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Local Government Review (England)

3.30 pm

The Secretary of State for the Environment (Mr. Michael Heseltine) : With permission, Mr. Speaker, I wish to make a statement outlining progress on the review of local government-- [Interruption.]

Mr. Speaker : Order. The whole House, and the country, too, have been waiting for this statement.

Mr. Heseltine : The House will remember that when I announced the review on 5 December I explained the comprehensive nature of our review. For the first time we are looking at the structure, functions and finance of local government in the round.

I should like to thank the very large number of people and organisations who have put forward their views. I do not need to tell the House that they have not always been compatible one with another.

We took as our starting point our firm belief that the local delivery of certain services--many of them essential--is a central feature of a pluralist society. Local government must enable local people to exercise continuing influence over the quality and the range of the services which Parliament entrusts to them.

Local government is responsible for the efficient delivery of these services. We need responsible, elected local authorities, not only to provide a check and a balance to Westminster, but also to reflect the multiplicity of aspirations amongst local communities.

But, given the primary responsibilities of central Government, local government cannot be a fully independent power in the land. It traditionally derives its power from Parliament, and it must complement and not compete with central Government in its activities.

Within this framework, we believe that councils should be accountable for their actions and that there should be a direct and visible relationship between the costs of services and the local bills to which they give rise. We believe that those bills should be spread widely and fairly throughout communities ; that they should bear some relation to people's ability to pay ; and that it should be possible to levy and collect them without difficulty.

These principles are guiding our review. I am able to announce today some interim conclusions and, in other areas, to narrow the options so as to proceed to more detailed consultations.

Many parts of England now have, in effect, unitary local government. The Greater London council and the metropolitan county councils were abolished in 1986. The Inner London education authority went in 1990. There is little demand for their restoration. Indeed, it is difficult now to perceive any real role that they played. Outside the main conurbations, leaving aside the valuable role" played by parishes, the system of two principal tiers is being questioned. Also being questioned is the continued existence of certain of the authorities which were created by the local government reorganisation of 1974, but which have not succeeded in inspiring local loyalty. Another challenge is that the role of authorities is changing as they increasingly become enablers rather than direct providers of services.

There is, therefore, now an opportunity to think afresh about the structure of local authorities. But the Government do not see this as an opportunity to impose

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a new pattern of local authorities according to a national prescription. Nor do we believe that it is necessary to have a uniform pattern of authorities in every part of the country. Local people should have an important role in determining what structure of local government best reflects their community loyalties. That does not mean, therefore, the wholesale abolition of either county councils or district councils, nor even unitary authorities everywhere. It means arriving at the right solution for each community. We intend to adopt a practical approach in response to local views and local conditions, but it seems likely that we shall move to a larger number of unitary authorities.

We shall, therefore, consult on the proposition that a local government commission shall be charged with responsibility for evaluating the most appropriate form of local government for individual areas, taking account of the wishes of local people and putting forward proposals for reform. We will proceed area by area. The reduction in the local tax burden and the correspondingly larger contribution from central taxation announced in my right hon. Friend's Budget statement imply a need to consider whether a number of functions should now be brought into or financed directly by central Government. That would be without further changes to the balance between central and local taxation.

My right hon. and learned Friend the Secretary of State for Education and Science is bringing forward today proposals for such a transfer in one area of his responsibility.

The issue of how local authorities are managed is no less crucial. The problems that local authorities face are compounded by the cumbersome internal arrangements for the management of councils. The committee system- -which dates back to the Municipal Corporations Act of 1835--requires that all decisions are taken collectively by large numbers of councillors, in full council or committees. Too many councillors spend too much time achieving too little.

Consequently, it is difficult for local government to attract and keep enough men and women of the right calibre both to lead what are now multi- million pound organisations providing a range of key services and to represent properly the interests of the people who elected them. We believe, therefore, that there should be a new look at the internal workings of local authorities to improve the decision-making process. I shall issue a consultation paper on these issues.

