“Without financial autonomy, political autonomy is a bit of a myth – other countries have 40, 50, 60 per cent of revenue raised at the local level.”

Those are the words of an un-named Conservative MP in today’s Independent, in a story about cross-party concern about the scope of the new Government’s localism plans. The MP is quoted in support of comments from Labour’s Clive Betts, who is seeking to amend the Cities and Local Government Bill to allow Mayors to borrow money.

There’s a microcosm of wider politics there – Labour are seeking to allow local Government to run up debt, while the Conservative is interested in devolving tax powers – but they’re both right.

The Government’s localising instinct, most recently expressed in its Northern Powerhouse plan, is right (though the question of what happens to the south or to county government still needs to be answered) but it should be more radical, devolving fiscal as well as policy control.

At the moment, something like a quarter of the money spent by local government is raised by local government. Under any system there would likely be some proportion of redistributive contribution by national government, but the current split is completely wrong. The whole principle of localism is that running things centrally isn’t just inefficient and ineffective, it’s infantilising – “local” government that doesn’t hold true responsibility over its policies, tax and spending is insulated from the consequences of doing things wrong and denied the full credit of doing things right.

A left-winger like Betts might believe borrowing is the right thing to do, while a Tory like me might think controlling spending and cutting taxes is self-evidently better. But at the moment, neither approach is allowed beyond relatively small changes by local council leaderships.

Many local government powers were centralised in the 1980s for fear of “loony left” councils messing things up. It was an understandable reaction, but it was the wrong approach. If people want to vote for loonies to run their council as a wasteful, inefficient, job-killing mess then they should be allowed to do so – as long as the bulk of the fiscal effects of doing so (i.e. higher and higher council tax) apply locally. As long as those effects are absorbed into general taxation, as most of them currently are, then people are sheltered from the consequences of their decisions and the rest of the nation subsidises some areas’ bad council leaderships.

If we had real localism, I suspect that scenario would play out pretty rarely – and it wouldn’t happen twice in the same place. Voters showed in May that they understand and dislike loony leftism when they rejected Ed Miliband and Ed Balls. We can trust them to do so on a local level, too, if we give them that power.


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