Government must tackle the ‘English Question’ and devolve financial powers

09 July 2014

With the Government eagerly handing greater economic freedom to Scotland and Wales, the Communities and Local Government (CLG) Committee has urged Ministers and general election manifesto writers to show the same enthusiasm for devolution elsewhere in the UK—by allowing local communities in England to take greater control over how money is raised and spent in their areas.

In their new report, 'Devolution in England: the case for local government', the CLG Committee calls for the transfer of a range of tax raising powers to local authorities, including business rates, stamp duty, council tax and other smaller taxes and charges, along with greater flexibility to borrow for investment. Releasing groups of authorities in England—centred on large city and county regions—from the fiscal grip of Whitehall could, the Committee says, re-energise local democracy, boost England's economic performance and lead to more balanced growth across the country.

Comments from the Chair

Clive Betts MP, Chair of the Communities and Local Government Committee, said:

The Government should work with groups of local authorities, focused initially on England’s large cities, to break the log-jam stopping local areas from shaping their economic destiny. The public might well ask, when Scotland and Wales are being promised ever greater fiscal devolution, why not England? Devolving these powers is the next step on the path to genuine localism.

He added:

If the citizens of New York, Frankfurt and Tokyo can be trusted with tax-raising powers, why not the people of London, Greater Manchester or the north-east? Local areas know best how to stimulate their economies. With a wider range of revenue streams at their disposal, they would be able to invest in infrastructure and projects that mattered locally—without having to rely on or wait for handouts from central Government. Local people would then reap the rewards through increased tax take, which could be reinvested in their areas. In the same vein, if local politicians failed to deliver, they wouldn’t be able to hide behind Whitehall and Eric Pickles.

Despite gaining some responsibilities for spending through City Deals and limited control over business rates, England’s local authorities still have much less power than the Scottish Parliament and Welsh Assembly Government. The Committee therefore suggests the Government should develop a framework for devolution. With a cautious Treasury to consider, significant fiscal powers may go to only a few areas to begin with. But the rest of local government should not be left behind. The Committee argues that all local authorities in England should gain decentralised powers over spending and public services, and existing combined authorities should be able to take on a greater range of planning, housing and regeneration powers.

The Committee is clear that authorities taking on significant devolution will need to cover recognisable economic areas. No single governance model is recommended, but authorities should be transparent and publicly accountable. They should also be able to demonstrate fiscal competence and have clear and costed plans in place for their enhanced powers.

Clive Betts MP, Chair of the Communities and Local Government Committee, said:

Fiscal devolution in England is an idea whose moment has arrived. The starting point was the London Finance Commission (LFC) 2013 report, backed by the support of the 8 Core Cities. Now the Chancellor is arguing forcefully about the need to decentralise power to boost economic growth, while Lord Adonis’ review makes a powerful case for the devolution of more powers to local government. The time has come for Government to join with local authorities to push this agenda forward. Together they should work to establish a devolutionary framework which, while addressing need, offers clear incentives and benefits to authorities that take more control of tax and spending.

Further Information

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