House of Commons Hansard Debates for 18 Jan 1990

Mr. Bryan Gould (Dagenham) : The House will not need reminding that Opposition Members have conducted a long campaign against the poll tax. We have opposed it on the principle of what the Government have put forward. I am glad that that opposition has been shared not only by Labour Members but, as we have heard demonstrated this afternoon, by hon. Members of other parties, including the Conservative party. Those who have taken that principled stand have done so because we object to the proposals first, on the grounds that they are costly and complicated ; secondly, that they constitute a threat to the unity and cohesion of family life ; and thirdly, that they are an obstacle to the full exercise of the rights of citizenship, which gives cause for legitimate concerns on the grounds of civil rights. Fourthly, and most important of all, we have objected to the proposals on the simple, straightforward and fundamental ground that, because they are not in any sense related to the ability to pay, they are grossly unfair and damaging.

Mr. Roger King (Birmingham, Northfield) : Will the hon. Gentleman give way?

Mr. Gould : In a moment.

Today, while we shall certainly adhere to, and intend to continue to press, that campaign on the grounds of principle--and I expect many hon. Members of all parties also to adhere to that position--we have reached a new stage in the debate. We are no longer simply discussing questions of principle. The true significance of the reports that we are debating today is that they now allow us to

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look at the nuts and bolts and at the hard practical consequences of what will happen in terms of pounds and pence for individual local authorities and, even more importantly, for individual taxpayers when the bills start plopping through the letter boxes on 1 April. We are now moving to a new phase in the debate, but our objections in principle are maintained and, I believe, will be strengthened by what we are now discovering about the practicalities. However, there is now a further opportunity for those who may never have objected in principle to the Government's proposals--who may, indeed, have endorsed the Government's proposals in principle, perhaps because they understood them or perhaps because they did not fully understand them. For whatever reason, those who may have endorsed the principle, now have an opportunity to make a new judgment about the practical consequences.

Mr. Roger King : I listened with care and attention to the hon. Gentleman's four points, the fourth of which related to the ability to pay. Some of us have discovered what is afoot in the town hall in Birmingham, where councillors have worked out that the community charge arrangements feature the concept of the ability to pay. Of its 683,000 adults, the city treasurer has calculated that 300,000 will get a rebate. We believe that it is because of that that the Labour controlling authority is putting up the rate unnecessarily to cash in on the rebate system.

Mr. Gould : I shall happily take up the case of Birmingham a little later, but I was interested to hear the slight nuance of an attack on the principle of rebates, which is a chilling prospect for any authority and for any individual taxpayer should the hon. Gentleman's view ever prevail.

We must now make--and when I say "we", I mean that the whole House and every individual hon. Member has to make--a judgment about the practical consequences of the new measures. I am delighted to see that at 5.17 in the afternoon, our Benches, and especially the Conservative Benches, are still full. It shows an almost unprecedented interest from the Conservative party in the detail of local government finance.

Mr. Dykes : Will the hon. Gentleman give way?

Mr. Gould : By all means.

Mr. Dykes : I am most grateful to the hon. Gentleman for giving way. Bearing in mind his reputation for holding long-term consistent views on various policies, such as Europe, I advise him that another reason why the Conservative Benches are extremely well populated is not only the importance of the subject, but because we are fascinated to learn his proposed alternatives to these proposals.

Mr. Gould : I am grateful to the hon. Gentleman for his tribute to my consistency. I shall take up his point immediately, because I am glad to have the opportunity of responding to it. I can tell him that we are making very good progress with the work that we have undertaken to prepare our alternative. There will hardly be a more pressing problem for us to face than the total unacceptability of the provisions that the Government are putting in place. We have absolutely no intention of

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repeating the mistakes that are now so clearly demonstrated by Conservative Members and of hurrying the process simply because-- Mr. Spencer Batiste (Elmet) rose--

Mr. Gould : Perhaps the hon. Gentleman will at least allow me to answer his hon. Friend the Member for Harrow, East (Mr. Dykes) first.

