Downing Street Years - Margaret Thatcher [414]
The fact remains that the defects in our system of local government finance were largely remedied by the charge, and its benefits had just started to become apparent when it was abandoned. Those advantages would have become steadily more evident as contracting out of local authority services and improved local authority efficiency took effect. But one further thing would have been necessary. Although the 1990 — 91 community charge capping proved relatively successful in holding down local authority spending, it would probably also have been necessary to introduce the much more far-reaching direct controls over council spending to which my mind had anyway been turning until our legal advice changed. It would have taken time before the disciplines of the new system began to affect the behaviour of the worst overspenders. But eventually they would have done so. However, the community charge was abandoned. The fundamental problems of local government — badly administered services, an obscure relationship with central government, lack of effective local accountability — not only remain: they will get worse.
* Central government grant contributes a large proportion of local authority spending. GREAs were an attempt to allocate grants to authorities on the basis of their ‘need to spend’, as denned by central government on the basis of dozens of indicators covering everything from an authority’s population to the state of its roads. The block grant system altered the distribution of central government grant so that it provided a lower proportion of local authorities’ expenditure if they spent significantly more than their GREAs — in other words, the more a council overspent, the higher the proportion of its spending ratepayers would have to meet. ‘Targets’ for individual local authorities (based on past spending) were introduced later in an attempt to secure year-on-year reductions in local authority spending: local authorities exceeding their targets actually lost grant (‘holdback’). The Audit Commission was established in 1982 with responsibility for auditing the accounts of local authorities in England and Wales and with powers to undertake or promote work on value for money and efficiency.
* Rates were levied at so many pence in the pound (the ‘poundage’) on the basis of the rental value of the property, which was assessed by a general valuation carried out by the Inland Revenue. Since the rental market in domestic property was small and shrinking the valuations were often very artificial. In addition, obviously, their accuracy deteriorated over time; hence the need for periodic revaluations.
* A ‘full’ safety net was one that ensured there would be no losses or gains from the abolition of ‘resource equalization’ during the first year of the charge.
* The capping legislation allowed us to act on a number of different criteria. The lawyers now advised that we could be much more rigorous than we had thought in capping authorities which had made excessive increases of the charge year-on-year (as opposed to capping those which had an excessive level of spending in a particular year).
CHAPTER XXIII
To Cut and to Please
Tax cuts, tax reform and privatization
The 1980s saw the rebirth in Britain of an enterprise economy. This was by and large a decade of great prosperity, when our economic performance astonished the world. Whereas Britain lagged behind other European Community countries in the 1960s and 1970s, our economy grew faster in the 1980s than all of them except Spain.