Alongside that, we also want to develop further the idea of the enabling council. Many of the Government's policies have been designed to move power to individual members of the community--in particular, the right to buy, the tenants' charter and local management of schools. Compulsory competitive tendering has also been part of that process and we will be looking at ways to make it more effective and to carry it forward. In particular, we will be looking at new areas where contracting out should be applied. Those will include professional and technical tasks, as well as manual tasks. Housing management, legal services and computer services could all be added to the list. The success of a local authority must be measured not by its size, but by the quality of the services delivered, from whatever source, by its responsiveness to its clients and customers and by the value that it squeezes out of each pound of taxpayers' money.

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I now turn to the question of finance. A local tax base is essential if there is to be any meaning to the concept of local government. But local government services cost a great deal of money- -more than £50 billion in the coming year--and the burden on local taxpayers has become too great. We have therefore decided to make a fundamental shift in the amounts which central and local taxpayers pay towards the cost of local government services. This change will take effect in 1991-92, and will reduce local taxation to a level that should be sustainable in the longer term.

The first consequence of this was announced by my right hon. Friend the Chancellor of the Exchequer on Tuesday. We have concluded that it is right to reduce the present average headline community charge of £392 in England for 1991-92 by £140 to £252. The average amount payable by charge payers, after allowing for the community charge reduction scheme and benefits, will then be considerably less than this. To secure this, my right hon. Friend is providing a further £4 billion from national taxation to local authorities.

As a result, in 1991-92, the community charge will be raising less than rates in their last full year. For the coming year, locally raised finance will fund 22 per cent. of local government expenditure, compared to 34 per cent. this year. And these figures are before the substantial benefit of rebates and the community charge reduction scheme.

To achieve these objectives, my right hon. Friends the Secretaries of State for Scotland and Wales and I are today introducing in the House a short Bill. If enacted, this will have broadly three effects.

First, it will provide that the community charges which authorities have set for 1991-92 are replaced the day after the Bill's enactment by new charges £140 lower. Councils will not need to meet to set the new charges, but they will be treated in all respects as if they were set by authorities in the usual way.

Secondly, my right hon. Friends and I will be empowered to pay grants to charging authorities to make up the loss of income resulting from the reduction in charges brought about by the Bill's provisions. It is also our intention to pay grant to cover authorities' additional administrative expenses arising as a consequence of the Bill.

All this means that where authorities have already issued their charge bills for 1991-92--I know that some authorities have done so--they will, after the Bill's enactment, need to issue fresh bills reflecting their new lower charges. We propose to amend the regulations on the community charge demand notice slightly to provide the basis for the new bills but we believe not in ways that would result in significant changes to authorities' computing arrangements. We are revising the profile of payments from the non-domestic rates pool to ensure that our proposals have no significant effect on authorities' cash flow.

These proposals do not affect the operation of the community charge reduction scheme or community charge benefits, though it will, of course, be necessary to recalculate entitlements under both schemes. My Department has written to local authorities, and to the local authority associations, explaining the details of all these arrangements. Clearly, it is desirable that the new charges should be in place at the earliest opportunity. Accordingly, we shall be looking to Parliament to consider the Bill as a matter of urgency.

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Having reduced community charges to reasonable levels, we shall expect local authorities to restrain their spending to keep them at those levels. I shall therefore be prepared to use my capping powers rigorously again in 1992-93.

Having achieved a reasonable balance between funding from national sources and funding from local tax, we need to address the question of the local tax itself. I referred briefly in my opening remarks to the principles which I believe should underpin any form of local tax. Let me spell them out.

First, accountability. As far as possible, a local tax should buttress the accountability of a local council to its taxpayers. People should be able to see some link between what they are being asked to pay and what their council is spending.

Second, fairness. Nobody likes paying taxes. But in our society taxes have to be basically acceptable to taxpayers ; and to achieve that they must be perceived to be fair.

Third, ease of collection. Any tax will require administrative arrangements to collect the revenue, including measures to chase up those who are late in paying. But if the tax is too difficult to collect, the costs of collection become unacceptable.

Fourth, most people should make some contribution. We believe that it is right that, as far as possible, any tax should take some account of the number of adults in each household so that they contribute to the cost of services provided by the local councils which they elect. This principle has gained a wide measure of acceptance.

Fifth, restraint. No tax is acceptable if it is levied at penal rates either as a result of local authority overspending or because the burden on any individual or household is excessively high. We are adamantly opposed to excessively high bills for a minority of electors--a feature of the old rates system.

