Reform local government funding to create a transparent link between local taxes and local services
Though often considered a bit dull and frighteningly complex, reforming local government finance is a key objective of a third-term Labour government. Having helped modernise much of local government in our first two terms we now want to give councils more ability to make a difference in their communities. That means that their financing must be addressed.
In the first place, the council tax must change. It is no longer good enough for a Labour government to continue with a tax that is so far out of line with progressive principles. We will therefore bring in extra bands, so that those in lower value houses pay much less than those in the top houses. We will also transform council tax benefit so that poorer people in larger houses receive their council tax bill net of the benefit, thereby ensuring a much higher uptake.
Second, we will address the situation that leaves local authorities with only one tax directly under their control and on average the ability to raise through that tax only one quarter of the money they have to spend. Raising money and justifying how you spend the money is at the heart of local democratic accountability. We will give those councils with major service responsibilities flexibility over the setting of business rates at the margin, subject to prudent limits. We will also give councils a capacity to raise an additional local income tax subject to approval by referenda.
For all councils we would propose they could use hotel taxes, take-away taxes and other focused tax instruments to raise additional funds. Some of these could raise substantial amounts. Others would raise small amounts, but would really help councils fund discretionary expenditure that matters to local people. In addition, council tax capping will end, but councils will only be able to increase the combined extra burden on local taxpayers by more than twice the rate of inflation.
Finally, we will end the system whereby central government annually decides how much each council gets from the Treasury coffers. In future, central government will set the parameters of the allocations principles – for example, the weight to be given to deprivation. However, an independent body – the Local Authority Funding body – will set the exact amounts. To enable councils to plan, the allocations will be made on a three-year basis, revised every two years.
This agenda, together with fewer targets and ring fencing, will allow new localism to begin to take hold, delivering better services and more engaged citizens.
Create a majority elected second chamber
Reforming the House of Lords will be difficult. Consensus on how it should be reformed has been impossible to achieve so far and even if the Commons could agree on the way forward we would still have to persuade the turkeys to vote for Christmas. Nevertheless, reform is vital because this is about power and how it is used and abused.
The Lords enjoy phenomenal powers. Most significantly, of course, they can amend legislation. Of itself, this is not a problem – after all, thousands of so-called Lords amendments every year are tabled by the government. But sometimes the Lords use the fact that no one party has a majority in the Upper House to thwart the will of the Commons. A ban on hunting and an equal age of consent were both opposed by the reactionary Lords. In both cases, the government had to use the decrepit old Parliament Act to enforce the will of the elected Commons.
This power to amend can be used even more ruthlessly by the Lords when they want to disrupt a government’s whole programme, especially later on in a parliament, when they can effectively refuse to consider a piece of legislation during an annual parliamentary session. Any bill that fails to complete its passage through both Houses in a session automatically falls and the government has to launch it again from scratch.
So we need a new Parliament Act that lays out the roles of the Lords and the Commons, reasserts the primacy of the Commons, and establishes a proper process for reconciliation between the two houses when there is a difference of opinion. To date this has been governed by a series of conventions that were drawn up in a gentlemen’s club a hundred years ago. Now we need a proper constitutional settlement.
It’s not just the powers of the Lords that need reform. The Lords still has 92 hereditary peers and 24 bishops, and most of the others are appointed for life. It is no surprise that it is reactionary. After all, the very process of appointment means that many of the peers are people who have already made their name. Once in the Lords that expertise almost invariably fades as time goes by – and yesterday’s general or captain of industry all too soon reflects the opinions of a generation gone by.
Reform of the powers and the composition of the Lords should form a cornerstone of our manifesto commitments.
Create a written constitution to make it clear to every citizen which of their representatives is responsible for which aspect of their life
The United Kingdom is at a constitutional crossroads. The old order has rightly been challenged but the new one has yet to be established. It is essential that a third-term Labour government not only creates a strong democratic narrative to its constitutional reforms but that it engages the people as the prime actors in the process and not just present the electorate with a fait accompli.
The executive in the United Kingdom is more powerful than in any comparable democracy. Under the royal prerogative, ministers exercise wide-ranging powers without being scrutinised or held accountable to parliament. Far too often, the checks and balances placed on the executive are too weak to be effective. The House of Commons is dominated by one political party allowing the government to push its legislation through with very little scrutiny. The House of Lords, fatally weakened by its lack of legitimacy, unable to act as balance to the Commons, is browbeaten into accepting legislation and the Crown gives consent automatically. Our fundamental rights as citizens are protected by nothing more than the convention that they should not be challenged.
This Labour government has a proud record of constitutional reform. But these reforms can be repealed, in the same way as any other piece of legislation, by a new government. The Tories have already stated that they would repeal the Human Rights Act; if Labour’s progressive constitutional legacy is to remain it has to be entrenched.
A written constitution would set out what government can and cannot do in our name; it would define the relationship between the different branches of government and between the separate territorial parliaments and assemblies. It would be a single document that sets out the powers and functions of government and the rights of the individual citizen. If voters are to become citizens they must have a fundamental document. Without one, they remain powerless to exercise control over those who govern in their name between general elections.
For citizens to own a constitution they need to have built it themselves. A nationwide debate about the British constitution, perhaps based on the Big Conversation, would allow Labour to develop a constitutional strategy and a shared vision of the core values that underpin our society. It would not be a cure for all political problems but it would create a new relationship in which they could be solved.