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across the country in the amount of rates paid on similar properties for a given standard of service, generally to the disadvantage of the South, where properties were usually valued much more highly. A great deal of money was involved, though like much else in local government finance the average voter had never heard of it. Such a system, of course, made it still harder for voters to judge whether they were getting value for money from their authority. But with the abolition of domestic rates and the distribution of the national business rate on a per capita basis, taxable capacity would no longer vary between authorities and so the need for ‘resource equalization’ disappeared. Obviously some authorities had greater needs than others, but this would be compensated for by giving them more in central grant. For the first time it would be possible for every council to provide the same level of service at the same level of local taxation anywhere in the country, so that much more transparent comparisons between councils could be made.

In the discussion which followed there was a lot of tough questioning but general support for the DoE approach and in particular a commitment to the strengthening of local accountability. The only alternative was to go further in the direction of centralization, for example by having Central government take over specific local authority functions like education or teachers’ pay, and yet tighter controls on spending. We wanted to avoid this if we could.

Nor was there any enthusiasm for the two other options which had long been canvassed — local income tax (LIT) or a local sales tax. The former would have undermined our efforts to lower income tax at the national level and would have put in the hands of Labour authorities a powerful weapon to drive out even more people of talent and energy from their areas. A sales tax would have been a recipe for absurd distortions in a country as small as Britain: prices would have varied from authority to authority, with high spending authorities driving shoppers to lower-spending neighbours only minutes away. And there would have had to be massive redistribution of revenue from one area to another to compensate for variations in the distribution of shops. Finally, both taxes would have been highly bureaucratic.

Of the ideas now put forward by the DoE team, the only proposal which I rejected was that we should consider changing the whole of local government to single-tier authorities. Then and later I was to be attracted by this on the grounds of the transparency it would have brought to the community charge figures. But we could not do everything at once.

After the Chequers seminar William Waldegrave and DoE officials went away to prepare more detailed proposals. Nigel Lawson had already expressed reservations through his Chief Secretary Peter Rees at the seminar. But it was only afterwards that it became clear just how deeply opposed he was. The DoE proposals were to come before a Cabinet committee at the end of May. A few days before the meeting Nigel sent in a Cabinet memorandum strongly challenging the community charge and urging the consideration of alternatives.

Nigel’s dissenting Cabinet memorandum showed prescience in one crucial respect: he foresaw that local authorities would use the introduction of the new tax as an excuse to increase spending, knowing that they stood a good chance of persuading the voters that the Government was to blame for higher bills. I too had worries on this score, and the main aspect of the DoE’s early thinking of which I was doubtful was their optimistic suggestion that enhanced accountability would make it possible to abandon ‘capping’ altogether. In an ideal world perhaps this would have been true. But the world which years of socialism in our inner cities had created was far from ideal. I was determined that capping powers would remain and, indeed, before the end I would find myself pressing for much more extensive community charge capping than was ever envisaged for the rates.

When the committee met I asked Nigel