In accordance with these criteria, we have reached our conclusions about the future of the community charge. In spite of the comprehensive system of income-related rebates, and the reduction scheme that we devised, the public have not been persuaded that the charge is fair. We have therefore decided that from the earliest possible moment the community charge will be replaced by a new system of local taxation.

After a careful reappraisal of the options, we have decided in principle to bring forward a new local tax under which there will be a single bill for each household comprising two essential elements, the number of adults living there and the value of the property. There are a number of ways of assessing values, on a capital or a rental basis, which require careful evaluation and extensive discussion and consultation. But it is our intention that the system that we introduce should have the following features : it should reflect people's concern that the system is fair ; the balance of funding as between central taxes and the new local tax should be broadly in line with that announced by my right hon. Friend the Chancellor of the Exchequer on Tuesday ; it will be essential to ensure that local taxpayers do not face undue changes in their bills as a result of the introduction of the new local tax arrangements : there will therefore, need to be arrangements to protect them during the transition to the new system ; the system should ensure that regional variations in property values do not lead to

disproportionate bills in high price areas ; there should be rebate arrangements to protect people on low incomes from making a

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disproportionate contribution to local taxation ; there must also be restraints to ensure that local taxpayers do not face excessive bills as a result of overspending by local councils, either before or after the introduction of the new system : there are a number of ways, including capping, by which this may be achieved.

I made clear at the beginning of this statement my commitment to the institution of local government. But, for its part, local government must recognise economic reality and the duty and responsibility of central Government to manage the economy. Central Government also have a duty to protect local taxpayers from excessive bills.

I intend to publish a consultative document after the Easter recess setting out alternative approaches and dealing with these issues. At present, the Government have no intention to propose changes to the uniform business rate. My right hon. Friends the Secretaries of State for Scotland and for Wales will be making separate statements about the outcome of the review as it relates to those countries. Let me summarise. We have already dealt with the burden of the local tax. I shall shortly publish consultation papers on structure, internal management and the new local tax. We will conclude the period of consultation in the summer. Depending on the outcome of that consultation, we intend to introduce legislation setting up the local government commission and providing for the new local tax in the next Session of Parliament. We anticipate that the first of the new authorities could be in place by April 1994. We shall consult local authorities on the basis that the new tax could be in place in 1993-94.

The proposals that I have outlined will establish a system of local government which will carry through into the next century. These proposals are designed to end the sterile quarrel between supporters of central and local government. They should attract men and women of sufficient quality and commitment to restore authority to and confidence in local government. They should enhance the quality of services and give extra momentum to the pursuit of value for money. They should result in a local government which puts people first. I commend the proposals to the House.

Mr. Bryan Gould (Dagenham) : We have just heard the most complete capitulation, the most startling U-turn and the most shameless abandonment of consistency and principle in modern political history. The former Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher), who cannot bear to be present, was famously not for turning. The Secretary of State and his new Prime Minister have not only turned ; they have been through a revolving door. May we be assured that the new Prime Minister will not complain tomorrow that he has once again been bounced by this latest leak by the Secretary of State of his own proposals?

We have not heard from the Secretary of State a single word of contrition or apology. Will he now make a formal apology to the people of Britain for 12 years of arrogance, to local government for unprecedented chaos, and to millions of people who have been driven to despair by shattered services and unfair and ever rising bills? Is it not

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astonishing incompetence that, after 12 years in office and £13.5 billion of taxpayers' money, the Secretary of State still cannot tell us what he intends to do?

What happened to the Prime Minister's assurances on Tuesday that we would have all the answers this week? How could a Prime Minister on top of his job make promises on Tuesday which his Secretary of State is unable to fulfil on Thursday? Why are we left not with the answers but with the questions? Why have we not had answers to the most obvious questions? When will the charge take effect, what will be the valuation rate, how many people will be assumed to constitute a household, what will be the size of the poll tax element, and how many people will be losers?

Is not the problem that, while the Secretary of State clearly concedes that the poll tax flagship has been holed beneath the waterline, the wreck is still afloat and is a danger to all shipping? What the Secretary of State told us today, with its continued uncertainty and confusion, its inevitable doubts and delays, is in effect that the poll tax bills will keep on coming --this year, next year, in 1993 and in all probability in 1994 as well. Why will not he accept our offers of co-operation on a Bill to abolish the poll tax, on the basis of our fair rates proposals--the only way in which we can ensure that this year's poll tax bills will be the last?

