to light day after day with regard to the poll tax. The noble and gallant Lord, Lord Bramall, in Question Time this afternoon referred to the difference between the Gurkhas and visiting forces from overseas and the way in which the Gurkhas are discriminated against. The noble Baroness, Lady Robson, as she has done on previous occasions made a moving plea for the vast majority of student nurses who are clearly discriminated against compared with trainees—who are receiving considerably more money—and who are now to be very severely squeezed by the poll tax.
The noble Lord, Lord Campbell of Croy, in Question Time yesterday referred to the anomaly of the standard charge being doubly imposed immediately after death. He did not receive a very satisfactory answer. The noble Lord, Lord Monson, referred to a new anomaly concerning beach huts. I had never heard of that before.
The point is that these anomalies are cumulative. There are many more yet to be resolved. If they are to be dealt with, as the noble Lord, Lord Ellenborough, said, by way of a series of minor concessions, then the credibility of the poll tax—if there ever was any—will be drastically reduced. More seriously, every specific concession increases the general unfairness of the poll tax because it increases the level at which the poll tax has to be charged on those who are not eligible for benefit. The noble Lord, Lord Mountgarret, very clearly made that point, as did my noble friend Lord John-Mackie and others, who referred to the case of tied cottages.
Every specific concession increases the general unfairness of the poll tax and takes it further away from its original intention. Every specific concession decreases its accountability. That is the fallacy in the argument of the noble Lord, Lord Jenkin. The poll tax is sinking under the weight of its own complexity. It is revealed to be a taxation system, not only unfair in conception, but unworkable in practice. That is the reality.
In closing I need only refer to one issue to make that absolutely clear and to ask the Government 908 what they propose to do about it. I refer to the issue of capping. When the subject of the tax was before the House two years ago a number of noble Lords, who were not antagonistic to the poll tax as such, felt that there was some defect because, having introduced what they must believe is the best possible solution for local authority accountability, the Government still felt it necessary to provide powers for capping.
We understand that decisions concerning capping are to be made this week—they have to be made very soon. Do the Government fully realise the implication of the fact that capping applies to the tax which will be imposed as from next Sunday? That is the difference. Where rate capping applied in the past it applied to the following year and not to the current year. Any efficient local authority which has now declared its poll tax rate will already be printing the demand; many demands will soon be going out. The local authority will have arrived at its budget on that basis. If the local authorities are now capped there will be enormous additional administrative expenditure. Have the Government made an estimate of how much that additional expenditure will be? Do they plan to make additional grants to those local authorities for the additional administrative costs involved?
Will the Government give us the up-to-date figure for the total costs of administration? How do they compare with the cost of collecting the rates? On what will the capping be based? Will it be based on the collection charge? Will it be based on the standard spending assessment, and is that based on a realistic estimate or, as I suspect, on a distorted version of grant distribution? There are many ways in which the capping could be carried out, as the well-informed public administration correspondent of The Times made clear last week. They all produce greater burdens for Labour authorities. But I challenge the Minister to think of any way in which capping will not cause a burden on Kensington and Chelsea in particular.
We are concluding a very serious debate in which the Government have a last opportunity to rectify some of the very serious evils identified by noble Lords on all sides of the House. I look forward to the Government's reply.
§ 5.18 p.m.
§ The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh)
My Lords, we are now just a few days away from the introduction of the community charge in England and Wales. Nearly two years have passed since the passage of the Local Government Finance Act 1988. In those two years government departments and local authorities alike have worked hard to prepare the way for the effective and successful implementation of an almost entirely new system of local government finance, as the noble Baroness, Lady Stedman, pointed out in a somewhat more far-reaching speech than I was expecting but which I am sure the House found extremely informative.
A substantial body of detailed regulations now underpins the charge. Some 25 community charge practice notes have been issued by my department to 909 local authorities. Leaflets with a distribution figure counted in its millions have been sent out explaining the new charge and a major information campaign has recently been completed with the object of ensuring that we reach everyone who is entitled to help through benefits and transitional relief.
In many local authority areas bills have already been sent out; in most others billing will very shortly commence. Generally authorities have set about what has been a difficult and demanding task in a highly professional way. They have quite clearly put paid to opposition arguments that it could not be done.
Noble Lords have talked long of what is described in the Motion as the imposition of the community charge; but we should also consider the other side of the coin. Domestic rates have for a long time been regarded as both outdated and discredited. Rental values of people's homes are arbitrary, difficult to understand and poorly related to the people's ability to pay. It is well worth remembering that over 40 per cent. of homes with above average rateable values are occupied by households with below average income. So complicated was the rates system that it was rarely possible for local electors to gain any picture of what levels of spending they were supporting. The fact is that the number of people who paid for local services as a proportion of those who benefited from them produced very little accountability. Furthermore, this Government have taken the bold step of challenging a system which placed the heaviest imposition on businesses which could not vote.
