By Richard Johnstone | 14 March 2014
The government has been urged to use next week’s Budget to scrap the cap on council tax increases that can be made without holding a local referendum.
In its Budget submission today, CentreForum, the liberal think-tank, said requirements for councils to hold local referendums if they propose an increase above 2% weakened the link between local finance and local democracy.
Its proposals also called for the introduction of a ‘clear delineation’ between national and local responsibilities, as well as an end to the government’s council tax freeze grant. This had simply transferred the cost of providing local services from council tax to national taxes, the think-tank said.
As part of the local government finance settlement for 2014/15, the Department for Communities and Local Government confirmed that authorities that propose an increase above 2% in council tax would need to hold a local vote.
However, CentreForum said this effectively increased town halls’ dependency on Whitehall.
‘Local government should be solely responsible for raising the revenue to finance local competencies, and should be free to decide how and whether to deliver these,’ its submission stated.
‘In the short term, government should commit from 2015 to abandoning the annual offer of council tax freeze grant and the imposition of referendum requirements. In the long term, local government should be given the resources and the freedom to raise what it needs, how it needs. Local electorates remain the best mechanism for keeping local government in check.’
CentreForum also called on ministers to begin to reduce the statutory duties on local authorities by setting out in law where national and local competencies lie, with the former fully funded by government and the latter paid for through local taxation.
This should be accompanied by greater devolution of funding, with a proportion of income tax hypothecated to fund local government. After this was introduced, councils could then vary the local share, within bands set by the Treasury. There should also be greater freedom for councils to experiment with new ways of raising revenue.
The submission also reiterated the think-tank’s call for the current separate National Insurance regime for the self-employed to be scrapped, which it said would give self-employed workers a tax break.