From Rates to the Poll Tax: Local Government Finance in the Thatcher Era

mechanisms of control given the continuing gaps in aspirations and objectives between the government and local authorities. The policy mess continues.

The history of local government finance in the 1980s is a story of policy failures. In essence, the reforms failed because of the inadequacy of the economic and political theories on which they were based. Ministerial rhetoric consistently took the form of a heady brew of false assumptions and unsubstantiated assertions.

The government's economic arguments about its need to control local spending for purposes of macro-economic management cut little ice. Indeed, they are even less convincing now that local authorities raise only 10 per cent of their income. Arguments about the need to cut local spending would have been taken more seriously if the Government's own performance on spending and taxation had not been one of continued growth in real terms. This does not square with its claims to fiscal prudence and sound money ( Thain and Wright, 1988). Even on borrowing, its performance has often been little different from its Labour predecessors ( Jordan and Richardson, 1987). Indeed, for 1992-93, government borrowing has returned to the high levels of the early 1980s (HM Treasury, 1991). On obtaining office, it attacked 'local government overspending' in a way which bore no resemblance to the reality of the stability and control of local expenditure evident in the latter half of the 1970s. Through a 'hands off' approach, the financial reforms of the period had delivered spending levels broadly acceptable to the Government of the day.

Likewise, its political arguments for reform were based on an unrealistic critique of the functioning of local democracy and bureaucracy. With its origins in abstract economic concepts, the public choice model offered little evidence to support its prescriptions. The result was one of the most dramatic policy failures of the twentieth century. The principles of the poll tax were defended vigorously by Scottish Ministers until its sudden demise, yet a little touch of the old Tory pragmatism would have avoided what is now regarded as a policy fiasco.

From our review of current developments, it is clear that the Government has drawn the wrong conclusions from its experience of the poll tax. Rather than moving back to a more conventional approach based on genuine consultation, it has opted for greater control.

The poll tax failure led to the return of a control strategy, which seems inevitably to be pointing to a further reduction in local political power. The

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