Latest news with #fiscal devolution
The Independent
17 hours ago
- Business
- The Independent
MPs call for local authorities to be handed control of council tax
Councils should be given control over council tax as the current broken link between the local charge and the quality of services risks undermining local democracy, MPs have warned. An inquiry into the financial sustainability of local government concluded that councils should be given interim powers ahead of reform of 'the most unfair and regressive tax in use in England today', which it said should be more of a priority for the Government. This would include giving individual authorities the power to revalue properties in their area, define property bands, set the rates for those bands, and apply discounts, the Commons Housing, Communities and Local Government Committee said. The report said a broader devolution of fiscal powers, such as applying tourist tax, should also form part of fixing local government finances, which have been under growing strain since the onset of austerity in the 2010s led to reduced funding. Deputy Prime Minister Angela Rayner recently said she wanted 'more push' towards fiscal devolution as part of the Government's pledge to transfer central decision making to local areas. The committee also recommended that central government ringfencing of funding be replaced with 'a rigorous outcomes-based system of accountability', so that local authorities are held accountable for achieving against a set of agreed outcomes within their overall budgets, not for meeting spending targets. Council tax bill rises hit 5% in April for the third year in a row, as almost all councils increased bills up to, or close to, the maximum permitted. The revaluation of properties has long been called for, with council tax bands in England still based on property values in 1991. The Institute for Fiscal Studies found that the most expensive properties (Band H) attract three times as much tax as the least valuable (Band A) despite being worth more than eight times more now, as prices have risen most in affluent areas. 'Council tax is therefore both increasingly out of date and arbitrary, and highly regressive with respect to property values,' it added. A recent analysis commissioned by the County Councils Network found allowing councils to administer and retain taxes generated locally would boost funding for services by more than £4 billion in many areas and 'supercharge' economic growth. Florence Eshalomi, Labour chair of the committee said: 'When residents are paying more and more in taxes but seeing less and less in regular, everyday services, such as libraries and fixing potholes, then trust in local democracy is at risk of being undermined. 'Government in England is overcentralised. The current financial pressures on local government are also driven largely by mandatory, high-cost, demand-led services, such as social care and special educational needs or disabilities, where councils have little control over these needs. 'Councils are trapped in a straitjacket by central government, with local authorities lacking the flexibility or control to devise creative, long-term, preventative solutions which could offer better value for money. 'If, as a country, we are going to deliver growth and improve local services, Westminster needs to ease its grip and let councils have more power to control their own affairs and be accountable to their own electorates.' The report also called called for the Government to reconsider its decision to freeze local housing allowance rates and extend its support for local authorities to acquire new housing stock through the local authority housing fund. Responding to the findings, the Local Government Association (LGA) said the findings provide further evidence of the fragile state of local government finances. Pete Marland, chair of the LGA's economy and resources board, said: 'Greater financial certainty and a simpler funding system are important. However, all councils remain under pressure and face having to increase council tax bills to try and protect services at the same time as making further cutbacks. 'A sustainable, long-term financial model for local government must lead to all councils having adequate resources to meet growing cost and demand pressures.' London Councils, which represents the capital's 32 boroughs, said the report shows 'change is long overdue', but raised concerns over the Government's plans for changing the way funding is distributed. Claire Holland, chair of London Councils, said: 'The Government's plans to reform council funding are pivotal for ensuring local areas receive funding that genuinely matches their levels of need and enables them to cope with fast-rising costs and pressures. 'It's right that the Government is targeting deprivation in the new formula, but we are concerned that the measures used in the current proposals will not sufficiently account for London's extreme housing poverty. This could mean London is left without the funding we need to deliver vital local services and return to financial stability.' A Ministry of Housing, Communities and Local Government spokesperson said: 'The Government is taking decisive action to fix the broken council funding system, so local leaders can deliver the vital public services their communities rely on. 'We have announced over £5 billion of new grant funding for local services on top of the £69 billion already made available this year to boost council finances, and we will go further to reform the funding system to make it fit for the future. 'This will ensure councils get the support they need and protect residents from further costs by keeping a 5% limit on the amount council tax can be raised without a referendum.'
