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The Development and Implementation of the Community Charge Policy - Research Paper Example

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The purpose of this paper "The Development and Implementation of the Community Charge Policy" is to investigate the development and implementation of the Community Charge Policy with reference to key theoretical literature. Further, two theoretical approaches to the policy process will be compared…
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The Development and Implementation of the Community Charge Policy
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A Critical Analysis of the Development and Implementation of the Community Charge Policy INTRODUCTION In April 1990, the United Kingdom government was committed to reforming the system of local rates in order to ensure more effective control over local government. It introduced th Community Charge Policy or ‘poll tax’. Though every adult had to pay the Community Charge, the social security system provided aid to poor individuals. The local rates were regressive with respect to income, but they were actually proportionately related to the wealth which is characteristic of owner-occupied houses. Additionally, the Community Charge is even more unfair in terms of income than the rating system. Under the Policy, rebates for the poor are limited to 80 percent of the tax due, while under the rates a 100 percent rebate was obtainable. Before the introduction of the new system, studies (Smith & Squire 1987) concluded that “a poll tax would be an even more regressive tax than are domestic rates” (Richards 1993: 239). Thus, poorer households would pay a higher proportion of their income in tax, and richer households would pay a lower proportion of income in tax, than with domestic rates. Further, redistribution of wealth in favour of the wealthy is difficult it accept since generally wealthy people have inherited their wealth from their predecessors, and not built it up through hard work. The distribution of wealth in Britain is significantly more uneven than in other countries such as the United States. There is no justification for creating further unequality in a system already lacking equity of distribution. Although the previous rating sytem was considered dissatisfactory by all political parties, the International Financial Services (IFS) argued that the rating system should not be abolished because they were essential in taxing the services of housing, and it would be possible to supplement them by means of a fairer local income tax, avoiding “the need to establish a new complex system to compensate those too poor to afford the Community Charge” (Richards 1993: 240). The Community Charge was later replaced by the Council Tax in 1993. Thesis Statement: The purpose of this paper is to investigate the development and implementation of the Community Charge Policy with reference to key theoretical literature. Further, two theoretical approaches to the policy process will be compared. DEVELOPMENT AND IMPLEMENTATION OF THE COMMUNITY CHARGE POLICY The greatest lack of consensus and highest controversy have been associated with the poll tax policy. The rates revaluation in Scotland in 1985 caused an intense reaction amongst the Conservative middle class support, expressed at the party’s Scottish conference in Perth that year. Revaluations in Scotland were in 1971, 1978 and 1985, while the last revaluation to take place in England and Wales was in 1973, which led to Scotland’s rateable values set much higher than those for comparable property south of the border. In response to this move, George Younger took action to abolish the rates, and replace it with a community charge. At the same time, others also argued the case for a poll tax, such as Michael Forsyth, Tory MP for Stirling, and Douglas Mason of the Adam Smith Institute. “In January 1986, the Government issued a Green Paper, Paying for Local Government. The Abolition of Domestic Rates etc Scotland Act 1987 introduced the euphemistically termed Community Charge” (Mitchell 1990: 117). The rates were to be replaced by the community charge described in the Green Paper. The Theoretical Background of the Community Charge Policy A new flat-rate charge, the community charge for local services was paid at the same rate by all the adult residents of a local authority. Each local authority determined the level of its own community charge. Each local authority being accountable to those who pay for its expenditure requires clear and comprehensive price signals to be given to all local taxpayers. A community charge could achieve this because all local adult residents faced similar bills. However, certain categories of particularly poor persons were eligible for reduced charges instead of the flat-rate. Although the enactment was considered as seriously unjust, it was unimpeachably valid as a matter of law which underscored a legal duty to pay the statutorily prescribed charge (Mitchell 1990). The positivist theory