government and only a fraction (one-eighth) is raised locally by council tax. In
2012/13, total central government support to local authorities in the UK totalled
£129.4 billion. This dependency culture must end. A radical new settlement is needed
on taxation, with HMRC sending the appropriate tax take back to local councils via an
independent redistribution commission. Central government could continue to be
free to assist councils with funding on particular problems, just as the federal
governments of the US and many European states do.
The other nations of the Union - Scotland, Ireland, Wales, and Northern Ireland - are
already leaps and bounds ahead of England in terms of financial independence.
The Scotland Act 2012 enables the Scottish Parliament to retain 10p of income tax,
administered by HMRC, for Scottish taxpayers. It is expected to apply from April
2016. A rate of 10 percent levied by Scotland (or any other nation in due course)
would mean no change to the UK rates. It would cover one-sixth of total spending,
and with other retained taxes, one-third would be covered.
“Scotland, Ireland, Wales, and Northern Ireland - are already leaps
and bounds ahead of England in terms of financial independence”
We should not be frightened of what is proposed. This is the way to deliver the most
accountability for the least change. No change in income tax rates. No change in the
method of collecting income tax by HMRC. No change in the equalisation
formula/distribution, so funding levels on the ground would be precisely as now. By
being clear and honest about the amount local government spends and how much
income tax that spend is equivalent to, the relationship between income tax and local
spending becomes much more obvious. Central government will continue to be
funded to precisely the same levels, and in precisely the same way, as now.
While the concept of devolving some responsibility for income tax
government is now established, the degree to which it should apply to
government is open to negotiation, so this could be introduced gently
go. There are, of course, several options for English local councils
government should discuss with local government.
to devolved
English local
or all in one
that central
Firstly, ”the full English” devolution option. Income tax is collected by HMRC as it is
now, but with this setup, one third goes to central government and two thirds goes to
English local government, allocated using the existing redistribution formula. This
would cover most of local expenditure. Linked to the legal separation that my
committee suggests, this would create the sort of independent local government in
Englan