Is it not clear that under the Secretary of State's proposals the poll tax will still be with us even after 1994? This is the tax that refuses to lie down and die. Under those proposals, will not people continue to be taxed simply because they live and breath? Are we not still faced with a head tax, with all the problems of a register, with all the unfairness of a flat rate tax, and with all the difficulties of extricating money from people with no income? Does not the right hon. Gentleman recognise that he cannot rely on the electoral register to solve his problems without putting a price tax on the right to vote and then inviting people to sell that vote at a price which may be as much as £150 or £200 per vote? Are we not left with all the objectionable features of the poll tax but with all the difficult and transitional problems of a new and untried property tax? Are we not faced with a pig-in-a-poke tax, a bed-and-breakfast tax, a property poll tax, a tax on the roof over one's head and a tax on the heads under one's roof?

How can the Secretary of State be confident of persuading his own party to support these proposals in the Division Lobbies? Does he recall the right hon. Member for Finchley assuring the country that she would never introduce a property tax? Does he expect her to follow him through the Lobbies? And what of himself and all his Front Bench colleagues--indeed, of the whole Tory party, all of whose members fought the last election on a manifesto commitment to abandon property taxes? Are they now to be whipped through the Lobbies--and how many of them will refuse to follow?

Are not the right hon. Gentleman's proposals for reorganising local government, vague as they are, also driven by the poll tax? Should not structure determine finance rather than the other way round? Why is the poll tax still in the driving seat, spreading its malign influence not just through education and through the whole of the Budget strategy but into the whole structure of local government, too? Are not this a Government who, despite their belated confession of terrible error, are still in thrall to the monster that they created?

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There is, after all, some justice in the spectacle of the Government continuing to pay a heavy price for their poll tax debacle. The tragedy is that the rest of the country will also continue to pay that price--the price of a mistake borne of arrogance and perpetuated by a leaking and limping Government who, on the evidence of this broken-backed and blood-stained statement, are too weak and divided to correct their own error.

Mr. Heseltine : It will be apparent to the whole House that we have achieved more in three months than the Opposition achieved in 11 years. I repeat, for the benefit of the hon. Member for Dagenham (Mr. Gould) who obviously did not hear what I said, that we shall consult on the basis that the new local tax will be in place for the year beginning 1993.

Let me return to the spirit with which we began this review a few months ago. The hon. Gentleman has criticised our proposals. I will make him an offer : I would be very happy to include his proposals in the consultative process that we are about to begin-- [Interruption.]

Mr. Speaker : Order. We have a very heavy day ahead of us.

Hon. Members : Labour party Members are leaving.

Mr. Heseltine : I am not quite sure who is deserting the sinking ship, but I should like to help the hon. Gentleman a little more. To conduct that consultative process with the thoroughness that the hon. Member for Dagenham would want, I need to know answers to some questions about the costs of the fair rate proposals. The House knows that, in the past few days, we have put £4 billion into switching the incidence of responsibility from local people to the centre. The Labour party said that it would not have increased VAT to do that. What would it have increased? I need to know the answer so that I may consult thoroughly. If people need to know exactly who will pay how much, which is the complaint of the hon. Member for Dagenham, he must say precisely where he wants the tax burdens to fall. When the Labour party has worked out the answers to those questions, we shall have already won the next general election.

Mr. Bob Dunn (Dartford) : If there are any apologies to be made in the House today, they should be made by the Labour party, which allows law breakers to sit on its Benches.

Will my right hon. Friend the Secretary of State be a little more precise about the equalisation arrangement to reflect property values between the north and south, and within the regions?

Mr. Heseltine : I am grateful to my hon. Friend. Obviously, we must address the equalisation problem in the consultative document. It is not possible to do so in general terms, but we must weigh up the various elements of the local tax before making a judgment. Some remarkable figures have been quoted as the likely consequence of our proposals for people living in the south-east, but they bear no relationship to reality.

On my hon. Friend's first point about the discrediting of local government, it is impossible to overstate the damage that has been done to the institution of local government by the behaviour of many Labour-run local councils.