has the same conclusion; that is, the law is a valid law, “but if the duties it imposes are duties in violation of the demands of justice, it will follow that the moral issue whether or not to comply is prima facie an open one” (McCormick 1994: 109). Up to this juncture in the argument, there is no significant difference between the positivist and the proponent of the natural law. This is in spite of all the generations of controversy directed to this very point of the existence of the unjust law as such. Some supporters of natural law may flatly deny the existence of an unjust law, but not all do so. Finnis (1980) asserts that the mainstream of conventional natural law confirms the possible existence of such laws, while denying or reducing their morally compelling quality and emphasizing their essential defectiveness as law. On the other hand, while their may be some positivists who will consider the unjust law as fully obligatory as any other, however the mainstream at least in the English-speaking world, unrestrictedly asserts the lack of moral obligation of the unjust law. In fact, “it can be claimed that the positivist attitude actually facilitates a sharpened awareness of the always present potential conflict of the legal and the moral” (McCormick 1994: 109). The positivists have delineated a boundary for natural law theory with useful signposts and perimeter. According to the government’s assessment, the importance of local accountability and the flat rate were vital. “Spendthrift local authorities would be held accountable to a wider section of the community with the least well-off, who gained most from the services provided” (Mitchell 1990: 117), unable any longer to pass the cost onto the ratepayer, though provision was made in the Act for the Secretary of State to introduce rebates. This challenged the dependence of Scots on high levels of services. The poor would lose, as found in the government’s technical appendix to the Green Paper. The Green Paper was based on Public Choice Theory, stating that the voter would optimize his or her ability by voting for the package likely to be most individually beneficial. This theory believed that the level of poll tax will be kept down because of the flat rate, and because greater numbers of voters would pay for local services directly. Mitchell (1990) states that Midwinter and Mair (1987) found that “the assumptions involved in public choice theory have fundamental theoretical and empirical flaws in relation to the poll tax in terms of democratic theory, fiscal psychology, electoral behaviour and policy analysis” (Mitchell 1990: 117). On the other hand, Loughlin (1996) argues that the community charge scheme could not be adequately explained by referring to public choice principles or on the basis of a shift from equity to benefit as the cardinal principle of local taxation. “The scheme is best understood as forming an important part of a broader ideological vision of the institution of local government” (Loughlin 1996: 95). Despite the widely prevalent use of the term ‘poll tax’, it is important to not lose sight of the exact intention of the government in giving the term ‘community charge’ to the new local tax. The government conveyed that the local government was not a tier of the former which should be vested with the governmental power of taxation. It was to be perceived a an administrative agency which provided particular services for which the principle of direct charging could not be applied. Those who benefit from such services were thus required to pay a general charge to the agency securing the provision of these services. In a short while, the community charge became widely known as the poll tax. Before the 1987 General Election, an Act had been passed to introduce the poll tax in Scotland but not in England. If the Tories had intended to depict themselves as giving greater importance to Scotland, their plan did not work well. The poll-tax was unpopular, and Scotland was considered to be a guinea pig. This increased Scottish antagonism to the Conservatives in an election in which the poll tax was a dominant issue (Mitchell 1990). The government was able to call a general election in 1987, achieving a comfortable victory. The result was similar to that of 1983, “with the alliance of the Liberal and Social Democratic parties splitting the anti-Thatchervote with Labour, allowing a Conservative victory by an even larger percentage of seats than in the previous election” (George 1996: 141). Thus, in 1987 Thatcher led the Conservatives to a third consecutive electoral victory, though the majority was reduced. She proposed to implement free-market changes to the national health and educational systems, and she introduced the controversial per capita “poll tax” to pay for local government, which ignited critcisms that she expressed no compassion for the poor. Conflicts over the poll tax, beginning from 1990, and over European integration led to a leadership challenge from within her party, and Thatcher resigned as prime minister, while John Major