The Control of Resources and Local Democracy

Peter McLaverty

Reading Helen Jackson’s autobiography, People’s Republic of South Yorkshire,¹ reminded me of the PhD research I carried out into Sheffield City Council in the late 1980s.² As Jackson argues in her book, Sheffield City Council, along with other councils including, but not limited to, the Greater London Council (GLC) under Ken Livingstone’s leadership, in the early 1980s, attempted to offer a socialist alternative to the neoliberal policies and approach of the Thatcher Conservative governments. For a while, Sheffield and other councils made progress in furthering that aim, promoting equal opportunities, improving the position of low paid council workers, working with local communities, trade unions and workers, developing policies to improve council services, such as bus services, council housing and arts and cultural policies, and promoting exciting industrial and employment policies in their local areas. However, again as Jackson argues, after defeating the miners in 1985, after their year-long strike, Thatcher and her government next turned their attention to local government, with the aim of stopping Labour councils with ‘new urban left’ leaderships (to use John Gyford’s term)³ and, in the process, restricting what all councils could do.

Restrictions on local government

The decisive policies in the assault on the new urban left-led Labour councils were rate-capping and the abolition of the GLC and the metropolitan county councils. The rate-capping policies gave central government considerable control over what councils could do by restricting the funds councils could spend through the central government’s ability to cap or limit the amount each council could raise through the domestic rates (since replaced by council tax). The campaign by councils to prevent rate-capping was unsuccessful, despite efforts to co-ordinate actions by councils and support among academics, trade unions and various pressure groups. The central government still retains council tax-capping powers in England. If a council wants to increase its council tax above a certain level, they must initiate a referendum among their voting population to allow the higher increase. The Thatcher governments further restricted what local councils could do through such measures as deregulating and privatising local bus services, selling off council housing (through the right to buy policy), and effectively preventing councils from building new council houses and flats, and forcing local authorities to put services out for compulsory competitive tendering. In England, compulsory competitive tendering has been ended, the right-to-buy policy for council tenants continues and has been piloted for housing association tenants. Though councils can now build council houses, outside London council control over local bus services remains limited.  Funding restrictions still exist. Between 2010 and 2020, local councils in England lost almost 60 per cent of central government funding, with some of the biggest cuts being imposed on some of the poorest council areas. ⁴ Moreover, significant central government spending in local areas is determined through competition between local councils for central government funds which is granted for specific purposes.

Decentralisation and devolution

With the government announcing the possibility of greater decentralization (and, perhaps, devolution) of political powers across England in its Levelling Up white paper and in the Queen’s Speech, this is surely the time for Labour to look at the funding of local government.⁵ The white paper indicates the type of powers that might be  to different local government organisations, though the details are limited. It is also not clear whether local areas will get the funds to carry out certain activities only if they meet definite central government-imposed criteria and/or are selected by central government in a competition between authorities, which is how much money under the general ‘levelling up’ agenda has been dispersed over the last couple of years. The results of the use of such mechanisms have sometimes been highly regressive. For example, 61 per cent of poorer areas in England have been allocated no money under the leveling-up fund worth £48 million.⁶ Of 79 areas in England who applied for central government funding to improve their bus services, only 34 will get funding. South Yorkshire asked for £474 million but will receive nothing.⁷ If this approach is to be continued, there will be little scope for local initiative or democracy.

If the Conservative government is willing to devolve powers to local areas, it is crucial that all relevant bodies should be able to get the resources they need to make democratic use of new and existing powers. Of course, resources should be allocated from the centre to local government based on need, with the cuts of the past 11 years reinstated. But beyond that local government organisations should have the power to raise funds from local taxation in a way that is prevented by the current working of the council tax system and is more progressive.

To make local taxation more progressive the council tax bands could be extended at the top, with frequent periodic re-valuation of property to take account of housing price inflation, so that those living in the most expensive property are taxed fairly. Alternatively, council tax might be replaced by a proportional, or a progressive, property tax, as proposed by the IPPR.⁸ This would involve not only abolishing council tax but also stamp duty. The drawback of a proportional property tax replacing council tax is that it would limit the ability of local authorities to raise or reduce the funds they need to meet their commitments by varying local tax rates. Further restricting the ability of local authority organisations to collect and be responsible for part of their revenue would not promote local democracy.  Council tax is the only tax in the United Kingdom where potential increases above a specified level must be agreed by a referendum of the people. From a democratic point of view, there seems little, if any, justification for this difference. If people, therefore, in a local area support what the local council, the combined authority or mayor wants to do, the council, combined authority or mayor should be able to raise the funds they need – over and above what it receives from central government – from local taxation.