The community charge is fairer because it spreads the burden of paying for local government. In 1990–91 nearly 36 million people in England will pay the community charge compared to 18 million who paid rates. It is fairer because it reflects the fact that most local services are delivered to people rather than to properties. It will increase local accountability because every charge payer will in future be able to see how the charges his authority is levying compare to the Government's figure for the community charge at standard spending.
I am led to believe that the Opposition have an alternative proposition to put to us—though not, I fear, today; but that would be unfair to the noble Lord, Lord Ross of Newport, who stated, in part, his position.
§ Lord Ross of Newport
My Lords, I thank the noble Lord for allowing me to intervene. What is the standard tax on second homes, if they are not beach huts, if it is not a roof tax?
§ Lord Hesketh
—but to what I have read in the popular press on future possibilities, and I humbly suggest that may well result in the country not having a change of government after the next election.
We have given the Opposition plenty of time to come up with their detailed and consistent thoughts. Unfortunately the Labour Party seems to be rather shy of giving us much more than a hint of its deeper reflections, if I may put it that way. I am told there would be a roof tax, but I am afraid I have not been told how there will be a roof tax. Such modesty is most unbecoming, particularly to the noble Lord, Lord Mcintosh.
We will be providing local authorities with £23–1 billion of aggregate external finance, an increase of 8–5 per cent, over the comparable figure for this year. This is made up of £10–4 billion in business rates, £9–5 billion in revenue support grant and £3–2 billion in specific grants. We have allowed for a total standard spending figure of £32–8 billion in 1990–91. This is within the rate of inflation, being a 3–8 per cent, increase but 11 per cent, over what we had allowed for in respect of 1989–90.
Noble Lords will be well aware that many local authorities have chosen to set a charge well above £278. As my right honourable friend the Secretary of State announced last week, the average community charge in England is estimated to be £363. This is not because government support has been slashed but because authorities have chosen to raise 33 per cent, more finance by way of the community charge than they did for domestic rates in 1989–90. This represents an overspend of £3 billion. If the Government had decided to meet that level of spending by putting in extra grant in order to keep the average charge down to £278 it would have put 2p on the basic rate of tax. The noble Lord, Lord Monson, referred to a banded tax system of, I believe, 15 per cent., 30 per cent, and 45 per cent. If we had reacted as some noble Lords suggested, that level of tax would already be 17 per cent., 32 per cent, and 47 per cent.; and there are only three days to 1st April!
This would have been a real imposition. In the local elections to come and in future elections charge payers will be able to exercise their right to say no to high charges and, perhaps for the first time, hold their councils accountable for the spending decisions they have made. The Opposition have made much of Conservative-dominated councils where the charge is somewhat higher than £278, but I invite them to look at the statistics. For example, the average charge in London boroughs controlled by Labour is £452; the comparable figure for Conservative controlled councils is just £285.
Noble Lords have expressed their concern at the ability of people to pay the community charge. The Government have addressed this concern. We have introduced an extensive system of community charge benefit which will give help precisely where it is most needed. In Great Britain some £2 billion in benefit will be given in 1990–91. Community charge benefit will be more generous than the old rate rebates. This year spending on benefit will amount to an increase of over 20 per cent, in real terms on what was paid last year in rent rebates.
911 I should make quite clear that benefit is calculated on the basis of the actual charge that an authority sets. We estimate that some 10 million people in great Britain will get relief (around 8 million in England). At this point I turn to the noble Lord, Lord Stallard, who referred to the calculation of benefit. With great respect, I point out to him that he was using the regulations for transitional relief in making his argument rather than the regulations as they exist in regard to benefit itself
Noble Lords will also recall the recent announcement in another place that the level of savings allowed for benefit entitlement has been raised to £16,000 from the previous ceiling of £8,000. This means that there will be 130,000 gainers, including about 50,000 pensioners. The announcement will be particularly welcomed by pensioners who may have accumulated modest savings but are on a low pension and were previously ineligible.
We have also made provision for the changeover in local government finance systems and the new system of standard spending assessments. The scheme for transitional relief which I announced to the House on 11th October last year will over the next three years bring £810 million of help to people whose community charge bills are significantly higher than rates. The scheme also provides a special form of relief to elderly and disabled people who were not former ratepayers or the partner of a former ratepayer.
In the Statement I made to this House on 11th October last year I explained that, provided each local authority spent in line with the Government's assumptions, transitional relief would ensure two things: first, that ratepayers and ratepaying couples need not pay more than £3 a week extra in community charges over their previous rates bills; secondly, that pensioners and disabled people who had not paid rates in 1989–90 need not pay more than £3 a week more in total.
