Genuine constitutional reform or devolved spending cuts?
As predicted in yesterday’s entry, the Tax Credits U-Turn made the front pages of every English newspaper known to man. Unless you opened today’s copies of the Northern English newspapers, there was very little about devolution. Or at least, more specifically, the devolution of Business Rates.
Business rate devolution: rich boroughs richer, poor ones poorer?
Though the Conservatives have hailed the devolution of business rates a progressive step, this has been met with concern by opposition voices. One reason could be a sting in the tail awaiting local authorities at the end of this parliament. A 56% cut in the Local Government Grant doled out by Westminster for 2020 – 21.
With the changes, local authorities will be able to keep any income received from business rates. Though this sounds good in principle, there is one major drawback: rich councils will be made richer by higher business rate receipts. Any form of cross-subsidisation or shortfall which could have been bridged by the Local Government Grant would be gone. Ultimately, this could lead to the end of the Local Government Grant and local authorities having to fend for themselves.
Before 1990’s introduction of the Uniform Business Rate (inaugurated the same time as the Community Charge in England and Wales), local authorities had control over setting business rates. Rates were redistributed by Central Government to best reflect population in any given locality.
Yesterday’s announcement is unlikely to offer that luxury. Supposing we had two municipalities with a population of 220,000, a rich borough would earn more per head than a poor borough. If our two boroughs in question were Trafford and Tameside (both with similar populations), the former would benefit more due to Trafford Park Industrial Estate and intu Trafford Centre. Tameside, with 85% of its private employers being small businesses, would lose out.
Furthermore, intu Trafford Centre is a regional shopping centre along with Manchester city centre and the Liverpool One development. The Tameside area has nothing of similar nature to rival intu Trafford Centre. Its main four shopping centres (Ladysmith and Arcades in Ashton; Clarendon Mall, Hyde; and Crown Point North, Denton) are more on a par with Altrincham’s Stamford Quarter, the Stretford Arndale (now Longford Mall) and Sale’s shopping centres. They are major local centres rather than regional centres attracting shoppers throughout the North West and further afield.
Therefore, the amount of business rate receipts will vary from council to council. Each municipality’s receipts will be affected by changes in the labour market. The loss major employer in one area (say for instance Tata Steel in Redcar before its closure) could mean a significant drop in rates revenue. This could mean councils having to privatise more services or ramping up car park charges. The weekly bin collection could be chargeable; your Council Tax bill could resemble an itemised telephone bill based on each service used.
Labour councils would have most to lose. Many with great reluctance have had to cut public services to the bone before the start of this parliament. Furthermore, cuts to local government funding have disproportionately affected deprived areas. Universal Credit claimants on the former Working Tax Credits element pay more income tax than Facebook have in Corporation Taxes. With the taper element, akin to an 85% rate of income tax. As a consequence, being able to heat and eat – let alone spend any money in local pubs and shops – is a luxury, even for the working poor!
What will this do? Well, any number of boarded up shops, pubs or takeaways would mean a loss in business rate revenue. If a major employer goes, the shops and cafés follow suit, as do the ancillary companies. The council loses a chunk of business rates. At worse, some of our post-industrial heartlands could end up like Detroit.
Detroit, Michigan, was dependent on its motor industry. In the 1950s and up to the mid-1960s, it brought wealth to the proud city. As well as Fords, its other gift to the world was the legendary Motown record label and soul music. By the 1980s, its economy tanked. It still hasn’t recovered with many of its proud buildings lying derelict. With municipal assets on their knees, the private sector cleaned up. The people of Detroit are ‘enjoying’ among other things, privatised water, where the company has pursued a programme of water shut-offs for ‘delinquent payers’. 40% of Detroit citizens are without water.
Could this happen in England and Wales? Hopefully not, but some commentators may suggest making up the shortfall with more building sales and privatised council services. Plans to make Academy Status the norm for all schools in 2017 falls into place as the cost of running schools is transferred to private contractors.
What if your council has already had to sell off most of its buildings to keep its core services running over the previous parliament as well as this one? More cuts, though with little revenue from business rates due to depressed local economies. How would it make the shortfall? Inevitably, a rise in Council Tax. At present, this is pegged to 2%, but some flexibility has been given due to changes in social care provision.
More social care provision will be transferred to local authorities. At a time where some councils have no option but to cut social care programmes, thus ensuring your libraries are open. Or that your bins have been emptied on time.
Recent changes could force some authorities to impose an illegal budget. Shortfalls in business rates could inhibit their abilities to set rates by the 31st March each year (as per the 1986 Local Government Act). This (as proven with Clay Cross Urban District Council in 1973 and Liverpool City Council in 1985) could lead to surcharging by Central Government with Messrs Osborne and Co. imposing the cuts on your municipality.
Failing that, you could also ramp up the business rates. But, as some of you may know if you’ve played Sim City 3000, rate changes have an effect on the make up of your city. Lower commercial rates could mean tons of drive thru burger bars; moderate residential rates and well thought out streets could mean a good property market; factories could close their doors if industrial rates aren’t set to correct levels.
