Downing Street Years - Margaret Thatcher [399]
So in 1981 Michael came up with new ideas. He proposed that if local authorities spent more than a certain amount over and above their GREAs all the extra would have to be paid for by domestic ratepayers. The Government also agreed that a local referendum should be held before a council could go ahead with the extra spending. This proposal had something new and important to be said for it because it at least marginally reinforced local accountability which — as I shall explain — was at the root of the problem. But, in spite or even because of that, it drew howls of protest from local authorities and the Tory back-benchers whom they so easily influenced. The proposal had to be withdrawn.
So Michael’s successors at the Department of the Environment — Tom King and then Patrick Jenkin — were left with no alternative but to apply more and more complex central controls, while the local authorities went on spending. In 1984 we took powers to limit directly the rates of selected local authorities, with powers in reserve to limit them all. This procedure — known as ‘rate-capping’ — was one of the most effective weapons at our disposal. Much of the overspending was concentrated in a small number of authorities, so that capping fewer than twenty could make a considerable difference. It allowed us to offer some protection from very high rates to businesses and families who were trying to make their own way in profligate Labour authorities — particularly those families on incomes just above the benefit levels, who could not rely on the state to pay their rising rates bills. But rate-capping was a complicated business: it stretched the capacity of the Department of the Environment and could be challenged in the courts. The fundamental problem remained.
I had always disliked the rates intensely. Any property tax is essentially a tax on improving one’s own home. It was manifestly unfair and un-Conservative. In my constituency and in letters received from people all over the country I witnessed a chorus of complaints from people living alone — widows for example — who consumed far less of local authority services than the large family next door with several working sons, but who were expected to pay the same rates bills, regardless of their income. I had, of course, been Shadow Environment spokesman at the time of the October 1974 election when we promised to abolish the rates altogether. In fact, this was a last-minute pledge insisted upon by Ted Heath about which I had considerable doubts for we had not properly thought through what to put in their place: but I had witnessed the anger and distress caused by the 1973 rate revaluation and believed strongly that something new must replace the existing discredited system.* When I became Prime Minister I stopped any further rate revaluations in England. (In Scotland the system was different and a domestic rate revaluation was required by law every five years, though extensions were possible and we took powers to put off for two years a revaluation due in 1983.) But the counterpart of this decision was that the potential disruption which a rate revaluation would have caused in England grew by the year. And we could not put it off for ever.
The reliance on property taxes as a principal source of income for local government went back centuries. Rates made sense, perhaps, when the bulk of local authority services were supplied to property — roads, water and drains, and so on — but in the course of the present century local authorities have increasingly become providers of services for people, such as education, libraries and personal social services.
Moreover, the franchise for local elections has been widened dramatically. Originally, it was limited to property