Guy Ware: Ten years on — a journey from crash to local government finance

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in Blogs · Resources
— 11 Jun, 2018

It’s a decade since the financial crisis. In that time tax revenues have gone up while money for spending on local government has shrunk. Guy Ware makes the argument not just for more funds, but greater control over local taxes.

Ten years ago, the world was steering a course between the Northern Rock and the whirlpool of Lehman Brothers. Looking back at the effects of the greatest global financial collapse since 1928, we can discern three types of human reaction.

First there are those – let’s call them Trumpians — who, despite proclaiming the importance of “growth”, nonetheless appear to believe that the quantum of wealth in the world is fixed, like karma. Who believe that any deal must be a fight — that, if I am to win, then you must lose.

Then there are the Zuckerberg-Jobs-Muskians who believe our capacity for growth is infinite. All we have to do is cleave to their particular brand of Cupertino-capitalism that, like William Blake, finds a universe in a grain of sand (provided that sand is crushed and melted into silicon).

Financial collapse is merely grist to their mill. From the perspective of the Valley this is not altogether surprising, or incredible. Remember, the iPhone only arrived in 2007; Elon Musk, currently the 53rd-richest man in the world (and the only one named after a 1970’s aftershave) became CEO of Tesla as a result of the 2008 crisis; Facebook’s cashflow turned positive for the first time in 2009.

Then there are the rest of us, who know that physical resources are finite, but that human productivity is not, at least not in any timescale we are capable of comprehending. Who know that, when any part of a complex system flourishes, it can contribute to the welfare of the whole — that it is possible for me to win, and you to win also — or, left to its own devices, like a cancer, it can eat its host from within.

Balance

But what has all this to do with local government finance, I hear Room 151 readers ask?

Well, consider this. Over the last ten years, the number of hereditaments liable for business rates in England has risen by 11%, their combined rateable value by 35% and the gross rates payable by 44%.

The number of Band D equivalent properties liable for council tax has risen by 9.8%. In most spheres of public finance, when tax bases increase, so does revenue. But in our case, central government swaps out its funding to more than compensate for the growth in local resources.

By 2020, government cuts to the core funding of local government in England will have reached 63%. Service after service has been stretched to breaking point. The Public Accounts Committee is asking serious questions about the financial sustainability of local government, and less than 1% of respondents to an MJ/LGiU survey declared themselves “very confident” in the sustainability of council finances.

Meanwhile the Americans — the Americans, for heaven’s sake (or, at least, New York Times journalists) — have taken to pitying us for the decline of our local public services.

Over the next eighteen months central government will take three key decisions for local government: the NHS/social care funding review, the spending review and the fair funding review. And much the least of these is “fair funding”.

Focus on that, and we risk falling into the Trumpian trap: arguing about shares of a fixed, inadequate sum, like bald men fighting over a comb. The Californian cultists will tell us all to chill, because driverless cars, drones and blockchain will reduce the transaction costs of adult social care to zero.

The rest of us, meanwhile, should concentrate on making the case for greater spending by and for local communities; for access to — and control over — taxes that grow when the economy and the tax-paying population grows; for local taxes that fund local services for local people — with local politicians accountable for getting the balance right.