In reality, the running of our towns and cities can never be trivialised to computer game form. Maxis’ computer gaming franchise is inspired by one American import which has landed on our shores since Blair’s premiership: the all conquering elected mayor.
Elected Mayors and DevoManc
Since Ken Livingstone became Greater London’s first elected mayor, the elected mayor model has been hailed as a panacea for local democracy.
I don’t buy into elected mayors.
I am not in favour of one individual being the fall guy for an unreasonable budget settlement. Nor am I in favour of one guy being able to massage their ego. It also buys into the personality politics key to U.S. presidency campaigns. The signature of one’s city should be the property of citizens working for the common good. A mayoral led system allows one figurehead to take credit for the grunt work mainly done by the back-of-house staff. Or the front-of-house staff at your public library or council offices. It dumbs down the role of local government.
But, as per the devolution settlement agreed by Sir Richard Leese and other council leaders within Greater Manchester, we are getting one anyway. In fact, we already have one, but he’s a Shadow Mayor crossing the ‘T’s before the first one is elected. The Liverpool, Leeds and Sheffield City Regions are set to follow suit.
From 2016-17, the Office of the Mayor of Greater Manchester will offer greater devolution to our conurbation. As well as the mayor, there will also be a representative from each of Greater Manchester’s Metropolitan Borough Councils. He or she [the Mayor] will:
- Take over the Police and Crime Commissioner’s role (held by former Manchester Central M.P. Tony Lloyd);
- Have control over Transport for Greater Manchester’s functions, including a London style bus franchising system and the GetMeThere Oyster style card;
- Control the conurbation’s emergency services provision and National Health Service functions;
- Oversee back-to-work programmes, devolved from the Department for Work and Pensions.
Till recently, local authorities had a degree of control over back-to-work provision. They ran YTS schemes; oversaw their borough’s Careers’ Services. Prior to the formation of Training and Enterprise Councils (TECs), funded Further Education and lifelong learning programmes. But, the amount of devolution in back-to-work provision – no matter how responsive to local labour markets it may be – is scant compared with previous practice.
Part of recent thinking with the DWP, health and wellbeing is – in controversial circumstances – being integrated into back-to-work programmes. This time with emphasis on behavioural modification rather than holistic needs (via compulsion and rolling the Work Programme and Work Choice schemes into the Work and Health Programme).
This is also consistent with Manchester’s NHS devolution plans. Details of the Healthier Together programme will see fewer specialist hospitals and people travelling further to see their new baby. It also undermines the nationwide principle of our NHS, with the ‘N’ fast becoming ‘Notional’.
A Trojan Horse for more cuts?
Whilst drawing the blueprint for the NHS, Aneurin Bevan eschewed municipal devolution. With good reason; how can a National Health Service be the NHS if one service is available in SK1 though not in OL6? Does the Whitstable branch of Tesco sell a different brand of baked beans instead of Heinz’s, which may be available in Herne Bay? Supposing there’s a number of devolution deals throughout England and Wales, a mishmash of tailored packages would affect a universal service throughout the United Kingdom.
Supposing the Mayor of Greater Manchester gains more control, its 2.6 million residents may be wondering what’ll become of their Metropolitan Borough Councils. Could cooperation between borough councils to save public services result in further centralisation? There could be scope for a Greater Manchester-wide Library Service, a move which could mean fewer libraries (perhaps down to one in the main town). Rates could continue to be collected locally, though The Office of the Mayor of Greater Manchester might take a larger precept.
Much to the delight of some households, there could be a standard colour scheme for all refuse collections in Greater Manchester. With fewer services ran by Metropolitan Borough Councils, their role could be changed to business development, street maintenance and planning.
This is where the benign principles of DevoManc could usher in more cuts. What happens if The Mayor of Greater Manchester has to make the ‘hard decisions’? They’d probably do the same as councils of various colours had had done for years. Tender the service(s) to interested private contractors. In other words, bye bye libraries; bog off buses; toodle-oo trams; refuse refused.
And who will the electorate blame? Well, it wouldn’t be Central Government; it’ll be towards the mayor, and our fellows in Westminster would be laughing. Game over. Goodnight. No more continues. Rewind the tape to 030 on the counter and press the Space Bar to continue. Not even a ‘parachute payment’ of a local government grant.
Which is why I’m no fan of elected mayors. Which is why Westminster’s platitudes on devolution is bogus at worst.
I am pro-devolution, but I prefer a federal model like Germany’s with regional parliaments. In fact, the model prior to Thatcher’s abolition of the GLC was better for Metropolitan areas. Though it wasn’t perfect, we forget about the GMC’s role in bringing the Metrolink to Greater Manchester. Also the restoration of Liverpool Road Station which led to kickstarting Manchester’s role as a tourist destination.
The Conservatives’ approach is more akin to the U.S. model where each city region could be akin to American states with different laws from state to state. Erratic levels of NHS care is bad enough throughout the United Kingdom; business rate changes will heighten disparities. In short, its a road towards a more broken Britain. More than the one David Cameron claimed to be fixing in 2009. Worry now before we get to the point where Liverpudlians are unable to drink till 25 years old due to health concerns and perceived antisocial behaviour.
S.V., 26 November 2015.
East of the M60 