Monday, 14 February 2011

Localism is about choice - and that means taxes

Cameron's Localism Lite™ has run into trouble long before I thought it would. His attempt to short-cut the necessary process, which must involve both the devolution of formal democratic structures to their lowest level and with them tax-levying powers, has left the initiative isolated and perceived as merely central government cutting local services. With the devolution of formal democratic structures to the level of the parish or ward, together with tax-setting powers for property taxes and the responsibility for environmental and cultural services, and together with the devolution of VAT receipts and VAT rate-setting to the level of the existing county or metropolitan borough with responsibility for schools, hospitals and libraries, the initiative could have been so different. It would be local electors, not central government, who make decisions on local services; it's one thing complaining about 'the government' shutting your town library, it's quite another to decide not to raise local VAT by 3% to pay to keep it open. 

For Localism to work, local people need to own tax and spend decisions. The devolution of real power also makes tax and spend on local services a matter for local parties, not Westminster. The news media will find little to report; "On the news tonight, Chillington Parish Council is raising parking charges by 60%" isn't going to make the ten o'clock bulletin. By the same token, there must be real financial incentive for local communities to take back the functions assumed by the central State - it's not enough to step into the breach to preserve local services in return for a vague thanks for keeping the Treasury's budgets in line, there must be a real, immediate and worthwhile financial return in terms of lower taxes locally. Or a willingness to pay higher taxes locally. 

All the fripperies of Localism - the Big Society Bank, the transition fund and all the rest - just won't work without a real devolution of democratic power and tax power. The reform of local government, the creation of a new tier of democratic structures at the level of the commune, may be a difficult and demanding change that will be hungry of resources, but without it Localism is going nowhere.       


English Pensioner said...

The EU opposes any such thing. Look at the trouble they're having with a little "localism" in Ireland, lower Company taxes which actually attract businesses to the country. Suppose, horror of horrors, that Cologne started competing with Berlin, or Lyons with Paris, where might it end up?
We can't even change VAT without EU approval, so localism can never come whilst we remain in the EU.

Weekend Yachtsman said...

"...local people need to own tax and spend decisions..."

Ah, but which local people? The ones who consume all the handouts and pay little or nothing? Or the minority who pay for everything but consume little or nothing?

If we're not careful, we end up with the apocryphal two wolves and a sheep voting on what to have for lunch.

Raedwald said...

Ah, WE, that's the beauty of variety. If the wolves set the local tax rate too high, the lamb simply moves to the low-tax neighbouring area, or shops there. The elementary economics lesson will soon be learned.

Anonymous said...

Why not just let local councils retain business rates as they used to. It would certainly concentrate the minds of councillors to keep their borough viable.

BigDai said...

Excellent appraisal of how badly executed this programme has been