Tax powers for English cities urged

Local leaders in cities such as London and Manchester should be handed tax-raising powers, an influential group of MPs has said.

Cities including Manchester should have tax-raising powers, a committee of MPs said
Cities including Manchester should have tax-raising powers, a committee of MPs said

The Communities and Local Government Committee said that although English authorities had been given more responsibility for spending and limited control over business rates, they still had far less scope than the Scottish Parliament and Welsh Assembly.

Ministers need to develop a "framework for devolution" that would gradually see all local authorities given power over business rates, stamp duty, council tax and other smaller taxes and charges.

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."

Labour MP Mr Betts added: "The Government should work with groups of local authorities, focused initially on England's large cities, to break the log-jam stopping local areas from shaping their economic destiny.

"The public might well ask, when Scotland and Wales are being promised ever greater fiscal devolution, why not England? Devolving these powers is the next step on the path to genuine localism."

Local government minister Brandon Lewis said: "We disagree with the calls in this report for higher council tax, higher parking charges, higher business rates and new hotel taxes. There is no public appetite for a barrage of new stealth taxes on hard-working people and local firms, which would force up the cost of living and destroy jobs.

"This Government has devolved down funding and powers down to local communities, from housing finance to business rates, whilst avoiding higher taxes. 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."

A Treasury spokesman 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.

"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."

Local Government Association (LGA) chairman Councillor David Sparks said: "The right to local government that is financially independent has existed as long as England has existed.

"When I first started in local government it was self-evident and unchallenged that local government is financially viable and independent. However, over the last 30 years there has been such an erosion in our powers that today we need to re-establish and reshape these constitutional foundations for the 21st century.

"In short, we need a new constitutional settlement saying: First of all, what local government should do. But secondly, what central government should not do."

Mayor of London Boris Johnson said: "I am delighted that this excellent report recognises the overwhelming case for granting greater financial powers to London and other English cities that want them. There is a conundrum at the moment in the British constitution which is that Scotland and Wales have had a very great deal of devolution, with more on the way, whereas all the attempts to have symmetry in England have come to nothing.

"There is a now growing and welcome cross-party consensus that recognises the economic benefits of giving greater control of taxes raised in English cities back to those cities, which is very difficult for the Treasury to ignore.

"The modest reforms that I and others have been campaigning for and that are endorsed in this report, would provide England's cities with the means, incentives and crucially the stability of funding to deliver much needed jobs, growth and infrastructure."