How should we pay for local government? And could the revenue help fund some services that are under-funded by central government?
I’ve been picking up a number of very old books about all things local democracy from times gone by because the last time we had a major overhaul of local government – boundaries, funding, legal powers and statutory responsibilities, was over half a century ago. What’s frustrating is public debate is centred around whether council tax should rise or not. Or with transport, should fares rise and should congestion charging be brought in? By restricting themselves to those parameters, they’ve allowed the Conservative Party to decide the boundaries of what is and what is not acceptable in principle politically.
Above – Canadian Democracy in Action – from 1945, which stated that the greatest danger which faces democratic government was that peoples of those democracies may not understand their own institutions. We got an example of this at the recent state funeral of the late Queen Elizabeth II and the accession of her heir, now King Charles III. Locally in and around Cambridge we see this with the present Stagecoach furore – with few people having an understanding of which tiers of local government have what powers, and why Stagecoach can seemingly get away with taking such decisions.
Only ministers can make the case for this because they were the ones who implemented this structure, and if they don’t like it, then it’s up to them to undo it and come up with something better.
Paying for local government
The painful and gruelling battles between Rich and Poor, Tories and Radicals, Aristocrats and Democrats throughout the 1800s evolved into a system of property taxes that we are sort of familiar with today. It’s why you sometimes hear older generations grumble on about “The Rates” or “Rate Payers”. It’s another way of saying ‘council tax’ where the amount you pay was based on the value of your property. Successive governments in the UK have put the question of local government finance in the ‘too difficult’ box – hence hardly anyone understands local government finance and even fewer want to take on the long overdue task of overhauling it. As things stand for residents, the amount of council tax paid is a figure indexed to what the value of your house would have been in 1991. (Assuming it was around at the time).
What are the options? Or what were the options ***ages ago???***
Above – New Sources of Local Revenue by the old Royal Institute for Public Administration – founded after WWI and abolished by Thatcher and Major in the late 1980s/early 1990s. Because who needs to know about public administration eh? Today there is no big central provider – it’s a mix of private consultancies and university public policy schools. I’ll leave it to you to decide which models are the better ones.
Local income tax or local land value tax?
These were discussed more recently (in the grand scheme of things).
In 1967 Desmond Heap had a look at how a Land Value Tax might work. Caution. It is *not an easy read* and gets into some very archaic, legalise, and technical language in a number of places. But it deals with one question that came up in recent times here in Cambridge: taxing land value uplifts to pay for new infrastructure – i.e where a house rises in financial value because a new light rail line and station has been built near by.
Above – The Land Commission Act – not for the faint-hearted. But essential if you or your party are looking at a very different way of funding local public services.
A local income tax
This option was explored in further detail in the mid-1970s in the Layfield Report – digitised here. The main substance is in the first 120 pages or so, with much of the rest being transcripts of the evidence sessions.
The Institute for Fiscal Studies had a look in 1991 following the Poll Tax Riots (the Government called it the ‘Community Charge’ but because it involved ‘the Duke and the Dustman paying the same fee’, the name ‘Poll Tax’ stuck. The IFS compared the three – the Community Charge, Property Taxes, and a Local Income Tax. Click here and scroll to page 73 to see which one they went for and why.
The following year, the Joseph Rowntree Foundation published its assessment – digitised here.
What’s striking is that 30 years on, there has not been a serious attempt by ministers to reassess how local government should be funded. As a result, we are stuck with what was meant to be a temporary solution that is the Council Tax – where what you pay is based on the value of your property indexed to what it might have been worth back in the early 1990s. Successive governments have refrained from revaluing the properties – in part because they fear the backlash from asset rich, income poor home owners who would be hit by higher tax bills – the very cohort of the electorate most likely to vote.
The fragmentation of the public sector
Back in the olden days many of the services were provided for by a mysterious mix of public, private, and voluntary funding. Before the development of the welfare state there was a complex system of what were known as ‘friendly societies’ that were primarily a form of social insurance. You paid a subscription every week and you got a stamp to put on your card as a receipt to confirm the payment. If you got ill and had to go into hospital or take time off of work because of say a broken bone, the fund covered your medical expenses and your wage. The system of national insurance nominally replaced this. I say ‘nominally’ because the system ‘as is’ functions as an income tax, not as a contributory system where what you get after you retire is a function of what you paid in. Which is what (understandably) confuses a lot of people. But again no government has chosen to change the system.
