LONDON -- In what the opposition called the "biggest climb-down in modern political history," the British government retreated yesterday from the unpopular poll tax and announced a major switch from local to central funding of services.
The move shifted the cost of $8 billion worth of services previously financed by local communities to the central government. This will lower the average cost of the local poll, or head, tax by $250 per person.
To enable the central government to cover the tab, Chancellor of the Exchequer Norman Lamont announced an increase in the value-added tax (VAT) on goods and services to 17.5 percent, up from 15 percent.
The government's retreat from the poll tax is expected to be completed tomorrow when it unveils its plans to eventually substitute a property tax for the per capita charge.
The new property charges will be set at lower, less-unpopular levels because of the central government's assumption of the $8 billion in local spending.
Neil Kinnock, the opposition Labor Party leader, told the House of Commons that the "biggest climb-down" came after two years of "misery and injustice and inefficiencies" of the poll tax.
Labor's trade spokesman, Gordon Brown, said, "The poll tax is collapsing in confusion and chaos."
The poll tax was introduced by then-Prime Minister Margaret Thatcher in her third and final term in office.
It imposed a flat tax on rich and poor alike that replaced the old property tax system and was meant, by introducing a universal per capita tax, to make voters more conscious of local government spending, curbing outlays.
It was revealed by opinion polls to be overwhelmingly rejected as expensive, regressive and unfair.
It was blamed for the Conservative government's resounding defeat in a recent local by-election, and its abandonment is widely viewed as an essential element in giving the government any chance of re-election.
The next general election must be held by June 1992, but there is speculation that Prime Minister John Major could call it as early as this June. He is expected to wait to see the results of local elections in May and the trend then in opinion polls before deciding whether to seek an early mandate.
The budget yesterday contained help to small businesses and families, two sectors particularly hurt in the current recession.
Mr. Lamont said that his budget was "good for business, good for families, good for 'community' charge payers and good for the country."
He said it was aimed at bringing the rate of inflation, currently at 9.3 percent annually, down to 4 percent at the end of the year, while increasing industrial output by 2 percent in
the final quarter of the next fiscal year and then 3 percent thereafter.
Engineering trade union leader Bill Jordan dismissed the budget as "a catalog of trivia." He said: "There is no response to helping the nation in a crisis. . . . We are seeing a massive response to helping the Conservative government in a crisis."
Alex Carlile of the Liberal Democrats said: "The poll tax was unfair to some people. The increase in VAT is going to be unfair to everyone.
"This is replacement of the poll tax with something even more unfair, particularly to the poorer in our society."