Giving power to people and communities - Nick Clegg speech to the LGA (part 2)

3 July 2008

[Click here to read the first part of Nick Clegg's speech]

We need to radically circumscribe what central government does.

Not just setting councils free of the chains of central targets and central bureaucracy. But transforming the way we run all our public services. Shifting power downwards, where it can be responsive to local needs and circumstances.

The central state has a vital role – of course.

It must intervene to allocate money on a fair basis, to guarantee equality of access in our schools and hospitals, and to oversee core standards and entitlements.

But once those building blocks are in place, the state must back off.

And allow the genius of grassroots innovation, diversity and experimentation to take off.

So in the health service, for example, we should break down the current monolithic structure and give control over Primary Care Trusts given to locally elected health boards, accountable to local people.

It’s time to look at how we make other services accountable too.

Like police.

Police authorities are not elected. But they are allowed to tax people.

This breaches the fundamental principle of no taxation without representation.

And contributes to the unease people have about the effectiveness of their local police.

Who often don’t seem to respond to local demands.

I don’t have a simple answer to the problem.

In seeking to devolve power, we mustn’t set up a complex series of parallel governance structures at local level – that risks giving voters election fatigue as they’re asked to pick representatives for a plethora of different organisations whose power and responsibility they do not understand.

Councils must remain at the heart of local governance. But that doesn’t mean they have to directly run everything either.

Over the coming months, the Liberal Democrats will be exploring ways we can make services like the police more accountable.

Without damaging police neutrality.

Or councils’ role in local life.

For all of the services we seek to localise, much of the funding must be raised locally, too.

Central government will never let go while it holds onto the purse strings.

The Liberal Democrats are committed to scrapping Council Tax.

It’s Britain’s unfairest tax.

Based on property values nearly twenty years ago, instead of what people can afford to pay.

But our commitment to Local Income Tax isn’t just about fairness.

It’s about localising power, too.

Because with a local income tax in place, we can decentralise our tax system.

Transferring tax-raising powers from national to local government.

My ambition is to switch from a regime where councils raise just a quarter of the money they spend, and get the rest in handouts from the centre.

To a regime where they get a grant for just a quarter of the money they spend – and get the rest from local taxes, decided by local people.

Ending the unfair “gearing” mechanism where people see their local taxes soar to pay for marginal increases in the council budget – and don’t understand what they’re getting for their money.

I don’t want to go beyond this 75-25 ratio.

The government needs some leeway to make up the differences between needier and wealthier councils with a grant that varies between areas.

But with 75% of council spending funded locally, we’d have a very different Britain.

How do we achieve it?

First step: at the next general election, the Liberal Democrat manifesto will commit my party to localising business rates.

Putting councils in charge of how much businesses pay for their property.

Labour promised to do this back in 1997.

They chickened out.

It’s no use looking to the Conservatives for help, either.

They’re the ones who nationalised rates in the first place.

But I tell you now, we will never have localised power in Britain unless we put this fundamental tax into the hands of our councils.

It will engage them in their local economies.

Give them a financial stake in regeneration.

And give them real power over the resources communities need for services.

Of course we need to discuss protections for businesses, so we don’t go back to the excesses of the 80s with punitive anti-business taxes in some areas.

But the fundamental point must remain.

Councils should tax businesses, not just people.

Localising business rates will mean that councils will be raising 50% of their money locally.

That’s a vital first step.

That neither of the other parties will even think about.

But I want to go further still.

Replacing Council Tax with a fair tax won’t, in itself, have a localising effect.

Because to start off with, we’ll replace Council Tax pound for pound.

But a Local Income Tax gives us the opportunity to localise taxes further.

Once it is embedded, we’ll cut income tax further at the centre.

Cut the grant to make up the money.

And let councils raise their local taxes to fill the gap.

Eventually, Local Income Tax together with local business rates will add up to that 75% target.

Local money for local services.

And as we localise more services, giving councils control of more local spending, I want to maintain that 75% target.

We’ll keep cutting national taxes, cut regional grants and funding, give local communities control of the services, and let them raise the money to pay for them.

And if they raise taxes too far?

They’ll find themselves voted out of office.

So that’s the plan. Localise business rates. Replace council tax with a local income tax.
Cut central income tax significantly, and cut central and regional grants too. Give local communities the power and freedom to raise their own resources instead. And allow local people the power to choose through the ballot box.

This might sound radical. But it’s what they do in countless other developed economies. It’s called local democracy.

We should try it for a change.

There is one condition on which I would seek to craft this radical redistribution of power downwards in our country.

That councils do the same.

Letting go, allowing communities to make their own choices, and take control of their own destinies.

Councils are less distant than central government, for sure.

But they can be just as monolithic, as restrictive, and as unfathomable to local people.

I am not interested in seeing one set of politicians and officials in London cut down to size simply to give way to another set of politicians and officials in the Town Hall.

The real test of devolution is how much local people, families and communities are empowered themselves.

Liberal Democrat councils are leading the way in changing this.

In Kingston, which has a population of over 150,000, any group of 100 people can call in any decision the council has made.

And the opposition chairs the scrutiny panel – so this is no paper exercise in consultation.

In Hull, Liberal Democrats allowed public questions at cabinet meetings.

And in Cambridge, public contributions at planning committee, and questions at council meetings.

In Birmingham, Liberal Democrats in the administration have re-organised the council into ten 'constituencies' and given them £100m in service budgets and 2,500 staff directly responsible to each.

The 12 councillors representing each constituency have to meet in public, and to build links with the strategic partnerships and with key local agencies in each area.

There are minimum standards for each service across the city, but they have wide powers to adapt services to local needs.

They’re mirroring the model I’ve outlined for national government – limited central rules, with local diversity – at a smaller scale.

In Chard, in Somerset, Liberal Democrats have brought justice home, making up for the loss of a local magistrate’s court with a Community Justice Panel.

That sees low level offenders, makes them apologise for their offending, explain their behaviour – and agree a punishment.

They’ve got a reoffending rate of about 5%.

Because they’re encouraging community action.

And putting power and decision-making in the hands of people, not officials.

I could list examples all day.

But the fundamental point is this.

Central government has a legitimacy problem.

Lots of what it does should be transferred to you – to democratically accountable councils.

You are closer to the people.

But being closer to people should never serve as an excuse for not giving more power directly to people.

The Town Hall may be closer than Whitehall, but it can still horde too much power behind closed doors. So let’s remember that the powers which must be passed down from central Government to local Government must wherever possible be passed down further still – to people, families and communities.

Britain is stifled by our micromanaging, centralising government.

We’ve got to change it.

But when you’re listening to people speak about devolution – ask yourself one question.

Who will make it happen?

Who is prepared to match rhetoric with action?

It is only a party that will commit to devolving power over money. To put its money where its mouth is.

Without control over the purse strings, you as councillors, and the people and communities in your area, will never really be in charge of your own destinies.

You’ll still be treated like children, asking for your pocket money.

The Liberal Democrats are the only party willing to even contemplate giving that financial power to local councils and services.

So we are the only party that will make devolution happen.