The Independent
21 hours ago
- Business
- The Independent
Local authorities should be given greater powers over ‘unfair' council tax, MPs warn
Councils should be granted greater control over council tax, MPs have warned, arguing that the current disconnect between local charges and service quality risks undermining the very foundations of local democracy. An inquiry into the financial sustainability of local government concluded that interim powers should be devolved to councils, ahead of a more comprehensive overhaul of what it described as "the most unfair and regressive tax in use in England today". The Commons Housing, Communities and Local Government Committee's report recommended that individual authorities be empowered to revalue properties in their areas, define property bands, set the rates for those bands, and apply discounts. Beyond council tax, the report suggested that a broader devolution of fiscal powers, such as the ability to apply a tourist tax, should also be considered to address the growing financial strain on local government, exacerbated by austerity measures introduced in the 2010s. Deputy Prime Minister Angela Rayner recently voiced her support for "more push" towards fiscal devolution, aligning with the government's commitment to transfer central decision-making to local areas. Furthermore, the committee advocated for replacing central government ringfencing of funding with "a rigorous outcomes-based system of accountability". This would ensure local authorities are held responsible for achieving agreed outcomes within their overall budgets, rather than simply meeting spending targets. Council tax bill rises hit 5 per cent in April for the third year in a row, as almost all councils increased bills up to, or close to, the maximum permitted. The revaluation of properties has long been called for, with council tax bands in England still based on property values in 1991. The Institute for Fiscal Studies found that the most expensive properties (Band H) attract three times as much tax as the least valuable (Band A) despite being worth more than eight times more now, as prices have risen most in affluent areas. 'Council tax is therefore both increasingly out of date and arbitrary, and highly regressive with respect to property values,' it added. A recent analysis commissioned by the County Councils Network found allowing councils to administer and retain taxes generated locally would boost funding for services by more than £4 billion in many areas and 'supercharge' economic growth. Florence Eshalomi, Labour chair of the committee said: 'When residents are paying more and more in taxes but seeing less and less in regular, everyday services, such as libraries and fixing potholes, then trust in local democracy is at risk of being undermined. 'Government in England is overcentralised. The current financial pressures on local government are also driven largely by mandatory, high-cost, demand-led services, such as social care and special educational needs or disabilities, where councils have little control over these needs. 'Councils are trapped in a straitjacket by central government, with local authorities lacking the flexibility or control to devise creative, long-term, preventative solutions which could offer better value for money. 'If, as a country, we are going to deliver growth and improve local services, Westminster needs to ease its grip and let councils have more power to control their own affairs and be accountable to their own electorates.' The report also called called for the Government to reconsider its decision to freeze local housing allowance rates and extend its support for local authorities to acquire new housing stock through the local authority housing fund. Responding to the findings, the Local Government Association (LGA) said the findings provide further evidence of the fragile state of local government finances. Pete Marland, chair of the LGA's economy and resources board, said: 'Greater financial certainty and a simpler funding system are important. However, all councils remain under pressure and face having to increase council tax bills to try and protect services at the same time as making further cutbacks. 'A sustainable, long-term financial model for local government must lead to all councils having adequate resources to meet growing cost and demand pressures.' London Councils, which represents the capital's 32 boroughs, said the report shows 'change is long overdue', but raised concerns over the Government's plans for changing the way funding is distributed. Claire Holland, chair of London Councils, said: 'The Government's plans to reform council funding are pivotal for ensuring local areas receive funding that genuinely matches their levels of need and enables them to cope with fast-rising costs and pressures. 'It's right that the Government is targeting deprivation in the new formula, but we are concerned that the measures used in the current proposals will not sufficiently account for London's extreme housing poverty. 'This could mean London is left without the funding we need to deliver vital local services and return to financial stability.' A Ministry of Housing, Communities and Local Government spokesperson said: 'The Government is taking decisive action to fix the broken council funding system, so local leaders can deliver the vital public services their communities rely on. 'We have announced over £5 billion of new grant funding for local services on top of the £69 billion already made available this year to boost council finances, and we will go further to reform the funding system to make it fit for the future. 'This will ensure councils get the support they need and protect residents from further costs by keeping a 5% limit on the amount council tax can be raised without a referendum.'