I want to put this point clearly. We have every confidence that in the coming months we shall reach a conclusion that we shall be able to bring forward with confidence. That conclusion will offer us a fair and effective alternative to the poll tax. When we have that alternative, and, more importantly, when we return to government to implement it, we shall have a debate on those proposals. I hope that at least some Conservative Members who are present today will be present then when we explain the legislative effect of our proposals.

In the meantime, let us be perfectly clear. Our function this afternoon is to debate the important detail of the Government's proposals, which will be of immense importance to the constituents of every hon. Member in the House. I hope that we shall not have a volume of irrelevant interventions on Labour policy on this or that matter-- [Laughter.] That would divert attention from matters of great seriousness. Every Conservative Member who is laughing and trying to disrupt the debate reveals only the desperation and embarrassment felt on their Benches about the debate and the scrutiny of the Government's proposals.

Mr. Chris Patten : Will the hon. Gentleman tell the House what happened to the last alternative and how long he expects the next one to last?

Mr. Deputy Speaker : Order. I remind the House that we are debating a specific motion.

Mr. Gould : I am grateful to you, Mr. Deputy Speaker. As I said, when we have our proposals, we shall be happy to debate them.

Mr. Batiste : Will the hon. Gentleman give way?

Mr. Gould : No. I want to make some progress. I shall give way in a moment.

Both Opposition and Conservative Members have an obligation to reach a new judgment on the basis of the facts, as presented in the reports. Unfortunately, that jugdment cannot be made on the basis of anything new or of substance put forward by the Secretary of State or in the reports. The facts remain substantially unchanged. Since 6 November the process of consultation has produced virtually nothing of substance by way of change.

Mr. Batiste : Will the hon. Gentleman give way?

Mr. Gould : I shall give way shortly, but I want to make some progress. I do not want to take an hour, as the Secretary of State did.

Bringing forward the grant is welcome but it is merely a recognition of the transitional problems that local authorities will face. Perhaps the Minister for Local Government and Inner Cities can help us when he replies to the debate. It is hard to understand how bringing forward £800 million-worth of grants by two months is worth anything like £180 million worth on interest rates.

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The only possible explanation is that there will be some, as yet undisclosed, increase in interest rates. I suspect that he will not wish to enlighten us about that.

Mr. Chris Patten : We have plenty of other things to disagree about, so we need not disagree about this. The local authority associations would not dispute the figures that we have given. I am prepared to show the hon. Gentleman the detailed calculations by which we arrived at them.

Mr. Gould : I shall be interested to hear the detailed explanation. On the face of it, £800 million over two months does not produce an income of £180 million.

The Secretary of State deserves some sympathy from the Opposition. He faces a predicament. As on previous occasions, he revealed in his speech a certain lack of warmth towards his proposals. That is not surprising. He is not the parent of these proposals. They are not his baby. He inherited them and has little power to change them. When he first came to office, he made a brave attempt to change them by introducing a safety net and transitional relief. We must accept that the Secretary of State has reached the end of the road. He cannot, or he is unwilling to, achieve any more and he said as much when he conceded that he was unwilling to find any more money.

There is nothing that the House can do, save to vote tonight to force the Treasury's hand. This is our last chance. We can still come to the aid of the Secretary of State, who clearly lost the battle in Cabinet, by voting against the reports.

Mr. Batiste : The hon. Gentleman repeatedly asks me and my hon. Friends to make a judgment about these proposals. He will agree that, by definition, there is no such thing as a popular tax. Many of us support the proposals, because after extensive consultation lasting many years, we have concluded that they are the least undesirable among many options. May we make our judgment this afternoon on the clear understanding that the hon. Gentleman has no alternative to offer that is less undesirable than the one before us today, and that he is unlikely to produce one before the next election?

Mr. Gould : I am sorry that the hon. Gentleman intervenes to such poor effect. He is trying to divert attention from an important and central difficulty which the House faces and on which, as he conceded, he must make a judgment.