As we made clear from the start, transitional relief is calculated on the basis of the Government's assumed charge for each authority, or, if it is lower, the actual charge that an authority sets. The assumed charge is based on the assumption that local authorities spend in aggregate in line with the settlement figures for next year. In other words, it is designed to give protection against the structural change in systems. It is not designed to protect against losses resulting from councils spending above our assumptions.
Much of the financial loss many people face is the result of council overspending. There are better ways of protecting against such losses, the best of all being to vote in an election.
I know that noble Lords have expressed concern on a number of issues, not least the workings of the standard community charge which we discussed in the House yesterday and to which the noble Lord, Lord Mcintosh, referred. I have to say that I was under the impression that my noble friend Lord Campbell of Croy was satisfied with my answer but, again, perhaps the noble Lord, Lord Mcintosh, was making a Lord Colnbrook type of observation as he did earlier in the debate.
912 The standard charge applies where domestic property is not used as a sole or main residence. Charging authorities may make the standard charge by levying a multiplier of between zero and twice the personal community charge. I believe that we tend to rather skid over the fact that there is a range of five options that go from zero, half and then up to twice the charge. Nobody really seems to question the fact that local authorities seem to be proceeding on the basis of always charging double the standard community charge rather than making a value judgment on their own of what they believe is the right—perhaps morally right—thing to do.
However, the different multipliers may be applied for certain prescribed or specified classes of property. We have prescribed that the standard community charge will not be payable for an important number of classes of property. In particular, no charge is payable for up to three months on a property which is unoccupied and unfurnished—for example, a property which is up for sale—and until three months after probate where a property is vacant because of the death of the owner. No charge is payable for up to 12 months where a property is empty because the occupier has moved elsewhere either to care or to be cared for by another person.
The full list of categories prescribed by the Secretary of State is set out in regulations and in a recent Written Answer given by my honourable friend the Minister for local government and inner cities to a parliamentary Question in another place. Local authorities may also set different standard community charges for classes of property which they may specify by reference to one of a number of factors which we have set out in the legislation. That allows them either to extend the periods of relief which we have prescribed or to create new classes which they consider appropriate.
Noble Lords have told me of their concern that people who live in tied cottages or farm buildings, and who own a house elsewhere, are being required to pay the full standard charge. I can assure your Lordships' House that we have given local authorities the power to set a lower charge for such cases. In the next few months we will have a more complete picture of the use that authorities are making of their discretion. That is a discretion that we have given them in response to their argument that they were best placed to determine most classes. We are concerned that authorities may not have made sufficient use of this discretion. We have made it clear that if necessary we will have to consider further prescription by the Secretary of State in 1991–92.
The noble Lord, Lord John-Mackie, and my noble friends Lord Onslow and Lord Mountgarret referred to the position of tied cottages generally and different examples were given. I am very much aware of the concern of people in tied cottages who are facing the personal community charge and whose rates—themselves relatively low—have been paid until now by the landlord. In part, that situation was brought about by agricultural rating in an age when far fewer services were provided by local authorities. I intend to produce further advice on the precise point of tied cottages because there appears to be 913 some confusion. I stress that it is one of the prime aims of the community charge to move away from the notion that local services should be paid for according to a rateable value which might be completely outdated and bear precious little relation to the services which are being offered in a modern community.
As I have said, transitional relief does give protection against the effects of the change in the system. I can reassure the House that in many cases transitional relief will help people in tied cottages to pay their community charge in the first years. My noble friend Lord Montgarret referred to a tractor driver earning £120. I do not have the actual figure because I am not aware of all a tractor driver's circumstances. I point out to my noble friend that the benefit goes to £156. Therefore, there is a reasonable chance that the individual to whom he referred will come within part of that benefit.
My noble friend Lord Colnbrook raised a point concerning Berkshire County Council. The council has claimed that its budget for 1990–91 is about 4 per cent. less in volume terms than it was in 1989–90. I do not know the basis for the calculation, but I know that in 1989–90 Berkshire County Council drew heavily on balances and reserves and from the disposal of assets. It seems that that will not be possible for the next year. That has forced the council to raise that much more by way of the precept and hence the rise in the community charge. We have increased the amount of central government support to Berkshire by 23–5 per cent, in cash terms. We believe that the county has been well treated by the change from rates to the community charge.
The noble Baroness, Lady Stedman, and many other speakers raised the point of how SSAs are achieved. My noble friend Lord Colnbrook raised the inevitable question about the man from Whitehall and whether he knows best. We have never maintained that Marsham Street or the man from Whitehall knew best. I can assure my noble friend that we believe, when we are spending tens of billions of pounds of the taxpayers' money, that standards must be set. And even if they are disagreed with, we set those standards to the best of our ability.
