Tuesday, September 30, 2008

 

When Does ‘Local’ Mean ‘National’?

In the bizarre dictionaries of those centralising, micro-managing, decision-grabbing, purse-string-pulling, power-hungry, choice-stealing control freak twins, the SNP and the Tories. And when both are reacting against the bossiest centralised Westminster Government since the Second World War, that’s quite an achievement. No-one likes the Council Tax; it was cobbled together in a hurry to get the Tories out of their great big Poll Tax pit, sweetened by a great big wodge of central money, and bears little relation to ability to pay or even to house prices… But dictating ‘local’ decisions from Holyrood or Westminster isn’t the way to fix it.

How the Council Tax Started

I’m old enough to remember when the Tories devised the Council Tax; it felt like a hasty bodge-up then to get them to the next election, an unfair, unlovely hybrid staggered in whopping great bands based on decades-old valuations, and was clearly never meant to last – it’s just that, after the Tories’ brilliant idea of the Poll Tax, neither they nor Labour have dared touch local taxation (except to tell elected local councils what to do with it). There are only two reasons the Council Tax worked at all to begin with. First, it wasn’t the Poll Tax, so everyone was bound to breathe a sigh of relief. And second, it was subsidised by a massive injection of central government money to keep the bills artificially low, thanks to that great (if only by comparison to George Osborne) Conservative Chancellor Norman ‘Yoghurt Pot’ Lamont.

The immediately obvious problem with this at the time was that it was paid for by raising VAT – I remember it well, as the effect was to send the standard price of a video (locked for years at the psychologically important rate of £9.99) through the £10 barrier, after which prices pretty much kept going up. Gee, thanks, Norman. The problem with it that still bedevils local government nearly two decades later is that that meant a huge shift of the local government tax base from locally decided and raised money to centrally decided and raised money. Incredibly, only about a quarter of the money spent by local government across the UK is raised locally. That means that central government has huge power to decide which local councils get what money, with both Conservatives and Labour at Westminster funnelling cash to their own areas so that Labour and Tory councils respectively – and, of course, all those many areas that vote Liberal Democrat and get stiffed for the bill both ways – have to raise Council Tax disproportionately or cut services. And, of course, because the vast majority of what local authorities spend is dictated by central government grant, any extra spending by local councils decided by local people in local elections needs a heavily disproportionate tax increase to make much difference. So local decision-making has been made increasingly meaningless.

What Are the Different Parties’ Answers?

The Labour Government, of course, have capped the amount councils can raise taxes – while raising taxes uncountable times nationally, of course, but why behave yourself when you can boss someone else around to look prudent instead – and increasingly made the ‘local’ decisions nationally by dictating exactly what money must be spent where.

On the opposite end of the liberal-authoritarian scale, equally predictably, the Liberal Democrats have a better answer. We’ve long said that we would scrap the council tax in favour of a local income tax, based on ability to pay; return the setting of local business taxation to local councils from central government; and, in the long term, alter the balance further so that local government raises more of its own money and less comes at the whim of Westminster (but that bit’s a little scary, so we don’t talk about it much).

So, that’s the party you’d expect to boss everyone around and have every bit of power prised from their cold dead hands sorted, and the one that you’d expect to be in favour of decentralisation and of decisions actually (imagine!) being made by the people they affect.

The SNP Answer: Abolish Local Government

The other two parties with a significant say on local taxation are more interesting. No, that’s a bit of a euphemism; they’ve both been all over the place, but both – after using the rhetoric of decentralisation – have come down heavily in favour of even more central control than Labour. The SNP Government at Holyrood have a plan that, on the face of it, sounds like a good thing: scrapping the Council Tax in favour of a local income tax of 3p in the pound. Gosh, isn’t that what the Liberal Democrats have been saying? And, hurrah, the unfair Council Tax scrapped in favour of a local tax based on ability to pay (all sorts of odd people have seen the light on that one). But, hang on… There’s something a bit strange, there. How does the central Scottish government know what rate the local councils are going to choose?

Oh.

The SNP Government at Holyrood is going to decide the ‘local’ rate for the whole of Scotland. So they’re combating the Tories’ and Labour’s authoritarian, centralised, local government-neutering approach where local government decides a mere 25% or so of its own money by enforcing a system where local people vote to decide a much-improved 0%. Er, some mistake, surely?
“Sentence first – verdict afterwards.”

Alex’s Adventures in Wonderland
With the SNP not having a majority in the Scottish Parliament, they’ve apparently been in negotiations with the Scottish Liberal Democrats for support over the policy. Unsurprisingly, we like the ‘ability to pay’ part, but aren’t too keen on the ‘local government losing its last measly remaining power to decide anything at all’ part. I’ve not heard how this is going for a wee while, but I hope it’s the SNP that are giving ground, and not us; if ever there was a better example of the truism that not everything that’s given the same name necessarily has the same effect, it’s when a “local” income tax is decided in its entirety by Alex Salmond’s central government.
“When I use a word,” Alex Numpty said in rather a scornful tone, “it means just what I choose it to mean – neither more nor less.”
“The question is,” said Alice, “whether you CAN make words mean so many different things.”
“The question is,” said Alex Numpty, “which is to be master – that’s all.”

