It’s a fiscal drag

By Jonathan Werran | 15 October 2019
  • Jonathan Werran

The current state of local government finance is indefensible. It is also clear by now that no number of unarguably logical, strongly-evidenced cases for reforming the perversities of our centralised system of Byzantine complexity will ever burst the Westminster bunker.

As part of Localis’s further investigation of our ‘Hitting Reset’ agenda for reform of central-local relations for the purpose of building up a strong local state, we last week convened a group of local and national politicians, policy-makers commentators and academics to plumb the current climate for fiscal devolution.

If the justice of the economic case for reform won’t be listened to, attempts at change must be directed at senior political level and targeted to the psychology of national leadership.

For David Miliband, spurning the advice of Sir Michael Lyons for finance reform was avowedly the easiest political decision he ever had to make as communities secretary.

A decade later, as chief secretary to the Treasury, Rishi Sunak – despite the plaudits won for understanding the brief at the Ministry of Housing, Communities and Local Government – is adamant there will be no dice on revaluing council tax bands.

Why would anyone create more losers ahead of a General Election?

It’s a similar story with business rates – the other wing of local government revenue – for which Mr Sunak certainly does have an appetite for revaluation. It is equally bust. Even if legislation could be enacted for full devolution, we’d have to ask to what end for what has become, after three decades, and like council tax – a regressive levy detached from purpose and steadily failing even in its core function as a revenue-generating exercise.

Persuading Whitehall to yield to a tourism tax, something many of us experience when travelling abroad, will require sector unanimity. Any noises off will give the centre all the excuses in the world to cry this off as territory that shouldn’t be ventured into.

In this and other such examples, the ‘wicked problem’ as Whitehall parlance has it, might be the gap between what would be rather neat revenue-raising exercises at the scale of mayoral combined authorities and the fundamental realities of a local government finance system. Something has to give. From a localist perspective, there is a train of thought that says when talking about localising taxes, we should be thinking of doing so as solutions for different areas.

Local government has only a limited amount of political capital in this game, and should be careful on what it chooses to spend it on.

Ministers will always shudder at the prospects of fiscal reform. Devolved funding is presumably spending which cannot be boasted of at the Commons despatch box.

If you want to destroy a localist idea, it is often enough to simply declare ‘postcode lottery’ and almost invariably, hope for the best.

The answer to this must lie then, in restoring a strong sense of local leadership vested with the right powers. And promoting leaders who are accountable, recognisable and able to take the blame and brickbats as much as the praise. For with fiscal powers must come responsibility for delivering on outcomes, better local public services and improved sense of place.

Jonathan Werran is chief executive of Localis

What does our sector want?

Let's back the tourist tax

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