The Reform of Local Taxation
After the failure of its earlier reforms to achieve the desired level of local spending, the Government turned its attention to the system of local taxation. The arguments for change were set out in the 1986 Green Paper Paying for Local Government (Cmnd 9714). However, this document came only four years after a major review of local authority finance concluded that rating should remain the basis of local taxation. Furthermore, in the Green Paper, the Government deduced that, 'these proposals amount to the most radical re-structuring of local government finance this century. They will provide both a new impetus to local democracy and a much fairer basis of local taxation' (Foreword to Green Paper, Department of Environment, 1986). The main components of the financial reform were: the abolition of domestic rates (a property tax) and their replacement with a community charge payable by all adults aged 18 years and over; the pegging of non-domestic rates in line with inflation and their eventual replacement with a Uniform Business Rate; and the development of a simpler grant system, the Revenue Support Grant, to succeed the three-pronged Rate Support Grant.
This chapter seeks to consider why a wholesale reform of local authority finance was deemed necessary and draws comparisons between the principles underlying the new financial system and the realities of its operation. As such, the chapter is broadly divided into two main sections. Firstly, arguments for reform and the subsequent legislation are outlined. Secondly, the evidence relating to the implementation of the new fiscal structure is analysed.
Although the Green Paper criticised the rating system for its inequity, the central theme was the weak accountability which underlay the old system of local government finance:
Effective local accountability must be the cornerstone of successful local government. All too often this accountability is blurred and weakened by the complexities of the national grant system and the fact that differences arise among those who vote for, those who pay for, and those who receive