succeeded her (The Columbia Encyclopedia 2009). On the other hand, George (1996) argues that Thatcher’s personal position was strong both domestically and internationally before the election, and became stronger after it. Thatcher’s success reduced any room for criticism within the Conservative Party. However, the government was opposed by its own backbenchers on some of its domestic legislative programme. Internationally, Thatcher’s position as the longest serving European head of government facilitated her playing a leading role in the European Community and on the wider world domain. Even so, before the end of 1990, Thatcher had been replaced as Prime Minister by John Major. The new decade 1990 did not improve the political fortunes of Margaret Thatcher and the Conservative Party. “The British economy continued its slide into recession; inflation showed no sign of slackening; the movement for European integration accelerated; and the Tories failed to halt their tumble in the national public opinion polls” (Geelhoed & Hobbs 1992: 177). Soteri and Westaway (1993) explain price inflation in the United Kingdom between 1971 to 1992 by means of the wage-price system of the National Institute model. This work updates a similar analysis performed on Her Majesty’s (HM) Treasury model, which explained inflation up to 1986. The wage-price system for the Institute model shows “a significant role for world inflation and the exchange rate via import prices in explaining the increased levels of inflation in the 1970s and the declining rates in the 1980s” (Soteri & Westaway 1992: 94). Changes in the rate of utilisation of goods and labour also provided a marked additional impact. Direct unemployment effects took as much as 3 percentage points off the inflation rate at the height of the 1980 recession, but added over 3 percentage points at the height of the 1980s boom. On the other hand, it is argued that the rate of inflation over the last five years has tended to be higher. The authors suggest that the earlier explanation for aggregate earnings behaviour may be breaking down, but perceive the necessity for a deeper analysis of this question. In 1988 Labour had more votes than Tories, maintaining consistently an 8 percent to 14 percent lead in the polls since that time. From the winter of 1989 there were continued and wide-scale protests in Britain over the “hated community charge, or poll tax, that the government had instituted to fund the services provided by the local councils” (Geelhoed & Hobbs 1992: 177). In spite of fierce opposition, the community charge was implemented in Scotland in 1989-1990 and in England and Wales in 1990-1991. Implementation at the end of the policy process attracts less interest than its development, with “the pressures that give rise to it and the political conflicts that surround its adoption” (James 1997: 152). Those policies that work well are implemented quietly. Policies that are not successful in their implementation are covered comprehensively. The community charge policy failed because of its inherent flaws, which helped it to gain neither public approval nor cooperation. The success of the council tax received a slightly greater level of coverage only because it replaced the failed community charge. MacGregor (1991) argues that the community charge was not only an unpopular mistake, but partly underscored the logic of the entire welfare strategy of Thatcher. Rejection of the community charge depicted a rejection of this entire set of policies due to increasing awareness of their effects in causing greater poverty and inequality. Similarly, Winetrobe (1992) states that the government green paper of December 1981, Alternatives to Domestic Rates concluded that a poll tax was only feasible as a supplement to another major revenue-raising tax, in order to minimise possible enforcement difficulties and adverse effects on lower income groups. The issues associated with local government finance in the 1990s are significant. The community charge scheme did not restore local accountability, it was an extension of centralisation of power. Destroying the scheme’s capacity to restore local accountability was due to various factors including outcome of nationalization of non-domestic rate, the volatility of central grant assessments, and the high-gearing effect of the community charge. Moreover, its highly regressive impact along with its retaining of capping powers, “made it almost impossible for local authorities to diverge significantly from central government spending assessments” (Loughlin 1996: 97). Within a couple of years of the scheme’s implementation, it was dismantled, because of its instability and lack of workability. It is a unique instance of “a government putting a single piece of legislation at the forefront of its programme, forcefully implementing it, and then ignominously abandoning it in the course of a single parliament” (Loughlin 1996: 97). It was destroyed ultimately by its widespread unpopularity among the public. The tip of the iceberg in terms of the costs of