More freedom urged over councils’ finances

15 May 19

A reconfigured relationship between central and local government is needed to prevent Britain “sleepwalking into a second lost decade”, a think-tank has said.

The government should relax rules on council tax rates and allow councils full retention of business rates, according to a report from Localis.

While business rates retention is a “positive step towards decentralisation” it is still not enough to overcome pressure of rising demand and fewer resources, today’s report said.

Currently, the government plans to increase councils’ business rates retention from 50% to 75% by 2020-21 as a means of income, but the think tank suggested councils should keep all the money from business rates.

The other way authorities can raise funds is through council tax, and in order to raise this tax by more than 2.99% year on year, a local referendum must be held on this decision. Localis recommended scrapping this requirement in its Hitting Reset report.

Localis also recommended that in the wake of Brexit the government should establish a British Investment Bank, through which Local Enterprise Partnerships and local authorities can apply for major infrastructure loans. The report suggested that this “has the potential to be far more valuable than a Shared Prosperity Fund that simply swaps Brussels for Whitehall”.

The government committed to producing a UK Shared Prosperity Fund to replace EU funding to communities, but it has yet to publish details of the scheme.

Jonathan Werran, Localis chief executive, said: “The country is sleepwalking into a second lost decade by default. Unless we reconfigure our political economy to give our localities the resources, powers and funding required to achieve their full potential, the last three years of Brexit water torture will have been in vain.”

He argues that the last ten years have been defined by “stagnating growth, flatlining wages and dwindling standards of living”.

The report called for the government to set up a Royal Commission as the first step to providing long-term surety of resources, empowering the local state to drive economic and social reforms.

Paul Dossett, head of local government at Grant Thornton, called for a new relationship where councils can “own their own future”.

“Accountability and responsibility for local services needs to ultimately rest with town halls but, for this to be possible, we need to create a culture where local government is trusted to act in the interests of its residents and businesses and own its risk appetite.”

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