England & Wales Democracy, devolution and governance, Finance

Government finance plans signal dedication to localism


This article was first published on the Guardian’s Local Government Network.

As I wrote in my predictions for 2012, councils will find themselves at the forefront of the charge towards recovery this year. Communities secretary Eric Pickles has a plan for this charge; by changing the way local business rates are distributed to incentivise local growth.

Reform here is much needed. Currently, all money collected is pooled together and then redistributed back out to councils. This is rather uninspiring for everyone involved.

Understandably, because of its unglamorous nature – and perhaps because it is a little confusing to journalists – local government financeisn’t an issue that gets the media buzzing, nor ministers hurrying to expend energy on it. Local government has seen suggestions for change come and go, but not make much impact on the ground.

So after decades of dither and delay, it’s quite exciting to see such ambitious plans put forward by Pickles. Giving locally elected representatives real powers and incentives to shape regional economies is a crucial step towards re-energising local democracy.

But speaking to authorities across the country, it’s clear that there are real anxieties about how the plans will play out over time. Will the proposals actually put more power in the hands of councils? Will top-ups retain their value over time? Will a permanent hierarchy between rich “tariff councils” and poorer “top-up councils” emerge?

Perhaps the biggest difficulty though is how hard it is to see far into the future; many councils I’ve spoken with have aired concerns over their medium-term financial strategies.

Under the new plans, a council would be able to borrow against their estimated increase in business rate, but what if that doesn’t come to pass and the town hall is left with massive loans to service? Will central government step in with money to save the day, as it did with Southern Cross?

What might all this mean for diversity in local economic development? Some councils may offer incentives to large supermarkets in attempt to certify long-term income. If they were to do so, how would this fit with retail guru Mary Portas’s vision of rejuvenating the high street – and would central government feel the need to interfere?

Some councils may even choose to make further cuts and play it safe by putting some extra cash into reserves as a rainy day fund.

Results may vary across the country, but that’s OK, providing councils have sufficient power to determine their own destinies. That’s why localists should welcome the ambition behind these plans. Economic localisation is the first step in a fundamental shift in the centre of political gravity, whereby the local becomes the first point of political and economic identification.