23 January 2004
The government is 'seriously considering' proposals to hand control of the business rates back to town halls, and privately recognises that firms are not contributing their fair share of funding to local services, Public Finance has learned.
A source close to the Balance of Funding review has told PF that proposals put forward by local government leaders at the meeting on January 15 were received 'enthusiastically' by Nick Raynsford, the minister chairing the panel. These called for a return to local control and pointed out that businesses now contribute only 22% of authorities' budgets, down from 29% 12 years ago.
The source said that the minister had indicated his personal support for the proposals on business rates and, as a result, local government leaders were increasingly hopeful that publication of the panel's findings in July could presage their return to local control.
'The Local Government Association's proposals on business rates are sounding a chord with Nick Raynsford and have forced the CBI on to the defensive,' the source added.
The news came as Labour Party heavyweights weighed into the debate over relations between central and local government, calling for a 'radical resettlement' to be the centrepiece of a third term in government.
Former health secretary Alan Milburn used a speech to think-tank Demos on January 21 to sketch out the terrain on which he expects the next general election will be fought. He proposed a range of sweeping changes that would constitute a 'transformation, not consolidation' of the current local governance system.
Milburn's comments came the day before fellow Blairite and former Cabinet minister Stephen Byers was due to tell a conference in London that council tax should be abolished and the proportion of funding raised by authorities doubled to 50%.
Briefings, given before Byers cancelled his appearance because of family illness, indicated that he would use his speech to call for town halls to be freed from Whitehall control, under Labour's 'new localist' agenda.
His call echoed Milburn's, who urged the government to use the current Balance of Funding review as a springboard for an overhaul of the 'creaking' system of local government funding.
'It is a recipe for confusion and is crying out for reform,' Milburn said. 'Whatever the outcome of the government's review of the current council tax system, the transition must be towards more equality between local and national funding. We should examine whether over time a 50/50 overall split is feasible.'
This would mean giving councils the freedom to raise more income locally, he said, starting with 'small taxes and charges, balanced by popular permission being sought through local referenda'.
Milburn called for an end to the centralised state and said devolution needed to go beyond the 'town hall door' to include local communities and individual service users.
He argued that directly elected neighbourhood councils, with a limited precepting power, should be set up to tackle 'local quality-of-life issues'.
Milburn also backed moves to reduce the plethora of inspection bodies regulating local authorities, revealing his support for a super-regulator. 'Our ambition should be a single national body reporting to Parliament, perhaps merging the Audit Commission and the National Audit Office, under which a slimmer tier of specialist inspectorates would operate.'
PFjan2004
