and he won many battles in Cabinet by handling Margaret Thatcher with sly skill.
Kenneth Baker’s original plans were well received. His estimate for the level of the Poll Tax was an average of £30 a head in 1990, when the system would be only partly in operation, rising to a fully-fledged £250 in the year 2000. There would be a rebate system to help the least well-off. These low sums were hugely attractive; it was not until much later that we found out they were utterly unachievable. The non-domestic rate, which was a milch cow for many local authorities and was loathed by business, was to be abolished and replaced by a Uniform Business Rate, set nationally and indexed to inflation
It is ironic that the Poll Tax was introduced early into Scotland at the request of the Scots, shocked by the revaluation of their rates; later, its unpopularity – and the inaccurate claim that Scotland was being used as a laboratory to test the tax – was central to the argument for devolution. The Poll Tax cast a long shadow.
After the 1987 election, the government introduced a Bill to apply the Poll Tax across the United Kingdom, with the exception of Northern Ireland. The whips calculated there were twenty-four outright opponents to the Bill on our backbenches, and a hundred doubters. Margaret Thatcher was undaunted: the ‘wets’, she thought, would be seen off again. But in a vote on an amendment to the legislation, tabled by Michael Mates in April 1988, sufficient Tories voted against or abstained for the government’s majority to fall from eighty plus to twenty-five.
I entered the Poll Tax story as chief secretary to the Treasury after the 1987 general election. Within Cabinet, Nigel Lawson continued to oppose the whole idea, and to warn that the tax would be unworkable and politically catastrophic. Although I warmed to the intellectual rationale of the tax, I was persuaded by Nigel’s warnings; and as chief secretary I was often deputed by him to argue the Treasury case in Cabinet committees. Even when I thought I had won the argument, I lost the decision. Defeated on substance, I remained involved in practical questions of implementation.
The Poll Tax brought dramatic changes in the burden of local taxation for millions of people. We faced a crucial decision: should we introduce these changes in one go, or phase them in gradually? Ken Baker had proposed a long period of phasing. Nick Ridley, his successor as Environment Secretary, was determined on a short period or, preferably, no transition at all. Nigel Lawson, so often Nick’s ally, regarded this view as ‘apolitical to the last degree’.
At first, phasing won. But Nick did not lie down. He never did. He launched an energetic lobbying campaign for a clean switch to the Poll Tax. At the party conference in October, speaker after speaker got up to demand the abolition of the rates, with no transition period. At the Treasury, we believed this show of impatience had been contrived by Nick to impress Margaret. When I suggested this to Nick he denied it strenuously: it was, he claimed, a spontaneous uprising by thinking Conservatives. If so, many of them were soon to think again.
Margaret, however, was impressed, and despite the clear opposition of the Treasury team the decision was taken to abolish the transition in all but a few councils. In June 1988 we abandoned dual running altogether. Nick Ridley had won.
The Poll Tax became law in July. The issue then lay fallow until, nearly a year later, we began to discuss how much taxpayer subsidy should accompany the new tax upon its introduction. After the Treasury and the Department of the Environment failed to settle on a figure, Margaret adjudicated and an increase of £2.6 billion was agreed. It was at this point that we really lost control. By now, the estimated average Poll Tax bill had risen to well over £300. Colleagues were aghast. Worse was to come. Inflation and wage costs had begun to rise, and local authorities were increasing their spending and blaming the new tax for the higher bills. By late autumn, headlines warned that Poll Tax bills could be even higher.
Margaret replaced Nick as environment secretary with the more voter-friendly Chris Patten in late July 1989. Chris warned her in private that the tax was a liability, and began the first of many reviews of it – but Margaret made it clear to him that ‘review’ did not mean replacement.
Slowly, the scale of the political problem became clear. Conservative Central Office found out that in ten marginal constituencies, 82 per cent of individuals would be out of pocket as a result of the change from rates – and that was on the heroically optimistic assumption that local authorities increased their spending by just 7 per cent. The rates system had been untenable, but the Poll Tax was turning out to be worse.
Things slid downhill fast. By January 1990, by which time I had succeeded Nigel as chancellor, the Poll Tax monster was rampaging voraciously. As local authorities set their budgets in stormy town hall meetings, headline Poll Tax levels averaged £360, with some much higher: my old borough, Lambeth, set theirs at £560. In March we sustained a massive by-election defeat in Mid Staffordshire. The press blamed the Poll Tax. Our backbenchers blamed Margaret and Nick.
In late March, Margaret rang me in something of a state. She had assumed, she said, that if local authorities put up spending, they would get the blame for putting up taxes. Instead, the government was getting the blame for changing to the Poll Tax. She was worried about the impact of high bills on people of modest incomes (‘our people’, she said) just above the cut-off for Community Charge benefit. She asked me to examine means of exercising some sort of direct control over local spending which, with a larger level of grant, might bring down the Poll Tax bills. I agreed to do so.
Margaret was right: a radical rethink was necessary. But it was ironic that she should advocate it, since the pain endured by people just above the benefit level was the direct result of the hard-edged ‘financial accountability’ which had always been proclaimed as the main advantage of the Poll Tax.
On 31 March, the day before the Community Charge came into effect in England, political protest erupted into violence with rioting in Trafalgar Square. Many of the demonstrators may have been of the ‘rent-a-mob’ type; but many were not, and I was shocked that the British people, normally so slow to anger, should have taken to the streets over the reform of local government taxation. The event was unprecedented in post-war Britain, and it was becoming clear that the Poll Tax was not so much an albatross as a ticking time-bomb, ready to explode. The political consequences of this riot were nothing in comparison to the fury that erupted from the Tory shires when the first Poll Tax bills arrived. The local government election results in May were dismal.
Sinking beneath a sea of angry correspondence, our backbenchers began to panic. As the year wore on, the issue fuelled a whispering campaign about Margaret’s leadership. She was in a bind, and did not know how to escape. Although she had executed more than a few U-turns in her time – pretending they were no such thing – she had comprehensively boxed herself in on the Poll Tax. The zeal with which she had advocated it meant that its unpopularity was seen as a failure for her personally, and its progressive emasculation was viewed as a climbdown of the most wretched sort. The Empress was losing her clothes.
Throughout April and May 1990 argument raged between the Treasury, the Department of the Environment and Number 10. At first we believed we would have to legislate to control the amount local councils could spend. As chancellor with a budget to stick to I supported this idea, but as a former whip I had grave doubts, given the mood on our backbenches, whether any such legislation would pass the House. Then, in July, we struck lucky. Fresh legal advice suggested that if the government set a figure for what it considered to be ‘excessive’ spending, we would be able to use our existing powers to prevent local authorities from exceeding it.
After a good deal of haggling we announced that local authorities could increase the total level of their spending by up to 7 per cent on the year before. We increased grant provision to them by £3 billion – an amount that should, according to Department of Environment estimates at the time, have produced a Community Charge that averaged around £376. This was a generous settlement, but was nothing like enough to satisfy many of our colleagues. It was becoming clear
