Effects
After the Community Charge was announced, support for the governing Conservatives in the opinion polls reduced, and the Labour opposition benefited from it by gaining a strong lead in the opinion polls. After the Poll Tax Riots, Conservative ministers contemplated abolition of the tax but knew that, as a flagship Thatcherite policy, its abolition would not be possible while Thatcher was still Prime Minister. Kinnock had vowed to abolish the Community Charge if he won the next general election.
For this, among other reasons, Thatcher was challenged by Michael Heseltine for the Conservative leadership. Although she prevailed by a margin of fifty votes, she narrowly missed the threshold to avoid a second vote, and on 22 November 1990 she resigned. All three of the contenders to succeed her pledged to abandon the tax.
The successful candidate, John Major, appointed Heseltine to the post of Environment Secretary, responsible for replacing the Community Charge. In early 1991 the Chancellor of the Exchequer, Norman Lamont, announced a rise in Value Added Tax from 15% to 17.5% to pay for a £140 reduction in the tax. The abolition of the Community Charge was announced on 21 March 1991.
Councils were left with the task of pursuing large numbers of defaulters. There is also some evidence that the community charge had a lasting effect of people not registering themselves on the electoral register to evade collection attempts; that may have had an effect on the results of the 1992 general election, which ended in a fourth successive Conservative victory, despite most opinion polls in the run-up to the election suggesting it would result in a hung parliament or a narrow Labour majority.
By the time of the 1992 general election, legislation had been passed replacing Community Charge with the Council Tax from the start of the 1993/94 financial year. The VAT rate of 17.5% remained despite an earlier policy of charging a higher Community Charge.
Council Tax strongly resembled and resembles the rates system that the Community Charge had replaced. The main differences were at the tax's inception that properties were placed in bands thereby capping the maximum amount, and it was levied on capital value rather than notional rental value of a property. Households with only one occupant were also entitled to a 25% discount. The only substantial change since the introduction of the Council Tax form of direct taxation is the gradual introduction of certain exemptions and discounts.
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