22 May 2009
By David Williams
A Commons committee has called for a local income tax after finding that councils have too little financial and political autonomy.
Balance of power: central and local government, published by the communities and local government select committee on May 20, suggested widespread reforms. It said that, although the trend since the Second World War has been to centralise, communities could be better served by more powerful councils.
The reforms would lay the groundwork for a reinvigorated local democracy, which would have knock-on benefits for national politics, the report said.
The MPs recommended giving local authorities control of policing and health care and ending capping. They also proposed giving councils direct control over at least 50% of their budgets – currently they depend on central government for 75% of their funding.
The committee suggested an overhaul of council funding, with a local income tax to run alongside the existing council tax, coupled with a proportionate reduction in centrally levied income tax.
Business rates should also be set locally, the report said – the commercial property tax has been calculated centrally since 1991.
The MPs want constitutional changes to make the reforms permanent, calling for the European Charter on Local Self-Government to be enshrined in law.
Committee chair Phyllis Starkey said: ‘We are still a long way from an equitable and healthy balance of power. Central government must take radical steps to tilt the balance of power towards localities, and local government must become more ambitious.’
Local government minister John Healey said the government had no plans to reform council tax or business rates and ‘unprecedented steps’ had already been taken to empower councils, such as three-year funding settlements.
Local Area Agreements allowed councils to work closely with health and police authorities, he added, and the city-region pilots introduced in last month’s Budget enabled governance to transcend council borders.
‘In addition, the government has put councils at the heart of its downturn efforts by prioritising worklessness and asking them to deliver the £1bn job creation fund,’ he said.
Margaret Eaton, chair of the Local Government Association, said the principle of increased localism was a ‘ringing endorsement’ of everything councils had been arguing for for years.
‘While we do not agree with every detailed recommendation in the report, decisions taken by councillors will be better because they are more likely to understand people’s needs,’ she said.
