Sunday, 19 February 2017

Almost Casually

It hardly seems believable that 10 years have passed since the publication of Simon Jenkins's landmark Thatcher and Sons: A Revolution in Three Acts. Therein, he wrote:

When introducing the Poll Tax, Thatcher had decided almost casually to end local taxes on business property, or rather decided to fix and gather them centrally. These constituted more than half of all local revenue.

She argued that since businesses did not vote (or pay Poll Tax), they should not be vulnerable to continued local taxation, which was often discriminatory against them.

It was not an argument that worried central government in levying corporation tax. The bartering of business taxes was an accepted part of dynamic urban renewal worldwide.

Yet, without any leave or consultation, Thatcher in effect added the local business rates to corporation tax, collected them centrally and redistributed them to their relevant councils by a complex historical formula.

The introduction of Council Tax offered an opportunity to restore business rates to local councils. Major declined to do so.

Labour in Opposition pledged itself to reverse this decision, and then broke its pledge. The Treasury always ruled.

In 1994, the so-called uniform business rate yielded £12.3 billion, against £8.8 billion from the suppressed Council Tax, representing a huge transfer of fiscal control from local government to the centre.

The centralising of the business rate in 1990 was the single biggest act of true nationalisation ever undertaken by a British government, yet it passed virtually unnoticed.

By the end of the Major period, local treasurers reckoned that their discretion to vary their budgets in response to the local franchise had shrunk to near insignificance.

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