Reform of Local Government Finance in Britain

Ronan Paddison, S. J. Bailey

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136088049
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

First Published in 1988. This book of readings was compiled during the period between publication of the Green Paper 'Paying for Local Government' (Cmnd 9714) in January 1986 and the passage of the English and Welsh Community Charge (PoIl Tax) Bill through Parliament during the first half of 1988. The Scottish Bill reached the statute book in May 1987. Whilst the Scottish Bill had a fairly easy passage through Parliament that for England and Wales generated a particularly contentious debate centred on the lack of account taken of the ability to pay the tax. This book provides the reader with a balanced and comprehensive examination of the British PoIl Tax system.

Chapter One

LOCAL GOVERNMENT IN BRITAIN: RATIONALE, STRUCTURE AND FINANCE

Ken Young

INTRODUCTION

A century ago, the question of local government occupied the attention and energies of statesmen, the press and intelligentsia to a degree which today's debates only faintly echo. Popular emancipation through the extension of the franchise brought to the forefront the need for some form of elective institutions below the level of the state, building upon and making universal the model of the reformed borough council of the 1835 Municipal Corporations Act. Views differed as to the precise purpose of these local councils. Radicals saw local government as a vehicle of popular mobilisation. Some Conservatives saw the need to resist the extension of reform for that reason. Others saw the possibility of local democracy as a counterbalance to the administrative state, the coming of which seemed the natural corollary of popular politics. The settlement of the question of local government through the ‘county councils act’ of 1888 and the ‘parish councils act’ of 1894 (followed five years later by the completion of London government reform) satisfied most of these aspirations. In the following decade the moderate politics of the provincial cities and the aristocratic dominance of the counties laid to rest many of the more lurid fears.

It was a robust settlement, capable of withstanding the strains of a century of social, political and demographic change with periodic adaptations and adjustments to structure, functions and finance. That the settlement has now collapsed is due not to any inappropriateness of structure (so easily revised) nor to the atrophy of local autonomy (so often exaggerated) nor even to any special deficiencies in its financial underpinnings (so long thought tolerable). It has collapsed because we have lost sight of the underlying rationale – the why of local government – a rationale that any Victorian politician understood intuitively and which has been embedded in the implicit political education of succeeding generations.

That loss points up a failure in the political education of the governing classes, whose grasp of the intimations of the British political experience has never been less sure. For no counter-rationale has been offered. No political party argues that the time for local government is past, that central determination of local issues is proper or more appropriate. Rather, specific interventions to achieve national purposes at the sub-national level are pursued, for reasons for expediency, at the expense of local authorities. This is to make no judgment about the propriety of the purposes themselves nor of the likely efficacy of the means by which they are to be sought. It is possible to be agnostic on a range of issues from metropolitan government and inner city regeneration to school governors and the business rate while recognising that their cumulative impact is to change the nature of the polity.

It is of course necessary to recognise that governments will assume the responsibility for the public welfare in a wide range of senses, from promoting educational achievement to fostering competitiveness. Indeed, we give too little critical attention to the question of how governments can pursue their legitimate national aims when these must be achieved largely through local actions (Young 1983). But these responsibilities are not exhausted by the pursuit of programmes; the maintenance of the polity itself – what in another regime might be termed ‘upholding the constitution’ – is fundamental. And when we lose sight of the rationale for local government the way is open for an unconsidered, insidious and cumulative process whereby the substance of local democracy can be unintentionally quashed. It is in this sense that a programme of governmental actions towards local authorities may be described without paradox by a great public lawyer as ‘politically unconstitutional’ (Griffith, 1985).

The root of this ‘unconstitutionality’ lies not in particular actions but in the assumptions which underlie them. Thus, the Government's rejection in the 1986 Green Paper Paying for Local Government (Cmnd 9714) of structural changes (understandable) and of increased Whitehall control (laudable) in favour of the abolition of domestic rates and the substitution of the community charge is in itself no more than a controversial and perhaps ill-considered move, the merits of which will be fully explored by the other contributors to this volume. My concern is with the underlying assumption, with the lack of political understanding revealed in the Green Paper's claim that the principal rationale for local government is the provision of services to local people. ‘What is the role of government in this country?’ asks the Green Paper. The answer – ‘the main role of local government is to provide services in a way which properly reflects differences in local circumstances and local choice’ (Cmnd 9714, p. vii).