The Secretary of State has a real dilemma. Not only has he lost the battle in Cabinet, but each time he talks about the safety net or transitional relief, each time he talks approvingly of the extent to which the central purse has been opened to help local authorities in their spending plans and about the need to cap the community charge or poll tax, indeed every time that he makes such a move--and he would love to move further--he undermines and destroys the only original case for introducing the poll tax. The poll tax had only one merit, or claimed merit--that it was simple, that everyone paid it and that it imposed the burden of accountability on those who received services and obliged such people to pay for them. Every move that the Secretary of State makes is a move away from the central simplicity of the poll tax. By every such expression of opinion, he demonstrates what little confidence he has in his proposals.

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Mr. Julian Brazier (Canterbury) : Does the hon. Gentleman deny that the community charge will enormously benefit the vast majority of single pensioners? He said that it had only one merit. Is not that another one?

Mr. Gould : The hon. Gentleman should note that at least 1 million single pensioners will be worse off under the proposals.

The Secretary of State has attempted to find an escape route from his difficulties. He has taken refuge in facts and figures that are unreliable. The reports are based on total expenditure, as the Secretary of State described, of £32.8 billion. Everyone in local government accepts that that figure is based on a Government assumption, not on actual spending. The Secretary of State does not dispute that. The reasons for that are instructive. First, the figure based on his assumption takes no account of spending from balances and special funds, which, as some of his hon. Friends have said, had to be made to meet local authorities' spending commitments. The local authority associations estimate that that factor alone accounts for a £1.6 billion shortfall in the figure that local authorities need in order to stand still.

We then pass to the inflation rate of about 4 per cent. that has been used in making the calculation. Yet everybody, even the Secretary of State, knows that inflation is running at 7.7 per cent. and that it may well rise even further in the year at which we are looking. The local authority associations calculate that that factor means a further £900 million shortfall, leaving local authorities, even under the Secretary of State's total standard spending assessment, £2.5 billion short. That is to take no account of yet a further factor based on the further spending commitments that do not appear yet to have been taken into account.

My hon. Friends have mentioned the pay rises for fire fighters, police and teachers, but there are further commitments in the pipeline arising from the Education Reform Act 1988, the "Care in the Community" White Paper and the Environmental Protection Bill, none of which has yet been taken into account. Yet the Secretary of State assumes that local authorities will, somehow or other, be able to freeze their spending in real terms.

Mr. Chris Patten : I want to be clear about what the hon. Gentleman is saying about balances, because it is an important point. Is it the Opposition's policy that, if a council uses its balances this year in order to increase its current expenditure, next year the taxpayer should find a similar amount so that the council's current expenditure does not have to fall by that amount of balance? If so, it will be of interest to the shadow Chancellor.

Mr. Gould : With great respect, the Secretary of State misunderstands my point. When we consider, as the Secretary of State invites us to do, percentage increases on levels of past spending--however strong or weak the case for doing so may be--there is no point for the purposes of that calculation in saying that spending came from this or that source, or this or that justified quarter. The fact is that that spending was undertaken. That is the level of spending. Therefore, anyone, including the Secretary of State, who wants to come to the House to say that the level of spending has been permitted to rise by a certain percentage, has to make that judgment on the basis of the actual figure rather than an assumed figure.

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If the Secretary of State wishes to say that they should not have made that spending, by all means let him say so, but that is irrelevant to the question of what percentage increase he has now allowed over the actual level of spending. There is no way that he can duck that. He cannot talk in terms of percentage figures while at the same time basing his judgment on an invented figure. That is the essence of his difficulties.

Ms. Dawn Primarolo (Bristol, South) : While my hon. Friend is dealing with matters that the Government have clearly not taken into consideration in the calculation of the standard spending allowance, let me add another to his list--the police precept. Avon county council, an alliance and Tory-controlled council, budgeting at the moment on a standstill budget which will produce a £500 poll tax, was allowed £34.3 million for its precept under the standard spending assessment. Its current expenditure is £38.8 million and the Home Office has just agreed an increased budget of 13 per cent. for the Avon and Somerset constabulary. That too has not been included in the calculation. The Government are forcing up local government expenditure.

