The Downing Street Years
Page 85
Then there was the concern about planning — or rather the alleged lack of it — and overdevelopment of the countryside. Here there was, as Nick Ridley became somewhat unpopular for robustly pointing out, a straightforward choice. If people were to be able to afford houses there must be sufficient amounts of building land available. Tighter planning meant less development land and fewer opportunities for home ownership.
There was also widespread public concern — some merited but much not — about the standard of Britain’s drinking water, rivers and sea. The European Commission found this a fruitful area into which to extend its ‘competence’ whenever possible. In fact, a hugely expensive and highly successful programme was under way to clean up our rivers and the results were already evident — for example the return of healthy and abundant fish to the Thames, Tyne, Wear and Tees.
I always drew a clear distinction between these ‘environmental’ concerns and the quite separate question of atmospheric pollution. For me, the proper starting point in formulating policy towards this latter problem was science. There had always to be a sound scientific base on which to build — and of course a clear estimation of the cost in terms of public expenditure and economic growth foregone — if one was not going to be thrust into the kind of ‘green socialism’ which the Left were eager to promote. But the closer I examined what was happening to Britain’s scientific effort, the less happy I was about it.
There were two problems. First, too high a proportion of government funding for science was directed towards the Defence budget. Second — and reflecting the same approach — too much emphasis was being given to the development of products for the market rather than to pure science. Government was funding research which could and should have been left to industry and, as a result, there was a tendency for the research effort in the universities and in scientific institutes to lose out. I was convinced that this was wrong. As someone with a scientific background, I knew that the greatest economic benefits of scientific research had always resulted from advances in fundamental knowledge rather than the search for specific applications. For example, transistors were not discovered by the entertainment industry seeking new ways of marketing pop music but rather by people working on wave mechanics and solid-state physics.
In the summer of 1987 I instituted a new approach to government funding of science. I set up ‘E’(ST) as a new sub-committee of the Economic Committee of the Cabinet which I now chaired. This replaced ‘E’(RD) that had been chaired by Paul Channon as Industry Secretary. I also set up a Cabinet committee of officials and experts — ACOST — to replace ACARD which had been shadowing Paul Channon’s committee. ‘E’(ST) and ACOST examined departmental science budgets, breaking them down between basic science and support for innovation, giving greater emphasis to the first. My ideal was to search out the brightest and best scientists and back them rather than try to provide support for work in particular sectors. What those who have no real understanding of science are inclined to overlook is that in science — just as in the arts — the greatest achievements cannot be planned and predicted: they result from the unique creativity of a particular mind.
At every stage scientific discovery and knowledge set the requirements and the limits for the approach we should pursue towards the problems of the global environment. It was, for example, the British Antarctic Survey which discovered a large hole in the ozone layer which protects life from ultra-violet radiation. Similarly, it was scientific research which proved that chlorofluorocarbons (CFCs) were responsible for ozone depletion. Convinced by this evidence, governments agreed first to cut and then to phase out the use of CFCs — for example in refrigerators, aerosols and air conditioning systems. From the time of the first international meeting and agreement in Montreal in 1987 until my last days in office when I was addressing the Second World Climate Conference in Geneva on the subject, I took the closest personal interest as the scientific evidence was amassed and analysed.
‘Global warming’ was another atmospheric threat which required the application of hard-headed scientific principles. The relationship between the industrial emission of carbon dioxide — the most significant though not the only ‘greenhouse gas’ — and climatic change was a good deal less certain than the relationship between CFCs and ozone depletion. Nuclear power production did not produce carbon dioxide — nor did it produce the gases which led to acid rain. It was a far cleaner source of power than coal. However, this did not attract the environmental lobby towards it: instead, they used the concern about global warming to attack capitalism, growth and industry. I sought to employ the authority which I had gained in the whole environmental debate, mainly as a result of my speech to the Royal Society in September 1988, to ensure a sense of proportion.
That speech was the fruit of much thought and a great deal of work. It was our outgoing ambassador at the UN, Sir Crispin Tickell, who first suggested that I should make a major speech on the subject. I decided that the Royal Society was the perfect forum. George Guise, who advised me on science in the Policy Unit, and I spent two weekends working on the draft. It broke quite new political ground. But it is an extraordinary commentary on the lack of media interest in the subject that, contrary to my expectations, the television did not even bother to send film crews to cover the occasion. In fact, I had been relying on the television lights to enable me to read my script in the gloom of the Fishmongers’ Hall, where it was to be delivered; in the event, candelabra had to be passed up along the table to allow me to do so. The speech itself triggered much debate and discussion, particularly one passage:
For generations, we have assumed that the efforts of mankind would leave the fundamental equilibrium of the world’s systems and atmosphere stable. But it is possible that with all these enormous changes (population, agricultural, use of fossil fuels) concentrated into such a short period of time, we have unwittingly begun a massive experiment with the system of this planet itself… In studying the system of the earth and its atmosphere we have no laboratory in which to carry out controlled experiments. We have to rely on observations of natural systems. We need to identify particular areas of research which will help to establish cause and effect. We need to consider in more detail the likely effects of change within precise timescales. And to consider the wider implications for policy — for energy production, for fuel efficiency, for reforestation… We must ensure that what we do is founded on good science to establish cause and effect.
