In any event, the Cabinet committee – E (LF) – agreed that the Baker–Waldegrave proposals should go forward, and ignored Nigel Lawson. By early November, a chirpy Oliver Letwin felt able to write to Mrs Thatcher and tell her that everything was now resolved – including the plans to protect business ratepayers by creating a uniform, national business rate. ‘The only remaining major issue’, he advised, ‘is the replacement of domestic rates by another form of taxation.’108 She put a wiggly line under ‘The only remaining major issue’ and an exclamation mark beside it. Although she placed great faith in Letwin, Mrs Thatcher was by nature less blithe. His remark was a bit like ‘Apart from that, Mrs Lincoln, how did you enjoy the play?’ She had a strong sense of how difficult the subject remained. Indeed, she herself was a creator of the difficulty. As David Norgrove, who had replaced Andrew Turnbull as Treasury private secretary that month, put it: ‘It all got more and more constrained because Mrs Thatcher was determined that there shouldn’t be a property tax, yet all the options pointed to a property tax.’109
The Policy Unit could see the disadvantages of moving directly to a pure residence charge. It would produce ‘too many big losers’, said Letwin110 – he and Redwood were now seriously worried by the loser calculations. On the other hand, a mixed tax would be seen in the media as two taxes. This could be unpopular, and would undermine the beautiful simplicity of the ‘residence charge’.* If proposed in the forthcoming Green Paper, a mixed tax might look like a climbdown. ‘We believe’, wrote Letwin, ‘that George Younger may be offering a way out of this dilemma. He is clearly extremely keen to use Scotland as a trail-blazer for the pure residence charge … If the Scottish experiment worked, it could make a pure residence charge look sensible rather than extreme.’111 This was the start of the idea that Scotland might be what critics later called the ‘guinea pig’ for the poll tax. It is worth bearing in mind, however, that a guinea pig has no say about experiments conducted on him. Scotland, on the other hand – as judged by public and political opinion at the time – was fiercely hostile to increased rates and eagerly demanding a different form of local taxation.†
The eventual compromise between the Environment ministers, Baker and Waldegrave, who wanted the mixture of taxes, and poll tax purists was a transitional scheme, known as ‘dual running’. In England and Wales, this was intended to last for ten years. Part of the rates would be replaced by a community charge, and the remainder would never increase and would gradually wither away. One effect of the temporary retention of rates was to still objections from Nigel Lawson. But it also meant that the reforms themselves were threatened with incoherence. It was vital, argued Oliver Letwin, with supportive double underlining from Mrs Thatcher, that the change be presented as ‘a phased replacement of rates by the community charge’.112 After all, there would be little point in the whole exercise if Mrs Thatcher could not say, at the end of it, that she had got rid of the rates.
What remained, however, was the difficulty at the heart of the new tax. It was expressed by a senior official, Brian Unwin,* in his Cabinet Office brief to Mrs Thatcher. Although Unwin preserved the judicious, mandarin tone insisted on for such documents, the reader can detect a note of real anxiety. Indeed he was, according to David Norgrove, ‘very concerned’,113 and he and his colleagues ‘felt we ought to put our anxiety into the brief’.114 On the same day as Letwin was crying ‘Forward!’, using Scotland as the battering ram, Unwin wrote to Mrs Thatcher:
There is a fundamental problem that if local accountability is to be effective the consequences of excessive spending must be painful for the electorate. Moreover, if the tax base is to be expanded, some people will have to pay who have not done so before. The local charge will therefore almost by definition have to be unpopular, at least in high-spending areas.115
When confronted with this point in later years, Oliver Letwin said, ‘That was the idea!’116 This was a strong argument of principle, but it was hard to reconcile with the search for electoral popularity which was driving part of the longing to get rid of the rates. In retrospect, Waldegrave criticized himself for putting ‘clever-silly’ arguments117 against this basic objection. How could a tax which extended itself, by some calculations, to potentially millions of people who had not paid local tax before, ever expect to be welcomed by them? Unwin’s point was not answered.
