In contrast to the national results the London borough of Brent has gone further to Labour with two incumbents, Tulip Siddiq and Barry Gardiner, increasing their seats’ majorities and Dawn Butler gaining a massive victory in Brent Central all this following Labour winning 56 out of 63 seats in the council election last year.
While the residents of Brent have given Labour an overwhelming mandate the shadow of this new Conservative government looms large. Polly Toynbee has warned that ‘local council cuts will be severe’ and council leaders are preparing for an onslaught of further reductions in their spending power and wondering whether they will still be able to deliver statutory services. Bob Kerslake, until recently the permanent secretary at the Department for Communities and Local Government, told the Financial Times councils ‘can’t just simply be asked to do the same again’ in terms of cuts in the next parliament. Indeed even the Economist has realised that ‘local government has already faced swingeing cuts approaching 50 per cent in some areas; there is not much more fat to trim’.
With a future this existentially grim there is a need to be bold and for radical thinking from the bottom up. Over the past five years many councils have adopted the ‘dented shield’ argument of doing what they can to protect services and hoping for a change of approach from Westminster. This is largely due to the ludicrously old-fashioned means of funding council services typified by the antiquated and regressive council tax that barely pays for some 30 per cent of Brent’s budget.
For genuine localism and accountability there needs to be a campaign to go beyond the dented shield and for far greater fiscal autonomy at a local level led by both Labour councils and grassroots campaigning. Gone are the days of ‘loony left’ authorities that refused to set budgets and those councillors elected since 2010 have been making decisions all starting from the premise of balancing the books. However, up until today these books have been predominantly drawn up centrally by Eric Pickles as part of an experiment to see how far local government can go until the pips squeak.
There is an alternative and greater fiscal autonomy combined with grassroots campaigns can deliver it. Community campaigns, such as the excellent Citizens UK push for a living wage, are essential for Labour at a local level to broaden its connections and appeal. As opposed to some of the more academic ideas formulated at the top, local initiatives can show Labour in action. It is political imagination in Brent that has seen successful new programmes of dealing with gang violence, leadership on the ‘White Ribbon’ campaign against domestic violence, becoming the first council to offer business rates discounts for living wage employers and award-winning innovation on our flexible childcare programme.
The campaign for greater fiscal autonomy for councils should start in London and play an important part of the London mayor and assembly elections next year. Labour’s fightback cannot simply be the domain of a new parliamentary leadership, a genuine campaigning bottom-up approach that shows innovation, fiscal responsibility and community backing is a recipe for both the future of local government and Labour’s electoral fightback.
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James Denselow is a cabinet member on the London borough of Brent. He tweets @cllrjdenselow
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“Greater fiscal autonomy” at the moment simply means the freedom to raise (or lower, volunteers for this anybody? I know of one London borough that did so, madly in my view) Council Tax, but I presume James would want this without the referendum hoop to jump through. Nobody has yet suggested local income tax or sales tax variable from one authority to another. In the United States where one town may be 100 miles to the next, variable sales tax may be a runner but not her in England for sure. And varying income tax even between the component nations of the UK has not yet been done even though the statutory power may exist. No Scottish turkeys have yet voted for Christmas.
Simply raising Council Tax by x% doesn’t produce an x% rise in Council revenues, but a great deal lesser of a rise because the Council also receives as a major source of revenue an element of the NNDR raised locally. Indeed when the levels of Revenue Support Grant were higher than they are now, the negative gearing was such that it might take a 10% rise to produce a 3% rise in local revenues. Those figures are illustrative. It is amazing how many borough residents here and elsewhere think Council Tax is what resources local services (“Why do we pay our Council Tax?” is a known rhetorical question) and are ignorant to it only funding 30% of them. I dread to think how high Council Tax would be if it was the sole source of council funding. As RSG fell, the negative gearing has dropped but it is still very considerable.
RSG performed and, while it still exists (on present rate of decline my borough will receive nil by about 2023) still performs a progressive and redistributive role that Council Tax does not.
RSG derives from general taxation. Whilst indirect taxes like VAT are generally recognised as regressive, Income Tax and Employee NIC are generally regarded as progressive. Council Tax on the other hand, in Brent at any rate, is not especially progressive. This may not apply outside London but we have analysed the income distributions of Council Tax payers for each current Band and with the exception of the lowest Band, Band A, and the highest Band, the standard distribution for all other Bands is pretty well the same. This curious outcome may be because whatever the 1991 values of properties, the cheaper properties in 1991 are now just as likely to be occupied by higher-earning individuals or families as the then more expensive properties. whatever the reason it points to the urgent need for a full Council Tax re-banding operation and probably the addition of one or two extra bands at the upper end.
As to redistribution, I may not make myself popular in London by saying this, but RSG plays an important role in redistributing the national tax revenues received in London and the South East to Northern authorities less awash with millionaires, billionaires and oligarchs. Indeed it is one of very mechanisms to do so.
So when we hear calls from the Mayor of London for more fiscal autonomy for London, he may be saying he wants Stamp Duty to stay in London rather than be redistributed further north, Income Tax raised in London to stay in London, VAT raised in London to stay in London and so on. Fiscal autonomy is a double-edged sword and the creation of the Greater Manchester northern hub may be a way of giving it fiscal autonomy, yes, but without the redistributive benefits that should go with it. The same could apply to any other fiscally autonomous bodies local councils outside London and the South East are seeking.
We need to devise a replacement to Council Tax that doesn’t have quite the rigid link between the rate charged on Band D properties and the rate charged on other Bands. At present a Band A charge cannot be lower than 2/3 of a Band D charge and a Band H charge cannot be higher than double a Band D charge. The theoretical logic of this is that the cost of council services do not rise according to income or wealth. The downside is that there is no progressiveness whatever in Council Tax, no element of “from each according to their means …” I cannot think of a better system, but the combination of a re-banding exercise, the addition of two extra Bands and a mansions tax would go some way; but we must wait for 2020 at the earliest for the latter of these, and I suspect for even the first of them.