If more powers are to be devolved to local areas in England, now is a good time to look at ways in which councils might involve local people in the budget setting process. Recently published research reports levels of dissatisfaction among members of the public in Britain with politics and the political process which show that representative democracy is not in a good state in Britain. Turnout at UK general elections fell below 70 per cent for the first time since 1945 in 2001 and has remained below 70 per cent at each subsequent general election, with turnout being lowest among young people, low earners and those with fewest educational qualifications.⁹ (Turnout in local elections is on average considerably lower than in general elections, at around 30 per cent.)¹⁰ 78 per cent of those surveyed said that ‘politicians understand the lives of people like you’ badly, with 36 per cent saying they understand fairly badly and 42 per cent saying they understand very badly.¹¹ Only 6 per cent of the sample thought their views were the most important influence on the decisions government ministers make, with a quarter believing major donors to political parties are the main shapers of policy.¹² The research shows that feelings of what might be called estrangement from formal politics are particularly strong among younger people.Only 19 per cent of people aged 18-24 think democracy works well, with 55 per cent saying it works badly.¹³ In addition, people in the most deprived neighbourhoods are least likely to say democracy serves them well.¹⁴ In short, a big gap exists between politicians and the people.

Budgeting and democracy

There is a danger that if political power is devolved, without a clear effort to increase people’s trust in representative democracy, the dissatisfaction expressed towards national parliamentary and governmental politics might be devolved to local government. Involving members of the public more in the local government budgeting process might help to reduce the gap between politicians and the people, though obviously more thorough changes in the relationship between the people and elected politicians and the political sphere is needed.

One method for involving the people in the local government budgeting process is participatory budgeting. This was initiated in Porto Alegre in Brazil in the early 1990s and has since been applied in several different parts of the world. The method is applied in different ways. In Britain, where the idea has been applied, it has generally been used to enable people in a local area to decide how a comparatively small amount of money can be spent to improve their area. But my outline of how the method might work would involve people in the general local government budget-making process which will enable them to gain some control over how resources are spent across services, activities and geographical areas.

I would suggest the process could begin with annual meetings open to all local residents in distinct neighbourhoods. At the initial meetings, people could come forward with priorities for the allocation of the local government budget. Different proposals could be debated and the people could decide on their priorities. At the initial meetings, people in neighbourhoods could elect delegates from their number to attend a meeting of delegates from different neighbourhoods who will discuss the spending priorities that have been put forward by the neighbourhoods and, from those suggestions, decide the priorities they think should be funded by the budget. The priorities could then be considered by the local council and and/or the mayor. The final decision-making power would rest with the councillors and/or mayor who are accountable to all the people through elections, even if turnout at local elections in Britain is low. If the local councillors or the mayor rejected any proposals, they could be under an obligation to explain and justify why each proposal was being rejected. A proposal might be rejected, for instance, because it goes against the policy commitment of the council or mayor or it is seen as requiring other policies to be implemented before the suggested policy could be made to work effectively, or a proposal might be outside the council’s competence or be incompatible with existing law. Parts of the council budget have to be spent in line with statutory requirements and that limits the freedom of local government over its budget. The important point is that reasons for rejecting a proposal should be set out clearly, and not in a way that simply dismisses what the people have put forward.

Specific efforts should be made to ensure that people from social groups who participate in small numbers in elections and in ‘politics’ generally are encouraged and given a real opportunity to participate and have their views heard in the budget making process. The mechanism would be of little benefit if it simply resulted in people who are already active in politics having even more influence over the process and, in effect, entrenched existing political inequalities. Care should be taken in deciding the timing of meetings to maximise opportunities for participation. Each of the initial meetings should probably be moderated by an outsider, so that the meetings are not dominated by the articulate, those who want to talk all the time and those who want only one issue or proposal to be discussed. It would also be a good idea to have a list of rules about how the meetings will be organised that can be agreed by all attendees, along with a summary of the scope of local government. One of the benefits of participatory budgeting, as Paul Ginsborg has argued, is that it is an annual ongoing process and thus can help people to get into the habit of political participation, with possible positive knock-on effects.²²

Once the participatory budgeting process is up and running, each year the council and/or mayor should report back to the people explaining how the budget was spent and the impact of the spending. People should have an opportunity to question councillors and/or the mayor on the report. This would give people the ability to see whether and how their priorities have been followed and with what impact. Reporting back could become a prelude to the annual budget-making process and could take place at the start of the initial neighbourhood meetings or in separate meetings.

Conclusion

Given that differences in voting and in other political activities reflect inequalities in society, a two-track approach to renewing democracy is needed. Public estrangement from politics is unlikely to be effectively tackled on a large scale while the inequalities that exist in Britain remain. As C. B. Macpherson argued many decades ago, to achieve greater political participation in liberal democracies there needs to be greater equality but to achieve greater equality, more political participation is needed.²³ In other words, efforts at promoting greater and more inclusive political participation and other measures to increase popular trust in politicians should be connected with measures to achieve greater social equality.