Rate-capping rebellion

[8] The Conservative Party manifesto declared:[9] There are .. a number of grossly extravagant Labour authorities whose exorbitant rate demands have caused great distress both to business and domestic ratepayers.

Over the weekend of 7–8 July, Labour councillors met at a conference organised by the Party in Sheffield; as the invitations included moderate councils, the meeting was expected to endorse the official line.

[42] The host, leader of Sheffield city council David Blunkett wrote a paper for the conference which said that "collective action, achieving Government retreat, and not martyrdom, is the objective".

[48] It was strongly opposed by Liverpool, where the deputy leader Derek Hatton regarded it as "a totally negative strategy",[46] and Militant supporting councillor Felicity Dowling complained that she had spent months arguing publicly against a formal 'no rate' stance which would have serious consequences.

[53] The second (composite 43) was moved by Derek Hatton on behalf of Liverpool Broadgreen Constituency Labour Party declared support for "any councils which are forced to break the law as a result of the Tory government's policies".

Livingstone was conscious that the Labour group on the GLC had recent experience of deciding whether to defy the law, having split 23 to 22 to vote in 1981 not to comply with a House of Lords judgment ordering it to raise public transport fares.

[96] Four of the thirteen Labour rebels were suspended from the party for terms between six and twelve months, and the others were reprimanded and required to give a written undertaking to observe group policy in future.

[97] After the rate-capping of Thamesdown was announced, the Member of Parliament for Swindon Simon Coombs (who was Parliamentary private secretary to Kenneth Baker, the local government minister) pressed the council to use the appeal mechanism provided in the Rates Act 1984.

The council felt sufficiently concerned to avoid budget chaos that it set up a special resources sub-committee to agree emergency measures for ordering supplies.

[123] It was soon clear that there was a significant split in the Labour group as Leader Jack Hart told a council meeting on 28 March that the Government would not increase their spending limit and urged members to be realistic.

[127] Sheffield's own action for judicial review of its spending limit ended on 2 April when Mr Justice Woolf refused it permission, ruling that while the High Court had jurisdiction, any matter involving political judgment should be dealt with through the democratic processes;[128] an appeal failed on 2 May.

[126] Tower Hamlets London Borough Council, which was not capped, was in the unusual position of being unable to set a rate due to the actions of dissenting councillors from the majority group combining with the opposition.

[141] On 6 March 1985 in the High Court, Mr Justice Mann issued an interlocutory declaration that the council had a duty to set a rate which did not breach the cap and that it could not use interim borrowing powers.

[143] At the end of the hearing, Mr Justice Woolf found both Hackney's resolutions of 7 and 28 March unlawful and quashed them but refused to immediately order the council to set a rate.

[153] The next day, the District Auditor Brian Skinner wrote to all councillors in authorities which had not yet set rates telling them to do so without delay and certainly before the end of May deadline given by the High Court in the Hackney case.

[161] When the council met again on 23 April, the members had been warned by District Auditor Brian Skinner of "serious consequences" including surcharge should they decide not to set a rate; Margaret Hodge ignored the advice and commented as she moved the motion that she would not "abandon the collective unity that is so important in the struggle against the Government".

[174] The budget agreed by Camden was prima facie unbalanced and illegal as it showed expenditure of £132.46m against a cap of £117.609m, but by counting income from the GLC's 'stress borough' fund and using accounting tricks, it came into balance.

[175] Greenwich had shown early interest in leading a fight against rate-capping, and its leader John Austin-Walker had signed the personal statement published in Labour Herald on 22 June 1984.

[39] The council duly passed a resolution declaring its inability to set a rate,[100] and John Austin-Walker accepted that his refusal to cut spending "may place us beyond the law".

[186] On 10 June, the auditor sent out letters to the Liverpool councillors reporting that the council's failure to set a rate that financial year had already caused a loss of £106,103,[186] and notifying them of an extraordinary audit under section 20 of the Local Government Finance Act 1982.

[196] The district auditor, Brian Skinner, found that his permission to use offices in Lambeth Town Hall allocated to NALGO was withdrawn in mid-May;[197] he was also surprised to discover his photograph on a threatening mock 'Wanted' poster in his local supermarket.

Former council leader Ted Knight described it as a "witch hunt", asserting that it had been a political decision by the Government to suspend the councillors from office for a further five years and that it amounted to being tried twice for the same offence.

[227] At the Labour Party conference the following week, David Blunkett agreed with Hatton that the GLC's Director-General Maurice Stonefrost could offer advice to Liverpool.

There were several reasons to delay action: the Lambeth and Liverpool appeals were proceeding, ratepayers were separately objecting to the accounts, and new auditors in Islington and Hackney were being challenged by the councils.

[233] After the High Court ruled in favour of the auditor on Liverpool and Lambeth, the Commission obtained legal advice from Robert Alexander QC who agreed that taking on other councils would be useless.

David Blunkett agreed in an interview in New Society in March 1986 that pursuing other councils would look "highly political" and would negate what the Commission had achieved in auditing Lambeth and Liverpool.

[239] Martin Loughlin, author of "Legality and Locality", ascribed the reason for the failure of the ratecapping challenge to the councils not being as united as they appeared; some had viewed it as a direct confrontation of the Government, while the majority saw an opportunity to exploit an ambiguity in the law.

On the morning that Labour Party leader Neil Kinnock was due to make his speech, an article by the Anglican and Roman Catholic Bishops of Liverpool David Sheppard and Derek Worlock denounced the Militant leadership and council's "policy of confrontation".

Ten of them had been rate-capped the previous year (Basildon, Camden, Greenwich, Hackney, Haringey, Islington, Lambeth, Lewisham, Southwark and Thamesdown); two were newly selected, Liverpool and Newcastle upon Tyne.

[249] This 'universal capping' continued from the 1991–92 financial year until 1998–99; when it was ended the Secretary of State took reserve powers under the Local Government Act 1999 to regulate increases in the Council Tax (which had replaced the Community Charge).