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10/07/2014

Govt committee calls for greater devolved city powers

Words: Sam Waddicor

A government committee has recommended that more economic powers should be devolved to English regions to help stimulate growth.

The Department of Local Government and Communities (DCLG) select committee recommended fiscal devolution for large cities such as London, Manchester, Birmingham, and Leeds.

Currently, cities in England control around five per cent of the money generated from taxation in their regions, with the other 95 per cent going to central government. They receive funding from eight different departments and 61 different pots of grant money which all come with conditions on what money can be spent on what project.

If the select committee’s recommendations are implemented, the power to fund developments would lie with the regions rather than Whitehall. Supporters say that this would lead to more focused projects from people who know what is needed in their areas. It would also enable greater local autonomy, with the regions being able to distribute and spend much of the revenue raised in their area on their area. This would make planning decisions more visible and make local people feel more involved as they would know that their taxes were being directly spent on them and problems they are facing.

The cross-party Communities and Local Government committee chairman, Clive Betts, said: "If the citizens of New York, Frankfurt and Tokyo can be trusted with tax-raising powers, why not the people of London, Greater Manchester or the North East?

“Local areas know best how to stimulate their economies. With a wider range of revenue streams at their disposal, they would be able to invest in infrastructure and projects that mattered locally – without having to rely on or wait for handouts from central government.

“Local people would then reap the rewards through increased tax take, which could be reinvested in their areas. In the same vein, if local politicians failed to deliver, they wouldn't be able to hide behind Whitehall and Eric Pickles.”

A treasury spokesperson said: "Stamp duty land tax and business rates are set nationally and are important sources of government revenue, raising several billion pounds each year to help pay for the essential services the government provides and supports both locally and on a national basis."

He defended the status quo: "We have recently devolved a range of responsibilities and funding through the Localism Act 2011 and have decentralised local government finance through the Local Government Finance Act 2012. Although the government keeps all taxes under review, any further fiscal devolution to sub-national authorities in England would represent a significant change to the existing tax landscape with potentially significant legal, economic and constitutional implications."

Brandon Lewis, the local government minister, added: “Contrary to this report’s blinkered view in concentrating power in the most distant and unaccountable tiers of municipal authority, we believe in devolving power down to the lowest appropriate – to councils, neighbourhoods and, most importantly, direct to local taxpayers.”

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