England & Wales

Local democracy and local growth


I spent yesterday at an interesting conference on local economic growth organised by Westminster City Council.  One of the key themes was the retention of business rates. Unsurprisingly, given the make up of the event there was a consensus that the current system of rates redistribution failed to incentivise councils to invest properly in business as they do not benefit from increased tax yields. Speaker after speaker emphasised the link between greater financial autonomy for councils and improved local growth. That’s a position the LGIU agrees with. We’ve often argued that councils need to have more freedom to raise and spend money locally and a forthcoming publication  with Westminster CC examines how social impact bonds, payment by results and employment bonuses can drive service innovation and help boost the local economy.

Of course there’s also a general recognition that such freedom needs to co-exist with a degree of redistribution and it’s here that things get difficult: everyone had different views on how this balance should be achieved and on what the most effective mechanism for determining an individual council’s allowance should be.

The government’s resource review will be announcing proposals in the summer and we expect to see a much greater degree of rate retention (described by Bob Kerslake yesterday as the “biggest  game changer) combined  with a degree of redistribution in a yet to be conformed system (possibly regional).

This raises some intriguing prospects such as tax competition between authorities in a manner reminiscent of the US.

What really interested me, however, was the link that participants made between local financial autonomy and local democracy. There was a strong sense that if we really want people to engage with decision making  – as we and other localists argue is essential – then they need to see that these decisions are meaningful and consequential. I’m not sure that money is the only marker of that consequentiality but it’s certainly a significant one. As someone said yesterday (and I’m afraid I didn’t note who so I can’t credit the line) it’s a key difference between local administration and local government.