The death of Margaret Thatcher and, even more, her reincarnation in the coalition government make this a propitious moment to re-examine the history of the 1980s. With severe cuts being imposed on local government, it’s especially worth revisiting the rate-capping controversy of 1984-85.
The history of the 1980s was never a simple tale of triumphal neoliberalism. The Thatcherite project was resisted every step of the way and at several critical junctures was seriously imperilled. During her first term, until the Falklands war, her government was deeply unpopular. That led to the election, in the early 1980s, of Labour councils with strong left-wing contingents. As unemployment rose, these councils raised spending on services, compensating for cuts in government grants by increasing ‘the rates’ – the long-established local property tax, paid by residents and businesses.
Determined to close this escape valve, the Tories introduced legislation soon after their 1983 victory to ‘cap’ rate rises in what they considered to be profligate councils. From the start, the proposal was controversial, even within the Conservative party, where a significant minority, including Edward Heath, regarded it as an unwarranted centralisation of power. Nonetheless, the government pushed it through parliament and it became law in June 1984.
The debate about how Labour should respond unfolded against the background of the year-long miners’ strike. For many on the left, this was an opportunity to open a second front against the government. Support for non-compliance was widespread, but there was considerable disagreement over what form it should take. The strategy eventually adopted – in which affected Labour councils would collectively refuse to set a rate – was a lowest common denominator, the one point of action around which most could unite.
It needs to be stressed that the discussion that led to this decision was extensive, involving large numbers at the base of the Labour party. The commitment to non-compliance was the result of a wide-ranging democratic exercise, not the influence of conspiratorial ‘entryists’, and reflected a determination among Labour members to fight the Tories not only during but between elections.
At the Labour Party conference at the end of September 1984, local government attracted more resolutions than any other topic. The official national executive committee statement endorsed non-compliance and called for unity; two resolutions went further, pledging support to councils forced to break the law. The statement and the resolutions were agreed by a show of hands – not at all the result the leadership wanted.
Despite the leadership’s equivocation, the campaign against rate-capping was taken up vigorously at the grassroots. It was inventive, diverse, populist, reaching out to and involving workforces and their unions alongside a wide array of community organisations. In November 1984, 100,000 local government workers took a day’s strike action; 30,000 marched in London. Through festivals, demonstrations, meetings, publications and events involving youth clubs, nurseries, play and pensioners groups, the campaign succeeded in alerting a broad public to the menace of rate capping and its effects on services, jobs and local democracy.
Among the most prominent in the leadership of the campaign and its central strategy of non-compliance were Margaret Hodge of Islington, David Blunkett of Sheffield, and Ken Livingstone of the GLC, along with Derek Hatton from Liverpool and Ted Knight from Lambeth.
From the start, it was clear to all that non-compliance could entail personal penalties for Labour councillors. If the district auditor found that the council had suffered financial loss as a result of their votes, councillors could be ordered to repay the lost money in a ‘surcharge’. If the surcharge amounted to more than £2,000 each, the councillors would also be disqualified from office. On top of that, councillors could be held to be ‘jointly and severally liable’ for the total sum lost to the council – not just their individual share of it.
In February 1985 Neil Kinnock issued his famous edict to the Labour local government conference: ‘Better a dented shield than no shield at all.’ While this was to become (and remains) the prevailing Labour wisdom, it was deeply dismaying to activists. Kinnock had effectively advised the Tories that councils that resisted their diktat would be left isolated. It was a declaration from the top that there would be no labour movement unity.
Nonetheless, at this stage, 26 Labour councils remained determined to defy the government. They planned to synchronise their budget meetings for 7 and 8 March, coinciding with TUC-sponsored ‘Democracy Day’ demonstrations. The government looked vulnerable. Thatcher’s popularity ratings had dipped: 60 per cent now said they were ‘dissatisfied’ with her.
But on 5 March 1985, the miners retuned to work after a year-long struggle. Their defeat became, in the short run, a pretext for giving up the rate-capping struggle, and in the long run, for a general accommodation with Thatcherism. On 7 March, the Times made a prediction: ‘Labour’s left-wing councillors value power more than a place of glory in the Socialist Pantheon . . . They will cling to office and make the shifts required, shifts which in most cases are perfectly manageable.’ The cynicism proved sadly prescient. The first to collapse was the GLC, where Livingstone himself led the climbdown, while John McDonnell led a minority of Labour councillors determined to hold the democratically agreed line.
Initially nearly all of the other rate-capped councils voted to refuse to set a rate and in doing so enjoyed voluble local support. In April, Islington council published a poll of local residents showing that in the argument over rate-capping, 57 per cent supported the council and only 20 per cent the government.
But as the threats from district auditors became more pressing, one by one the councils abandoned non-compliance. By the middle of June, all but Lambeth and Liverpool had yielded. In September, the district auditors gave notice to 81 councillors (49 from Liverpool, 32 from Lambeth) that the delay in fixing the rates amounted to ‘wilful misconduct’ and that they were therefore required to repay the costs as a personal surcharge. The 81 were also disqualified from office and barred from seeking re-election. A series of judicial appeals failed.
At the end of July 1986, the Lambeth councillors were given 21 months to pay off the ‘surcharges’ at a rate of £5,000 per month between them. Some months later, Liverpool councillors were held liable for an even larger total, £333,000. In the end, these sums were paid off by donations from the labour movement, though not without sacrifices for a number of the councillors concerned.
The councillors paid the price of principle. It was a very un-eighties thing to do. They stood against the current and should be celebrated for that. They kept faith with their electorates and their consciences, even when abandoned by their leaders, vilified in the media and threatened with bankruptcy.
The defeat of the campaign against rate-capping was a significant step in the hollowing out of local democracy as well as in Labour’s long-term adaptation to Thatcherism. Those who led the retreat soon shifted their defence. Initially it was posed as a stark choice of lesser evils. But gradually the ‘evil’ became celebrated as a virtue: the ‘reform’ of public services through privatisation and attacks on the workforce. Managerialism replaced politics.
And the pay-off for the ‘dented shield’, which was supposed to be the election of a Labour government, did not materialise in 1987 or 1992, and when it did, finally, in 1997, it did not herald a reinvigoration of local democracy. Instead, the managerial ethos was entrenched via ‘cabinet’ government and executive mayors. The fiscal autonomy enjoyed pre-rate capping was never restored.
Of course, Thatcherism was only the British version of the neoliberal wave of the era. But that global context does not mean its triumph was inevitable. It was resistible. Its hegemony was an end product, established piecemeal, unevenly and painfully. And its triumph required a political struggle.
In that struggle, it was immensely to Thatcher’s advantage that every time she singled out a target for attack, she could be confident that the target would be left high and dry by the Labour and trade union leaderships. Thatcher was never the leader of principle vaunted by the media; she was ruthlessly opportunistic. But it was that very quality that made her adept at calling the bluff of the spineless centre – whether among the ‘wets’ in her own party or the leaders of Labour local government.
Photo: James Taylor. It shows the Hackney Peace Carnival Mural, commissioned by the GLC in 1985.
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