The original intention was to introduce the poll tax gradually, starting at around £50 per head, alongside the rates, with the new tax only incrementally supplanting the old one over a
ten-year period, or more. The argument for this gradual introduction was that it would soften the blow of the poll tax’s launch and ensure that while the rates were slowly run down those
owning large houses would still make proportionately larger contributions. Given that there were now millions of voters who, having never been ratepayers, were being lumbered with a new tax for the
first time in their lives, there was much to be said for placing the burden upon them gradually. But running a dual system was cumbersome and expensive to administer. Also, gradual introduction
would undermine the philosophical principle underpinning the poll tax – that it would make immediately transparent to all local electors the full cost of their council’s budget. It was
these arguments that triumphed when the Scottish legislation was framed, thereby ensuring that the poll tax would be introduced in one big bang rather than in stages. Having determined this
approach for the Scots, it followed that the same should apply to the English and the Welsh. In an effort to make it seem fairer, Heseltine’s lieutenant, Michael Mates, introduced an
amendment in April 1988 that would have created three payment bands for the poll tax, equating to higher and standard rate income tax payers and those below the income tax threshold. With
thirty-eight Tory MPs supporting the amendment and a further thirteen abstaining, Mates secured the largest Conservative back-bench rebellion of the Thatcher years, though it was still twenty-five
votes short of carrying the day. The government preferred not to address income inequality through tax banding (which would create high marginal rates of tax for those whose earnings only just took
them into a higher band), but rather to insist that, although all adults would have to pay it, there would be an 80 per cent rebate for the unemployed and those on income support (whose benefits
would be increased to take account of the cost). Additionally, Kenneth Baker wanted to exclude students altogether. However, he was overruled and they, too, were expected to stump up 20 per cent of
the full charge. This was consistent with the guiding objective that every adult should have to pay at least something for council services, but it was an error nonetheless. Students transpired to
be among the most vociferous opponents of the tax, and their often peripatetic lodging arrangements made it especially difficult to track them down when they defaulted on payment.
The poll tax was introduced in Scotland on April Fools’ Day 1989, a year before England and Wales, at the particular insistence of Younger’s successor
at the
Scottish Office, Malcolm Rifkind, who miscalculated that the promise to abolish the rates would be a vote-winner north of the border.
25
Much as
the process was a case of the Scottish tail wagging the English dog, it quickly became apparent that the early introduction in Scotland was widely seen as evidence that the English were using the
Scots as guinea-pigs to test the new tax before it was imposed down south. Certainly, the Scottish experience offered little cheer for the tax’s Sassenach supporters. Not only did eight of
Scotland’s eleven regions set a poll tax above the Treasury’s estimate, but the level of public opposition was especially worrying. Kinnock’s opposition to law-breaking ceded the
initiative for a mass non-payment campaign to the SNP and the Militant Tendency, marshalled by the charismatic firebrand Tommy Sheridan – with the SNP’s initial call for one hundred
thousand Scots to take a principled ‘Can Pay, Won’t Pay’ stance seamlessly followed by an alternative ‘Can’t Pay, Won’t Pay’ campaign, alongside
Militant’s slogan ‘It’s better to break the law than break the poor’. Six months after its introduction, 15 per cent of Scots had not paid the tax, and far from seeing their
fortunes reviving, the Scottish Conservatives’ support was ebbing further.
The government was in a hole of its own making. It was not too late to take cognizance of the inherent problems exposed by the launch in Scotland and to scrap, or at least postpone, the poll
tax’s introduction in England and Wales. But doing so would have confirmed Scots’ suspicions that they were indeed being used as a laboratory by a party whose support came
disproportionately from southern England. The second problem was the attitude of the prime minister, who had boasted to her backbenchers in July 1987 that the poll tax was the ‘flagship of
the Thatcher fleet’ and who, when it came to U-turns, was still not for turning.
