COMMONS

Committee argues power and finance must go together if local government is to meet needs of local people

29 January 2013

In a report published today, the Political and Constitutional Reform Committee calls for more autonomy and fiscal powers for local government in England.

As part of its inquiry, the Committee produced its own code for relations between central and local government.  The code is published with the report.  The key principles of the code are that local government should be independent of central government, able to exercise a range of tax-raising powers suitable to the needs of the local community, and that government, of all levels, should be appropriately consultative and accountable to its people. 

The Committee believes that with further work such a code would be able to command widespread consensus and establish a settled constitutional role for local government.  The code is intended to replace the estimated 1,293 duties imposed on local government today.  The Committee wants the Government to use the code as the start of a national conversation. 

Conclusions

The Committee concludes:

  • The balance of power between central and local government is skewed in favour of the centre and needs to be addressed. Government should give local councils the ability better to shape their services to the needs of local people.
  • The devolution of power to Scotland, Wales, and Northern Ireland has been successful and is an evolving process. England is the odd one out. There is no apparent reason why local government in England is not capable of using similar powers.
  • Power and finance must go together if local government is to become an equal partner. Any attempt to make the relationship between central and local government more balanced would be meaningless without giving local government its own source of revenue.  To achieve fully the potential of localism, a key plank of the Government’s policy platform, local government requires financial freedoms. 
  • The Government should consider giving local authorities in England a share of the existing income tax take for England. The Committee does not propose a change in income tax rates.  The concept of tax transparency would allow local people to see more clearly what their taxes pay for locally and encourage them to hold local councils to account for their expenditure. 
  • The Government should consider how it can take its devolution of financial power further and free local councils in England to raise additional revenue, with the consent of their electorates. 
  • English local government lacks some of the most basic constitutional protections that are available to some of its counterparts in a number of other mature European democracies.
  • The Government should examine the possibilities of a stronger constitutional status for local government, through an entrenched statutory code, or a similar proposal.
  • A code for relations between central and local government, enforced by statute, could be beneficial to both tiers of government for several reasons. First, it could help set out exactly where powers do, and should, lie, thereby increasing transparency for the electors. Secondly, it could help redress the overcentralisation of England. Thirdly, it could provide an economic boost that the country sorely needs.

Comments from the Chair

Graham Allen MP, Chair of the Committee, said:

"Codifying the relationship between central and local government would pave the way for a radical new settlement for local government in England, freeing it from some 1,300 duties set by Whitehall, with which local councils are forced to comply. The Committee's draft code would clarify at what level of government power and accountability lie and provide a framework within which local councils would have the freedom to meet local needs and priorities. The code would give local councils in England greater autonomy over their financial affairs, allowing them to plan long-term investment for their local communities and providing the spur to restart economic growth. The Government’s commitment to localism is laudable, and the city deals are a step in the right direction, but there is still much more we can do to set local government free.

In the long term, I would like to see English local government retain a sizeable part of the income tax take for England, and have the ability to implement other revenue-raising schemes, with local consent. This 'tax transparency' would allow the ordinary voter to see what their taxes were spent on, allowing them better to hold all levels of government to account. These measures could revitalise local democracy and kickstart the local economic growth that we so desperately need.

We are seeing the devolution settlements in Scotland, Wales and Northern Ireland evolve to include devolved powers of taxation.  Why should we in England be the only part of the Union yet to have a devolved settlement? Local government in England could be the perfect vehicle for English devolution, as it would involve no further layers of elected politicians, no more taxation, and councillors have close links to their local areas."

Further Information

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