The independent commission on local government finance has proposed a radical programme of English devolution, arguing that local government in England is no longer sustainable in its present form.
The commission’s final report, which I helped draft, seeks to capitalise on the momentum towards devolution created by the Smith Commission proposals for Scotland, the powers negotiated with the government by the Greater Manchester Combined Authority, and the backing for devolution to local government from the leaders of all three main political parties. As prime minister David Cameron has said: “The debate now is about how far and fast it can go.”
Despite its radicalism, the commission’s report is a practical programme for reform in the next parliament, not a wish list. It shows how empowering local government would help ministers achieve national goals such as building more social housing, intervening early in troubled families and matching skills to the needs of businesses.
It also tempts the parties with a way to break the paralysis around reform of local government taxation by devolving property revaluation and the setting of council tax bands, as well as with the long-term prospect of extricating themselves from the detail of funding allocations to individual councils.
The most controversial recommendations revolve around what the commission sees as local government’s potential for self-sufficiency, and a way to end the dependency culture around central government funding. This would not mean the end of government grant, but it would mean total control over directly-raised revenues, keeping all business rates within local government instead of some going to the Treasury.
Pioneer areas – such as a combined authority around a city – would take responsibility for managing grant distribution within their areas. In time, government’s role would be reduced to managing redistribution between such sub-national areas.
The current local government funding system will not withstand another five years of cuts; more than half of local auditors for metropolitan and unitary councils have already questioned their ability to cope. The commission offers an alternative – local government with the powers and resilience to thrive in an era of austerity.
The report’s main suggestions for reform:
- An independent body to review what local government does and how well it will be able to meet its key responsibilities, including those on adult social care, in advance of the next spending review. It will also advise central government on funding for local government
- Freedom to set council tax and council tax discounts and the retention of 100% of business rates and business rate growth
- Multi-year settlements
- The ability to raise additional revenue through relaxation of the rules on fees and charges
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