Downing Street Years - Margaret Thatcher [406]
Two other changes would also have helped. First, wasteful as it might have seemed, there would have been something to be said for allowing a rating revaluation under the old system to occur in England before the community charge was introduced. This would have reminded people how painful it would be to carry on with the rates and how unfair the rating system was. The gainers under the new system might have been more appreciative and the losers less vociferous if they had seen the alternative. Second, I believe that we should have legislated before the introduction of the charge for much wider and stronger powers to cap local authority spending. Of course, there is an apparent contradiction between bringing in a new system of local authority finance in order to strengthen local accountability and then taking more powers to the centre. But the contradiction is apparent rather than real. The beneficial effects of the new system could not be expected to come through immediately. We should have been more alert to the cynical abuse of their power which left-wing authorities would practise, going to any lengths to blame us and the community charge for their own overspending.
In considering all this we were assisted less than might have been predicted by what was happening in Scotland. In the first year of the new system Scottish local authorities pushed up their spending, increasing their budgets by 14 per cent in 1989–90. But Malcolm Rifkind, the new Scottish Secretary, argued strongly against capping these authorities. Because the timetable was very tight and the legal advice we received was against, I agreed somewhat reluctantly with this. In the second year of the operation of the community charge in Scotland, though, there was evidence that the benefits of increased accountability had begun to restrain local authority spending. So the indications were mixed.
PREPARING FOR THE INTRODUCTION OF THE CHARGE
It was very important that the first year’s community charge in England (1990–91) was not so high as to discredit the whole system. In particular it was crucial that good authorities be able to announce community charges at or below the level we deemed necessary to achieve the standard level of service (known as the Community Charge for Standard Spending, or CCSS). But ensuring this was easier said than done.
In May 1989 Nick Ridley, Nigel Lawson and John Major (as Chief Secretary) began discussions on the level of the local authority grant settlement for 1990–91. There was a wide gap between the DoE and the Treasury. Each side had good arguments. The figures suggested by Nick Ridley were, he argued, the only ones which would lead to actual community charges below £300 (significantly, a far higher figure than we had envisaged a year before when the community charge legislation was passed). The Treasury view, with which I agreed, was that the 1989–90 settlement had been very generous — deliberately so to pave the way for the community charge. But the only result had been to lead to greatly increased local authority spending, which was up 9 per cent in cash terms. Local authorities had kept down the rates themselves in 1989–90 through the use of reserves, merely deferring increases. The lesson, the Treasury argued, was that providing more money from the Exchequer did not mean lower rates (or a lower community charge). On 25 May I summed up the discussion at a ministerial meeting by rejecting both Nick Ridley’s and John Major’s preferred options and going for something in the middle, which I thought would still give us a tolerable community charge while not validating the large increase in local authority spending in 1989–90. But I said that I wanted to see exemplifications of the likely community charge in each local authority area.
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