Below are extracts from Mr Major’s speech made to the Peterborough Industry Forum on Friday 15 April 1988. The extracts were published by Conservative Central Office as document 158/88 and the press release was entitled “The Banded Community Charge”.
The proposal to ‘band’ the Community Charge has attracted support from some Conservatives because they believe it will make the charge ‘fairer’. I believe that they are mistaken in their view. The proposal has superficial attractions that disappear on closer examination. And beneath the surface it has deep and damaging flaws that would introduce a whole range of unfairness and anomalies that could not be defended. That is not the intention of the sponsors but it is the effect.
The purpose of the Community Charge is to reinforce the relationship between how much a local authority spends and how much it has to raise. But we are not doing that by imposing a flat rate charge and ignoring the interests of those who cannot afford to pay. That is why we always proposed a Rebate Scheme that enabled up to 80% of the Charge to be abated. Even under that scheme about four million people would receive the maximum rebate and about the same number would receive smaller rebates. People on low income, therefore, have always been offered significant protection from the impact of the charge. And those on the lowest incomes will also have help through the social security system to enable them to meet the 20% minimum charge.
The Government has now decided to go even further to protect the position of those with modest incomes. Nicholas Ridley announced yesterday improvements to the rebate scheme to ensure that the Community Charge acknowledges still further the principle of ability to pay.
These changes mean that around an extra one million people will now receive a rebate and that a total of about nine million people will not be required to pay the full Community Charge. In short, one in four will get a rebate; so what they pay depends on their income. This is a clear illustration of the degree of protection offered to those on low incomes.
Yesterday’s changes also mean that about four million of those people will pay less in Community Charge than they would otherwise have done. That includes about three million non-taxpayers. It includes over one million single pensioners and a further million pensioner couples. Other gainers include 350,000 couples with children and 900,000 single people of working age.
Many of these are precisely the people that the supporters of the ‘banded’ Community Charge wish to help.
But the banded charge would not do that. It would enmesh people on low incomes in an incomparably deeper poverty trap than ever before. An extra £1 in income could cost a single person £100 and a married man double that.
This comes after a week in which we have been debating social security reforms designed precisely to eliminate the nonsense that an extra pound of income could lead to a loss of more than 100% in tax and benefits. It is ironic that the Opposition are now supporting a proposition which would reintroduce this nonsense more harshly. It would cause real hardship as low income individuals – many of them pensioners – reached the lower income tax threshold.
Moreover, though barely noticed, the banding proposal also seriously undermines one of the most widely welcomed features of the Budget – the introduction of independent taxation for married women. For the amendment would ensure that at the same time as the Inland Revenue gives married women privacy in their tax affairs, their liability to the Community Charge would be assessed on their husband’s income. That would be an absurd inconsistency and widely resented by millions of women.
I do not doubt the genuine motivation of those supporting the proposition for a banded Community Charge. But they are wrong. This amendment harms and does not help. And it is inconsistent with a whole range of other policies. The right way to help those on low incomes is to improve the rebate scheme. And that is what we have done.