the reforms were estimated at the end of 1991 were 7.5 million pounds of liability orders issued, over 1.5 billion non-collection of poll tax, and the imposition of 2,815 prison sentences being imposed for non-payment, with a vast majority being suspended. The Local Government Finance Act replaced the community charge with the council tax as a banded property tax, although with personal discounts, which represented a return to the basic principles of domestic rates. The banding structure as well as the rudimentary valuation methods have to be corrected. The community charge scheme nearly destroyed the integrity of the local tax system; it undermined the whole structure of local government. It has made the resoration of taxing capacity of local government extremely difficult. Additionally, the high gearing effect produced by 80 percent of local authority expenditure being centrally provided, local authority budgets are increasingly being determined by central government Standard Spending Assessments. With the introduction of universal capping in 1992, that restricted freedom has been eliminated and local council budgets now appear to be clustering around their Standard Spending Assessments. The outcome of these changes established a system in which local authorities now carry responsibility out of all proportion to their ability to actually control services (Loughlin 1996). According to neo-liberals’ argument, controversial reforms to the system of local government finance failed mainly not because of unacceptability of the principle, but because of wrong timing in the introduction of the reforms. This analysis reveals that the error of the community charge lay in its implementation before the major reforms to local government functions had been planned. The scheme’s failure is therefore attributed to its attempt to introduce during the 1980s a local tax for a system of local government which was unlikely to materialise until the mid-1990s at the earliest. The main purpose of the government’s numerous reforms to local government functions since 1980 has been as far as possible, “to eliminate the redistributive dimension to local services and to restructure the collective organisation” (Loughlin 1996: 98). The Policy’s Pluralist and Institutional Theories: A Comparison Two theoretical approaches to the policy process: pluralist theory and institutional theory are compared and contrasted. Pluralism is “the idea that power is and should be spread extensively through society and the political systems” (Peele 2004: 522). Pluralists argue that to maximise democracy, a broad spread of interest group activity is required. At the same time, however, institutional structure forms the core of British government, and it supports the cabinet as a whole, rather than the Prime Minister. Further, “institutional patterns include conventions and practices” (Peele 2004: 64). According to Bellamy (1999: 115), “pluralism is both the life-blood of democracy and its greatest challenge”. Pluralism gives rise to a clash of interests and conflict of values, without which the grounds for political negotiation that forms the core of democratic societies would be lost. However, a polarised pluralism in which rivals do not mutually address issues, but seek domination either covertly or overtly through violence and war, subverts the political process. In a pluralist society, a democratic constitution has two tasks, including the positive task of recognising and reconciling differences, “and the negative one of checking pluralism’s anti-political manifestations and controlling the abuse of power” (Bellamy 1999: 115). Loveland (1995) states that a government which retains discretionary legislation knowing that implementing agencies cannot manoeuvre its implementation, may be accused of employing false symbolism rather than an aspirational one. The Thatcher government intentionally created a socio-economic context in which the objectives of the 1977 Parliament could not be realised. This they did by an increasing demand for Part III housing accommodation by pursuing monetarist macro-economic and social security policies, while at the same time limiting its supply by eroding pluralism in central-local government relations. Thus, retaining the Act may be depicted “as an exercise in legislative deceit” (Loveland 1995: 331). Thatcher’s strong antagonism to local government is well known. However, evidence from research (Young 1989) reveals that the strategy for local government lacks a ‘grand strategic plan’ or a predetermined philosophy. Midwinter and Monaghan (1993) state that whilst this is relatively accurate in relation to policy instruments for reforming local government finance, it is less true from the analysis of the inefficiency of local government. In several domains, developments are in line with normative public choice, such as the promotion of user charges, competitive tendering, or the introduction of value for money techniques in the audit process. Through most of the 1980s, the Conservatives attacked the ability of the local