Government and Institutions

Local government can be made self-financing claim IEA authors


Economic Theory

The impact and legacy of the seminal 1981 Budget
Local government has never been less accountable to its electorate and more subject to central government control than it is today. At present, councils receive 75% of their revenue finances from central government and their role is closely defined by Westminster. There is little scope for the development of different or distinct policies in different local council areas. This prevents experimentation and also prevents local government responding to the particular needs of their locality. A new study, edited by local government expert John Meadowcroft, published by the IEA* shows how local government can be made self-financing and how local authorities could then be allowed to develop different and distinct approaches to service delivery.

It is argued that local government could be made self-funded by transforming VAT into a local sales tax used specifically to fund local councils. The local sales tax would be collected by councils who would be directly accountable to their electorates for how the money was spent. Councils could set different tax rates as they competed for revenue and people would be free to move to and shop within those local authorities whose tax and spending regimes most closely corresponded with their own preferences.

The study also examines the case for local government from first principles, analyses the Blair government’s programme of local government modernisation and examines the successes and failures of PFI.

Read the full study here.