The relationship between scientific research and policy towards the global environment was not just a technical matter. It went to the heart of what differentiated my approach from that of the socialists. For me, the economic progress, scientific advance and public debate which occur in free societies themselves offered the means to overcome threats to individual and collective wellbeing. For the socialist, each new discovery revealed a ‘problem’ for which the repression of human activity by the state was the only ‘solution’ and state-planned production targets must always take precedence. The scarred landscape, dying forests, poisoned rivers and sick children of the former communist states bear tragic testimony to which system worked better, both for people and the environment.
* For more discussion of ‘homelessness’ see pp. 603–4.
* I was, though, content to make one minor adjustment. This was to provide tax relief for workplace nurseries.
CHAPTER XXII
A Little Local Difficulty
The replacement of the rating system with the community charge
The introduction of the community charge to replace the domestic rates turned out to be by far the most controversial of the changes promised in our 1987 general election manifesto. Whereas the other elements of those reforms — in education, housing and trade union law — took root, the community charge has since been abolished by a government consisting largely of those who framed and implemented it.
The charge became a rallying point for those who opposed me, both within the Conservative Party and on the
far left. Had I not been facing problems on other fronts — above all, had the Cabinet and Party held their nerve — I could have ridden through the difficulties. Indeed, the community charge, having been modified in several ways, was beginning to work at the very time it was abandoned. Given time, it would have been seen as one of the most far-reaching and beneficial reforms ever made in the working of local government. Above all, the community charge offered a last chance of responsible, efficient, local democracy in Britain. Its abandonment will mean that more and more powers will pass to central government, that upward pressures on public spending and taxation will increase accordingly, and that still fewer people of ability will become local councillors.
PROBLEMS WITH THE OLD SYSTEM
We did not enter lightly upon the path of radical reform of local government finance. I shared much of the traditional Tory caution about turning existing financial or administrative systems upside down. If it had been possible to carry on as before I would have been quite prepared to do so. But by almost universal agreement it was not. The person who knew this best was Michael Heseltine — in fact, as it turned out, the most vocal Conservative opponent of the community charge. Michael, as Environment Secretary in the early 1980s, had tried to make the old system work by resorting to more and more complicated devices. He took a whole battery of new powers in an attempt to deal with the problem: that we lacked the means to control local government spending, though it made up a large fraction of overall public expenditure. He brought in the block grant system and ‘grant-related expenditure assessments’ (GREAs), ‘targets’ and ‘holdback’, limits on local authority capital expenditure, and the Audit Commission, as well as beginning a general squeeze on the central government grant — all designed to hold down local spending and to give ratepayers an incentive to think twice before re-electing high-spending councils.*
The system became so complicated that scarcely anyone understood it. It was like the ‘Schleswig-Holstein question’ of the last century: Palmerston joked once that only three people ever had a real grasp of it — one of them was dead, one was mad and he himself had forgotten it. The system was also highly unpopular, wayward in its application and inexplicably unfair to historically low-spending authorities, many of whom were set targets below their GREAs. Worse still, it did not work. Ministers might exhort, bewail and threaten but local government spending grew inexorably in real terms, year after year.
So in 1981 Michael came up with new ideas. He proposed that if local authorities spent more than a certain amount over and above their GREAs all the extra would have to be paid for by domestic ratepayers. The Government also agreed that a local referendum should be held before a council could go ahead with the extra spending. This proposal had something new and important to be said for it because it at least marginally reinforced local accountability which — as I shall explain — was at the root of the problem. But, in spite or even because of that, it drew howls of protest from local authorities and the Tory back-benchers whom they so easily influenced. The proposal had to be withdrawn.
So Michael’s successors at the Department of the Environment — Tom King and then Patrick Jenkin — were left with no alternative but to apply more and more complex central controls, while the local authorities went on spending. In 1984 we took powers to limit directly the rates of selected local authorities, with powers in reserve to limit them all. This procedure — known as ‘rate-capping’ — was one of the most effective weapons at our disposal. Much of the overspending was concentrated in a small number of authorities, so that capping fewer than twenty could make a considerable difference. It allowed us to offer some protection from very high rates to businesses and families who were trying to make their own way in profligate Labour authorities — particularly those families on incomes just above the benefit levels, who could not rely on the state to pay their rising rates bills. But rate-capping was a complicated business: it stretched the capacity of the Department of the Environment and could be challenged in the courts. The fundamental problem remained.
