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FEATURES - THE RIGHT IDEA

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The NLGN's latest pamphlet casually nods to the Layfield report and acknowledges the importance of local responsibi...
The NLGN's latest pamphlet casually nods to the Layfield report and acknowledges the importance of local responsibility

We welcome the New Local Government Network's pamphlet, New localism, new finance, by Iain McLean and Alistair McMillan, because - unlike some previous publications from the NLGN - it understands the arguments put forward by the 1976 Layfield Committee.

It acknowledges a central point of Layfield's, namely 'that the UK had an extreme degree of vertical fiscal imbalance. VFI arises when one tier of government has the power to tax and others have the duty - or the pleasure - to spend'. It notes: 'Layfield posed a question that all subsequent UK governments have ducked. VFI is undesirable because it clouds accountability and increases the incentives for fiscal irresponsibility.'

The pamphlet recognises that Layfield focused on responsibility and accountability for local government, arguing there was a basic confusion as to where they lay - with central or with local government. It did not argue that in order to change the balance of funding or in the authors' terms, to reduce VFI, would automatically increase local autonomy. Its concern was not with autonomy but with responsibility and accountability. That was why the Layfield report suggested, as do the pamphlet's authors, there was a choice between local responsibility - now called localism - and central responsibility - now called centralism. Layfield preferred the former to the latter, as do the authors.

We applaud the analysis of the pamphlet about the need to revive the local tax base. It proposes a number of possible changes ranging from limited changes - such as reforming council tax by increasing the number of bands at the top end - to more radical changes, like the introduction of a local income tax. Rightly the authors do not see their new localist approach as being incompatible with equalisation arrangements without which poor areas would be greatly disadvantaged.

The pamphlet suggests an equalisatio n process should 'settle for a coarser concept of needs'. We welcome this argument, which appreciates that the search for the perfect assessment of need will never reach that Holy Grail. Assessment of needs must always involve a subjective element. Councils in rural areas will never agree with those in urban areas.

The problem is aggravated because given the present balance of funding - or VFI - the grant matters too much for councils. The gearing effect means a 1% loss

of grant can entail a 4% increase in council tax, for which

the government then blames the council. Less fiscal imbalance - reduced VFI - will mean less gearing;

a smaller grant can be simpler and more comprehensible because it will not be expected to do so much, and voters can receive more accurate signals from their local tax levels about the expenditure of their councils, thus enhancing accountability.

We are not convinced, however, that an independent commission, 'politician proof', should determine distribution of grant, since the process involves political judgments, especially about needs. Elected politicians should take such decisions that involve political judgment. Yet the pamphlet is right to raise this issue as

a contribution to the on-going debate.

We are puzzled by the authors' description of the government's present practice as reflecting 'a lot' of 'steering centralism', quoting an earlier NLGN pamphlet, New localism, as implying a 'regime' in which the UK government 'steers and facilitates rather than commands and controls'.

But the comprehensive performance assessment process entails an unparalleled degree of direct intervention in the workings of councils, and the existing regime is based on the growth of inspection, over-prescription and detailed target setting. The threat of capping has been revived, even against so-called 'excellent' authorities. These developments constitute not steering centralism but straightforward centralism.

We oppose the authors' readiness to remove the fire service f rom councils. Such nationalisation is inappropriate when the fire services are seeking to be community based, encouraging public awareness and involvement in fire prevention. Since the authors rightly want a democratic local police service, why not a democratic local fire service? Because some emergency services are run by central government this is no argument against local control of the fire services.

Apart from these three reservations we welcome this pamphlet. We applaud its desire to go down the Layfield road of new localism and its observation that central government still needs to learn that it cannot micromanage local government. Liberal Democrats should heed its call for land tax to replace council tax. The government's review on the balance of funding, and the review by the prime minister's strategy unit on the future of local government should pay considerable attention to this valuable pamphlet, especially to its views about the need to reduce VFI.

George Jones, emeritus professor of government, London School

of Economics and Political Science and John Stewart, emeritus professor, Birmingham University

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