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capping under new legislation than under the present. I was reluctant to drop the idea of introducing a general capping power. I would have liked to combine this with the use of local referenda, so that an authority which wanted to spend more than the limit set by central government would have first to win the agreement of its electorate. This would have done a good deal to defuse the accusation that new spending controls would undermine local democracy. In the light of the revised legal advice, though, I accepted that unless the courts came up with some new judgement which changed the position it would be best to cap in 1991–2 under the existing law. It was crucial, however, to achieve the greatest possible deterrent effect and so Chris Patten had to announce in July — well before local authorities set their budgets — how he intended to use his powers. The other aspect we had to discuss was the extra money which was needed to be put in in order to limit the burden on individuals. Chris was authorized to announce to the House certain extensions to the transitional relief scheme and other changes.

The relevant Cabinet committee met the following week under my chairmanship to finalize the community charge review and agree the details of the 1991–2 settlement — the amount that we were going to provide for local authorities in the form of grant and business rates, and the amount that we thought they ought to spend. Chris Patten and John MacGregor (the Chief Secretary) had already reached agreement on a package. Our purpose was to endorse this: I also wanted to ensure that it was understood that the extra money for the community charge was not a sign that the brakes had been taken off public expenditure control — far from it. We agreed that the local authorities ought to spend £39 billion, an increase of 19 per cent over the same estimate the previous year and an increase of 7 per cent over what they had actually spent. This would produce a community charge at ‘standard spending’ of £379. The actual community charge in a particular area would of course depend on whether the local authority spent more or less than this figure. It should be possible to keep the community charge down below an average of £400 by vigorous use of charge capping. Yet even so this sum was well over twice the original estimate of the community charge which had been given to ministers. I stressed that the extra money — almost £3 billion — going to reduce the burden of the community charge would mean less for other purposes. That was the priority we had chosen and all ministers must abide by the consequences. Otherwise we would lose control of public spending. Chris Patten announced these measures to the House of Commons shortly afterwards. Some further details and modifications were announced at the end of October.

The system of local authority finance which I bequeathed to my successor remained unpopular. During the leadership contest in November 1990 Michael Heseltine made great play with his pledge to review the community charge and this prompted John Major and Douglas Hurd to promise their own reviews as well. At the end of March 1991 Michael Heseltine, once again Environment Secretary, announced the outcome: the Government had decided to abandon the community charge and to return to a property tax, supplemented by a sharp rise in VAT from 15 to 17.5 per cent.

Few episodes of my period in government have generated more myths than the community charge. It is generally presented as a doctrinaire scheme forced on reluctant ministers by an authoritarian Prime Minister and eventually rejected by popular opinion as unworkable. Mistakes were certainly made in implementing the charge, but this picture is a tissue of nonsenses. As Nigel Lawson has generously conceded, few pieces of legislation have ever received such a thorough and scrupulous examination by ministers and officials in the relevant Cabinet committees as did the charge. Its difficulties arose from a number of factors: the worsening economic and inflationary situation; the fact that the estimates