COLUMN ONE : Taxes and Turmoil in Britain : Why a new levy sparked riots in London and is being called Margaret Thatcher’s Titanic.

LONDON —  The meeting of Prime Minister Margaret Thatcher’s Cabinet on Jan. 9, 1986, has been called one of the most dramatic in British history.

Defense Secretary Michael Heseltine, undercut by his boss in his plan to save the ailing Westland helicopter firm, scooped up his papers and stormed out. A few hours later he resigned, triggering one of the most serious political crises of Thatcher’s long career.

Few recall that the next item on the Cabinet agenda that day was a proposal, warmly embraced by the prime minister, to change the way British citizens pay for such local services as schools, libraries, street lighting and garbage collection.

Now, four years later, the decision to levy a “poll tax” to pay for those services is causing far more turmoil than the Westland affair.

On Friday, the Gallup Poll indicated that Thatcher’s popularity had fallen to the lowest level Gallup has ever recorded for a British prime minister. It found her Conservative Party trailing its archrival, Labor, by 24.5%.

The main reason for this slide, according to 96% of those questioned, is the so-called poll tax.

With a 98-seat majority in Parliament and two years to go before there must be a general election, it would be as mistaken to write Thatcher off as it would be to regard as typical of her opposition the rioters who ransacked central London last weekend in an anti-poll tax demonstration.

But political opponents of every stripe see the tax as a possibly crippling government error, and they are preparing to take advantage of the situation.

“More than at any time since Mrs. Thatcher took office in 1979 (the Conservative Party) has its back to the wall,” the strongly pro-government Daily Telegraph commented Friday.

Robert Worcester, head of the MORI polling organization, observed: “The Conservative Party is seen as divided, with an unpopular leader and unpopular policies, and people are worn out with them. The poll tax is really a symbol--of Thatcher not listening, not understanding, not trying to understand how ordinary people react.”

As people in England and Wales began receiving poll tax assessment notices in the mail this week, a common response was that “it’s just not fair.”

In Scotland, the system went into effect last year, and about a third of the tax bills have gone unpaid there.

David Griffiths, vice chairman of a fast-growing group that calls itself the Anti-Poll Tax Federation, said: “It robs the poorest people for the benefit of the richest. The vast majority of people feel a terrible injustice is being done to them.”

Ironically, one of the arguments in favor of abandoning the old property tax system was that the new approach would be more equitable. Advocates of change argued that it was not right that a widow living alone in her own house had to pay as much in local property taxes as the household next door with five working adults. Some people paid nothing at all.

The answer was the poll tax--the “community charge,” it is called officially--which replaces the property tax with a flat levy on each of Britain’s 35 million or so adults.

The Conservatives were enthusiastic about the change because they saw political advantage in it. They thought that if voters were made to realize the cost of local services through a highly visible poll tax, as distinguished from the largely hidden property tax, they would reject Labor Party members of local councils and replace them with tight-fisted Conservatives.

There were a few naysayers. A Conservative reform group warned last summer that the change “has all the makings of a disaster.” And it went on to say: “The poll tax is fair only in the sense that the Black Death was fair. It is indiscriminate, striking at young and old, rich and poor, employed and unemployed alike.”

But the critics were overruled, even when they urged that the new system be introduced gradually, over a period of several years.

The tax bills going out now vary from place to place. Assessments range from the equivalent of about $250 an adult to $950, depending on the local government’s other sources of income--business taxes and central-government grants, for example--as well as the relative efficiency of the local council. The average assessment is about $575.

There are a handful of exemptions--foreign diplomats living here and members of some religious orders, for example, do not have to pay the tax. There is also a scale of percentage reductions for people living on reduced incomes, including pensioners, persons on welfare and students. Thus, nearly everyone has to pay something and most have to pay the full assessments for their areas.

“It’s not easy to be popular when you’re asking 17 million additional people to pay a tax,” a Thatcher confidant said, referring to the impact of the change.

But there is more to it than that. The government calculated that as many as 60% of all households would be better off under the poll tax. Significantly, that would include the majority of the homeowners, who make up a key Conservative constituency.

But someone’s arithmetic was faulty. According to a House of Commons study, 73% of the adults in England and Wales will be worse off under the new system. The study said fewer than 5 million households will gain under the plan against more than 14 million that will lose, despite a system of “safety net” rebates.

For small businessman Keith Packham, in suburban Wimbledon, the new system means that he and his wife owe the equivalent of nearly $1,200 in poll taxes, compared to the $825 they paid last year in property tax.

Part of the problem is that some local councils took advantage of the change to increase spending, knowing they could blame the inevitable result on the central government. But the central authorities were also at fault. In projecting local government costs, for example, they forecast inflation at 4% instead of the actual 8%.

As a result, the average poll tax is a third higher than it was projected to be.

Worst of all, many of Britain’s wealthiest citizens are getting the greatest benefit from the new tax system. For example, the head of the Conservative local council in the Westminster section of London will pay one of the lowest poll taxes in the country, the equivalent of about $300. This represents a savings of many thousands of dollars compared to what she paid in property taxes on her penthouse overlooking Hyde Park.

The injustice of it so bothered 72-year-old Sid Tierney, a retired shop steward in Coventry, near Birmingham, that even though he stands to benefit from the change he is campaigning against it.

“I feel we’re going back to the Dickens days,” Tierney said in an interview.

He said the system is hardest on young working-class families like that of his daughter and her husband.

“They’ve shifted the unfairness from one group of people to another group,” he said. “It’s so evil I’ve got to oppose it. And I’m not going to pay it.”

Tony Travers, director of research for the Greater London Group of the London School of Economics and a poll tax expert, said: “The fact is that the heaviest losers are those who live in small houses and flats. The old rates were levied based on the rental value of a property, so the bigger the house, the bigger the rates.”

The owner of a small flat in depressed northern England may have paid only $300 or so in property tax, but the poll tax for him and his wife could be triple that.

The government has tried in a number of ways to make the poll tax more palatable, in one instance putting a maximum on what certain local councils may charge.

Officials say there will have to be more changes in the system next year, but they still support the basic idea, and have announced that they will campaign for forthcoming local elections under the banner “Conservative Councils Cost You Less!”

“A desperate piece of cheek,” Daily Telegraph columnist Ferdinand Mount responded. “It cannot be emphasized too strongly that this is not simply an unpopular tax; it is a rotten piece of legislation, vilely expensive to administer and likely to clutter up the courts with non-payers in arrears for years to come.”

People who refuse to pay may see their wages attached and their personal goods confiscated. They may even be sent to jail for up to three months.

The issue promises to be a lightning rod for anti-Thatcher and anti-government sentiment later this month as the first poll tax installment payments come due and the boycott movement gets under way in earnest.

“It won’t be a deathblow with a sword,” anti-poll tax campaigner Griffiths said of the victory he expects to win. “It’ll be more like we suffocate it.”

But there will be no compromise, he pledged.

“We want (the tax) repealed, nothing less,” he said. “We want it off the books now. . . . We say that if she doesn’t withdraw the tax, this will be her Titanic. And we hope the captain will go down with the ship.”