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

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

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

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

Excerpt

Since the reorganisation of Scottish local government in 1975, financing the system has been a central political problem. No fewer than four reviews have been undertaken, in 1976, 1982, 1986 and 1990. This focus is integrally related to concerns with the British economy and the scale of public spending in general. Local government is big business, and authorities are among the largest employers, spenders and investors in their communities. In the financial year 1990-1, Scottish local authority expenditure was in excess of £5,000 million per annum, or £1,000 per capita. Such spending accounts for large shares of both GDP and public sector expenditure and constitutes approximately 49 per cent of the Scottish Office Budget.

Our concern in this study is with the impact of financial reforms on local spending and taxation in the period since 1979. Financial control was, however, a major concern of the previous Labour Government. The reorganisation of Scottish local government in 1975 was presented as a means of strengthening local democracy, but by 1976, the new local authorities were being told that the 'party was over' by a Labour Chancellor of the Exchequer. The IMF loan, high inflation, problems with the value of sterling, all combined to produce a dramatic change in the fiscal environment of local government, from one of expenditure growth to one characterised by financial retrenchment or fiscal stress. In this new atmosphere, Labour's 'softcore monetarism' enforced cuts in capital expenditure and demanded (and received) cuts in revenue expenditure from local government as can be seen from Table 1.1 (Midwinter, 1984a). A committee of inquiry into local government finance reported on the need for radical reform to promote responsibility and accountability, and interim increases in grants helped alleviate high rates increases (Layfield, 1976). However, it is the impact of the Thatcher Government which is most often presented as eroding local democracy (Jones andStewart, 1983). But is such a view justified? Rhodes has observed that the Labour Government had effected reductions every bit as great as the Conservatives (Rhodes, 1984).

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