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Mr. A. J. Beith (Berwick-upon-Tweed) : Why has the Secretary of State chosen to move from the most unpopular local tax ever to the second most unpopular local tax ever? He has gone straight from the frying pan into the fire. We have not learned much about the new tax this afternoon, except that it will not be based on people's ability to pay, which is the clear characteristic of a local income tax. Will the Secretary of State accept our welcome for the fact that his proposals on structure follow closely--even, in places, word for word--our proposals? Why does not he accept our whole package and recognise that fair elections for local councils, together with a fair tax, could make local government responsible and genuinely local?

Mr. Heseltine : I very much appreciate the conversations that we conducted with the Liberal party. They were in marked contrast to the wholly irresponsible position of the Labour party, which so lacked confidence in its proposals that it would not even discuss them. We started our review in the hope that we could find a measure of agreement on the various aspects of local goverment. We have been able to meet with the Liberal party on some of the approaches that we have adopted and I have no ground for complaint about that. The hon. Gentleman asked why we did not pursue the option of a local income tax as advocated by the Liberal party. There were several reasons, one of which was that the mood of the country means that it would not be inclined to want to entrust its income tax rates to local Labour-controlled authorities. Having listened to the hon. Gentleman at great length and with courtesy, I was persuaded not to follow his arguments, but to reject them.

Mr. Nicholas Ridley (Cirencester and Tewkesbury) : I support much of what my right hon. Friend the Secretary of State said in the first part of his statement. However, now that my right hon. Friend the Chancellor of the Exchequer has made a huge sum of money available to reduce the community charge, if my right hon. Friend the Secretary of State had put that money into improving the rebate system rather than reducing the total, might not the community charge have become acceptable in two years' time? The fact that my right hon. Friend has suggested a two-tax system that will be just as hard to collect as the present one, will not be related to ability to pay and will create a new class of losers might be simply because he decided to make his statement on the Ides of March.

Mr. Heseltine : As my right hon. Friend rises behind me, I do not think that anyone would suggest that he has a lean and hungry look. I very much welcome his support for the first part of my statement. To receive any agreement or support at all when dealing with the reorganisation and reform of local government is something of an achievement, so I am grateful to my right hon. Friend.

My right hon. Friend suggests that we should have taken the hypothetical concept of allowing the community charge to run on, perhaps spending more and more money and underpinning it with more and more social security arrangements. That is not a credible basis on which to sustain a tax. First, the tax is widely perceived as not being as fair as was originally intended and hoped. Secondly, there are undoubtedly collection difficulties because of the significant number of changes during the course of a given year. Therefore, introducing a new, local tax that

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combines many of the elements of my right hon. Friend's ideas but also holds out greater certainty of collecting most of the money moves us towards an important consensus.

Mr. John Garrett (Norwich, South) : Is it proposed that the Government would give evidence, or make recommendations, to the local government commission stating which local authorities they would prefer not to continue?

Mr. Heseltine : It is unrealistic to think that the Government will not have an input into the analysis of something of this sort. I cannot think of any reorganisation of local boundaries in which, in the end, Ministers of the Crown are not involved. Everybody should have a wide chance to contribute to such matters. The hon. Gentleman should bear with me until he is able to read the details of the proposals and the consultative documents. In drawing them up, I shall do my best to listen to points put to me from all parts of the House.

Miss Emma Nicholson (Torridge and Devon, West) : Does the Secretary of State agree with me that the Cassius's in this place sit on the Opposition Benches and that their skill lies in leading the electorate to their death? The answer proposed by the hon. Member for Dagenham (Mr. Gould), when he was invited just now by my right hon. Friend to consult again, was a helpless response--"Abolish the poll tax, abolish the poll tax." He had no constructive proposals to offer the British electorate or the Government. I congratulate the Secretary of State on retaining the key element of the community charge, accountability to the local electorate, while bringing in the greater concept of a household service charge.

Mr. Heseltine : I am extremely grateful to my hon. Friend for her constructive support. Nothing that we have heard from the hon. Member for Dagenham (Mr. Gould) today can in any way be described as an answer.

Mr. Stanley Orme (Salford, East) : What will be the costs of collection for the new poll tax--because that is what it is? Will there still be a poll tax register, with people being forced to register as they are at present? Will not the costs be increased? Is this not the poll tax under another name?

