Fixing the shop front of the state
Executive Summary
The contract between councils and their residents has broken down. The link between the amount people contribute in local taxation and the local services they get out has been severed by a tangle of issues: poorly designed property taxes that only go up to pay for statutory services most people don’t use, and poor areas pay higher council tax than rich areas. James Buckley, former Inbetweeners star said it best,
“We put our garden waste out there for the council to take out a couple of weeks ago.. They didn’t take it away. There was a sticker on it saying oh by the way…we’re now charging to take away garden waste. Don’t start with that sh*t. We were always f**king paying for it. It’s called council tax. Has my council tax gone down? No. Has it gone up? Yes. Why are you f**king taking more money off me and doing less?’
Sorting council funding is how we sort the shop front of the state - bins, potholes, parks, libraries, culture, and education. And by sorting the visible bits of the state Labour can demonstrate that the state is working for people.
Failing to repair this contract is a gift to populists. Reform claims that asylum seekers and diversity schemes lay behind the problems at our councils, whereas the Green Party thinks there is a magic money tree of other people to pay for the things that we want as a society.
The solution is a big bang package that combines nationalising the funding of adult social care with the reform of council tax and stamp duty into a unified proportional property tax system. Taking adult social care funding out of councils makes it easier to do real property tax reform without big losers. By shifting funding for adult social care onto a national tax - a new social care contribution levy - we can cut the amount of money property taxes need to raise.
This reform would lead to around three quarters of people paying less in property taxes, and therefore feeling like they are getting more from their council for less. However, people will pay more in national taxes. Labour can tell them that this is a contribution to their own adult social care support. These reforms will hit some harder than others: particularly those in London and the South East, and those who have seen their house shoot up in value but by careful policy design we can shield these groups from the worst of it
No longer will every council increase council tax by the same amount merely to keep up with social care pressures. Now, if a council wants to raise taxes to provide more frequent waste collection it should be allowed to and judged on the results. If a council puts in real effort to redevelop an area and grow its tax base it should get to keep the additional money it creates. This gives areas real skin in the game to improve the retail end of the state.
This report recommends the government takes 5 steps:
Nationalise the funding (but not delivery) of social care - funded in part from moving grants to councils, and from general taxation
Reform council tax and stamp duty into something approximating a proportional property tax
Give areas the ability to vary the rate of the tax and also to retain extra income they bring in from growing their economy
Form a parallel review to the Casey Review to report alongside it, so that these reforms can be done in the first year of the next parliament
In the meantime build capacity in local government - second civil servants to councils, and devolve clear areas of responsibility