Community Charge (Hansard, 19 July 1989)

§ Mr. Ridley

I have today placed in the Library illustrative community charge figures for English authorities which are consistent with 1989–90 rate levels and show what the community charge might have been if the new local government finance system were in operation now. The figures have been calculated on the basis of the safety net and other transitional proposals which I announced earlier today.

The figures are subject to the same qualification as those for earlier years. In particular they are not a prediction of the community charges which will apply in 1990–91. Those will depend largely on the spending decisions of individual local authorities.

These figures are based on: estimated 1989–90 income from rates and Government grants for individual authorities; the new revenue support grant arrangements (but using the 1989–90 distribution of grant-related expenditure between individual authorities); the 1989–90 equivalent to aggregate external finance (grant and business rates); the business rate distribution which will come into effect from April 1990; and a safety net calculated on the principles for 1990–91 which I announced today.

These figures illustrate the community charge levels associated with current levels of spending. The new local government finance system would have allowed all authorities to finance expenditure sufficient to provide a standard level of service while levying a community charge of £240 in 1989–90.

The extent to which the full, unsafety-netted, community charge in any area exceeds £240 is simply a measure of the overspending by local authorities in the area. Likewise a full community charge of less than £240 is a measure of the efficiency of the authorities concerned.

In this way the level of the full community charge in each area will provide a ready reckoner enabling chargepayers to compare the amount which their councils spend with the cost of providing a standard level of service and with the performance of other authorities. The message is clear. High spending leads to high community charges.

In 1989–90 the level of local authority spending is likely to be 6.8 per cent. higher than allowed for in these 216W settlement. This leads to an average illustrative community charge of £274 before the safety net, the same as the average rate bill per adult.

The published figures also include the latest estimates of the effect of moving to a uniform business rate. The latest figures suggest that about 60 per cent. of non-domestic hereditaments would have benefited from the uniform business rate on its own.

The move to a uniform poundage will be of particular benefit to businesses in the north and the inner cities. For example, poundages would reduce by 35 per cent. in Sheffield, 31 per cent. in Manchester and over 28 per cent. in Liverpool. The uniform business rate is particularly good news for areas of above-average unemployment where high rates have slowed economic regeneration. And businesses generally will benefit from the linkage of business rates to the RPI.

Although the move to the national business rate could mean significant changes in rate bills when combined with the revaluation of non-domestic properties, there will be transitional arrangements to limit the year-on-year changes.

I have also placed in the Library estimates of the impact of the combination of a local income tax and capital value rates.

As the basis for calculating community charges has been changed since 1988–89 figures were placed in the Library on 23 June 1988, I have also provided a comparative table showing 1988–89 and 1989–90 community charges calculated on a consistent basis. In 1990–91 actual charges will be determined by the amount that local authorities need to raise from their chargepayers. The nearest equivalent in 1989–90 is the amount they raise in rates. Illustrative charges in previous years were based on total expenditure which determined an authority's block grant but which is no longer relevant.