Additional financial freedoms – such as the ability to set their own taxes or devolving national taxation from central government – would empower communities to help kickstart a national COVID-19 economic recovery, councils say today.
Councils across the country continue to lead local communities through the COVID-19 crisis, which has underlined the transformative role they can play in supporting their communities and economies if they are given the freedom to deliver.
However, a new report by think-tank Localis, commissioned and published by the Local Government Association today, finds that – across the western world – local government has been able to react with greater power and autonomy than in the UK.
The UK economy is one of the most centralised in the world. The report finds that local authorities in Germany, Switzerland and Holland can access a diverse range of revenue sources and are able to adjust and introduce local levies in consultation with their residents and businesses.
The Government has committed to releasing a wave of investment across and country to bounce back from the pandemic. The LGA wants to work with government on how its forthcoming Devolution and Recovery White Paper can explore options for greater fiscal freedom for local communities.
This should include the power to raise more money locally, for example through a tourist or e-commerce levy, and have greater control over how national taxation is spent, such as income tax or a share of fuel duty to invest in roads.
The LGA said this is a crucial part of ensuring every part of the country is to bounce back from the economic shock we face.
Cllr Kevin Bentley, Chairman of the LGA’s People and Places Board, said:
“England is an outlier when it comes to fiscal devolution with international communities having much greater levels of financial freedom.
“As we look ahead towards the long process of economic and social recovery, this gap in local power and autonomy across England risks seeing our communities fall ever further behind.
“The forthcoming Devolution and Recovery White Paper expected is a real opportunity to do things differently.
“Councils want to work with the Government on how local communities can have the freedoms and flexibilities to play a lead role in the nation’s economic recovery and better connect local leaders to decisions made about how money is spent and raised for the benefit of their communities.”
Localis Chief Executive Jonathan Werran, said:
“There can be no genuine roadmap to future recovery and devolution without entrusting English local government with the freedom to use and choose locally-generated growth revenues to direct vital place-led priorities for economic and social reform.
“The examples Localis drew upon from the German federal system, the Dutch municipalities and the Swiss cantons neatly disprove the bogey-man argument that fiscal devolution should always lead to a ‘race to the bottom’ or an iniquitous postcode lottery. Far from it.
“The evidence suggests instead that without greater decentralisation of local government finance, the levelling up agenda will fail to provide either the targeted economic development support to rebalance regional economies or the social infrastructure to cement place prosperity.”