Yahoo
a day ago
- Business
- Yahoo
MPs call for local authorities to be handed control of council tax
Councils should be given control over council tax as the current broken link between the local charge and the quality of services risks undermining local democracy, MPs have warned. An inquiry into the financial sustainability of local government concluded that councils should be given interim powers ahead of reform of 'the most unfair and regressive tax in use in England today', which it said should be more of a priority for the Government. This would include giving individual authorities the power to revalue properties in their area, define property bands, set the rates for those bands, and apply discounts, the Commons Housing, Communities and Local Government Committee said. The report said a broader devolution of fiscal powers, such as applying tourist tax, should also form part of fixing local government finances, which have been under growing strain since the onset of austerity in the 2010s led to reduced funding. Deputy Prime Minister Angela Rayner recently said she wanted 'more push' towards fiscal devolution as part of the Government's pledge to transfer central decision making to local areas. The committee also recommended that central government ringfencing of funding be replaced with 'a rigorous outcomes-based system of accountability', so that local authorities are held accountable for achieving against a set of agreed outcomes within their overall budgets, not for meeting spending targets. Council tax bill rises hit 5% in April for the third year in a row, as almost all councils increased bills up to, or close to, the maximum permitted. The revaluation of properties has long been called for, with council tax bands in England still based on property values in 1991. The Institute for Fiscal Studies found that the most expensive properties (Band H) attract three times as much tax as the least valuable (Band A) despite being worth more than eight times more now, as prices have risen most in affluent areas. 'Council tax is therefore both increasingly out of date and arbitrary, and highly regressive with respect to property values,' it added. A recent analysis commissioned by the County Councils Network found allowing councils to administer and retain taxes generated locally would boost funding for services by more than £4 billion in many areas and 'supercharge' economic growth. Florence Eshalomi, Labour chair of the committee said: 'When residents are paying more and more in taxes but seeing less and less in regular, everyday services, such as libraries and fixing potholes, then trust in local democracy is at risk of being undermined. 'Government in England is overcentralised. The current financial pressures on local government are also driven largely by mandatory, high-cost, demand-led services, such as social care and special educational needs or disabilities, where councils have little control over these needs. 'Councils are trapped in a straitjacket by central government, with local authorities lacking the flexibility or control to devise creative, long-term, preventative solutions which could offer better value for money. 'If, as a country, we are going to deliver growth and improve local services, Westminster needs to ease its grip and let councils have more power to control their own affairs and be accountable to their own electorates.' The report also called called for the Government to reconsider its decision to freeze local housing allowance rates and extend its support for local authorities to acquire new housing stock through the local authority housing fund. Responding to the findings, the Local Government Association (LGA) said the findings provide further evidence of the fragile state of local government finances. Pete Marland, chair of the LGA's economy and resources board, said: 'Greater financial certainty and a simpler funding system are important. However, all councils remain under pressure and face having to increase council tax bills to try and protect services at the same time as making further cutbacks. 'A sustainable, long-term financial model for local government must lead to all councils having adequate resources to meet growing cost and demand pressures.' London Councils, which represents the capital's 32 boroughs, said the report shows 'change is long overdue', but raised concerns over the Government's plans for changing the way funding is distributed. Claire Holland, chair of London Councils, said: 'The Government's plans to reform council funding are pivotal for ensuring local areas receive funding that genuinely matches their levels of need and enables them to cope with fast-rising costs and pressures. 'It's right that the Government is targeting deprivation in the new formula, but we are concerned that the measures used in the current proposals will not sufficiently account for London's extreme housing poverty. This could mean London is left without the funding we need to deliver vital local services and return to financial stability.' A Ministry of Housing, Communities and Local Government spokesperson said: 'The Government is taking decisive action to fix the broken council funding system, so local leaders can deliver the vital public services their communities rely on. 'We have announced over £5 billion of new grant funding for local services on top of the £69 billion already made available this year to boost council finances, and we will go further to reform the funding system to make it fit for the future. 'This will ensure councils get the support they need and protect residents from further costs by keeping a 5% limit on the amount council tax can be raised without a referendum.'