Alex Through the Looking Glass
Come on, Tavish – don’t start your Leadership by laying a wreath of tax forms on Scottish local decision-making!

The Tory Answer: Um… Er… Um… Do As I Say, Not As I Do

That leaves the Tories, who invented the Council Tax and were the most centralising government in living memory (until Labour came along), but who since they lost power at Westminster have taken to saying that the answer to the Labour Government’s removal of power from local government is greater decentralisation. At least, that was what they were saying until – as Joe points out – a week ago. Now, as they become increasingly smug at the idea of getting their hands on all that lovely power again, they strangely no longer feel like letting anyone else have a say. In the good news, they’re less extreme authoritarians than the SNP. In the bad news, George Osborne’s idea of fiscal probity by central government is to… Tell local government it needs to tighten its belt.

The job of Chancellor of the Exchequer is really quite a big and complicated one, but it has its limits. It’s in charge of the Treasury for the UK Government, and controls central government spending in particular across England, following devolution. You’d have thought that was quite enough to do, and Mr Osborne’s never come across as conspicuously competent to do it. Well, we’re all in the middle of a massive economic crisis, and he had to come up with something to establish himself as both daring and statesmanlike (blimey).

At the Liberal Democrat Conference a fortnight ago, the answer was that out of the six hundred billion pounds the Labour Government spends each year, at the very least a tiny fraction could be spent better, so central government should cut some of the spending it’s rubbish at and either spend it more wisely itself or give it back to ordinary people in tax cuts so they can spend it as they think wisely. Central government, then, shouldn’t tell anyone what to do with their money on top of what it’s already demanding, and should get its own house in order instead.

The Tories have a very different approach.

Conservative Shadow Chancellor George Osborne has looked at the six hundred billion pounds he’ll be personally responsible for… And can’t cope. It might not be enough, he says. He’s announced he won’t rule out tax rises by central government, because, you know, sums are hard and power is fun. So, crikey, what can he say to sound like he wants to keep taxes down (which he won’t guarantee) and sound like he’s being careful with our money (which he’s not very good at)? Ah – of course. Announce that he’s getting someone else to do it!

Yesterday, Mr Osborne didn’t think that central government, once he gets his sticky fingers on it, could be run any better than the Labour Government. He might run it worse, and have to put up taxes. But local government – pressured for efficiency targets for decades by Tory and Labour Governments that have never once applied such strictures to themselves – oh, that’s an easy bottomless target for savings, isn’t it? So, if local councils can keep their Council Tax increases to 2.5% - no easy job when inflation’s running to 5% - he’s said he’ll give a 2.5% subsidy from central government to freeze Council Tax at no rise at all.

Let’s see what’s wrong with this proposal. First of all, it’s that Mr Osborne wants one of the biggest, most difficult, most responsible jobs in British public service, but is afraid of it because it’s too big for him and wants to pass the difficult responsibilities onto someone else. If a Chancellor wanted to freeze taxes, they could say they’d freeze the central government’s tax take. But Mr Osborne thinks that would be much too hard and, besides, it would mean he couldn’t have the power to raise all that lovely money. So he tells someone else to do it instead. As Vince Cable said yesterday, this is just “passing the buck to local councils,” and it’ll mean the councils that can’t cut their budgets enough – either because they’ve already been very efficient, and now need to raise their spending with inflation, or because they’re in poorer areas where more of their spending is vital, or because they don’t get as much central government grant as other councils – will end up with continuing Council Tax rises, while other councils that need extra money less will be given, er, extra money… Which means that, for those councils, even less of the money they spend will be raised locally, leaving local people with even less meaningful decision-making and local government even more under the control of central government. Council Tax was a regressive tax that didn’t reflect your ability to pay when the Tories invented it; under Mr Osborne’s plans, the Tories want to keep it that way, but (just as they did when they invented it) they want to throw a fat subsidy at it for a couple of years to sweeten the pill and get local government further under their thumb.

And of course Mr Osborne’s headline-grabbing promise that “Tories pledge council tax freeze” is one that he can’t deliver on, but which he can blame someone else for not delivering – as opposed to making a promise from within the six hundred billion pounds (or more) that he wants to control and would be personally held to account on. Because making a promise about the job he wants to do, making himself fit the standards he wants to order everyone else to obey… That would just be too hard.

Here’s a thought, Mr Osborne – if being Chancellor seems like it’d be too hard for you, have you ever considered that you might not be up to the job?


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Comments:
In terms of Scotland, the Lib Dems have certainly been pressing to keep local accountability and I hope will continue to do so. My view is that we should vote for the bill on second reading, but if we're unable to get the Gnats to change to a genuinely local set tax, then we should abstain at subsequent stages, meaning the bill would almost certainly be lost.
 
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