The coalition’s ‘Local Government Resource Review’ announced last autumn may have failed to send Twitter into meltdown or dominate national news agendas, but the current work of ministers and civil servants in Whitehall has the potential to radically transform the economic and democratic fortunes of towns and cities all over the country.
The anti-localism of the current local government finance system impedes economic growth, creating disincentives for councils to promote development. While the government has made a start at addressing this, Britain still operates one of the most centralised tax systems in the developed world.
Westminster’s 33,000 businesses, for example, pay more than £1 billion a year in rates but the council acts merely as the government’s tax collector. Along with more than 200 local authorities, we could be self-sufficient but the current system means we all have to join the queue for Treasury handouts, with the council’s services and the future of the heart of our capital in the hands of ministers and their number crunchers.
If councils were given a stake in the economic wellbeing of their area by retaining more business rates locally, they could then develop stronger links with business and promote distinctive programmes and initiatives to support local trade and encourage investment.
This is already the case in the US where states really value business investment and have the resources and the powers to offer targeted discounts that will support the development of stronger local economies. It is common, for instance, for start-ups in the US not to have to pay any local business tax for the first year – giving the entrepreneur a break when they need it most. We want to build on this experience.
Local government is best placed to know what local businesses need and more able to implement policies to provide practical support. Westminster’s business community might be best known for the big high street names of Oxford Street but in reality the local economy is made up a diverse range of small firms.
Businesses also don’t have a vote at the ballot box so they often get short shrift from their locally-elected representatives but private investment is essential for creating jobs and wealth and MPs and councillors should listen. Business leaders often complain that there’s plenty of taxation but very little representation.
But if done right, this change will not just replace one funding source with another; it will bring about a fundamental change in the way councils work. Suddenly investment in high speed broadband will be in the interests of local authorities in rural areas hoping to gain an edge over their rivals; businesses will have a stake in the local educational standards and work with private partners to tackle the tragic under-utilisation of talent caused by worklessness in our communities.
With these new responsibilities some authorities will excel and others will struggle but the vast majority of councillors are ready to stand up and be accountable for their decisions both to local residents and businesses. Those that fail to perform will be punished at the ballot box.
The reforms being considered by ministers could be truly transformational. For the first time local people would see the benefits of increased tourism in their area with positive knock-on effects for local employment and the wider economy.
Recycling money and making councils reliant on ministers is not an efficient way to support business in this country. Instead we need to unleash the latent entrepreneurial spirit in our communities by supporting private sector growth. Local authorities are ready to stand up on behalf of local enterprise. I hope ministers finally give us that chance.
Brian Connell is Cabinet member for business, enterprise and skills at Westminster Council