government and its professional staff. On the other hand, the government minister Nicholas Ridley’s Conservative analysis and principles of reform reveal that he “firmly supported the introduction of the community charge as a means of promoting accountability” (Midwinter & Monaghan 1993: 35), and to fulfil national economic objectives by exerting downward pressure on spending. He argues for greater pluralism and diversity in education, housing, social work, transport, and an enabling role. Charges such as the community charge are perceived as a method of promoting choice, effciency and accountability. Economists argue in favour of increased charging. According to Foster, Jackman & Perlman (1980), earlier there was a direct link between taxation and the benefits of provision, but this advantage of benefit has declined in the twentieth century. The main advantages of charging include a more efficient use of resources, making costs explicit, and avoidance of excessive and unwanted provision and overconsumption of free/ subsidised services. In the 1980s, there were greater benefits from charging especially in the financing of council housing, and in transport. The reforms “reflect concern at the inefficiency of monopoly public provision financed by taxation” (Midwinter & Monaghan 1993: 36). On the other hand, it is argued that the approach to policy through the pluralist perspective has its limitations. For example, the emphasis it places on policy as the outcome of the action of key individuals, each with their specific purpose, and the means to make policy through attracting supporters, or by changing the rules of the game so that other actors must re-evaluate their interests and strategies. When used simplistically, pluralism may depict governments as having human characteristics such as desires or objectives. More sophisticated uses of pluralism usually avoid such reductionism, although they may fuse together the different concepts of motivation, intentions, objectives and interests, and fall short of maintaining a distinction between objectives publicly announced by the government in power, and those that are analytic constructs imposed by the theorist (Collyer 2003). A pluralist conception of the policy process does not provide an adequate analysis of privatisation. This is because it reduces power to the interaction between public figures, revealing only their public face of power. The pluralist approach is in danger of over-rationalising the policy process, “presenting the outcome as the consequence of rational, intentional, and conscious choices of individuals and groups” (Collyer 2003). Alternatively, an Institutional perspective of Britain’s community charge policy reveals that previous interpretations of the poll tax policy do not provide adequate explanations. Casey (1996) argues that the poll tax can be understood only through an Institutional approach calling for an interaction of ideas, interests, and institutions. The analysis reveals that the policy originated from the inability of the Conservatives to compel reductions in local government expenditures through the previous local government finance system. This resulted in a search for new policy options which combining with Thatcherite ideas on local government, produced the poll tax policy. Margaret Thatcher’s reign as prime minister was the longest in the twentieth century; however it was brought to an end by obscure issues of local government finance. However, the implementation of the poll tax was the vital aspect of the Thatcher era. Casey (1996: 279) examines “why the Thatcher government would pursue a policy that Tory backbenchers dubbed a political cyanide pill”. Earlier explanations could not provide satisfactory answers to this question. Only by employing an institutional analysis can a complete explanation of the decision to adopt the poll tax be given. Particularly, the institutional structure of the local government finance system prevented the Conservatives from achieving their desired goals. As a result, they attempted to radically transform the structure of the system by implementing the poll tax. There are several competing interpretations of the poll tax. While some scholars view poll tax as the result of system failure, caused by eliminating checks and balances in the policy-making process that might have stopped or changed the community charge. However, their ultimate conclusion is quite unsatisfactory, because a more integrative approach is required. Other explanations of the poll tax focus on one of three variables including ideology, Thatcher’s political strength, the nature of central-local relations, “or an electoral calculus based on a public-choice interpretation of the impact of the poll tax” (Casey 1996: 279). The landslide victory in 1987 helped to re-radicalise Thatcher. Through an integration of Cabinet domination and radical ideology, the poll tax was distinguished as “Thatcher’s policy”. CONCLUSION This paper has highlighted the Community Charge Policy or the Poll Tax Policy, investigated its development