The Rates, the Poll Tax and Council Tax

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This April marks the twentieth anniversary of the Community Charge – universally known today as the Poll Tax. Or 'the ill-fated Poll Tax', because its implementation led to violent demonstrations in Glasgow and London, and it was quickly replaced. Arguably, it was the turning point for the Thatcher Administration.

We have to fess up to some involvement. It was an ASI report Revising the Rating System, written by my colleague, the late Douglas Mason, that put the idea on the public agenda. Mason recommended a flat-rate, per capita charge for local services, balanced by improvements in welfare benefits for those who would face the charge for the same time. He recommended gradual introduction, and lengthy testing. In the event, none of that happened. If anything sunk the poll tax, it was disastrously bad implementation, rather than the idea itself.

Everyone agreed the rates system – a local tax based on property values – was unfair. A house occupied by a large family with teenage kids, using lots of health, education and other services, paid the same as an identical house occupied by a single pensioner. Worse, only a minority actually paid the tax – just one in seven in Scotland. So the other six voted with impunity for high-spending local authorities. Councillors became unaccountable, and extremism took hold. Spending rose, the higher rates drove out local businesses, unemployment increased, social services were expanded, and rates rose again in an unbreakable cycle.

There had been various government commissions to review alternatives – a sales tax, a local income tax, and even a flat charge. They were all flawed. But Mason's report plumped firmly for the per capital charge as the least of several evils, and eventually that idea came through.

Scottish Conservatives, knowing that the scheduled rates revaluation would be electorally disastrous, insisted that the Poll Tax should be introduced right away, before its problems were ironed out. There were some welfare changes to help those paying for the first time, as Mason had proposed – but they were introduced a year earlier, and by the time the tax came in, everyone had forgotten about them, and the new tax was still a shock. There were problems with students and other mobile people. And some unscrupulous councils used the tax change to increase their total budgets – by up to 30% in one case – and then blame the government.

So the Poll Tax was scrapped and a compromise Council Tax introduced. Even that is getting to be as unpopular as the rates. Everyone knows that, if we are to revive local communities, more money needs to be spent and raised locally, instead of being handed out by Whitehall on their terms. So we really do need a better system of local taxation. No system is perfect, so, getting there will be painful. But until we find something that reflects Mason's ideals – a charge that reflects the volume of local services that people actually consume, but protects the poor, then we will continue to muddle along, with an over-mighty government in London dictating exactly what happens at the local level.

Dr Eamonn Butler's new book, The Rotten State of Britain, is now available to buy now. Click here to find out how.