POLITICS
Too late to turn back from one of Mrs Thatcher's less good ideas
FE RDINAND MOUNT
They have been made an issue solely by the dogged, unappeasable insistence of Mrs Thatcher on fulfilling the pledge she gave, as Mr Heath's spokesman on housing and local government in the second general election of 1974, to 'abolish the domestic rating system within the normal lifetime of a Parliament' and, mark this, to 'replace it by taxes more broadly based and related to people's ability to pay'. The pledge then went into hibernation for a decade or so. Most Cabinet ministers thought that rate- capping had finally taken the sting out of the rates issue. In 1987, though, against everyone's advice, up she pops again with the Community Charge. It is indeed all her own work.
To the connoisseur of taxes, this obses- sion with abolishing domestic rates seems odd. For on most criteria rates are one of the least bad taxes man has invented. They are of great antiquity, dating back to the 13th century at least, and found in one form or another all over the world. They are undeniably local, cheap to collect, and nigh impossible to evade. They tax the consumption of something which is other- wise untaxed; viz, housing. And by uprat- ing householders who have built on sun- lounges and carports, they provide a Brit- ish equivalent of a tax on signer exterieures de la richesse, which helps to keep the jacquerie quiet.
Unfortunately, 20th-century govern- ments of all parties have debauched the pristine purity of the system. It is now a raddled old whore of a thing with fewer and fewer friends. Forty-seven per cent of local authority spending is now paid for by central government grant (as against a mere 10 per cent in the last century); another 25 per cent is paid for by local businesses; only 18 per cent comes from the domestic ratepayers.
Mrs Thatcher is unquestionably right in wanting to `decouple' the business rates and the central government grant from the local authority's spending decisions. Under her new system, a council would simply receive its share of a nationally determined business rate and the amount of grant which the Government calculates it needs, in view of its total population, acreage, number of schoolchildren to educate and pensioners to look after, and so on. The council would have no power to affect how much it received from these sources. And quite right too.
The real argument begins when we consider the householder. Haters of the rates, like Mrs Thatcher, draw a touching scene of the widow living alone in a big house, scarcely troubling her dustbins, changing her library book once a month at most, having to pay three times the rates of the O'Feckless family in a smaller house down the road, with two of their children in care and the rest requiring a full-time social worker and remedial teacher each, dustbins overflowing, frequent calls from the local constabulary.
Haters of the community charge draw an equally touching picture but with a some- what altered cast list. In the big house now, we have the bachelor pop-star, his dustbins awash with glamorous garbage, paying just one community charge, while down the road the Goodchild family (he is a much loved vicar, she runs a hospice, and their three children are all doing post-graduate courses in brain surgery) have to pay five.
The Prime Minister claims that the community charge would restore local accountability, because every voter would pay something, while at present only half the 35 million electors in England pay rates. In some poor city areas, only a quarter of the inhabitants pay rates. Phooey, say, the rate-fanciers. The majority of these mysterious non- ratepayers are women married to rate- paying men. Do these wives think them- selves unaffected when their husbands receive a nasty rate demand? Anyway, surely in many families the husband will pay the community charge for the whole household, so where is the big difference? As for everyone over 18 having to pay something towards the community charge, the Government somewhat deviously forgets to mention that, under the Social Security Act, 1986, it has already legislated for people on social security to be responsi- ble, from next April, for 20 per cent of their rate bill.
The arguments are endless, and most of them are bogus, since they usually try to discover a single universal principle of taxation when there are in reality half-a- dozen conflicting and overlapping princi- ples. Should not a good tax relate to people's ability to pay, as Mrs Thatcher promised back in 1974 and as her commun- ity charge so signally fails to do? But lots of taxes bear no such relation — VAT, the duties on drink, cigarettes and petrol. There are also plenty of flat-rate charges around — the BBC licence, the vehicle excise duties.
Well, should not a tax at least relate to the amount one uses a service? I don't see why. Income tax doesn't. If it is so impor- tant that people should pay according to how much they use the services — and the community charge is a rough-and-ready way of trying to do this — then why not charge directly for refuse collection and so on, as local authorities already do for the use of swimming pools and tennis courts?
The one indisputable virtue of the com- munity charge—that it is a flat-rate charge — is also its one great defect. The differ- ence between a high-charge area and a low-charge area will stand out a mile and help to shame high-spending councils into thriftier habits. But there will also be some individual cases of hardship which no amount of concessions can avoid. The Cabinet committee's decision this week to phase the charge in over three years only prolongs the political agony.
True, if we kept domestic rates, there would sooner or later have to be a revalua- tion, which would be quite as painful for the losers as the community charge (Mr Ridley is already committed to revalue non-domestic property). But I doubt whether the Government would be as directly blamed for the unpleasant con- sequences of keeping an ancient but still viable system up to date.
No doubt the Bill will manage to limp through Parliament with a handful of Tory MPs harrying it all the way. Since the Scots are already landed with the new system, it is a bit late to turn back. I do not claim that it will be the worst tax in the world, but I do not think it is worth the bother either. Not one of Mrs Thatcher's better ones.
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