26
It may not have been her idea, but she had adopted it as
an article of faith and getting her to back down appeared beyond the courage or ability of anyone in her Cabinet. Yet even those government ministers like Alan Clark who remained loyal to her and
saw no principled objection to the tax, recognized that it would fail in practice. Those who ‘overload local authority expenditure’, Clark lamented in his diary, the ‘slobs, yobs,
drifters, junkies, free-loaders, claimants, and criminals on day-release’, would refuse to pay it, while ‘as usual the burden will fall on the thrifty, the prudent, the responsible,
those “of fixed address”, who patiently support society and the follies of the chattering class’.
27
Heseltine’s foreboding
proved especially prescient when, during the debate on the legislation’s second reading, in December 1987, he suggested that it would not hold local government to account because popular
outrage would instead be focused on the iniquity of a tax that presumed equality between ‘the slum dweller and the landed aristocrat’, with the blame falling on those in central
government responsible for its introduction. It would, he prophesied,
become known as ‘the Tory tax’.
28
And as
its implementation in England drew nearer, the scale of the iniquity became evident. The
Guardian
pointed out that, having previously paid £10,255 per year in rates, the Duke of
Westminster would now be asked for £417, the same as his housekeeper and chauffeur.
The environment secretary, Chris Patten, forecast that so long as councils kept their spending close to their Whitehall-set targets, the average poll tax in England would be £278. Among
the Conservatives’ ‘flagship’ boroughs, Wandsworth set it at £148 and Westminster at £195, but these were the exceptions. The average levy proved to be
£360.
29
On 31 March 1990, the day before the poll tax’s introduction in England and Wales, the All-Britain Anti-Poll Tax Federation
organized protest rallies in Edinburgh and London. Nearly one hundred thousand marchers joined the London rally and though police blocked the entrance to Downing Street they moved on to Trafalgar
Square, where Tony Benn addressed them. This main rally ended peacefully, but a hard core of about three thousand stayed on to trade provocations with the police, who, in the absence of Tories,
became the surrogate target for abuse, with bottles, scaffolding poles and other projectiles hurled at them. Wielding batons, the police responded with mounted charges, with the aim of dispersing a
mob whose fury had turned to looting shops, smashing cars, setting street furniture ablaze and assaulting the South African embassy. The disorder spread to Soho and Covent Garden, with plumes of
smoke rising from the heart of the capital, and by the evening’s end there were 339 arrests, 250 incidents of damage to property, 374 injuries to police, eighty-six injuries to protesters and
the public, and twenty injuries to police horses.
30
The behaviour of those bent on violence was easily condemned, but more concerning for the government was the scale of the opposition. Much as Militant Tendency was active in the All-Britain
Anti-Poll Tax Federation, the strength of feeling went far beyond what could be stirred up by professional agitators. Opinion polls suggested that three quarters of the electorate opposed the tax,
and Labour’s lead over the Tories stretched towards 24 per cent.
31
While rural and suburban England overwhelmingly paid the tax, the
shortfalls from inner-city areas were noticeable. In Scotland, the situation was worsening. There, by the autumn of 1991, 23 per cent of the previous financial year’s poll tax had not been
collected, and 13 per cent was still outstanding from 1989/90.
32
While the numbers sent to jail for non-payment were small (though they included
the Militant-supporting Labour MP Terry Fields), it was clear that the implicit social contract between government and people was being undermined by this level of civil disobedience.
The response was to throw Treasury money at the problem in the guise
of ‘transitional relief’, in an effort to keep down the size of poll tax demands. Between
1989 and 1993, £20 billion from national taxes was diverted (in addition to the annual central grant) to fund local government and thereby keep down poll tax bills. This money was not all net
cost to the public, since much of it would otherwise have been raised directly from the rates, but it completely undermined the poll tax’s rationale. Instead of encouraging voter pressure on
local councils to cut their spending, the new tax induced central government to shoulder a larger share of the cost. These Treasury subsidies – equating to increasing the basic rate of income
tax by 4 per cent – ensured that the poll tax turned out to be a remarkably non-transparent measure of town hall efficiency and value for money. The poll tax also created costs that could not
be shifted between Whitehall and town hall fiscal systems and that had to be written off as losses. Setting up, implementing and then scrapping the tax cost at least £1.5 billion. By the time
it was replaced by the council tax in 1993, up to £2.5 billion remained uncollected – in contrast to the near-total collection rate previously achieved for the rates. Some of this sum
was never recouped and an unknown number of individuals, estimated at 700,000, absented themselves from the electoral register in the belief that losing the right to vote was a worthwhile price to
pay for escaping the poll tax.
