Council competence and the Localism Bill

December 14, 2010 5:34 PM

The government’s Localism Bill was published this week and is packed with measures which will change the nature of local government. But for all the sensible changes in the Bill, they have dodged the big issue: money. As we noted in the TaxPayers’ Alliance localism research note, the case for devolving both tax-raising powers and spending responsibilities is overwhelming. British local authorities raise less than 20 per cent of their revenues themselves compared to the G7 average of over 60 per cent. If we could match public sector efficiency of decentralised Australia, Japan, Switzerland and the US we could get the same public services we have now for £140bn less and boost our economic growth rate by 0.5 per cent every year. The Localism Bill devolves no tax powers from Whitehall.

It does, however, introduce a large number of localist rights and schemes. Twelve (centrally selected) cities’ leaders will be turned into ‘shadow mayors’ immediately in preparation for referenda in May 2012. Other councils seduced by the government’s talk of the ‘prestige’ of a directly-elected mayor will be able to hold a referendum, too. And councils will be free to change back from the mayoral and executive models to the traditional committee model.

More alarming for people whose admiration for their local council’s competence is less than fulsome is the ‘General Power of Competence’ which ministers say will allow councils to “set up banks, develop property, run new services and own assets.” Some authorities could make good use of this provision, but there is a risk that others will go way beyond their proper role.  We’ve already tried big government running ‘key industries’ in the 1970s and it failed. The services were appalling and had to be privatised, the property developments were crime-ridden sink estates which have been fundamentally remodelled where they haven’t been demolished and we need to get rid of the state-run banks we already have, not set up more. Hopefully competition between local authorities will keep a lid on over-ambitious local politicians. The localism we need is more freedom for councils to provide the services they already do more responsively and more devolution of tax decisions so councils have a direct connection between the services they provide and the costs they incur. What we don’t need are councils expanding even further and crowding out the private sector.

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