The Downing Street Years (113 page)

Discussions continued up to the eve of the Party Conference where David Hunt, the Local Government minister, announced a scheme costing £1.2 billion over three years. The scheme would ensure that former ratepayers (and ratepayer couples) need pay in community charges no more than £3 a week extra over and above their 1989–90 rate bills, provided that their local authority spent in line with the Government’s assumptions. Pensioners and disabled people would be entitled to the same level of help even if they had not previously paid the rates (and of course many of them were entitled to rebates as well). At the same time David Hunt announced that the taxpayer would finance the safety net in England and Wales after the first year and that all gains would therefore come through in full from 1 April 1991. In spite of this, back-bench pressure increased. There was even doubt as to whether we could win the crucial Commons votes in January 1990 to authorize payment of the 1990–91 Revenue Support Grant. We met to discuss whether concessions needed to be made. Even if we had wanted to make concessions, it would not have been easy to
do so because there was really no common thread to the rebels’ concerns. In fact, I decided that we should hold our ground, and through the efforts of the whips and with the help of a superb speech from Chris Patten — always an able debater — we won the votes by a good margin. But I was under no illusion that victory in the House of Commons would be sufficient to convince public opinion, which had now turned strongly against the community charge.

By now the bad news about likely future levels of the charge was coming through thick and fast. By January 1990 the DoE had yet again raised its estimate of the average community charge to £340. We were heading for double the original estimate. That had been bad enough. Now in February, with local authorities likely to increase their spending by some 15–16 per cent, the latest indications were that it could be £20 or more higher.

Another piece of bad news was that the Retail Price Index Advisory Committee had in its wisdom decided that the community charge should be included in the RPI — treating it like the rates, but unlike other direct taxes. But the massive reliefs to individual charge payers should not be taken into account. This administrative fiction gave another expensive upward twist to the RPI and greatly increased the political damage which we were sustaining.

The political atmosphere was becoming grim. All my instincts told me that we could not continue as we were. On Thursday 22 March we sustained a very bad by-election defeat in Mid-Staffordshire, losing a seat in which we had had a majority of over 19,000. The press was full of outraged criticism of the community charge from Conservative supporters. I was deeply worried. What hurt me was that the very people who had always looked to me for protection from exploitation by the socialist state were those who were suffering most. These were the people who were just above the level at which community charge benefit stopped but who were by no means well off and who had scrimped and saved to buy their homes. Our new scheme of transitional relief did not protect them against overspending councils. Something more must be done.

My thoughts were crystallized by the discussion I had with Ken Baker, Tim Bell and Gordon Reece over supper at Chequers on Saturday 24 March. Their message was clear. It was vital to achieve lower
levels of community charge. If this were not done the political consequences would be grave. This matched my analysis entirely.

There was widespread support for the principle that everyone should pay something towards the cost of local government, which only the community charge could ensure. When people complained about its fairness they were not usually rehearsing the hackneyed — and spurious — point about the hypothetical duke and dustman paying the same. Unless the duke were very poor or the dustman very wealthy this could not be so, because about half of local authority expenditure was met out of general taxation which did reflect ‘ability to pay’. The problem was the levels at which the charge was now being levied and the fact that it was sudden and unexpected in its impact, frequently bearing down on our own people. That was what the authors of all those letters of complaint which I received were really driving at. But what could now be done?

The essential point, I felt, was to ensure that central government stepped in to protect the victims of what was essentially an arbitrary abuse of power by irresponsible local authorities. Arguments about accountability and the prospects for long-term improvement simply had to take second place.

So on Sunday morning, before I began work with my advisers at Chequers on drafting my speech to the Central Council, I rang the Chancellor, John Major. I told him that I had been reading the papers relating to community charge capping for 1990–91. I had a number of fundamental concerns. The first was political. When the community charge system had been developed we had assumed that if authorities persisted with high levels of spending, the blame for the resultant high community charges would fall on them rather than the Government. But that was not in fact happening. The public were blaming us and indeed the spending levels of a number of Conservative-controlled councils as well. Second, the impact of high community charges was falling on those in the middle income groups — what might be called the ‘conscientious middle’. Those on low incomes were well protected by the various rebate arrangements. Indeed, we were having to meet a much higher public spending bill than expected for community charge rebates because the charges themselves were so high. This would be given a further twist because, since the levels of community charge were pushing up the RPI, that would carry through into a higher than expected uprating for all social security benefits next autumn. The new system was not yet bringing about increased accountability. Nor did it seem to me that this was likely to materialize in the second year either. We could give some modest protection to charge payers in
1990–91 if we went ahead with the current proposals for charge capping, and indeed we must do so. But the effect on average bills would be marginal, at best. We therefore needed to consider radical further measures in relation to 1991–2.