This innocuous and apparently self-evident claim must be challenged. True, the popular support for local government is probably shaped more directly by the experience of service delivery than by any other factor. True, many influential and well intentioned people expect local government to fight its corner on the basis of its record on local services. But to found the existence of local authorities on service provision alone is to provide an inadequate rationale. Other agencies may do particular jobs more effectively. The boundaries between public provision and market provision are a matter of historical accident and are not immutable. The public good can be equated neither with municipal imperialism nor with minimal local government. Service issues can be settled from time to time on their merits. The danger lies in a sequence of pragmatically adverse judgements about the competitive advantages of local authorities as providers of particular services being taken to imply the redundancy of local government as a political institution. It implies that local government is to be viewed in terms of convenience and, if that convenience is exhausted, as something expendable.

Local government is first of all a political institution and a vital part of the framework of democracy in Britain. The secure foundation of a system of local government therefore requires a wider rationale than that provided by the Green Paper. The wider rationale is to be found in large measure in the report of that other inquiry (The Widdicombe Report) – announced in tandem with the finance studies which culminated in the Green Paper – ‘The Inquiry into the Conduct of Local Authority Business’ (Cmnd 9797). Widdicombe's analysis, unlike that of the Green Paper, is based on the view that the case for local government must rest on three distinct, but practically inseparable bases. I shall call these the arguments of pluralism, participation, and public choice. Taken together, they constitute a rationale for local government that can be as robust and relevant in the twenty-first century as in the nineteenth and twentieth. However, a rehearsal of these arguments – political arguments within each of which there are many different positions to be taken – is a vital but neglected preliminary to any consideration of the essentially subordinate issues of structure, functions and finance.

(1) PLURALISM

The first line of argument in defence of local government derives from a concern with political liberty which predates democracy and yet is recognisable to us. It can be located in the rise of the modern European state in the 16th and 17th centuries. At that time it became necessary to redefine the relationship between state and citizen in terms of intermediary corporations which, by protecting existing privileges or liberties restrained the power of the would-be autocrat. The fear of absolutism and the dispossession of lands and wealth was sufficient to support the rise of pluralist doctrines as rhetorical counterweight to the growth of the state.

Those who claim to find little relevance in the general propositions about local government and political liberty focus too narrowly upon the freedom of the individual and the direct significance for him or her of central or local government power. This preoccupation with a polar tension between the individual and the state is part of the heritage of J.S. Mill. It reflects the sense that the mediating institutions of the medieval world would have been swept away, leaving only Law to mediate between the individual and the state in an otherwise face-to-face encounter.

Yet the fundamental point about the significance of local government for political pluralism rests on no such bald polarity. Rather, it concerns the need to moderate a tendency or temptation towards autocracy which is itself destructive of good government.

Intermediary bodies, as corporations in their own right, interpose themselves between the individual and the central power. Historically, a good deal of early pluralist thinking derived from the controversies over the relations between city and monarch (Lustgarten, 1983; Nicholls, 1975). Those relations demonstrate that governments generally find such intermediaries inconvenient, even as forces to be reckoned with. But this is proper. Their role is to mediate and temper the exercise of political power.

It must be recognised that there is no challenge to sovereignty itself here. No rival mandate need be invoked. While some distinctively American arguments about local government presuppose a divided sovereignty or ‘a real division of power’ (Maas, 1959) they are, however widely quoted, of little relevance to Great Britain. The theory of the intermediary corporation subsists quite happily with the notion of sovereignty and no particular difficulty arises in the case of the unitary state in which local authorities draw their status from Parliament. For John Milton, writing in 1660, every county in the land should ideally be ‘a kind of subordinate Commonaltie or Commonwealth … so it be not supreme but subordinate to the general power and union of the whole Republic’ providing thereby ‘not many Sovranties united in one Commonwealth, but many Commonwealths under one united and trusted Sovrantie’ (Wickwar, 1970).