Feeling, as he put it, ‘self-protective’,118 William Waldegrave made sure throughout that he saw Cabinet ministers individually to explain his ideas to them. It was most unusual, in the hierarchical system of government, for such a junior minister* to find himself in such an important position, so he was as diplomatic as possible. On the whole, he was supported by his seniors. He remembered George Younger telling him, ‘This is what I have been waiting for all my life.’ Even the cautious Whitelaw, shocked by the anger against rate revaluation in his native Scotland, was ‘thoroughly supportive’. Douglas Hurd, who had succeeded Leon Brittan as Home Secretary in September 1985, was quite seriously concerned that the poll tax would deter people from voting, since they would imagine (falsely) that the voting register and the register required by the new tax would be the same. He pointed out that the only existing poll tax – the television licence – was widely evaded, and, in bad areas like West Belfast, hard to collect. Evasion would ‘bring the new system quickly into disrepute’.119 Norman Tebbit was robust in dismissing the fears about a register (‘Why shouldn’t we be able to know who lives where in our own country?’), and said, ‘At last we’re doing something for our own people.’ Only Michael Heseltine and Nigel Lawson were full-throatedly opposed. The former ‘thought it was all nonsense’,120 but by the time the decision approached, he was deeply embroiled in the Westland affair (see Chapter 14) and unable to open another front in his struggle with Mrs Thatcher. The latter was rather sullen. ‘I’m going to call these the Waldegrave reforms,’121 Lawson told the young minister with baleful humour. As Norgrove put it, ‘Lawson took his bat home.’122 Lawson criticized colleagues – Hurd, for example, ‘was not prepared to stick his head above the parapet’123 – but also criticized himself: ‘I was singularly unsuccessful in persuading them.’
By the time E (LF) had agreed the whole package in mid-December, the balance of forces within the Cabinet was narrowly in favour of reform. Oliver Letwin enumerated and named the different groupings for Mrs Thatcher.124 Only five – Whitelaw, Younger, the Welsh Secretary Nicholas Edwards, Ridley and Baker – were fully in favour. Four – Hailsham, Lawson, Hurd and Heseltine – were ‘probably against’, and the rest in various states of mostly favourable wavering. At the turn of the year, Letwin followed up: ‘This Green Paper is now about as good as it will ever be. The aim should be to get it through Cabinet and out into the world as soon as possible – otherwise, the rats will start nibbling.’125
Although Letwin himself encouraged the idea that the paper was ‘only Green, and that the Government seriously wants to know whether there are any undetected gremlins lurking in the proposals’,126 Mrs Thatcher put a wiggly line under this, and scribbled to Norgrove to stress that the Green Paper was ‘green only in detail’.127 She considered the decision of principle made. When it was suggested that Kenneth Baker should give a separate presentation to Cabinet about what was wrong with the rates, she grew nervous about the likely consequences. ‘You were concerned that too extensive a discussion of this would give an opportunity for sceptics to question the need for any reform at all,’ David Norgrove wrote to her.128 ‘Yes,’ Mrs Thatcher confirmed. If Baker were allowed his presentation, ‘Others would want to do the same.’ She was thinking of Heseltine in relation to Westland. She wanted the Green Paper to be as White as possible. She wanted to get on.
On 9 January 1986, the Cabinet approved the Green Paper which launched the community charge. By a strange stroke of fate, this was the meeting at which Michael Heseltine stormed out over Westland and resigned. The community charge was the first substantial item of business after he had left the room, so he was not
present to oppose it. No doubt it would have been counter-productive for his case if he had been because he was, at this point, so unpopular with colleagues and above all with Mrs Thatcher herself.
The discussion of the subject by the shell-shocked gathering was quite long, and contained several passages of debate where the ‘rats’, as Letwin had described them, did a bit of nibbling. According to Robert Armstrong’s scribbled, semi-shorthand record,129 critics on at least some points included Howe, Joseph, Hurd, Brittan, Biffen, John MacGregor (who had replaced Peter Rees as chief secretary to the Treasury the previous autumn), and the Energy Secretary, Peter Walker. The last was the most vocal and vehement. ‘I don’t think this is going to be positively attractive – the opposite,’ Walker said. ‘We are going to say to more than half of ratepayers you are going to pay more than before.’ He spoke of the ‘unbelievable complication’ of the register, of tracing people and of rebates, and he warned of the political consequences: ‘The disadvantaged will howl; the advantaged will keep quiet.’ In a phrase presumably designed to stir Nigel Lawson, he said that ‘If Ch Ex was thinking of a new tax, he wouldn’t think of a poll tax, for sound reasons.’ The real live Chancellor, however, did not weigh in, and confined himself to short, secondary points.