The noble Baroness, Lady Robson of Kiddington, raised the question of nurses. I well remember that the first amendment I lost in your Lordships' House was at the fair hand of the noble Baroness. I draw to her attention the future of the Project 2000 concerning nurses. I am sure she will agree that the situation is satisfactory from all points of view. The noble Baroness said that she felt it was unfair to current student nurses. It is worth reminding your Lordships that, under the current system, student nurses, rather than receiving about £4,700 per annum, are in receipt of an average of £6,000 per annum. That is a considerably higher figure than that to be received by the Project 2000 nurses.
The noble Lord, Lord Stallard, suggested, as I pointed out earlier, that the benefit scheme was badly affected because it had to take into account the level of community charge which effectively can be disallowed. That applies only to transitional relief and not to the benefit scheme. I can assure the noble Lord on that point. The noble Lords, Lord Taylor 914 of Gryfe and Lord Hughes, and my noble friend Lord Jenkin of Roding raised the question of community charge payments being made in Scotland. I am the first to admit that they raised the question in different ways.
As my noble friend Lord Jenkin of Roding pointed out, in the Border region payment is running at 98 per cent. I also draw this to your Lordships' attention. If the Lord Provost of Edinburgh refuses to pay the community charge that is not the kind of example that encourages people to keep the law. The noble Lord, Lord Monson, raised the issue of other levels of rates of tax. I explained the situation if we carried through the extra £3 billion of expenditure.
I believe that I can go away from this House and return to the department with a very clear message about the concerns and worries that have been raised about tied cottages. I dealt with that earlier. I am always encouraged when my noble friend Lord Harmar-Nicholls rises to his feet and excites a certain amount of noise from the Benches opposite. It usually indicates that a matter of some interest is going to be drawn to your Lordships' attention. I do not accept the argument put forward by the noble Lords, Lord Donoughue and Lord Hughes, to the effect that the Secretary of State for Scotland pays the same community charge as the dustman.
My noble friend Lord Harmar-Nicholls has always been a keen student of fact. He has researched the matter. He produced an interesting figure. The Secretary of State for Scotland, far from paying a standard community charge or any other community charge, was paying £3,266 towards the cost of local government. The noble Lord, Lord Stoddart, asked whether heterosexuals or homosexuals were better off. I remind him that the community charge is individually payable and thus I believe that we are all in the same boat.
§ Lord Stoddart of Swindon
My Lords, I was talking about homosexuals living together; married couples living together; and common-law husbands and wives living together. I hope that the Minister will look at that point. Perhaps I can discuss the matter with him after the debate.
§ Lord Hesketh
My Lords, I shall look at the point and also discuss it with the noble Lord. The noble Earl, Lord Attlee, the noble Baroness, Lady Stedman, and other noble Lords, raised the question of the small village shop. Here we are seeing the reverse side of the coin of what happens if there is not a revaluation in 17 years. The definition of what a village shop is would be impossible to agree. The noble Baroness also berated the Government over the depradations, as she saw them, of the UBR. I remind your Lordships of the key figure to be kept in the back of our minds. Of the rise in rates that will be paid by those businesses where there is an increase, 75 per cent, of the rise is not an adjustment from north to south, but the revaluation itself.
The noble Lord, Lord Mcintosh, asked whether or not my right honourable friend the Secretary of State was going to introduce charge capping. He is currently considering the information which he has about local authorities' budgets. When he has 915 completed consideration of the matter he will announce his decisions on capping.
Noble Lords can rest assured that we shall continue to listen and respond to the views expressed by this House. Today's debate marks the long-awaited demise of domestic rates. The community charge is a system which before long will be seen to be better, simpler and more responsive to the service and charge levels that people want. I once again remind your Lordships that we are willing to listen and to respond to the views expressed this afternoon.
§ 5.39 p.m.
§ Baroness Stedman
My Lords, the attention shown to this debate, and the number of speakers, justify my colleagues and I in choosing this subject for our one and only debate this Session. I am grateful to all those who have taken part in it. I did not derive much joy from the Minister's reply although he covered the points very fully. If the noble Lord will not heed pleas from this side of the House I hope he will accept the concern of his own friends. He said that the Government will continue to look at the matter. I hope that he will do that and that he will urge the Secretary of State and his colleagues in the Cabinet to reconsider before 1991 the whole way in which the poll tax is working. The Government should make the tax relate to ability to pay and, above all, get the SSAs right to begin with. These should be based on up-to-date population statistics and a realistic figure for inflation. We might then not have quite the problems that we have had this time. I hope too that the noble Lord and his colleagues will think of the pensioners, people on low fixed incomes, one-parent families and those who were encouraged by the Government to buy their own houses and who now, in addition to high mortgage rates, face even higher poll tax demands. The Government must remember that when they place duties on local authorities that have to be paid for.
§ The Deputy Speaker (Lord Elliott of Morpeth)
My Lords, the period allotted for debate has now expired. Does the noble Baroness wish to withdraw her Motion?
§ Motion for Papers, by leave, withdrawn.