Mr. Gould : I am grateful to my hon. Friend for demonstrating how futile it is to pretend that percentage increases can be based on assumed starting points. The list is long and, as my hon. Friend the Member for Newham, East (Mr. Leighton) said, we could add interest rates as well.

Mr. David Wilshire (Spelthorne) : Will the hon. Gentleman give way?

Mr. Gould : No, I want to make some progress.

Those factors mean that the Government's assumed total standard spending is a substantial under-estimate. No one disputes that. It cannot be used with any confidence as the basis for calculating the impact of the Government's poll tax. Nevertheless, those areas are carried over in the most damaging way conceivable, in particular, into the so-called benchmark of accountability--the famous, or perhaps I should say infamous, £278 so- called community charge for standard spending.

Not only does that figure reflect all the errors that we have detailed in the assumptions that are at the basis of the total standard spending, as many hon. Members understand very well--the £278 is a direct function of that figure ; it is in no sense some detailed and careful totting up of individual spending commitments, as is sometimes assumed--not only is the £278 figure flawed as a consequence of the mistakes made in calculating the total standard spending, but that mistake is exacerbated by further errors.

For example, when we look at the level of collection of the poll tax, the assumption made by the Government is that 100 per cent. will be collected. Yet everybody understands, and all the evidence is, that district treasurers and finance departments throughout Britain are naturally and properly budgeting on the assumption that they will collect no better than 95 per cent., and some may be lucky to achieve that.

Every shortfall in income and every increase in spending will have an immediate, huge and disproportionate effect on the level of the poll tax because there is no other way in which that shortfall or increased commitment can be made up. For every £1 of increased spending that

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is not accounted for, or every £1 of shortfall in revenue, the poll tax will go up by £4. That means that the £278 figure, to which so much attention has been paid, is, as I said when we first heard of it on 6 November, an invention, a mirage, a fairy tale. It bears no relation to reality and no one believes it.

In case anyone needs a demonstration of that, I need do no more than turn to the Conservative controlled Association of District Councils. The chairman of that local authority association, Councillor Roy Thomason, who is himself a Conservative, in a statement issued yesterday, said :

"The total spending envisaged by Government remains at an artificially low figure. It does not allow for the actual level of inflation"

"the fact that many authorities took money from their balances to pay for their spending last year".

He concludes by saying :

"According to the information currently available to us" we must bear in mind that these are mostly Conservative-controlled district councils--

"we estimate the community charge across England is going to average about £340."

In the Municipal Journal of 12 January we are told : "A straw poll' at a recent meeting of district treasurers showed that only one out of 246 authorities represented expected to levy a charge at or below' the notional figure".

It went on to say that Conservative councillor Watson from Horsham prepared a report showing that

"120 districts were expecting to exceed Government guidelines by between £76 and £100 per head. A further 65 were expecting overshoot by between £51 and £75 Only nine were expecting to keep their excess to £50. And, in one instance, a district"--

unnamed--

"was expecting to overshoot by more than £150 per head." No wonder Councillor Watson concluded that the Government's notional figures

"appear to have scant regard for the realities of life at the sharp end."

That is testimony from people involved in local government, experts in these matters and mostly members of the Conservative party. The real weight of their evidence is that many Conservative Members know that the evidence is accurate because they see it mirrored in their own experience in their own localities--

Mr. Richard Tracey (Surbiton) : No doubt the hon. Gentleman will know that the Association of Labour Authorities in London has been consulting various Labour-controlled boroughs, suggesting that they should go for the highest possible community charge and thereafter blame the Government. Does he agree that the public automatically assume that the highest community charges will come from Labour-controlled authorities?

Mr. Gould : I totally reject that calumny.

