England & Wales, Global Finance

New radicals

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This is the fifth consecutive year that LGiU and The MJ have collaborated on an annual survey of local government finance. Some clear messages have come across throughout that time: local government finance is not seen as fit for purpose, councils want more control over the levers of local economies and more power to raise and spend money locally.

This year, however, interest in, and coverage of, the survey went through the roof including The Sun, The Mirror and the Daily Mail. Why was this? The headline issue was that 90% of councils told us that they were planning on putting up council tax.

And of course it’s true that ordinary citizens will see their council tax rise, especially as virtually all upper-tier authorities are planning to use the extra 2% precept to fund adult social care. But the Government has kept council tax artificially low over the last few years through the freeze grant.

With this removed councils have little choice but to put it up. There’s a degree of sleight of hand here as a government that presents itself as low tax and that has indeed taken hundreds of thousands of people out of income tax has put local government in a position where it has to raise taxes in order to meet its obligation to provide vital statutory services.

Local government may resent the burden of taxation being passed on to its shoulders. Nonetheless, it may still be preferable that such decisions are made locally in a way that is directly accountable to local people and that admits (albeit in a limited way) of local variation.

This points towards what I think is the real story coming out of this survey.

The Government has announced radical intentions for the reform of local government finance. Year after year the sector has been telling us that the system is fundamentally flawed. This is vividly illustrated in the ways in which councils are cobbling together their finances using reserves and extra charging.

So radical change should be welcomed. And this survey reveals that in many ways government is on the right track. Six out of 10 councils are confident they can meet the Government’s aspiration for councils to be financially independent by 2020.

But, and it’s a big but, four out of 10 do not think this is feasible and even the 60% that do are not confident they can achieve it with the fiscal powers currently available from the Government.

Seven out of 10 councils felt the devolution package currently on offer from government wouldn’t, in and of itself, provide a meaningful redistribution of funding and spending power from central government to local government. They called for increased powers over charging and trading, freedom to undertake council tax rebanding and the ability to raise specific local taxes.

The clear message is this: you can’t be half a radical. If government is really serious about changing a system that everyone agrees is broken, they need to have courage in their convictions and commit to real localisation of local finances. It’s time to quite literally put their money where their mouth is.

Jonathan Carr-West is the Chief Executive of LGIU. This article was first published in The Municipal Journal.

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