33
In her memoirs, Thatcher convinced herself that ‘given time, it would have been seen as one of the most far-reaching and beneficial reforms ever made in the working of local
government’.
34
In 1993, at the moment of its demise, the minister who had introduced the poll tax in England and Wales concluded otherwise.
‘It was,’ Chris Patten admitted, ‘fundamentally flawed and politically incredible. I guess it was the single most unpopular policy any government has introduced since the
war.’
35
The Diet of Brussels
The issue that directly triggered the fall of Thatcher was not the poll tax but the European Community.
EN51
The drama had two
sub-plots. The first concerned whether the British economy could be better managed if sterling joined the Exchange Rate Mechanism (ERM) of the European Monetary System. This intrigue pitted
Chancellor against prime minister and resulted first in Lawson’s resignation and then in Thatcher’s capitulation to John Major, his successor at the Treasury, when he insisted that ERM
entry could be deferred no longer. Though it seemed like a victory for Major at the time, ultimately it was a decision that ended up damaging his credibility far more than it did that of Thatcher.
Much as it was a sign of her weakening
dominance, her grudging submission to conventional wisdom on the subject could have bought her short-term political capital but for the
interweaving of the second sub-plot. This concerned not just the technicalities of an acceptable level of exchange rate volatility but the destiny of the nation. When Thatcher made it clear that
she did not believe – or no longer believed – that the Treaty of Rome’s promise of ‘ever-closer union’ within the European Community remained the goal of Her
Majesty’s government, she caused the resignation of her deputy prime minister, Sir Geoffrey Howe, in circumstances that goaded Michael Heseltine into duelling with her for the leadership of
the party and inflicting a wound that proved mortal.
To Thatcher, the two sub-plots had long been inseparable. The ERM was established in 1979 to stabilize its member currencies by fixing their value (within narrow bands of movement) against the
continent’s leading currency, the West German Deutschmark. Back then, the prospect that this mechanism would hasten the replacement of Western European currencies with a single currency
remained a vague aspiration. Nevertheless, sterling did not join and, despite the pound’s subsequent volatility, the possibility of it being constrained within the corset of the ERM remained
a technical one which rarely pushed itself to the forefront of public debate before 1985. It was unsurprising that Thatcher was no enthusiast. The ERM was a mechanism designed to make sure that
interest rate policy was orchestrated towards keeping the value of the currency close to the value politicians wished to hold it at, whereas, as Thatcher assured the House of Commons in March 1988,
‘there is no way in which one can buck the market’.
36
It was therefore fundamentally in conflict with her economic principles. What
was more, in June 1988 the European Community’s heads of government met at Hanover and (reluctantly in Thatcher’s case) agreed to let the president of the European Commission, Jacques
Delors, chair a committee looking into how European economic and monetary union (EMU) might be achieved. This gave substance to Thatcher’s fear that the ERM truly was a ramp leading to the
abolition of sterling. Thinking she was fussing unnecessarily, Lawson refused to believe that the two were necessarily entwined. He did not wish to replace the pound with the ecu (as the accounting
unit that would become the euro was then called), but did believe that ERM membership would give sterling much-needed stability. In the process, it would enhance the UK’s bargaining power if
decisions about moving towards a European currency were eventually to be made. The battle between Chancellor and prime minister was thus between two Eurosceptics, though Lawson was assisted in the
fight by those, like Sir Geoffrey Howe, who would emerge as Euro-enthusiasts and who shared Thatcher’s analysis that the ERM would probably lead to a single currency, while dismissing her
fears that this was necessarily a bad thing.