It’s natural to care more about those close to us – and that has implications for government
One important reason is that France is closer to us – in location, culture and worldview. While we may pay lip service to the idea of every human being of equal moral worth, people’s revealed preferences suggest that these “distances” tend to be important in how we react to events. If not, on immigration, everyone would talk about the positive impact on the welfare of migrants just as much as the potential impacts on native UK workers. We’d react similarly to motor accidents in our local towns or villages to accidents on the other side of the world.
As Europe Economics’s Matthew Sinclair has explained, it is natural to have more empathy with people closer to us, and it is unrealistic and harmful to insist on equality in our affections for every person on the planet. The relationships we build mean we tend to react more strongly to things that happen to our families, then local communities, then nations, then places we perhaps have visited or feel affection for, before the wider world.
Does this have implications for how we are governed? If we feel more strongly about what happens in our local areas, regions and then nations, should we not try to bring power closer to the people affected by policies?
The government, through its City Deals and recent announcement on devolving business rates, has suggested that it believes decisions being made closer to the people they affect can engender better outcomes. This in itself is welcome, given how centralised the UK has become in the past century.
The disempowerment of local communities is striking. In 2011, just 4.8 per cent of tax was raised sub-centrally – compared with 50 per cent in Canada and 37 per cent in Germany. Even powers that local authorities do have are heavily constrained. On spending, this subservient role can be seen through the 1,300 duties imposed on local authorities in 2011; on taxation, through their inability to alter council tax bands, rates or valuations.
This over-centralisation prevents local preferences and conditions from being represented in policy-making innovations. Should delivery of welfare programmes to encourage re-entry to the labour market really be the same in former steel towns as, say, in the South East? It also leads to voter confusion and weakens accountability, as residents often do not know who to blame for service failures (local authorities who deliver the functions, or central government which provides the funding and rules on how to deliver). At a macro level, it undermines “foot voting” – the ability of voters to reside in different areas with different policies, in turn helping spread good practice.
These theoretical problems are reflected empirically. A weighty literature suggests that, if both spending and revenue-raising powers are decentralised, this dispersal of power can lead to higher national income, better school performance and higher levels of investment. Indeed, the IEA’s recent book Federal Britain estimated that increasing the local share of taxation from 5 per cent to 20 per cent could raise GDP per capita by 6 per cent.
As the chancellor delivers his Autumn Statement next week, these lessons should be borne in mind. Of course, there are certain powers – such as rules governing trade, national defence and foreign policy – that must be delivered at a higher level. But beyond that, the UK is ripe for a major decentralisation of power from Westminster, and the government should be more ambitious and symmetrical in devolving both spending and tax-raising powers to make local authorities more autonomous and responsive to residents. This not only offers significant potential economic benefits, but runs with our instincts about the affiliations we feel with things local to us – providing the prospect of more accountable and responsive government.
Ryan Bourne is the IEA’s Head of Public Policy. This article first appeared in City AM.