The Independent
15-07-2025
- Business
- The Independent
Analysis finds devolved tax powers could add £4 billion for local services
Allowing councils to administer and retain taxes generated locally would boost funding for services by more than £4 billion in many areas and 'supercharge' economic growth, a new analysis suggests. The report argues that new fiscal arrangements which enable authorities to a proportion of revenue from income tax, stamp duty and the apprenticeship levy alongside a new tourist tax could prove transformational and support the delivery of the Government's priorities. The County Councils Network, which commissioned the report, stressed the proposals do not advocate tax rises and acknowledged that a process of redistributing tax revenue would need to be established to address regional variations in the amounts generated. Deputy Prime Minister Angela Rayner recently said she wanted 'more push' towards fiscal devolution as part of the Government's pledge to transfer central decision making to local areas. The English Devolution White Paper published last year states that mayors could submit proposals for new powers, such as fiscal devolution, which the government is obliged to consider. The guidance recently published alongside the the Devolution and Community Empowerment Bill earlier this month stipulates that new strategic authorities can pilot devolved powers to make it 'easier to deepen devolution over time'. The 20 CCN councils, including top tier shire authorities and unitaries, serve about 45% of the population and contributed almost £390 billion in national tax receipts in 2022/23, the report said. This level of county revenues amounted to 44% of the revenue total for England of £891.3 billion, rising to 57% if London's contribution is not taken into account. This includes contributions of 62% in income tax and and 55% in VAT. The analysis found that expenditure in county areas totalled £273 billion, amounting to a net benefit to the exchequer of £113.6 billion a year. The report said allowing authorities to retain 'better than expected' income tax growth could raise £3.8 billion in county areas annually and would 'dramatically incentivise' local job creation. Retaining half of stamp duty on new homes could provide about £237 million and encourage councils to deliver more housing, the analysis showed, while a tourist tax set at £2 a night could generate about £209 million in extra annual revenue. If county and unitary councils were granted 10% of funds from the apprenticeship levy generated locally, councils could direct an estimated £120 million a year to skills and growth. The report concluded that these measures combined could raise about £4.4 billion in county areas, which equates to 10% of an average budget for these authorities, while nationally the figures are about £8.9 billion a year. Richard Roberts, CCN's economic growth spokesman, said the research 'warrants serious consideration from government and from existing mayors'. He added: 'There has never been a better time to consider empowering local areas with fiscal devolution and let's be clear: this is not about new taxes for local residents and businesses. It's about using existing taxes more effectively, allowing local areas who understand what's needed to drive growth to invest to that end. 'More pressingly, there is the shared local and central government need to increase growth, create jobs and build homes alongside the urgency to invest in local economic growth services and infrastructure. 'The potential revenue generated from the fiscal devolution options modelled in this report would be a game-changer for local areas, allowing them to invest in growth and incentivise areas to maintain productivity gains. 'Whilst there will still be a need for central government to a play a redistributive role to ensure equity across regions, we have long argued counties are the backbone of the economy. 'Now is the time for Government be bold and ambitious and think about unleashing the potential of counties.' London Councils, which represents the 32 boroughs in the capital, said authorities' current reliance on council tax and government grants perpetuates unsustainable financial stress. Claire Holland, chairwoman of London Councils, said: 'Devolving more fiscal powers to a local level is crucial for fixing this broken system and ending the crisis in council finances. 'With more autonomy and flexibility – such as powers to introduce an overnight accommodation levy – we would be in a much stronger position to respond to our communities' needs and encourage economic growth. 'London is the powerhouse of the UK economy, but still faces immense challenges around productivity, unemployment, and poverty, as well as an enormous £500 million funding gap in boroughs' budgets. 'Fiscal devolution could help us tackle these issues and maximise London's contribution to the country's future prosperity.'
