Local Government finance is still big news – though you might not realise that from the main-stream media. It’s a subject of huge significance for all of us, and for the services on which we rely.
Sir Merrick Cockell, Chairman of the Local Government Association (LGA), which represents more than 400 councils, and a leading Tory, warned: “Local government has taken the deepest cuts in the public sector and despite councils best efforts everyday services are starting to suffer.
“We are only halfway through a 43% cut in council’s central funding and the impact on services is only going to get more severe over the next few years.”
“Unless local government funding is put on a sustainable footing services like road maintenance, leisure facilities and business support projects are going to suffer enormously and some services are likely to be wound down entirely by the end of the decade.”
Watch out for your meals on wheels, street cleaning – and expect more potholes!
In these circumstances, it’s scarcely surprising that the Core Cities – including Leeds – have begun to think radically about local government finance – especially in calls for devolution.
But these calls are not just motivated by a desire to protect services. They’re a very positive demand for the powers which will unlock real and sustained economic growth.
Scotland and Wales have far greater devolution than English cities – and devolution is a key to economic growth and jobs, putting cash and power in the hands of those who really understand local needs.
A couple of weeks ago the Core cities joined with London in an historic move, to call for greater financial freedoms. With London on board, these cities account for over half England’s economy and around half its population.
This cross-party initiative is the latest in a series of calls for more substantial devolution. In particular, it follows the publication in May this year of Professor Tony Travers’ London Finance Commission report, ‘Raising the Capital’, which recommended a comprehensive package of measures to give Londoners a more direct say over a greater proportion of taxes raised in their city. The report outlined the benefits for London of devolving financial and fiscal control rather than relying on the current formula of majority Government grant. It also found that this was a formula would not just support the growth of London but other large cities.
So what would this financial devolution mean?
Basically the aim is the devolution of property tax revenues streams – including council tax, stamp duty, land tax and business rates.
It would include the power to reform those taxes, while retaining prudential rules for borrowing, similar to recent changes in Scotland.
There would be no extra or new costs.
But what the changes would provide is the stable and continuous funding councils need in order to stimulate economic growth according to local needs. It would be a move away from ad hoc financing for specific projects, allowing cities to raise sustained investment for vital infrastructure such as transport, schools, housing, energy supply and technology.
The key principles of this ‘City Centred’ campaign include:
– Cities need freedom to invest to drive the national economy – together London and the Core Cities equal more than half the English economy and half its population, whilst cities internationally are on the rise. Existing centralised funding models are ineffective in supplying the investment cities need to maximise their growth potential;
– Empowered cities can be more competitive and can be incentivised to grow faster – England is one of the most centralised states in the world and its cities need more freedom to develop a competitive environment and create jobs. In most developed countries, top cities usually outperform the national economic average, yet in the UK only London consistently does so, which suggests that the Core Cities’ potential remains unexploited. If their economies were unlocked just to meet the national average, it could equal at least £1.3 billion additional growth into the national economy
– Local leadership delivers better results – currently around 95 per cent of all taxes raised in a city go directly back to government coffers, with money coming back with strings attached. Greater control for cities of taxes raised locally would deliver more power to join up public services and plan for future needs, as city governments are best placed to create jobs and free up spending.
We don’t often find ourselves quoting Boris Johnson, but on this occasion he’s right – and we’re happy to acknowledge that.
‘That London’s government is joining with England’s largest cities to call for change is an historic and significant move. It’s a partial but positive and practical answer to the conundrum about English devolution and I believe it is good not just for the cities involved but for the country at large.’
Sir Richard Leese, Chair of the Core Cities cabinet and leader of Manchester City Council, said:
‘The launch of this joint campaign is an important moment. Our message is simple: free our cities from central control so they can create more jobs and economic growth, reduce dependency and improve lives.
‘England’s great cities have a proud tradition of independence and ambition. Yet our ability to act on that ambition has been eroded as central state control of our finances has increased year on year.
‘Together the Core Cities and London represent more than half of the national economy and almost half the population. But we only directly control around five per cent of the taxes raised within our cities, and such funds as are returned by the government come back with strings attached. This means less local decision-making, missed opportunities, wasted time and money and less competitive cities.
‘Both the Core Cities and London could create more growth if we were not hampered by an almost complete lack of control over finances.’
We’ve said it about planning, and we repeat it about finance – what we need is true localism – to return power to us, but also to unlock the potential of great cities like Leeds.