Downing Street Years - Margaret Thatcher [401]
By the time that the studies were complete, the political imperative for change had been dramatically demonstrated by a disastrous rate revaluation in Scotland. In Scotland there was a legislative requirement for rate revaluation every five years, though if George Younger and Michael Ancram at the Scottish Office had alerted us to the full consequences in time we could have introduced an order to stop it or mitigated its effects by making changes to the distribution of central government grant. The Scottish Conservative Party Chairman, Jim Goold, came to see me in the middle of February 1985 to describe the fury which had broken out north of the border when the new rateable values became known. The revaluation had led to a large shift in the burden from industry to domestic ratepayers and — with the high level of spending of Scottish local authorities — this was combined with large overall increases in the poundage. By the time that I chaired a proper ministerial discussion on the evening of Thursday 28 February to see what could be done about the problem it was really too late. Scottish ministers, businessmen and Tory supporters began with one voice to call for an immediate end to the rating system.
For us, south of the border, it was powerful evidence of what would happen if we ever had a rate revaluation in England. There was no legal obligation to undertake a revaluation in England by a particular year, but it could fairly be argued that without any revaluation the rates would contain more and more anomalies. As noted above, the whole basis of rating valuation by reference to rental values was dubious anyway. Of course, we could have used capital values for revaluation. But capital values can go down as well as up, so a system based on them would have been highly disruptive, unpopular and a very uncertain basis for local government finance. This was the option which Nigel Lawson and — from time to time depending on which spokesman was asked — the Labour Party favoured. But I was firmly against it, because it was still a tax on the value of someone’s home and the improvements made to it.
ORIGINS OF THE COMMUNITY CHARGE
So it was that when Ken Baker, then DoE minister responsible for local government, his junior, William Waldegrave, and Lord Rothschild made their presentation to a seminar I held at Chequers at the end of March 1985 I was very open to new ideas. It was at the Chequers meeting that the community charge was born. They convinced me that we should abolish domestic rates and replace them with a community charge levied at a flat rate on all resident adults. There would be rebates for those on low incomes — though rebates should be less than 100 per cent so that everyone should contribute something, and therefore have something to lose from electing a spendthrift council. This principle of accountability underlay the whole reform.
The second element of the approach was that business rates would be charged at a single nationally set level and the revenue redistributed to all authorities on a per capita basis. The reform of business rates would also make it possible to end one of the most unsatisfactory features of the old system: ‘resource equalization’. One problem with the rating system was that taxable capacity varied enormously from one authority to another, since the value and amount of property itself varied — particularly commercial and business property. ‘Resource equalization’ was the name given to the process by which central government redistributed income between authorities to even out the effect. As a result there were major variations