Mr. Heseltine : I can understand the dismay of the Labour party and its attempts to suggest that this is a poll tax, but it is not. It is a local tax which is quite different in its concept and application. It is perfectly possible that we shall not need a register to administer the tax. But all those matters need detailed consultation with the local authority associations. I am absolutely amazed that, every time I suggest discussing the detail with anyone, the only party that goes through the roof with indignation is the one that does not believe in consultation and wants to impose its own wholly unacceptable views on everyone in sight.

Mr. Cranley Onslow (Woking) : May I congratulate my right hon. Friend and his colleagues on producing a system that will preserve the principle that every adult should contribute to the cost of local government, that will take account of people's capacity to pay, that will ensure collection--even from the most notorious evaders on the Opposition Benches--and that will, above all, keep down the cost of good Conservative local government?

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Mr. Heseltine : My right hon. Friend is as aware as I am that, on average, a vote for the Labour party puts £50 on the community charge. I welcome his support. We shall ensure that our proposals progress with the greatest dispatch.

Mr. William Ross (Londonderry, East) : As VAT was increased by 2.5 per cent. on Tuesday, may we assume that the extra income will be allocated specifically to local government or to its particular functions? Will he confirm that each elector or ratepayer in Northern Ireland will benefit by £140?

Mr. Heseltine : I pay tribute to the hon. Gentleman for the courteous and helpful discussion that I had with him. He has made an important point. This was not an hypothecated revenue that the Chancellor described when increasing VAT by 2.5 per cent. The important point that my right hon. Friend made was that he was broadly creating a new balance between revenue raised from local sources and revenue from the central Exchequer. The single biggest change for which he was responsible was in the balance between the very substantial amount funded from the centre and the amount that will increasingly be funded by the local ratepayer or charge payer. We have begun to reverse the process that began in 1976.

The right hon. Member for Bethnal Green and Stepney (Mr. Shore), who I am glad to see in his place, began the process of increasing the amount paid locally when he reduced central Government support. That reduction continued between 1976 and 1979 until my right hon. Friend the Chancellor brought about a significant shift.

On the specific question about Northern Ireland--it is important to shed light on the darkness of Opposition Members, even though it means a slight digression--these are matters for my right hon. Friend the Secretary of State for Northern Ireland, but the same proportions will apply in Northern Ireland.

Sir Hugh Rossi (Hornsey and Wood Green) : I welcome the principles enunciated by my right hon. Friend as underlying the new form of local tax that the Government propose, and I recognise that much will depend on the balance achieved in the application of those differing principles, but I urge him to bear well in mind that what counts most in an area such as my constituency is the total demanded of residents by the local authority and the services provided in return for those moneys. Will he ensure that under the new system and structure of local government provision is made to regulate local authorities and greater power is given to the independent Audit Commission to ensure that real value for money is given?

Mr. Heseltine : I very much welcome my hon. Friend's question. We are aware that the issue is one of detail when it comes to the introduction of the specifics of the tax. It is important to issue a consultation document so that local authorities, which must administer the tax, can participate in how it develops. We shall bear that carefully in mind. All right hon. and hon. Members will have a chance to consider the issues in principle before we draft legislation. I thoroughly agree with my hon. Friend that, in many aspects of local government, the pursuit of value for money has not been taken sufficiently seriously. Our proposals will provide us with an opportunity to do so.

Mr. Merlyn Rees (Morley and Leeds, South) : In the midst of all the "interim", "in the future" and "after

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consulting" proposals that the Secretary of State made, there was the certain statement that we would be paying the poll tax in the 1992 financial year. The right hon. Gentleman says, "We do not know what the figures are." Will he tell me the figures so that when I return to Leeds at the weekend I can tell people what the average three- bedroom house with two residents will pay after 1 April next year?

Mr. Heseltine : I have been as fair to the Labour party as I can be. Can the right hon. Gentleman conceivably answer that question in terms of the fair rates policy of the Labour party? Would it not be easier for him, in giving fair and dispassionate advice to his constituents, if he could compare our proposals with those of his party? I am offering the Labour party the chance to do that. Because of the switch that my right hon. Friend the Chancellor made in the Budget, we have brought down the contribution by local payers to such levels that it would be wrong for the right hon. Gentleman to indulge in scare stories in Leeds or anywhere else.

