Speeches, Interviews & Other Statements

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1965 Oct 15 Fr
Margaret Thatcher

Speech to Conservative Party Conference (rates)

Document type: Speeches, interviews, etc.
Document kind: Speech
Venue: Brighton
Source: Conservative Party Conference Report 1965, (pp87-88)
Journalist: -
Editorial comments: Afternoon.
Importance ranking: Key
Word count: 1570
Themes: Conservative Party (organization), Education, Local government, Local government finance, Transport

It says a great deal for the interest there is in this subject that at the end of such an inspiring day there are still so many people here to listen to this debate. Theoretically, this is a dry subject; in fact, it is one full of controversy and feeling. Throughout the debate one feeling has been apparent, namely, that although the system of rating is designed to be fair, it is falling unfairly on a number of groups in our population. Some speakers have tackled this by suggesting that we should reform the whole system. Others have suggested that we try to identify the areas of unfairness and the cause of resentment about rates and then bring forward specific proposals to tackle the problem from that angle.

I would like to congratulate Councillor Miss Spokes on the excellent way in which she moved the Motion, but as she started by giving a wonderful summary of the Allen Report I propose also to start by referring to that Report. One of the points it raised, and one that was also raised by Mr. Alexander, was about paying rates by instalments. I am certain that one of the reasons why rates cause so much resentment is that the bill comes twice a year. I wonder, for example, how many smokers would be able to foot their tobacco tax bill if they had to pay it twice a year instead of with every packet of cigarettes they purchased? Perhaps then we would get motions about reforming the Customs and Excise taxation system. I believe that to have statutory payment of rates by instalments would remove a great deal of the resentment from people about the rates they have to pay, and we propose to introduce that after the next election when we are given the opportunity do to so. I must admit that it does not make the burden any lighter, but it makes it feel lighter.

The second point raised by the Allen Report referred to individual hardship, and this is the problem which concerns us most of all; that those who live on small fixed incomes—or I should rather say on small dwindling incomes—have to pay a very high amount in rates compared with their income. Table 203 in the Report gives some firm figures and shows that approximately 14.6 per cent of our domestic rate is paid by people in households with incomes of less than £10 a week. It is to these people that we should direct our first efforts of relief. To relieve them entirely would cost approximately £62 million—not an enormous sum.

There are various ways of doing it, but we think that perhaps one of the most successful would be to have a kind of rate rebate system similar to the kind of rent rebate system we have experienced and which the Conservative Government sent out in so many model schemes in 1956. Other methods have been proposed, such as linking it to the taxation system, but I believe that some of these would be difficult to work administratively. Whatever method we use, I am quite certain that our top priority must be to continue the work of Sir Keith Joseph and to relieve individual hardship.

A number of other speakers have referred to the proportion of rate-borne expenditure which should be transferred to the Exchequer. I should like to make one thing very clear at the outset. The taxpayer already foots a far larger proportion of the bill for local expenditure than does the ratepayer—the proportion is roughly 53 per cent from your taxpaying pocket to 47 per cent from your ratepaying pocket. But another point which is often missed is that in the last years of Conservative Government the amount contributed by the taxpayer to local expenditure went up enormously; from some £659 million in 1959 to £1,116 million—almost double—in 1965. It is pertinent to point out that this was done without increasing Income Tax or any other forms of taxation.

The first solution to the problem of rates has been repeatedly proposed ever since 1833, I think, that is, to transfer more to the Exchequer. But there is a limit to the process, because one must always keep sufficient [end p1] expenditure with the local authorities; otherwise, the whole basis of local government is undermined for good and all. The task of a local councillor who was not responsible for rating would be absolutely marvellous. He could demand everything, the sky would be the limit, and he could blame the Government always if he did not get it. It would cease to be local government. It would cease to have any semblance of responsibility whatever. In those circumstances, I think I should very much like to be a local councillor. One would get the best of all worlds.

In our policy group, we have been thinking about possible services which could be transferred, together with the financing of them. I say at the outset that I reject the whole transfer of education to Government expenditure. This morning, we had an excellent and inspiring debate on education. If there are to be any changes in education, they must come because those changes are best for the children and not as a by-product of the reform of the rating system. There are, however, a number of special services within the general educational group which might be transferred to central government. For example, teacher training would seem to be more of a national service than a local service. Advanced further education of the type which demands the equivalent of a degree course and grants to students are two more. These are three specific items which we believe could be transferred to central government, together with the financing of them.

I am very happy to be able to tell Mr. Bright of Thurrock that a fourth item we have considered is the transfer of expenditure on Class I and Class 2 roads, together with the responsibility for looking after them. I am very glad he was called. If I had been asked who to call, I should have asked for someone to make that point. It is seldom that one can reply so promptly to a query. Another service which we believe could be transferred to the central government is the registration of electors and of births, marriages and deaths. Another is the administration of justice.

All of these items together would relieve rate-borne expenditure of something like £100 million. It is not a large amount, but it is an amount still consistent with leaving a good deal of expenditure to underpin the system of local government while yet relieving the domestic ratepayer of a good deal of his burden.

There is, however, another point. Merely to transfer one or two services would only solve the problem temporarily. Many of the other services which remained would soon creep up once again, as several speakers have recognised. We have, therefore, made plans for stabilising the rate burden at approximately 3½ per cent of the gross national product. We believe that this will help to solve the problem not only for the present but also for the future.

Several other sources of revenue have been proposed. Some people have suggested a local income tax, that is, that rates should be raised on people. I do not think that a local income tax would be possible. We should have to have two methods of assessment and collection, and, on the whole, people are taxed not in the place where they live but in the place where they work. The only thought that ever endeared a local income tax to me came from Professor Ilersic last week when he said that “if the Inland Revenue in its present state were asked to operate such a scheme we could all forgo paying our income tax for a year or two” .

One speaker, I think it was Mr. Alexander, suggested that unoccupied property should be partially rated. We have considered this, and we think that the local authority should have power to levy partial rates on certain kinds of unoccupied property, subject to certain restrictions. But I must be frank; it would not bring in an enormous amount of extra money to the rates, though it would help.

One or two speakers—I have particularly in mind Mr. Hugh Rees, to whom I am particularly grateful because he made many of the points I have no time to make—spoke about capital values as a basis of assessment. I rather agree with Mr. Rees that, if the basis of assessment were changed from rental values to capital values, it might well mean that the domestic ratepayer—whom, after all, we are trying to relieve—would bear a larger share of the burden, not a smaller share. It is very easy to put down a Motion criticising a system and calling for reform. It is very difficult to find a method of reform which would result in less hardship than the system we already have. We must not fall into the error of having change for the sake of change.

I was very impressed by the difficulties of capital valuation when I had to deal with an estate duty case locally, trying to help a widow with the valuation of her house and the assessment of the amount of death duties she would have to pay. We had a tremendous tussle, but eventually the capital value of that house was put far above its ordinary owner-occupation value because the Revenue successfully contended that if it was bought it would be bought and developed by a developer. Eventually, the capital valuation was about 50 per cent above the ordinary owner-occupation valuation. Capital valuation would certainly not have helped that person.

If we tackle the problem in the way I have indicated—payment of rates by instalments, a system to relieve hardship on individual ratepayers, the transfer of the items of expenditure I have mentioned to the Exchequer, and stabilising the rate burden at approximately 3½ per cent of gross national product—we shall deal realistically with many of the complaints which are being made about rates.

I have great pleasure in recommending that Conference accept the Motion.