and implementation with reference to key theoretical literature, and compared the pluralist and institutional theories of the policy process. The evidence indicates that the community charge policy failed because it was doomed from the beginning as a source of local government revenue and replacement for domestic rates. The government badly mishandled its introduction and administration. This is reiterated by Winetrobe (1992: 420), who adds that “its principles never gained popular acceptance, the campaign against it embraced a uniquely broad spectrum” (Winetrobe 1992: 420), and it failed as a tax on almost all counts. The success of government reforms, unlike economic theory, depends on the precision of the assumptions, and the absence of intervening misrepresentative variables. A narrow economic approach to policy making is dangerous. Midwinter and Monaghan (1993: 37) support this view, stating that “policies based on simple axioms and maxims run a high risk of resulting in catastrophe”, because the world is a highly complex and uncertain place. Additionally, the causal chains involved in policy as theory are normally much more complex. Hence, a distinct and precise theory of cause and effect is one of the essential preconditions for successful implementation of policy. It is clear from the literature, that a Pluralist conception of the community charge policy offers only a one-dimensional perspective. It fails to offer an adequate analysis of privatisation because it reduces power to the interaction between public figures. It has the tendency to over-rationalise the policy process, presenting the outcome as the consequence of rational, intentional, and conscious choices of individuals and groups. Contrastingly, according to the analysis by Casey (1996), the Institutional approach was more successful in explaining the community charge policy. It refers to the poll tax policy as emerging from an inability of Conservatives to enforce reductions in local government expenditures through the earlier local government finance system. The resultant search for new policy options when combined with Thatcherite concepts on local government, created the poll tax policy. It is concluded that the poll tax policy is based on several theories discussed above, which explain the policy process. BIBLIOGRAPHY Bellamy, R. (1999). Liberalism and pluralism: Towards a politics of compromise. London: Routledge. Casey, T.C. (1996). Britain’s poll tax policy: An institutionalist approach. West European Politics, 19 (2): pp.279-302. Collyer, F.M. (2003). Theorising privatisation: Policy, network analysis, and class. Electronic Journal of Sociology. Retrieved on 11th January, 2012 from: http://www.sociology.org/content/vol7.3/01_collyer.html Finnis, J. (1980). Natural law and natural rights. Oxford: Clarendon Press. Foster, C., Jackman, R. & Perlman, M. (1980). Local government finance in a unitary state. London: Allen & Unwin. Geelhoed, E.B. & Hobbs, J.F. (1992). Margaret Thatcher: In victory and downfall, 1987 and 1990. New York: Praeger. George, S. (1996). Politics and policy in the European community. Oxford: Oxford University Press. James, S. (1997). British government: A reader in policy making. London: Routledge. Loughlin, M.I. (1996). Legality and locality: The role of law in Central-Local government relations. Oxford: Clarendon Press. Loveland, I. (1995). Housing homeless persons: Administrative law and the administrative process. Oxford: Clarendon Press. MacCormick, N. (1994). Natural law and the separation of law and morals. In R.P. George (Ed). Natural law theory: Contemporary essays. Oxford: Clarendon Press. Chapter 5: pp.105-133. MacGregor, S. (1991). Poverty, the poll tax and Thatcherite welfare policy. Part 1: How the poll tax axed Mrs. Thatcher. The Political Quarterly, 62 (4): pp.443-450. Midwinter, A. & Monaghan, C. (1993). From rates to the poll tax: Local government Finance in the Thatcher era. Edinburgh: Edinburgh University Press. Midwinter, A. & Mair, C. (1987). Rates reform: Issues, arguments and evidence. Edinburgh: Mainstream Publishers. Mitchell, J. (1990). Conservatives and the union: A study of Conservative Party attitudes to Scotland. Edinburgh: Edinburgh University Press. Peele, G. (2004). Governing the UK: British politics in the 21st century. Edition 4. London: Wiley-Blackwell. Richards, K. (1993). Redistribution under conservatism: Past and future. In N.M. Healey (Ed). Britain’s economic miracle: Myth or reality? London: Routledge. Chapter 12: pp.227-240. Smith, S. & Squire, D. (May 1987). Local taxes and local government, IFS Report Series, No. 25. Soteri, S. & Westaway, P. (1993). Explaining price inflation in the UK: 1971-92. National Institute Economic Review, 144 (1): pp.85-94. The Columbia Encyclopedia. (2009). Thatcher, Margaret Hilda Roberts Thatcher Baroness. New York: Columbia University Press. Winetrobe, B.K. (1992). A tax by any other name: The poll tax and Community Charge. Parliamentary Affairs, 45 (3): pp.420-427. Read More
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