This I take to be the classic statement of the proper relationship between centre and locality in Great Britain. It makes no claim that would not be readily conceded by the British public, who appear to combine belief in the value of independent local government with a recognition of the superordinate nature of the centre. It is, after all, no accident that the heyday of local government was also the heyday of the symbols of monarchy and indeed of its inflation into the Imperial ideal. The celebration of the centre and the celebration of the periphery went hand in hand in Victorian England. They can and should do so today.

Again, this view has little to do with democracy as such. Modernisation and change lead to both an extension of the scope of government and to an increase in popular expectations of government. Over time, government's capacity to satisfy those demands increases, but eventually at a diminishing rate, while expectations continue to increase. The governmental crisis of modernisation can be tackled only by further extending the capacity of government, or by lowering expectations, or by a mix of both measures. Local government has an important part to play in this particular school of statecraft by helping to maintain a sense of the possible and by ensuring that government's own reach does not outrun its grasp too far. This is what I would term the underside of the intermediary theory. Local authorities, as intermediaries, buffer the central power from the ultimately unmeetable pressures of a mass democracy. Pluralism is good for governments too.

The rise of the European autocracies between the wars quickened interest in the longstanding pluralist arguments (Anderson, 1967) and encouraged not a return to the phoney historiography of the Anti-Centralization Union but to the idea of the intermediary corporation. The young Harold Laski wrote that the implication of what he called the ‘monastic state’ in a modern complex society was ‘the transfer of freedom from ordinary men to their rulers’ (Laski, 1925). Douglas Cole, another committed interpreter of the pluralist tradition, commented that democracy can work at the scale of the modern nation-state ‘only if each state is made up of a host of little democracies’ (Cole, 1960). And it was this relationship between local government and what we might term the culture of liberal democracy that William Robson had in mind when he wrote that:

there can be no such thing as local government … under a dictatorship. Freedom in the localities implies freedom at the centre. Dictatorship at the centre inevitably involves the arbitrary suppression of local freedom and initiative, the curtailment of local responsibility and opportunity (Robson, 1935)

These were arguments put in time of political crisis, and it is perhaps only in such times (the leap in the dark of franchise extension, the rise of the dictators) that thoughts turn to the justification of a plural society (Young, 1985a). It should be no surprise, then, that the last few years should have seen a ferment of intellectual activity in which the democratic left have returned to the pluralistic strand in English socialist thought. Earlier in the century Guild Socialists argued for the autonomous organisation of the workplace in their gentle and so-English version of European socialism. Today, this same impulse to both mobilise and defend working people at the smaller scale manifests itself in Local Socialism (Gyford, 1985; Boddy and Fudge, 1983).

The practice of this new municipal pluralism, with its emphasis on local self-determination and experiment, are at the forefront of the campaign to defend local government against the centre. It places considerable importance upon the advocacy role of the local authority, speaking for an area against the central power as the Greater London Council and Metropolitan County Councils have done with such vigour. It is decentralist and participatory. It concedes the validity of many of the criticisms of local government as both autocratic and inefficient. Above all it argues that a new social order cannot be achieved by wrestling control of the state,...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Contributors
• Preface
• Introduction
• 1. Local Government in Britain: Rationale, Structure and Finance
• 2. The Recent History of Local Fiscal Reform
• 3. The Politicisation of Local Government
• 4. The Legal Limits of Local Autonomy
• 5. A Poll Tax for Britain?
• 6. Local Freedom and Central Control – A Question of Balance
• 7. Rates Reform and the Housing Market
• 8. The Future Role of Grants in Local Government Finance
• 9. Non-domestic Rates and Local Taxation of Business
• 10. Local Government Finance and Macroeconomic Policy
• 11. The British Reform in its International Context
• 12. Conclusion
• Index