All-party proposals for local taxation powers had been developed as part of attempt to free local government up from Whitehall
Eric Pickles yesterday rejected proposals from local government and an all-party select committee to give councils greater independence to raise local taxes.
The MPs had proposed a statutory code to free up local government from Whitehall and proposed that councils are handed a fixed proportion of income tax.
The proposals, from the political and constitutional reform select committee, include a plan for councils to be entitled to raise local taxes such as a hotel bedroom tax subject to local consent. The proposals are enthusiastically supported by the Local Government Association
Local government minister Brandon Lewis rejected the proposals. “I believe there is little public appetite for introducing a barrage of new local taxes especially given the fact council tax doubled under the last administration. We need to recognise the long standing and hard fought role of parliament in overseeing and authorising taxation accountable to the British people through the ballot box,” he said.
The emphatic rejection of local tax raising powers came as Pickles was accused of backtracking on a government commitment to localism by threatening councils with tighter financial controls if they seek to increase council tax by more 2%.
He has promised to provide councils funding from central government to impose a council tax freeze, so long as they do not increase their spending above 2%.
Pickles has already banned a council from increasing its council tax by more than 2% without a local referendum, but he claimed some councils were avoiding this legal requirement by loading taxes through bodies exempt from legislation such as waste or transport authorities. He said he would next year punish councils that use such loopholes.
Pickles published a list of 115 councils that so far have agreed to freeze council tax in return for government grants.
As many as 15 councils may ignore the government warnings about a freeze citing the need to raise revenue.
But Graham Allen, the chair of the political and constitutional reform select committee yesterday published a major report calling for “an end to the sterile artillery exchanges between Whitehall and local government”.
He said on the one hand Whitehall was loosening controls by reducing earmarked budgets, and by allowing them to retain increases in local business tax, but on the other councils were losing freedoms.
The all-party select committee propose a statutory code of independence to replace the estimated 1,293 duties imposed on local government today.
The committee concludes England has been the odd country out in the devolution of powers in the UK. It suggests government should consider giving local authorities in England a share of the existing income tax take for the region. The committee does not propose a change in income tax rates. The concept of tax transparency would allow local people to see more clearly what their taxes pay for locally and encourage them to hold local councils to account for their expenditure”.
The report proposes that the fraction of existing income tax that funds local government should be printed on every salary and wage slip. It adds: “English local government lacks some of the most basic constitutional protections that are available to some of its counterparts in a number of other mature European democracies”.
It also suggests the government should examine the possibilities of a stronger constitutional status for local government, through an entrenched statutory code, or a similar proposal.
Tony Travers, the London School of Economics director of London government and an expert on local government finance is quoted by the committee: “Local taxation has been made so perceptible and unpopular that it will surely remain capped for the foreseeable future. The tax base is impossible to revalue. In short, council tax is dying.”
Allen admits that previous voluntary attempts to codify a better relationship between Whitehall and local councils have failed. He suggests some kind of guarantee of greater financial independence could yet feature in the manifestoes in all three main political parties.
Central government appears to be focussing its remaining constitutional reform efforts on strengthening the economic powers of the English city regions, such as Birmingham, Manchester and Sheffield, with Cameron meeting city leaders on Monday to discuss their proposals for greater financial independence.