Britain is the most centralised country in the Western world. Of the money spent by our local councils, 75 per cent comes from the Treasury. Of all the countries in Europe, only Ireland, with 1/25th of the UK’s population, gives less financial autonomy to its local authorities. This has many deleterious consequences. It allows profligate councils to escape the consequences of their actions. Indeed, it actively rewards inefficiency, since the worse a council performs, the higher its grant becomes. Because no one is exactly clear on who is meant to pay for what, local elections become a farce, with each party claiming that someone else is responsible for the tax rise (no one, of course, has an incentive to cut taxes). Voters have understandably switched off: turnout over the past decade has ranged from 27 to 35 per cent. Meanwhile, good candidates are deterred from standing or, if they do stand, often leave in frustration after a single term.
We want to create a genuine link between taxation, representation and expenditure at local level
We want to create a genuine link between taxation, representation and expenditure at local level. Allowing for a top-up to deprived areas, towns and counties should become self-financing. This might happen through a variety of methods, but one which we feel recommends itself is replacing VAT with a Local Sales Tax (LST), to be set by counties or metropolitan authorities. LST has several advantages over the main alternatives.
1: Everyone would pay. The current system of rates falls disproportionately on non-working homeowners, notably pensioners. A local income tax would penalise people with jobs. Under either system, a large number of residents have an incentive to vote for higher spending knowing that they will be exempt from the consequential tax rises. LST, however, would closely correlate the tax base to the electorate: we would all pay to the extent that we all buy things.
Click to enlarge 2: It would visibly replace an existing levy. By happy coincidence, the amount of money raised for the Treasury by VAT (£64 billion) happens to be almost identical to the grant given by Whitehall to town halls (£66 billion). LST would therefore not simply be an additional impost; it would allow for the scrapping of a complex and unpopular tax.
3: It would encourage tax competition. Local authorities would have an incentive to lower their rates so as to attract custom and thus boost their revenues. This, combined with the fact that almost everyone would be affected, would lead to something hitherto unknown in the United Kingdom: downward pressure on taxes.
Fiscal autonomy is only a beginning. Local councils should also be given genuine power over issues of essentially local consequence. This is not the place to make a definitive list of the powers that ought to devolve to town halls but, as a rough guide, English local authorities should assume control over the fields of policy devolved to the Holyrood Parliament in 1997.
Of immense concern to most voters, albeit understandably ignored by national media, are what one might call local quality-of-life issues: the siting of mobile phone masts, the building of incinerators, the crowding together of new houses.
Being necessarily local issues, they tend to be missed by commentators during general election campaigns. Yet they leave people feeling outraged, not only because of the immediate impact on their communities, but because of their sense of powerlessness. It is bad enough that someone should want to build a tower block at the end of your road, but it is maddening to be told that his authority has come from John Prescott, on the advice of a local Regional Authority, and that, however you vote, you cannot influence the outcome. Planning decisions – except in the case of projects of strategic national importance, such as major airports – should be transferred to local authorities. Similarly, large elements of social security could be decentralised.
Such a reform would quickly have an impact on voters’ attitudes. We would take a very different view of, for example, a neighbour whom we knew to be claiming disability allowance while working on the black market if we could see a direct connection between his behaviour and our local tax bill.
It is striking that many of the policies taken up by the current Washington administration, from workfare to “three-strikes-and-you’re-out”, were trialled at state level. Pluralism allows governments to copy what works best. It was once so in Britain. We should not forget that the Thatcher government’s single most popular reform – council house sales – was pioneered in the 1970s by Tory councillors.
A revival of local democracy in Britain will encourage responsibility in councils and in their electorates, attract a higher calibre of politician and restore a sense of civic pride to our local communities.Localism