saw another call for debt caps on council borrowing to be removed,
this time from the London Finance
Commission, established last year by Boris Johnson to look
independently at the financing of London government and make
recommendations for its future. It comes among recommendations for
extensive reform of London government finance and taxation
including full control of council tax and non-domestic rates.
Chaired by the doyen of local government finance experts, Tony Travers of the London
School of Economics, the Commission found a "clear and unanimous"
message from a wide range of sources that London's government
"needs to be given more freedom to determine and use the resources
raised from taxpayers".
To realise its full potential, the city needs to plan for a
population likely to grow to 10 million by 2030 and needing new
railways, schools, homes, waste facilities and streets. Relying for
separate decisions on these from a multitude of Whitehall
departments each with its own agenda will hold back economic
growth. Compared with other major cities, says the Commission,
London is an extreme outlier in retaining only 7 per cent of the
all the tax paid by London residents and businesses. The equivalent
figure for New York is over half.
As the Commission acknowledges, a similar case could be made for
financial reform in the other city-regions of England. These
arguments are not new: local government finance reform has been on
the political agenda almost continuously since the 1980s, when
abolition of the rating system led to the poll tax for households
alongside the nationalisation of control over business rates.
The poll tax was
soon replaced but business taxation has never been returned to
local control. A commitment to look at the issue appeared in Labour's 1997 election
manifesto, leading eventually to the establishment of the Lyons Inquiry into the future of local
government, which in 2007 made some fairly modest recommendations
for devolution for local taxation powers, with no result.
Opposition parties lost no time in denouncing what they saw as
Labour's ingrained centralism, with the Liberal Democrats calling
for a Local Income Tax and prominent Conservatives supporting
relocalisation of business rates.
Cynics use local government finance to illustrate their conviction
that all parties are localist in opposition and centralising once
elected to government. Despite campaigning on a localist ticket and
even passing a Localism Act, the Coalition partners have so far
used the overriding priority of reducing the deficit to reject
relaxation of council debt caps, and will most likely reject the
London Finance Commission's recommendations on the same grounds.
But there is one new issue that they might want to think about
The big news story this week was not the London Finance Commission
but the prospect of a referendum on EU
membership. Subsidiarity is an unwieldy word invented by the EU to
describe the important principle that powers to decide and act
should be devolved to the lowest appropriate level - which is
precisely the basis on which prominent members of the government
are arguing for the devolution of powers from Europe back to the UK
To invoke the principle in relation to EU/UK relations but ignore
or deny its force in relation to central/local government relations
could easily be construed as hypocrisy. In the brief period when
David Miliband was Labour's Cabinet member responsible for the
issue, he proposed a deal to local government - a "double
devolution" in which powers would be devolved to councils if and
only if councils themselves were willing to devolve more power and
involvement to local people and communities.
It was a deal councils were bound to accept to avoid looking as
though their only ambition was grabbing more power for themselves.
How ironic it would be if the EU's response to Britain's bid to
renegotiate the treaty were the same - devolution of power and
freedom to the British Parliament only along with more power and
freedom for Britain's cities and councils.