The Association of County Councils may be rather more to the taste of the hon. Member for Surbiton (Mr. Tracey). That

Conservative-controlled association has today published its comment on the Government's reports and figures. It raises the same range of objections to the accuracy of those figures as did the ADC. Under a heading,

"The unrealistic nature of the assumed £278 average community charge",

the association states :

"The wide publication by the Government of assumed community charge figures for individual areas is bound to have raised false expectations."

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We also have the testimony of the much- respected Chartered Institute of Public Finance and Accountancy. It has done a study which shows that if we put together the omission on inflation and accounted for a modest increase in real spending of 1.5 per cent. and allowing for a proportion of 5 per cent. of those registered adults failing to pay the community charge, this would produce an average community charge of about £344, compared with the £278 quoted in the exemplifications. The institute states :

"local authorities could only deliver an average community charge of £278 per adult by making very substantial cuts in the volume of spending--typically of the order of 8 per cent. to 10 per cent." I am glad that the House is taking notice of the overwhelming evidence which comes from local authorities of all types and colours of political control. During the debate hon. Members will no doubt testify to the experience of their own local authorities. I mention in passing--because it has been drawn to my attention in the past couple of hours--the position in Conservative-controlled Kensington and Chelsea. In a by-election a short time ago the hon. Member for Kensington (Mr. Fishburn) maintained that the poll tax would be about £122 per head. We now find him complaining that the poll tax bill will be at least £400. I have no doubt that Conservative Members will have similar horrific stories to tell.

I can speak for some Labour-controlled local authorities. For example, Birmingham, Wakefield and a range of other authorities have told us in telephone conversations today that for them the £278 figure is simply an invention--an absolute fiction.

Mr. Tony Banks rose --

Mr. Gould : I shall give way for the last time.

Mr. Banks : If he has the opportunity I should like my hon. Friend to address the calumny perpetrated by the hon. Member for Surbiton (Mr. Tracey) in suggesting that Labour authorities in London were being advised by the Association of London Authorities to go for the highest possible poll tax. My borough, the London borough of Newham, faces the prospect of a £503 poll tax which it realises is totally unacceptable to the poor people of Newham who will be forced to pay it. It knows that it must therefore consider making massive cuts. If the hon. Member for Surbiton thinks that we are so irresponsible that we want to penalise our own supporters, he is a bigger fool than he looks.

Mr. Gould : My hon. Friend offers weighty substance to my rejection of the calumny perpetrated a few moments ago.

Mr. Tracey : On a point of order, Mr. Deputy Speaker. There is documentary evidence for what I said. It has been discussed by the Labour group on Southwark council and, it is likely, elsewhere too.

Mr. Gould : On the central question of the veracity and reliability of the £278 figure, I have produced irrefutable evidence of its rejection by everyone who has considered it. In his recent television interview with David Frost, even the Secretary of State appeared to have some doubts. He said :

"the figures may fetch up higher."

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Why does it matter if the figure is an illusion? It matters because it is part of a propaganda battle in which a central Government--who have taken control of virtually every aspect of local government finance--will try to use that figure to show that when bills substantially in excess of £278 plop though letter boxes it has nothing to do with them. The practical consequence is that illusions have been created and expectations raised that will be shattered when the bills arrive. That is why, with that dreadful realisation, many Conservative Members are understandably concerned about what is being done in their name.

The practical consequences go further. The same mistakes that vitiate the £278 figure also affect the notional poll tax figure, on the basis of which the transitional relief is to be calculated. The transitional relief is meant to assure every poll tax payer that he or she will not be more than £3 a week worse off. The use of an inaccurate base figure means that undoubtedly many taxpayers will be more than £3 a week worse off, but will not qualify for transitional relief. There will be others who, having qualified for transitional relief, will still be more than £3 a week worse off. That is the practical consequence of the con-trick being perpetrated on the taxpayers of this country.

