Let councils be financially self sufficient

Cllr Colin Barrow, the Leader of Westminster City Council, calls on Ministers to be bold

To date the Coalition’s ‘Local Government Resource Review’ announced last autumn has failed to send Twitter into meltdown or dominate national news agendas but it has the potential to radically transform the economic and democratic fortunes of towns and cities all over the country. Recent reports in the Guardian and Conservative Home suggest that the Government is serious about taking this opportunity.

The anti-localism of the current local government finance system impedes economic growth and discourages councils from promoting economic development. The 33,000 businesses in Westminster pay more than £1 billion a year in rates but the Council acts merely as the Government’s tax collector. Westminster, like more than 200 other local authorities, could be self-sufficient but the current system means we all have to join the queue for Treasury handouts, with the council’s services in the hands of the bean counters in Whitehall.

Giving councils a stake in the economic well-being of their area will see authorities develop stronger links with business and promote initiatives to support local trade and encourage investment. This already happens in the US where states really value business investment and have the resources and the powers to offer targeted discounts. It is common, for instance, for start-ups in the US not to have to pay any local business tax for the first year – giving the entrepreneur a break when they need it most. We should learn from this experience.

Businesses often complain that there’s plenty of taxation but very little representation. Yet private investment is essential for creating jobs and wealth and MPs and councillors should help. If done right, this change will not just replace one funding source with another; it won’t merely cut out the middle man, it will bring about a fundamental change in the way councils work and will bind business and local governance together for the benefit of the local area. Suddenly investment in high speed broadband will be in the interests of local authorities in rural areas and businesses will have a stake in local educational standards, skills and unemployment.

Stronger links with business help councils to deploy their resources in such a way as to assist the economy. Westminster helped create several Business Improvement Districts and they already demonstrate that every day. These partnerships generate more than £5million of additional investment, but despite the additional costs, the businesses have seen the benefits and have voted by substantial margins to renew the schemes after their initial terms.

I believe that there is also a wider, more fundamental point at play here.

Recycling money in and out of the Treasury and making councils reliant on Whitehall decisions not only harms both business interests and democracy. It is also really inefficient. Imagine how many officials we employ to suck all this money up from local areas, put it through the Government machine, and have local government beg to get it back again. Instead, we need to move away from central control, and re-establish local decision-making on local taxation and local spending. Fast, accountable and efficient.

There exists now, today, a coalition of willing and capable authorities that are ready to stand up and do exactly this by taking on these responsibilities. These councils are happy and willing to be held accountable for the decisions that they take and of course, where things go wrong, to take the blame. Those that fail to perform will be punished at the ballot box – that’s part of the deal. Such a system would also make the current arguments over levels of cuts and front-loading a thing of the past.

The reforms being considered by ministers could be truly transformational. Ministers should be emboldened in making these deliberations. We must not lose this opportunity.