The Poll Tax and the workers (1988)

From the May 1988 issue of the Socialist Standard

The government decision to replace rates with a "community charge" has sparked off furious controversy. The government claimed that the new system will get rid of existing anomalies and inequalities, and the opposition parties argue that it will destroy democratic local government and create new burdens for the poor. The new system is to begin in Scotland in April 1989 and a year later in England and Wales, starting with some London boroughs.

At present local authorities get their revenue from four sources: 40 per cent from central government through the Rate Support Grant; 20 per cent from local householders paying rates; 25 per cent from local industrial and commercial rate payers; and 15 per cent from council tenants paying rent. Domestic rates are payable only by the householder, not by other adults living in the house.

Pressure for the new system has come largely from the industrial and commercial rate payers. They complain that only 34 per cent of local electors pay full rates, and 57 per cent of those entitled to vote in local elections have no rates liability at all, due either to the rebate system or to the fact that they are not householders. The consequence is, they say, that local councils are elected by people who have no interest in keeping expenditure down — high rates are of no concern to them.

Under the new system everybody over the age of 18 will have to pay Poll Tax, except the mentally ill and elderly people living in homes and hospitals. Low paid workers and students will not have to pay the full amount. Business ratepayers will pay a standard Unified Business Rate pegged to inflation.

The Westminster Bank magazine, Money Care (February 1988), says that while many millions of individuals and householders will lose money another large group will gain:

  The people who will generally pay less are homes with only one adult and people living in large homes. Households where the total bill will be higher will be ones with more than two adults, small homes and those excused rates at the moment. Everyone will have to pay at least 20 per cent of the community charge.

The government has already acted to keep rates down. Councils raising rates unduly are penalised by a reduction in the amount of the central government grant. Mrs Thatcher, in a speech reported in the Financial Times (7th March 1988) said this about the new system.

  This will transform inner cities. No longer will they [the councils] be able to spend, spend, spend, putting it on owner-occupiers and businesses. It is being specifically designed so that the same degree of efficiency will result in the same community charge all over the country.

The new system has come under criticism from professional bodies interested in taxation and local government on the ground of its complexity and the difficulty of enforcing it against the large numbers of people likely to evade payment if they can.

There is nothing new in one group of property owners, in this case the business rate-payers, trying to unload some of the burden of the rates on to other groups. Professor Cannan, in his History of Local Rates in England (1912) showed that it was going on throughout the 19th century. Then, as now, one of the issues was how much of local authority expenditure should be paid by central government and there were then, as now, complaints about the "extravagances and mismanagement" of particular local councils. The business rate-payers naturally wish to reduce the burden of rates and most of them can count on doing well out of the change.

But what about the working class and the assertion by the Labour Party and others that the Poll Tax will, on balance, make the workers worse off?

At its formation the Socialist Party rejected the popular theory that rates (and taxes) reduce the workers’ standard of living and that they therefore have an interest in keeping them down. They are. in the long run. a burden not on the workers but on the propertied class. The argument against rates is that they are an addition to the rent workers have to pay for accommodation and that any increase in the rates makes the working class worse off.

Examination of what actually happens in the matter of rates and rents shows that the argument is not valid. High rates do not increase the amount the workers have to pay but reduce the rent the landlord gets. If rates are higher in one district than in others, businesses and tenants of houses avoid these districts if they can, compelling landlords to accept less then they would otherwise be able to get. Professor Cannan gave evidence of this. He wrote:

  The high rates of a highly rated district undoubtedly tend to deter population and businesses from settling in it, and this means that they will not settle in it unless the owners charge less than they would if the rates were lower. If the rates were reduced the owners would be able to charge more for their properties.

Examples of this were quoted in the Socialist Standard (October 1904). One was West Ham, at that time the most heavily rated district in England: "rents are falling, while rates are rising, owing to the decreased demand for houses". At the present time a shift of this kind is taking place between Camden, where the average rate charge is £752 a year, and neighbouring Wandsworth where it is only £327.

Since 1938 there has been a huge increase, in real terms, in the amount of rates collected by local authorities (as in the amount of taxes collected by central government) but it has not had the effect of lowering the majority of workers' standard of living, which is in fact very considerably higher than it was in 1938. The point is that the workers, through organisation on the industrial field, can take advantage of the favourable phases of capitalism when production and profits are rising, to get higher wages. In most of the years since 1945 the average wages of workers who are in work, have risen more than the rise in their cost of living. It is going on now. Since 1982 when production and profits began to rise again, average real wages have been rising continuously and are now well above the level of 1979.

It has happened in defiance of the regular pleas by government ministers that the unions should modify their wage claims and employers should not agree to large claims. Chancellor Nigel Lawson said, for example: "It is very important for businessmen to keep firm control of their pay costs" (Financial Times, 18th March 1988). Trying to keep wages down has been the line taken by every government, Labour as well as Tory.

Edgar Hardcastle