It does not take a political genius to understand the benefits of George Osborne’s announcement that the council tax freeze would be extended for a further year. Given the squeeze on family budgets the announcement will be a welcome relief for many. But alongside last week’s pronouncements on weekly bin collections, it is yet another nail in the coffin of real localism and demonstrates once again that all governments love localism in opposition but can’t help themselves but pull big levers when they come to power.
Ministers all around the Conservative Party conference have been trotting out the figure that hard-pressed families would be £72 better off next year as a result of the freeze. This figure is based upon a series of (regressive) assumptions: that the family is paying council tax; that the family happens to live in an average property with average council tax bills; but perhaps most importantly in respect of localism, that the council would have raised council tax by some 2.5% anyway. As Stephen Greenhalgh, Leader of Hammersmith & Fulham Council, was keen to point out at a fringe meeting, they weren’t planning to put up council tax anyway.
Of course councils and their residents will be grateful for the extra cash but, as with payments to return to weekly bin collections, councils are in effect being rewarded for what many would consider a failure to be more efficient. And, ironically, the ‘rewards’ are being paid from two new ring-fenced pots – the kind government was trumpeting they would do away with.
Technicalities aside, any government meddling with council tax is an affront to real localism. In most developed democracies, local government is trusted to set its own local taxes and local residents are trusted to exercise their vote in response, without central government interference. But not here. Ever since the Poll Tax, local taxation has been a toxic issue for government requiring very careful handling and very little trusted to localities. As a result, Council Tax valuations now bear no resemblance to real house prices, our central-local balance of funding is more centralised than any OECD country other than Malta, and the system for formula grant redistribution has become so complex and opaque that all sides cry foul.
So what would a brave government do? At the very least the Local Government Resources Review, with its focus on business rates retention, should move next to council tax revaluation. In fact, unravelling business rates and council tax together might actually enable a simpler and more transparent way to ensure some element of fair redistribution. But the bolder move would be to give councils much greater freedom to design and raise their own revenues from a much wider portfolio of taxing, charging and borrowing powers such as those being debated in the Scotland Bill.
Of course this opens up the danger of council profligacy, but as the Chancellor knows to his credit, we now have citizens who are acutely aware of public finances and they should be trusted to pass judgement on their local politicians as they have done at a national level. Until the time though that national figures stop meddling in local tax issues for political gain, real and sustainable localism in England will be kept on ice.
Ed Cox is Director of IPPR North, IPPR’s dedicated think tank for the North of England