Britain local councils need stronger fiscal powers for devolution push

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Local council fiscal devolution

Highlights

Funding for local authorities fell by more than 40 per cent in real terms post-2010, with 65 per cent of council spending now directed to centrally mandated social care.
Less than a third of council spending is discretionary due to statutory obligations, limiting investment in local amenities and resulting in nearly 800 library closures during austerity.
The article proposes removing council tax caps, updating 1991-based property valuations, increasing local influence over business taxation, and permitting municipal bonds for housing to restore fiscal autonomy.

Victorian model shapes devolution debate

As argued by Financial Times, the core lesson for Andy Burnham’s devolution agenda is that power should be rebuilt from the town hall upward rather than concentrated in a limited number of regional offices. The piece says Burnham is right to criticise Whitehall centralism, but warns that shifting authority from London to metro mayors alone risks repeating centralisation on a smaller scale.

The article points to 19th-century civic leaders such as Birmingham’s Joseph Chamberlain, who viewed public libraries and other municipal services as part of the social and economic glue of prosperous communities. That tradition linked local activism with productivity, growth and stronger accountability because decisions were made closer to residents.

It also notes that the UK became highly centralised over recent decades, even as France moved in the opposite direction from the 1980s. Responsibilities once held by town halls, including planning, housing, schools, roads and transport, steadily shifted to Whitehall control.

Fiscal reform and local economic impact

The analysis says the weakening of councils came through the poll tax upheaval, the nationalisation of business rates and later austerity measures. Funding for local authorities fell by more than 40 per cent in real terms in the decade after 2010, while an estimated 65 per cent of council spending now goes to centrally mandated social care.

That squeeze leaves less than a third of spending discretionary once other statutory duties are included, limiting investment in local amenities and regeneration. The closure of nearly 800 libraries during the austerity years is presented as a visible sign of the erosion of municipal capacity.

The proposed remedy is to restore councils’ ability to raise more money locally by removing caps on council tax increases, updating property valuations still based on 1991 levels, and giving local authorities more influence over business taxation. The article also argues councils should be allowed to issue municipal bonds for housing and create local enterprise partnerships, despite expected resistance from the Treasury over the risk of higher taxes or waste.

In our earlier report on Andy Burnham’s expanding economic agenda, we examined how he was moving beyond immediate cost-of-living measures with a cluster of proposals spanning transport, energy and business taxation. We also noted growing scrutiny over whether “Brand Burnham” — including his unconventional communications style — would stand up to the pressures of national leadership if his trajectory takes him to No 10.

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