The Poll Tax-Origin, Errors and Remedies

Abstract

This paper begins with an account of the context in which this decision was taken and of the reasons for it. It will then be seen that the situation has developed so very differently from expectations, that a fresh start is required. The over-riding objective when the new system was being devised in I984/5 was to check the persistent growth in local expenditure which had caused so much concern to both Labour and Conservative governments. The situation in Britain was therefore in sharp contrast to that traditionally envisaged in the literature on fiscal federalism which largely reflects conditions in the United States. For it was usually assumed that local government neglects externalities, notably in education, and should, therefore, be encouraged to spend more by schemes for rewarding tax-effort (Musgrave, I 96 I). More recently, when Brennan and Buchanan (i980) have discussed the means of reducing total government expenditure, they recommended an increase in the scope of local government - an astonishing suggestion from a British point of view. Whatever the reasons for such national differences, it should be common ground that the reason for having some taxing power at the local level is to permit some diversity of choice. If the choice is to be effectively exercised, however, an appropriate form of local taxation is clearly required.