Baroness Janke (LD)

My Lords, Amendment 190 in my name would place an obligation on the Government to introduce devolved fiscal and revenue-raising powers within 12 months of the introduction of the Act. Fiscal devolution is the transfer of financial powers and responsibilities from central government to local authorities, enabling them to raise and manage their own revenue and tailor tax policies and spending to meet local needs and ambitions. The UK is widely recognised as having the most centralised system in the world. The dead hand of the Treasury is firmly on the purse strings, holding back local potential, opportunities and energies. Overcentralisation has held back regional economic growth and increased regional inequalities. Vast numbers of reports have been written on this subject, urging central government to empower local government by devolving powers close to the people they affect. Charities and think tanks such as the Resolution Foundation, the LGA, the Centre for Cities, Core Cities and many more have produced well-evidenced reports as to how financial devolution could empower the UK’s communities to boost economic growth and greater public participation in governance, but progress has so far been extremely slow. There are many ways in which fiscal devolution could be achieved in England. Evidence from other countries demonstrates effective and achievable systems in such countries as the Netherlands, Germany, France and Switzerland. Measures include raising direct tax revenues, expanding the tax base, taking a proportion of locally levied income tax, placing different conditions on business rates and making council tax a buoyant and progressive local tax, which it certainly is not at the moment. There is ample evidence available for the successful introduction of fiscal devolution in England. There are many advantages, such as democratic accountability and voter turnout at elections. Anybody who has ever campaigned in local elections will have experienced the challenge of persuading people to go out and vote when they understand that virtually all the funding comes directly from central government. “What is the point of it?”, they ask, when their hopes and aspirations are slapped down because of no funding coming from central government, only more cuts. Economic dynamism benefits enormously from fiscal devolution in that the regions and cities of the UK are able to take actions that add to economic strength, such as attracting inward investment, job creation, skills training and development of specific infrastructure such as transport that enable more locally focused dynamic economic activities. There is also greater transparency and clarity. My colleague talked about the loss of trust among the public, part of which is because of the perception by many voters that money just goes into a great big hole: it comes from central government and they have no influence over how it is spent or raised. If they had more involvement there would be much greater trust and participation in local governance, which is a vital factor in the delivery of key projects. The Government claim that the Bill will provide devolution and empowerment, but clearly it will keep firm central control over the finances. Funds are allocated from Whitehall, and mayors continue to be local outposts of central government who are responsible, in essence, for ensuring that central government policy is delivered at a local level. As my colleagues here have said, unless revenue-raising powers and financial powers are devolved, this is not devolution but decentralisation, and opportunities are likely to be lost: the opportunity to underpin local powers with real financial powers and responsibilities, and the opportunity to give people hope and optimism that they can achieve their local ambitions, with a realistic chance of them being financed, and improve their local area.