Prospects for codifying the relationship between central and local government

Written evidence submitted by Bristol City Council (L&CG 03)

1. Article 4 ‘Scope of local self-government’ of the European Charter for Local Self

Government states that ‘Local authorities shall, within the limits of the law, have full discretion to exercise their initiative with regard to any matter which is not excluded from their competence nor assigned to any other authority’. Yet historically, England has been one of the most centralised democracies in Europe. It can be argued that a significant element in the weakness of English local government in comparison to central government has been the lack of constitutional definition or protection for local government. When examined on a worldwide scale England is not alone in having minimal or no constitutional safeguards for local government, but there are also useful examples where relations are more formalised.

2. In Germany, the constitution (Basic Law) recognises and offers protections for local government. Article 28 (1) guarantees the existence of elected councils for counties and municipalities (though not ruling out changes in their boundaries). Article 28 (2) guarantees municipalities "the right to regulate all local affairs on their own responsibility, within the limits prescribed by the laws." It also guarantees their "self-government" within their areas of competence, and critically applies this principle to "the bases of financial autonomy; these bases shall include the right of municipalities to a source of tax revenues based upon economic ability and the right to establish the rate at which these sources shall be taxed." In Article 28 (3), the Federation stands as guarantor that Land constitutions will respect these rights. This is generally interpreted as giving local government right to appeal to the Constitutional Court against Land legislation which it believes is contrary to its rights of self-government [1] .

3. The Chairman of the LGA, Sir Simon Milton, has, among others, argued "councils will only be free when we can guarantee the rights of local councils, and the democratic mandate of councillors, in a constitutional convention". Much of the content of such a resolution could be drawn from the Concordat signed by the Department of Communities and Local Government (CLG) and the Local Government Association (LGA) in December 2007 and from the European Charter of Local Self-Government. To be truly meaningful, however, any such resolution would have to address the issue of finance. In this respect, provisions within the French and German constitutions on self-financing, and on the diversity and buoyancy of funding sources provide useful examples.

4. As we have noted in previous submissions, English local authorities currently have quite a wide service remit, yet a relatively limited and inflexible financial base, particularly in relation to their European and Commonwealth counterparts. There should therefore be a combination of local income sources for local government, which could include:

· A reformed and more equitable property tax

· The progressive re-localisation of business rates (similar to German model)

· The transfer of a proportion of national income tax to fund local government directly, either initially as an assigned revenue, developing into a local income tax or moving straight to a local income tax;

· A reduction in grant to local authorities consistent with this shift of national income;

· A basket of smaller taxes and charges, for example:

o Localised vehicle excise duty;

o Local sales taxes (not a general sales tax, which would fall foul of the EU VAT regime);

o Localised stamp duty on property transfers;

o Land value taxes;

o Tourist (bed) taxes;

o More charging for services, using and extending the powers in the 2003 Local Government Act;

o Charges for utilities’ street works;

o Local congestion charges

o ‘Green Taxes’.

5. Greater direct management of European structural funding is also essential to ensure that the full potential of the funds can be exploited. Previous experience with European structural funds has highlighted the need to have greater local involvement over the development and management of the programme, ensuring that the policy fits local priorities and has greater alignment with sub-regional strategies and national funding programmes.

2 December 2010