I had always disliked the rates intensely. Any property tax is essentially a tax on improving one’s own home. It was manifestly unfair and un-Conservative. In my constituency and in letters received from people all over the country I witnessed a chorus of complaints from people living alone — widows for example — who consumed far less of local authority services than the large family next door with several working sons, but who were expected to pay the same rates bills, regardless of their income. I had, of course, been Shadow Environment spokesman at the time of the October 1974 election when we promised to abolish the rates altogether. In fact, this was a last-minute pledge insisted upon by Ted Heath about which I had considerable doubts for we had not properly thought through what to put in their place: but I had witnessed the anger and distress caused by the 1973 rate revaluation and believed strongly that something new must replace the existing discredited system.* When I became Prime Minister I stopped any further rate revaluations in England. (In Scotland the system was different and a domestic rate revaluation was required by law every five years, though extensions were possible and we took powers to put off for two years a revaluation due in 1983.) But the counterpart of this decision was that the potential disruption which a rate revaluation would have caused in England grew by the year. And we could not put it off for ever.
The reliance on property taxes as a principal source of income for local government went back centuries. Rates made sense, perhaps, when the bulk of local authority services were supplied to property — roads, water and drains, and so on — but in the course of the present century local authorities have increasingly become providers of services for people, such as education, libraries and personal social services.
Moreover, the franchise for local elections has been widened dramatically. Originally, it was limited to property holders: now it is almost identical to that for parliamentary elections. The old business vote has gone too. The only serious argument for the rates — business and domestic — was that they were relatively easy to collect: people can abscond, houses and factories cannot. The rates became a painless tax for the large number of local electors who were not liable to pay them. But this was what made the old system so defective, ultimately even dangerous. Of the 35 million local electors in England, 17 million were not themselves liable for rates, and of the 18 million liable, 3 million paid less than full rates and 3 million paid nothing at all. Though some of those not liable contributed to the rates paid by others (for example, spouses and working children living at home), many people had no direct reason to be concerned about their council’s overspending, because somebody else picked up all or most of the bill. Worse still, people lacked the information they needed to hold their local authority to account: the whole system of local government finance worked to obscure the performance of individual authorities. It is not surprising that many councillors felt free to pursue policies which no properly operating democratic discipline would have permitted.
This lack of accountability lay behind the continued overspending. Although central government steadily reduced the share of local government spending met from the Exchequer, the result was more likely to be higher rates than lower total public spending. That was unsatisfactory for the overall economy. But it was ruinous for local businesses and — ultimately — for local communities. In the summer of 1985 when we began seriously to look at the alternatives to the rating system, some 60 per cent of the rate income of local authorities in England was coming from business rates. In some areas, though, it was a far higher percentage. For example, in the Labour-controlled London borough of Camden it reached 75 per cent. Socialist councils were thus able to squeeze local businesses dry and the latter had no recourse except to press central government to cap the council concerned or to move out of the area. It might be imagined that the devastating effect of such policies of overspending on employment would discourage Labour authorities from such action. But I never forgot that the unspoke
n objective of socialism — municipal or national — was to increase dependency. Poverty was not just the breeding ground of socialism: it was the deliberately engineered effect of it.
Popular discontent with the rates surfaced strongly in the motions submitted by constituencies for our 1984 Party Conference. Conservatives in local government were unhappy at the apparatus of central controls — particularly on capital spending — and within the Department of the Environment there was concern that these controls gave rise to so many anomalies and political difficulties that they could not be sustained for many more years. Nor was it yet clear how effective rate-capping would prove. Accordingly, in September 1984 Patrick Jenkin sought my agreement to announce to the Party Conference a major review of local government finance. The Party Chairman, John Gummer, gave him strong support. But I was cautious. There was a danger of raising expectations that we could not meet. After all, there had been two previous reviews — under Michael Heseltine and Tom King — and only the most modest of mice had emerged. Unlike October 1974, we must be absolutely clear that we had a workable alternative to put in place of the present system. I authorized Patrick to say no more than that we would undertake studies of the most serious inequities and deficiencies of the present system. There would be no publicly announced ‘review’ and no hint that we might go as far as abolishing the rates.
Later that October I held a small meeting at Chequers to listen to a presentation of the intricacies of the Rate Support Grant system. When it ended I was more convinced than ever of the fundamental absurdities of the present system. Afterwards I discussed the proposed studies with the Junior Local Government minister, William Waldegrave, and suggested that Lord Rothschild — the former head of the CPRS in Ted Heath’s time and someone for whom I had the highest regard, having worked with him on science policy when I was Education Secretary — should be brought into it. William had also worked with him at the CPRS and jumped at the idea. Much of the radical thinking which resulted was Victor Rothschild’s.