Mr Major’s Parliamentary Answer on Rates Increases – 4 May 1989

Below is the text of Mr Major’s response on Rates (Increases), made on 4th May 1989 in the House of Commons.

Mr. Harry Greenway To ask the Chancellor of the Exchequer what has been the impact on the real personal disposable income of (a) pensioners and (b) others, of the latest rates increases; and if he will make a statement.

Mr. Major The information available on the domestic rate poundage as set by local authorities in England for 1989–90 indicates that average domestic rate bills have risen by 9.3 per cent. There is no information available on likely movements in real disposable income for particular groups between 1988–89 and 1989–90.

Mr. Greenway Does my right hon. Friend agree with me that high rates, which occur so often in Labour areas such as Ealing – where rates this year have gone up by no less than 32 per cent., added to the 65 per cent. increase of two years ago – damage pensioners and everybody else, including industry and employment? Although I welcome the fact that pensioners get pension increases well in line with inflation, they are severely damaged by the way in which the Labour party squitters their money away in great expenditure. Does my hon. Friend join me in that view?

Mr. Major The message that my hon. Friend gives me is that he regards Ealing council as a loopy council. I am happy to join him in that condemnation. My figures for the rate increases were slightly different from those given by my hon. Friend. My understanding is that Ealing has budgeted to raise its spending by 16 per cent. in 1989–90, and the domestic rate bills have risen by 31 per cent. following a 72 per cent. rates increase only two years ago. That shows a substantial disregard for pensioners, who are in fact protected by the substantial rate rebates that we have provided for them.

Dr. Marek Could the explanation be that this 9.3 per cent. increase that will have adverse effects on pensioners, as mentioned by the Chief Secretary, is brought about by the fact that, at current prices, rate support grant in 1987–88 was £10,059 million, and in 1988–89 it was only £9,687 million? Local authorities had no alternative but to make up for this increase in Government taxation in order to preserve services. Is this not yet another reason why taxation as a percentage of GDP is higher now under a Tory Government than it ever was under the previous Labour Administration, and why the Tory Government are the Government of high taxation.

Mr. Major If the hon. Gentleman believes that, I despair for him. He will never persuade anyone else to believe that. He speaks for the party of high taxation, as I speak for the party of low taxation. I will explain to him why rates go up so much, and disproportionately, in Labour-controlled authorities. It is because they waste a good deal of their money, and they do not control it properly. It is as straightforward as that.

Sir Anthony Grant If the daft proposals for rate reform, of a local income tax and capital value proposed by the Opposition were implemented in my constituency – and I think in that of my right hon. Friend – the burden would be more than twice as much as the community charge. Does my right hon. Friend agree?

Mr. Major I understand that. That is not a unique proposition for, if many of the policies of the Opposition were carried out, the tax burden generally would go up dramatically for taxpayers as well.