The Secretary of State rightly said that he was not going to deal with the national non-domestic rate which he would leave to his hon. Friend the Minister when he wound up. However, the reports set the figure for that rate--the poundage--and, therefore, we are entitled to say briefly that our objections to the national non-domestic rate follow the pattern of our objections to the poll tax. We object to this rate in principle because we see it as a further measure of unwelcome centralisation of the Government and a further attack on the autonomy and independence of local government. It breaks the link between those who receive services and those who pay for them. There is a complete and flat contradiction in the case for the non- domestic rate of the very principle which was said to commend the poll tax.

Mr. Chris Patten : I hear what the hon. Gentleman says about the uniform business rate. Will he confirm that the Opposition support the revaluation,?

Mr. Gould : There is no dispute on that matter. I would go further and congratulate the Government on undertaking that revaluation, which is long overdue.

Mr. Neil Hamilton rose --

Mr. Gould : I shall not give way, because I am about to conclude. One interesting fact about the proposals by the Secretary of State is that, as far as I can tell, the inflation rate at which he thought it appropriate to set the total standard spending for the poll tax, 4 per cent., is different from the inflation rate he has used to calculate the revenue to be obtained from the national non-domestic rate. It is extraordinary that a Government who are said to pride themselves on the accuracy of their book- keeping should, in the same set of proposals, operate on inflation rates that differ by almost 100 per cent.

There are other practical problems about the incidence and impact of the national non-domestic rate. The latest Inland Revenue analaysis of 20 December shows that the combined effect of the revaluation and the new business

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tax will mean that 252,000, or 15.5 per cent., of businesses will face an increase in their bills of more than 100 per cent., and 246, 000, or 15.2 per cent., of businesses will face increases of between 50 and 100 per cent. Therefore, nearly a third of all businesses in England and Wales will face business tax increases in excess of 50 per cent.

The Government's only defence is to point to the transitional arrangements, which purport to limit any increase to 20 per cent. in any one year, over a five-year period. Even that obscures the fact that the 20 per cent. increase is to be calculated cumulatively and takes no account of inflation, which must also be added. As a result, instead of a 20 per cent. increase from one year to the next, the maximum increase--at an inflation rate optimistically of only 6 per cent.--will be 26 per cent. in the first year, 59 per cent. in the second, and 100 per cent. in the third.

Mr. Chris Patten : Did the hon. Gentleman criticise Haringey when it increased its business rate by 56 per cent. last year?

Mr. Gould : I can understand the right hon. Gentleman wanting to divert attention from the central weaknesses of his own position, but we are debating his own proposals.

Just as with the poll tax we had the testimony of Conservative and non- Labour local authorities, so today we received a letter from Maidstone borough council--which I imagine many right hon. and hon. Members received- -concerning the business rate. Maidstone, which is certainly not a Labour- controlled council, states :

"This council notes that the recently announced revaluations for non- domestic ratepayers will result in vast rate rises for the majority of local businesses, on average around 69 and in many cases in excess of 100 . This represents the withdrawal by the Government of over £8m. from the local economy".

The council goes on to express its concern and dissatisfaction.

Mr. Max Madden (Bradford, West) : Will my hon. Friend comment on how the Government can square their claims that the uniform business rate will benefit the north when figures released this week show that, as a result of the poll tax and uniform business rate, Yorkshire and Humberside will lose more than £300 million per year? Does not that explode the myth that both innovations will greatly benefit the north?

Mr. Gould : My hon. Friend is right. The Local Government Information Unit has produced excellent research material to demonstrate that point.

A huge proportion of small and new businesses--particularly those using new technology, which are at the leading edge of economic advance and on which we need to rely for our future prosperity--face massive rate increases. Even on the basis of the Government's own assertions, the Government should display a decent sense of embarrassment. Year after year they have been saying that businesses were being crippled by rate increases. The situation now is that the Government themselves are imposing increases, of more than 100 per cent. in some cases, on the very type of businesses whose interests they claim to represent.

This evening, we are presented with a last chance to do something about the Government's iniquitous measure. We are opposed, both in principle and in practice, to the Government's proposals. Whatever views we may hold on the principle, we have an opportunity to modify it, by

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