The main option seemed to be the introduction of a direct central control over levels of local authority spending; for example, laying down that expenditure by each authority could be no more than a certain percentage above a Standard Spending Assessment (SSA) — that is the level at which the authority needed to spend to deliver a certain nationally uniform standard of service. That, however, would need to be matched by a substantial increase in the level of government grant to local authorities, perhaps with a larger proportion of the total in the form of specific grants for particular services. I saw no reason why it should not be possible for this dual approach to reduce total public spending by local authorities. We would then have to consider whether to continue with the community charge as the sole means of financing expenditure above the level allowed for, given that at present all the extra expenditure fell on the charge. An alternative would be to place some of the burden of higher spending on the business rate. All this pointed to the need for a major internal review which would have to be carried out very speedily. It would be necessary to indicate publicly that some kind of review was under way, although the terms and manner of such an announcement needed careful thought.

John Major did not dissent from my judgement that a radical review was necessary. He also agreed that the changes we came up with must control total public expenditure. I finished by saying that I would speak very soon to Environment ministers to tell them what I wanted done.

In one form or another I was to pursue this approach over the months ahead — until, as I shall describe, unexpected legal advice caused me to revise my views about the best practical way forward. I did not, though, even then alter the view which I had now come to about the future of local government finance. I still believed that the local accountability which the community charge did so much to strengthen would have a salutary effect. It would, not so incidentally, help ensure that low-spending councils — generally Conservative — were elected. But I had also seen — and did not intend to forget — the perversity, incompetence and often straightforward malice of many local councils. High-minded talk of local democracy must not be allowed to obscure the low-level politics of the people we were up against. That meant that central government must have adequate
powers — and be prepared to use them — to protect the individual citizen against rogue authorities.

But the most public opposition to the community charge came not from the respectable Tory lower-middle classes for whom I felt so deeply, but rather from the Left. From 1988 a number of Labour MPs, mostly in Scotland, had proclaimed their determination to break the law and refuse to pay the community charge and the far Left were agitating effectively in England too. They found little sympathy from the law-abiding mass of Labour supporters. But there were enough people ready to take the lead in organizing violent resistance. On Saturday 31 March, the day before the introduction of the community charge in England and Wales, a demonstration against the charge degenerated into rioting in and around Trafalgar Square. There was good evidence that a group of troublemakers had deliberately fomented the violence. Scaffolding on a building site in the square was dismantled and used as missiles; fires were started and cars destroyed. Almost 400 policemen were injured and 339 people were arrested. It was a mercy that no one was killed. I was appalled at such wickedness.

For the first time a government had declared that anyone who could reasonably afford to do so should at least pay something towards the upkeep of the facilities and the provision of the services from which they benefited. A whole class of people — an ‘underclass’ if you will — had been dragged back into the ranks of responsible society and asked to become not just dependants but citizens. The violent riots of 31 March in and around Trafalgar Square was their and the Left’s response. And the eventual abandonment of the charge represented one of the greatest victories for these people ever conceded by a Conservative Government.

The trouble was that, because of the size of the bills now being sent out, the new system had the very same law-abiding, decent people — on whom we depended for support in defeating the mob — protesting themselves. The riot did not, therefore, shift me from my determination to continue with the community charge itself or to see the criminals of that day brought to justice. But it did reinforce the conclusions I had reached about the need to take effective action to limit the burden it was placing on what I had described to John Major as the ‘conscientious middle’.

In fact, unbeknown to me, the rioters were on their way up to Whitehall as I was addressing the Central Council in Cheltenham.

I began my speech with what was to be the first of a number of increasingly risky jokes about the political threat to my leadership.
Cheltenham’s reputation as the traditional retirement centre for those who governed our former empire provided the peg. I began:

I then went almost immediately to the heart of the issue about which the Party was agonizing.:

But I did go on to announce a number of limited special reliefs. Even this modest package had necessitated my tearing up a feeble draft from the Treasury and writing it myself. Given the weak draft, the absence of colleagues and the late hour, however, I was not able to write into my speech assurances of the weight and substance I would have liked. So I had to content myself with hinting at my ideas about further capping powers to deal with overspenders.

My main message, therefore, had to be that the way to have low community charge bills was to vote Conservative in the forthcoming local elections. I pointed to some of the figures for the charge to illustrate my point.

But I also drew a wider lesson, and in doing so I deliberately sought to move the political argument back to the greater questions of politics which distinguished the Conservative from the socialist approach — and back to the values for which I personally stood:

The reception was good. But for them and for me the worries remained.