Dame Peggy Fenner (Medway) : I am grateful that I caught your eye, Mr. Speaker, as I should have, being the Member who represents the area with the lowest community charge, apart from two London boroughs, which have heavy safety nets. Of course, my constituents will be pleased to have the extra money that my right hon. Friend concedes that they should have had from central Government. Will my right hon. Friend visit my constituency to find out how we produce value for money?

Mr. Heseltine : If my hon. Friend will come with me, I shall be delighted to attend upon her constituents.

Mrs. Margaret Ewing (Moray) : I assure the Secretary of State that the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is totally wrong in assuming that the longer the poll tax is in place, the more popular it will become. The people of Scotland have testified to that in opinion poll after opinion poll, as we were used as guinea pigs one year in advance of everyone else.

When considering how to change this tax, will the right hon. Gentleman advise the House what assessment he made of the possibility of having in a unit the size of Scotland a local income tax, based on ability to pay, which could have been implemented in the next financial year? We should not be held back until 1993-94.

Mr. Heseltine : Again, I thank the hon. Lady. She was courteous in coming to talk to us and in giving her views--[ Hon. Members-- : "Oh."] It is embarrassing for the Labour party. I do not want to repeat my comments about the paucity of thinking behind the Labour party's views. All the other political parties joined our consultations, which were very profitable. We incorporated in the review many of the ideas which we discussed. A desperate bankruptcy exists, and it is to be found among Opposition Members.

We considered a local income tax, but we were not persuaded, for several reasons. First, within the totality of local government, entrusting local Labour authorities with setting the levels of income tax would have given them the power to reverse what was one of the main thrusts of Government economic strategy in the past decade. Secondly, in many local authority areas, where the number of income tax payers was relatively limited and the number of people on a form of rebate or exemption was high, the

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danger was that people with significant resources would be imprisoned in an area without having any effective control over the outcome of elections there. Adding a local income tax to a national income tax would create confusion in people's minds as to which function or service they were financing--whether local or central. There were many complicating factors. We decided that a local tax formula would leave a clear idea in people's minds that they were paying a local authority which they could identify for local services.

Mr. John Biffen (Shropshire, North) : Is my right hon. Friend aware that when a flagship becomes a navigational hazard the best thing to do is to scupper? I congratulate my right hon. Friend on the professional way in which he has set about that job.

Mr. Heseltine : I understand something of my right hon. Friend's thinking, although I could never emulate his language.

Mr. Tony Banks (Newham, North-West) : The question directed to the Secretary of State by the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) was the first example I have ever witnessed of a Brutus stabbing a Judas. After 11 years, local government has been reduced to absolute chaos and muddle by the Government's policies. What the Secretary of State has done today is to snatch chaos from the jaws of the poll tax defeat, and local government will suffer for it.

The right hon. Gentleman says that the commission that he is to set up will be able to consult local people and that if local people wish a certain form of government to be instituted, that will be allowed. If the people of Greater London decide that they want a strategic local government structure in London, along the lines of the old Greater London council, will the right hon. Gentleman allow that to happen?

Mr. Heseltine : Having listened to the hon. Gentleman, I am even more convinced than I was before of the dangers of such a proposal. If the hon. Gentleman were in my position, perhaps he would pause before accepting the advice of a former councillor from Lambeth.

Hon. Members : What about the Prime Minister?

Mr. Speaker : Order.

Mr. Robin Squire (Hornchurch) : May I wholeheartedly congratulate my right hon. Friend on introducing a system which will seem much fairer to the overwhelming majority of people in the country and which retains the important concept that most people will pay something? Will my right hon. Friend confirm that, for the two years--or whatever period--for which the present system remains, he, and local authorities, will expect all those liable under it to pay, whether they are Opposition Members or people occupying less illustrious positions in society?

Mr. Heseltine : While I was listening to my hon. Friend's important question, I was conducting a further interim review of local government and, on mature reflection, I have come to the view that some councillors from Lambeth are really rather good people. There can be no shadow of a doubt about the need to collect in respect of legitimate bills issued by the legitimate authorities of our local democracy. There can be no question about that and the utmost rigour should be

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