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MPs call for English devolution

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Financial freedom should be handed to English city and county regions on the same basis as Scotland and Wales, MPs have said.

The Commons communities and local government committee urged ministers and political parties to allow “local communities in England to take greater control over how money is raised and spent in their areas”, in their report Devolution in England: The Case for Local Government.

Doing so would re-energise local democracy, boost England’s economic performance and lead to more balanced growth across the country, the MPs said.

The committee chair, Labour’s Clive Betts, said: “If the citizens of New York, Frankfurt and Tokyo can be trusted with tax-raising powers, why not the people of London, Greater Manchester or the north-east?

“Local areas know best how to stimulate their economies. With a wider range of revenue streams at their disposal, they would be able to invest in infrastructure and projects that mattered locally - without having to rely on or wait for handouts from central government.”

Local politicians who failed to deliver would then no longer “be able to hide behind Whitehall and Eric Pickles”, he added.

He conceded that Treasury caution would mean that only a few areas might get significant fiscal powers at first “but the rest of local government should not be left behind”.

The report said significant fiscal devolution should occur only in “recognisable” economic areas, but it did not specify any preferred form of governance.

It said there had been general agreement in evidence given that city and/or county regions had the greatest potential to assume fiscal devolution.

The report noted that in 2011 the proportion of tax set at local or regional level in England was 2.5% of GDP, compared with 15.9% in Sweden; 15.3% in Canada; 10.9% in Germany; and 5.8% in France, a country it said was often regarded as highly centralised.

Local government minister Brandon Lewis said he disagreed with suggestions in the report that councils should be able to set higher council tax and business rates and impose new taxes such as one on occupancy of hotel rooms.

“There is no public appetite for a barrage of new stealth taxes on hard-working people and local firms, which would force up the cost of living and destroy jobs,” Mr Lewis said.

“Contrary to this report’s blinkered view in concentrating power in the most distant and unaccountable tiers of municipal authority, we believe in devolving power down to the lowest appropriate – to councils, neighbourhoods and most importantly, direct to local taxpayers.”

Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, was sympathetic to the report’s aims.

He said: “Over the past few years we have had a series of reports and enquiries into the growing democratic deficit in England and the need for reform.

“All have concluded that there is a pressing need for greater devolution of financial powers and more freedom for local authorities to deliver for their communities.

“Yet despite all of these reports there remains too much central control of local government.”

He said he expected the independent commission on local government finance, which Cipfa has set up with the LGA, to propose workable solutions.

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