Let councils keep half of local tax take, former minister suggests

30 Sep 14
Former local government minister Bob Neill has said the government should set a target for half of the total tax take in England to be devolved to councils and combined authorities.

By Richard Johnstone in Birmingham | 30 September 2014

Former local government minister Bob Neill has said the government should set a target for half of the total tax take in England to be devolved to councils and combined authorities.

Speaking at a CIPFA fringe event at the Conservative party conference Neill, who was a minister in the Department for Communities and Local Government for two years until September 2012 and is now the party’s vice-chair for local government, said fiscal devolution was ‘a massive bit of unfinished business’.

‘What we need in the next term of I hope a Conservative government is to finish the job, and that means a major shift of financial powers to local authorities,’ Neill told delegates.

‘Isn’t it about time that we set as an objective that central government will take no more than 50% of total public spend. The rest should be devolved.'

Neill, who stated that he was not speaking on behalf of the party, said among the taxes devolved should be full retention of business rates, up from the current system where half of the growth is retained by town halls.

‘Eric [Pickles, local government secretary] has spoken very bravely about 80% in the next parliament – I’d like to go further and make it 100%,' he said.

'And shouldn't we be looking at the raft of other property taxation that very often will be better and more efficiently run at a local level.’

Neill highlighted that the formation of combined authorities in city regions in England was creating ‘serious and powerful models where people can take major decisions’, and called for similar models to be encouraged in counties for further devolution.

‘That means, it seems to me, that central government will no longer work on the assumption that we provide all of this through a block grant – we no longer suck up vast amounts of tax and then redistribute through a massively inefficient [system].’

A shift of powers away from the centre will mean that local authorities will have to take on greater financial and political risk, Neill said, but this was ‘legitimate’ in the role of local government.

‘It also means that they will have to be prepared to play much more for the long term and shape their own destinies. I think that is a pretty radical agenda, but it’s a worthwhile agenda.

‘You move local authorities away from being obsessed with day-to-day service provision into being commissioners and are able then to develop Community Budgets in a meaningful sense. That’s been a little bit too stillborn in my book compared to where we should have been on that,' he added.

Also speaking at the event was CIPFA chief executive Rob Whiteman. He highlighted that the fiscal consolidation needed to close the deficit was only between 40%-50% complete.

‘I would argue that without some major surgery in the way that money is controlled by central government and without devolution, some of the fiscal issues may be impossible to deal with,’ he told delegates.

‘If we stay in our present settlement, I think that the position for English local government in terms of its fiscal position would be pretty bleak.’

He added that an issue that needed to be examined ahead of any localisation was how to balance decentralisation of funding with the needs of local areas.

‘What does a proper system of distribution look like where you’re not sucking up all money in central government and redistributing it,’ Whiteman asked.

‘I’m actually with Bob. I think it stands in the way of localism [currently], but government is going to have to be clear, transparent and fair in how it does spend its money.’


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