Magazine article Public Finance

Cut-Price Localism?

Magazine article Public Finance

Cut-Price Localism?

Article excerpt

Shortly after delivering what many saw as the worst financial settlement for England's councils in a decade, the government this month produced an empowerment action plan' to channel more power to neighbourhoods and citizens.

A worthy ideal, where rhetoric cannot hope to match reality? Distinctly impracticable at a time of tight public spending, when even the most modest proposal to transfer power and assets from council to community carries a price tag? Another example of government working at cross-purposes, promising more while giving less? Perhaps all of these.

Ministers, naturally, don't see it that way. They are surprisingly upbeat. Most of England's 390 councils might be facing a 1% real-terms increase next year, with the prospect of below-inflation rises after that, but 'hey, cheer up', they exhort.

The mood music from Communities secretary Hazel Blears - 'my whole approach is anchored in localism and devolution' - has struck a high, positive note. Ministers now believe that local government is crucial to delivering their ambitious place-shaping agenda by bringing a range of partners together under (potentially) a big, democratic tent.

'We have an opportunity to turn around a pervading sense of apathy... re-engage people with their local community and encourage people to take a more active role in making public services work for them,' says the minister who, to be fair, is so far proving extremely popular with council leaders.

Blears' devolution plan for neighbourhoods involves 23 action areas, from creating community kitties' in every authority to encouraging the transfer of municipal assets, such as redundant schools, to the grass roots. Eighteen councils have been named as empowerment champions' in the drive to help communities 'shape the services they rely on [and] take control over the future of their area to get things done'.

But here's the catch. All this is happening at a time when the government has ducked, seemingly indefinitely, the crucial question of reforming the way authorities are financed. 'They've put it in a box marked "too difficult",' says a senior official close to Whitehall who regularly meets ministers. 'It's the missing ingredient in the whole agenda.' And a crucial one at that

How is meaningful neighbourhood/community devolution possible when it's far from clear how local people can get access to the necessary cash to, say, fix the road or the pavement, cut the grass in the park or fund the recently transferred school-turned-community centre? All these deeply parochial 'non-statutory' spending areas - and opinion polls show they are the priorities for a majority of payers of council tax - have been squeezed by the government as more money is poured into health and education. So to argue that funding from hard-pressed town and county halls will somehow follow the transfer of functions and assets to communities is, according to critics, a pipe dream.

And all this at a time when council tax revaluation is off the agenda, dismissed as both impracticable and more important - too politically sensitive; when alternative, local revenue-raising wheezes are similarly non-starters, and when a return to local control of the business rate is never discussed these days. No matter that council taxpayers are being asked to shoulder an increasing proportion of town hall funding. In 1993/94, for instance, just as the English council tax was kicking in, households on average contributed 21% to council revenue and business 28%; now the position is all but reversed - council tax yields 26% and the business rate just 20%.

Any director of finance will tell you that such a lopsided system is unsustainable in the medium term. Privately, some ministers accept the fact that the funding system urgently needs an overhaul, as long as it's after the next election. Politically, though, they acknowledge that it does not figure on Downing Street's radar screen, let alone its equivalent in Conservative central office, where shadow ministers are equally vague about how to fund local government - while, ironically, promising a localist revolution if returned to power. …

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