Further education, higher education, lifelong learning – inside or outside local councils?
The announcement that the Cambridge College of Art and Technology – CCAT, becoming the Cambridge Campus of Anglia Polytechnic University, came as a bit of a shock locally. (This from the Cambridge Evening News in 1988 – 14 years later I joined as a post-graduate student).
I can’t say I’ve ever been happy with the name change from “Polytechnic” to Ruskin because although he opened the original institution in Cambridge in 1859, I feel that John Ruskin‘s local links are not that strong, and other places have stronger claims to his name. Furthermore the lack of decent transport links linking Cambridge and Chelmsford haven’t made things easy trying to manage two sites under one name far apart. Furthermore, when many of its courses transferred to Cambridge Regional College (which opened a new campus on King’s Hedge’s Road in the early 1990s), it didn’t get the support it needed from Central Government to cover the gaps that opened up between Cambridge’s changing economy and 18 years of austerity.
Above – the calendar for CCAT’s predecessor in 1954-55 before they renamed it. I wrote this blogpost about it. Locals from the time recall a wide variety of courses and a deep culture of day-release from employers to do bespoke industry courses there.
“How do you establish a unitary authority to cover all of this?”
Good question – one that has come up again following the Stagecoach Shambles (see the Mayor Nik Johnson’s latest statement here). Fortunately someone else has already written a book about establishing new local authorities. It was from half a century ago, but the principles are still there.
That’s not to say running a local council is easy. It isn’t. Those of you elected to local councils will know just how much time and effort (and expense!) is needed to do the job well.
Which also explains why the structures, systems, processes and cultures need to be overhauled, consolidated, and simplified so that those providing the public services are not overburdened, and so that the public are better able to follow what’s being done in their local communities. I was going to say ‘modernised’ as well, but that’s a loaded term that can mean anything anyone wants it to mean.
Taking advantage of technologies that previous generations did not have
This is one of the big things for me – certainly after I left the civil service and started scrutinising Cambridge’s local democracy functions in detail. I will always have more to learn – public service delivery is too great for one person to have an in-depth knowledge of everything. One big challenge is finding ways of reducing the amount of information overload so that people can find what they need and quickly. This might be using automation to flag up to interested persons when a decision is due to be made that will affect their community. CycleStreets is one crowd-sourced example. Having a single events portal for a defined geographical area and specific places is another – Events On The Wight is the best example I have seen that easily enables users to filter content to get to what they want, and event organisers to upload their own – without the commercial or corporate SPAM.
We’ve got much better with live-streaming meetings so that people can follow along online. Although numbers are inevitably low – single figures sometimes, for me the effort is worth it. For a start there is a permanent video record, and secondly it means that at least one person who would otherwise not be able to take part, was able to follow along. The ability to submit Qs remotely at area committee meetings also means a greater number of more targeted questions can be put to councillors to be followed-up. The challenge now is publicising and familiarising the public with them – which comes back to the events listings issues.
“What’s that got to do with local taxation?”
Having the revenue streams to do all of these things without ministers putting their feet down. Back to Stagecoach and buses again.
Cambridgeshire Labour Party (part of the Joint Administration at New Shire Hall) telling the Leader of the Conservative Opposition Cllr Steve Count that the Cambridgeshire and Peterborough Combined Authority was one of several that did not get funding from ministers regarding bus funding. If the devolution that ministers like to speak of actually meant what it said, it wouldn’t be a system where local areas have to apply to central government for funding, but one where either funding would automatically be devolved by a formula based on need, or where local areas would be given far wider powers to raise revenues themselves without the dead hand of the Treasury coming down on them. Because the current model alongside the massive growth in local council borrowing (to try and generate new revenues to pay for services where central government grants have been cut) is now coming unstuck – as Thurrock as found out, and as even more will do given today’s rise in UK Interest Rates – ones which are expected to rise further as we go through the autumn.
Food for thought?
If you are interested in the longer term future of Cambridge, and on what happens at the local democracy meetings where decisions are made, feel free to:
- Follow me on Twitter
- Like my Facebook page
- Consider a small subscription or donation to help fund my continued research and reporting on local democracy in and around Cambridge.