Kenneth Baker, who introduced and argued strongly in favour of the proposals, nevertheless expressed doubts about the Scottish desire to rush forward. It was the Scottish point of view, however, which came through most strongly. George Younger (whom Armstrong noted as ‘SS Def (Scot)’, because he had been promoted to defence secretary during that meeting) declared: ‘It is essential for us in Scotland that we cannot rest just on a manifesto commitment,’130 but must legislate before the general election. The community charge should begin in Scotland on 1 April 1989 and take three or four years to phase in. Willie Whitelaw argued that, contra Baker, there was ‘a strong case for doing nothing’, but that this case was overwhelmed by ‘the full weight of Scottish feeling’. He supported Younger’s call for immediate legislation as a ‘political imperative’. If wise old Willie was for pressing forward, and Mrs Thatcher was firmly in favour, who could hold the line against them? What Mrs Thatcher wanted, Mrs Thatcher would get. The Green Paper would be published. Although this theoretically allowed time for second thoughts before legislation, the Scottish factor made the reform all but certain. Besides, no one could face a second row on the morning that Heseltine had just stormed out. The poll tax – as they were never allowed to call it – was agreed.
Given the weakness of Mrs Thatcher’s political position after the Westland crisis it is striking to note how little trouble from colleagues she encountered over the poll tax in the ensuing weeks and months. Her Tory critics, massing against her over issues like selling off British Leyland, more or less left her alone on the rates. The Green Paper, Paying for Local Government, was published only the day after she had survived the last full-scale parliamentary assault over Westland. Kenneth Baker’s statement in the House went well. The fact that there was now time for consultation (until October) and that the new arrangements would not begin to apply until 1989 in Scotland and 1990 in England and Wales, soothed anxieties. Criticisms in the press were quite strong, but the parliamentary reception, on the Tory side, was mostly good. Baker did record, however, that Nigel Lawson reached over to him and whispered: ‘It will be her King Charles’s head.’131* Except in the case of Scotland, the community charge would not be legislated for before the general election and, even in Scotland, would come into being after it. So the matter became more the subject of election planning than of heated parliamentary dispute.
With the drama shifted away from rates and their reform, public attention reverted to the abolition of the GLC. This appeared to be a straightforward triumph for Mrs Thatcher. She had attacked the council ever since Livingstone’s coup the day after Labour’s victory in the GLC elections of 1981. With the collapse of the miners’ strike and the rate-capping revolts, Livingstone’s dream of an extra-parliamentary campaign to bring down the Thatcher government had completely failed. Now, on 31 March 1986, abolition took place. The huge sign which Livingstone had erected years earlier on the roof of County Hall, the GLC headquarters across the river from Parliament, so that MPs could constantly be reminded of the rising number of unemployed, now came down. County Hall, as Mrs Thatcher wished, eventually found various private sector uses, including as two hotels.
Mrs Thatcher’s victory, however, was perhaps too complete for people to feel happy about it. Livingstone had been a bogeyman so long as he seemed to be on top, but sympathy turned his way at the idea that an elected body could be abolished by a government because it happened to dislike its political complexion. Using £250,000 of money carefully harboured by various ingenious accounting tricks, the GLC spent its last days celebrating itself, including a magnificent display of fireworks on the Thames so that it literally went out with a bang. Many participants wore badges saying ‘We’ll meet again’.* Mrs Thatcher herself made only two references to the GLC in her memoirs, perhaps conscious that her policy had not been the hit she had expected.
Although the politics went relatively quiet, the problems of the poll tax within government continued throughout 1986. The essential difficulty was that the pure, beautiful idea of leaving local government alone to do the right thing when confronted by the wishes of newly empowered electors was constantly being compromised. In the real world, it just seemed too frightening for central government to stand right aside, without granting exemptions and retaining powers to intervene and enforce.
