Localism, freedoms for local authorities and taxation

I have mentioned before my concerns over the push for more taxes being raised locally, and the push for ‘Localism’ without it being understood that most local authorities do not have the tax base from which to raise taxes locally to do what they need to do, or would like to do.

Recently I have been reading William Beveridge’s ‘Full Employment in a free society’ 1944 (yes, I am a bit behind in my reading), and will from time to time blog on some things from this which I think are still highly relevant. I am starting with the following which is about local taxation:

– “It is not reasonable to expect (local authorities) to engage in the activity envisaged by the national plan, as long as a substantial part of the cost is likely to fall upon local rates. Such costs must be borne centrally, inasmuch as the plan gives rise to them is determined centrally. It has been a frequent experience in the past that “distressed areas”, which needed most urgently an influx of industry, were burdened with such a high load of local rates that this alone was sufficient to deter industrialists. It has also been a frequent experience that the level of local taxation was lowest in the most prosperous areas – those where a further concentration of industry was least desirable from a national point of view. Nor is it desirable, once there is a plan for national development, that the ability of local authorities to collaborate fully should be dependent upon their credit status. Just those regions where development is most desirable often find it most difficult to raise the necessary capital and have to pay the highest rates of interest when they do so. This burdens local finance still further. Finance should be provided centrally, at the rates of interest at which the Central Government is able to borrow. If subsidies are required, it should be fall to the Central Government, not the local authority, to provide them.

A revision of local taxation is necessary also because local rates fall heavily upon private consumption and form an integral part of taxation as a whole. They are part of “Revenue” and the incidence and scale of local rates will have to be taken into account by the Minister of National Finance in framing his budget. He may need some powers of influence or control over them. “

He goes on to say that those activities which are the result of a central decision must not burden local finance. And arrangements should be so that even voluntary activities, if approved by the central authority, can be financed at rates of interest as low as those paid by the State.

If we adjust for some of the differences of approach between 1944 and 2015 I think the points made here are still valid and impinge on the current fashion which calls for greater ‘localism’ and freedom for local authorities, and need remembering and addressing by those advocating these freedoms and powers.

We need to remember that the burden of taxation (and responsibilities) shifted from local government to central government because leaving local government to their own devices failed the country as a whole. This is not to say that the UK’s Central Government doesn’t need to give some freedoms and resources to local authorities and let them get on with things, but the former needs to provide the bulk of the funding to the latter.

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One Response to Localism, freedoms for local authorities and taxation

  1. David Cannon says:

    Brilliant; we must either learn from history or repeat mistakes…

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