Local Councils Can Expect Little Financial Comfort from Labour. but a Change of Government Would at Least Devolve Some Power Back to the Localities

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It was appropriate that local authorities emerged as the fall guys of last week's Budget. After all, that has been their role for the past 17 years. Since 1979 the ministerial masters have seen them as little more than malleable objects in the bigger political game being played at Westminster: "If we don't like you, we'll abolish you; if we think you're inefficient, we'll get some popularity by promising to scrap the rates; we'll make you charge a poll tax instead."

And then: "My God, we're getting the blame for the poll tax; we'll put up VAT and cut the poll tax bills you've already sent out; on second thoughts, we'll abolish the tax altogether. And now we'll cut the basic rate of income tax and you can make up the shortfall by putting up the council tax."

It is hardly surprising that Conservative councillors are as disillusioned as Labour ones. Not that there are many Conservative councillors left.

As more than a week has passed since Kenneth Clarke waved his wand, here is a reminder of his tax-cutting illusion. He announced with some swagger that more money would be spent on education. But at the same time he cut the amount of cash going to councils. So in order to increase spending on schools and maintain spending on other services, local authorities would be forced to put up council taxes well beyond inflation. It enabled the big minister from Whitehall to come across as the generous sugar daddy in the areas where it mattered, leaving the local authorities to clear up the mess.

It was a disgraceful and typical act of bullying from central government, giving councils no choice but to dance to its destructive tunes. And the next Labour government plans to do something very similar.

Or at least it plans to be no more generous with its money, leaving local councils to face the consequences. Tony Blair, with typical candour, made this clear when he addressed council leaders in July. He told them: "The future of local councils will not be based on spending an increased share of the national cake, but on improved efficiency."

Clarke said almost the same thing in justifying his claim that spending on education could go up if local authorities spent their money more efficiently.

Blair offered this somewhat cold comfort in the same speech, "Councils will have greater choice and flexibility in how they improve efficiency and achieve value for money."

That's all right, then: new Labour, new freedom to find even more efficiencies. What he did not say was that councils could expect a better financial deal under Labour. This is not just part of the pre-election discipline that permits no uncosted spending commitments. It will be for real in government, too.

But that doesn't mean nothing will change if Labour is elected; that the current dismal state of relations between central and local government is doomed to continue. Far from it.

I predict that councils will be allowed to raise more money from local taxation under a Labour government. Front-benchers cannot say anything quite so baldly now. It is hardly an appetising slogan in the pre-election frenzy: vote for a Labour government and your council tax bills will go up even more than Clarke is planning. But Labour policy points in that direction.

A Labour government would lift the universal capping imposed on council spending, which is bound to give councils more flexibility in setting tax levels. At the moment every council is set a spending target by the Department of the Environment. If any of them exceeds the target by a set amount, it faces being capped.

There will be two disciplines under Labour, but neither is quite so rigid as uniform capping. Central government will still intervene, but only if undefined "excessive increases" are announced.

Annual elections for a proportion of councillors will act as a deterrent to irresponsible budgeting, placing the onus on councils to explain why they are taxing and spending more if they choose to which is healthy - but not preventing them from putting up taxes. …