As, in February, 121 local authorities were rate-capped under the new legislation, Mrs Thatcher was immediately confronted with cries of unfairness about some of the consequences, and was naturally most alive to these in councils which were Conservative controlled. She declared that there would have to be a legal facility for the central government to cap the community charge.132 In her memoirs, she recorded that she did not believe the ‘optimistic suggestion’ of her colleagues at Environment ‘that enhanced accountability would make it possible to abandon “capping” altogether’.133 She worried that left-wing councils would find ways of making trouble: ‘indeed, before the end I would find myself pressing for much more extensive community charge capping than was ever envisaged for the rates.’134 As so often, she was right in her instinct about what was politically likely. She was less attentive to the illogic she was importing into her own policy.
And although the community charge was intended to be decentralizing, other, related measures were intended to centralize. The non-domestic rate, paid by business, was now to be made uniform and set centrally. This presented Whitehall with a temptation (to which, over time, it has succumbed) of increasing the burdens on businesses rather than relieving them from those imposed by ‘loony’ Labour councils. Besides, Nicholas Ridley, who became environment secretary in May 1986, was conscious of the dangers inherent in the community charge ‘even at present likely levels’,135 and so wanted the business rate to bear as much as possible of the strain. The uniform business rate meant that local government now had a much smaller proportion of its total finance to raise itself.
The problems of who should have to pay and how they could be made to do so were manifold. What of the need to impose a duty of registration on all citizens? What of the perplexing relationship between rebates on the community charge and social security payments? What about the mentally handicapped or the senile elderly? What of students, who, in a looser sense, were thought to lack responsibility? Nicholas Ridley was stern on these last: ‘British students are one of the groups that most need to appreciate that public services cost money.’136 Yet there was not much point running round trying to gouge money out of this naturally impecunious and disobedient group. ‘The virtue of the community charge’, Ridley wrote, ‘is its universality.’ But that was its vice as well. It did not fit all cases, and could not easily be collected from all its victims.
If, as planned, no person deemed resp
onsible could avoid contributing at least 20 per cent of the standard community charge, how would you actually get it out of the poorest? Norman Fowler, the Social Services Secretary, thought there was ‘no politically sustainable course short of increasing the planned income support level across the board (i.e. including the unemployed as well as the disabled etc) by the average cost of the new liability to pay 20 per cent’.137* ‘I do have to warn colleagues’, wrote Fowler to Mrs Thatcher, by way of follow-up, ‘that the public debate will focus sharply on almost 4 million losers in real terms.’138
All the difficulties and objections applied, of course, to Scotland, which was pressing ahead first. Michael Ancram,* the Scottish local government minister, was concerned by the effects of ‘asking everyone to pay the same’, and argued for reductions for pensioners, exemptions for students and exemptions for most non-working wives.139 This last group – quite possibly a larger number than the widows who suffered under the rates – also worried Stephen Sherbourne. It was the first time many of them had been directly taxed, and they were likely to feel ill used.140 Such objections, however, were overruled, with the Treasury being tough. In Ancram’s opinion, ‘The Chancellor decided that the best way to ruin the tax was to make it as unpopular as possible.’141
On 26 November, the Bill to abolish domestic rates in Scotland was introduced in Parliament. At Cabinet two weeks earlier, Mrs Thatcher had emphasized that ‘speedy enactment … was of the greatest importance.’142 No parliamentary impediments were thrown in the way. Labour, which did not want to be seen to be fighting for the rates, mounted a half-hearted opposition. When it was voted on, Michael Heseltine, despite his declared opposition to the poll tax across the country, voted for it. Such controversy as there was concerned the transitional period. In February 1987, Malcolm Rifkind, by now Scottish Secretary, complained to Willie Whitelaw about ‘sustained opposition’143 to dual running, so complicated were the details and so eager were his fellow Scots to have the poll tax and nothing but. He decided to abolish domestic rates entirely and bring the Scottish poll tax into full operation on 1 April 1989.
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