Blear’s empowerment strategy a sham

Mention council tax to Gordon Brown or David Cameron and their faces turn white. They make the sign of the cross and reach for a stake and garlic. Local taxes are the devil’s work. Even to suggest their reform has ghosts howling in the graveyard. Strange no other country has such trouble.

This cowardice is no longer sustainable. Next week councils are to be told how the 0.9% real-terms increase in central exchequer grant for each of the next three years is to be shared between them, the lowest rise for a decade (so some say). Since this will not cover the rising cost of services, notably for the elderly and childcare, councils will scream. Grant now covers 75% of their outgoings (including schools), and inflation-busting council tax rises will be banned by capping. The result will be both “Labour cuts” and uproar over such tax rises as occur. Vicars and old ladies will go to prison.

All parties regularly make vague promises to “end the hated council tax”.The Liberal Democrats want it replaced with a local income tax. The Tories yesterday proposed a bizarre regime of capping plus referendums. Brown conducts a periodic ritual of “inquiring into alternatives”. The author of the last such inquiry, Sir Michael Lyons, was consoled for his rejection with the chairmanship of the BBC. The author of the previous one, Nick Raynsford, was consoled with the sack. It is a wonder that the British public puts up with this nonsense year in, year out.
Local government is, according to the Audit Commission, now more efficient than central government. No city council is run as incompetently as the Home Office or the defence, health or agriculture ministries. Councils cannot and do not bust their budgets. They cannot borrow at will or indulge in ludicrous computer schemes. Council schools are clean, government hospitals filthy.

Each year new burdens are imposed on councils under statute, through targets and by centrally negotiated, usually inflationary, wage deals. This, coupled with an ageing population and soaring inward migration, imposes costs on councils that are well above inflation, hence the severe upward pressure each year on council tax.

As the burden of meeting local spending has shifted to the centre (from 60% local in the mid-1980s to 25% now), the local share must be covered by an unbuoyant, fixed-band council tax. Business and income taxes and VAT, which benefit from economic growth, are retained by the Treasury. The government will not tolerate revaluation or introduce higher tax bands, as in Wales. A revaluation due before the last election was postponed by the then local government minister, David Miliband, out of sheer fear. Britons now pay among the lowest local taxes in the world, limited by a petrified Treasury.

As a result, the sole local tax is a de facto poll tax, identical in England on all houses above the H-band threshold of £320,000. This means that each year richer people pay a lower share of local taxes and poor people get angrier. Despite Labour’s pledge in 1997 to restore business taxes to councils, Brown has not done so. The share of local services businesses pay for is smaller than in most countries. Even a proposed local business development levy has been postponed until 2010.

This gutlessness, for which both Brown and Tony Blair are to blame, has led the Treasury to treat council tax as just another stealth tax. By holding back central grants (which are up by 37% in real terms since 1997) and urging higher spending, it has pushed up council taxes by 90%, even after capping. Whitehall now fixes both the ceiling and floor of expenditure across the length and breadth of England. This is not accountable local democracy.

I have been following this arcane debate for years and used to regard the rates as the best taxes in Britain. They were the most certain and the cheapest to collect, and they taxed the scarcest national resource, living space.

I have changed my mind. The council tax has proved a dwindling levy. By general consent, taxes should either be on expenditure or be related to ability to pay. This suggests a mix of local income tax, as in most of Europe and America, and “smart” local taxes such as tolls, licences and charges.

The Lib Dems’ proposal for a local income tax is a brave break with British convention and one the Scots may soon imitate. The best sales pitch would be to offer councils a small, capped income-tax surcharge (say a penny in the pound), which would cut council tax by a quarter on average. The Tories for their part lack almost as much bottle as Labour. Cameron clearly suffers the same “Treasury capture” by George Osborne as Blair did by Brown. Yesterday he unveiled his localist big idea and it was a mouse, reviving Michael Heseltine’s 1981 local plebiscites on tax levies above a centrally capped limit.

That a Tory opposition leader cannot trust his party, which is both dominant in local government and good at it, to account to its voters for an uncapped rate (or a business rate) is pathetic. A referendum with every excess rate demand is better than nothing, but is designed merely to enforce the cap. Why not subject central taxes to the same democratic discipline?

Councils should levy what they need for such services as they supply, and answer for it to their electors. They did so before the myth of “local overspending” was disseminated by the Thatcher government, now repeated by Brown and Cameron. Where overspending occurred in London in the late-1960s, the Tories swept to power in 1968 – even capturing Lambeth and Camden. The franchise can bite if allowed to.

A decade ago Bernard Crick and Jerry White noticed that British politicians suffered a “fear of politics”. They hated people voting (other than for them). The current local government minister, Hazel Blears – as anti-localist as her predecessor, David Miliband – suffers likewise. She is busy reinventing unelected Victorian vestries, but with no money or power. She wants stakeholder forums, juries and meetings, “community kitties [sic] in 23 neighbourhood action areas” under 18 “empowerment champions”. Such a monument to meaningless Blairism is beyond satire.

What is serious is that Blears wants no return to local democracy and no fiscal devolution. Like her boss, she is frit. She dare not devolve power to the people. Cameron is little better.