CNJ COMMENT - Blast from the past could be the Coalition’s saviour

Published: 31 March, 2011

THOUGH it has been little reported, a plan to revert to an old-style form of funding for local authorities could be the ace up the sleeve for the Coalition government.

That is, if the government survives what a great many economists predict will be a turbulent four years before its parliamentary term runs out.

While some on the left of the spectrum believe the Coalition will implode  before its term ends, all the signs are that the Ed Miliband leadership accepts they are in for the long haul.

If they are right then before the nation goes to the polls in 2015, the government is expected to introduce legislation that will allow local authorities to bank business rates in their areas.

Before 1990, councils were able to collect business rates and keep a dominant share with the balance sieved though a net for distribution to those councils less well endowed with bankable business rates.    

This was known as an Equalisation Policy.

As a result, inner-London councils were able to collect a bonanza of funds from the businesses – many of them the head offices of transnational companies – in their areas.

In Camden, which hosts dozens of world companies, the funds collected by the council ran into tens of millions of pounds a year at the very least. Even after Camden had paid its share through the Equalisation Policy, a sizable net figure remained, large enough to make today’s local politicians green with envy.

In the eyes of some councillors they had “money to burn”.

While Tory think-tankers would like to shrink the financial base for local authorities, it would not be the first time radical policies have had to be put on hold for the sake of electoral advantages – and advantages there would certainly be if the government were able to give advance notice, say at the end of 2014, that local authorities would be able, through the collection of business rates, to make themselves less dependent on Whitehall.

One step back, admittedly, in the long march back to a Victorian version of municipal government. 

But enough – Tory thinkers may believe – to steady the ship in what will be the last lap of the parliamentary term before the election.

Though Labour policy- makers in the borough are aware of this possibility, they appear to think it is all pretty politically fanciful.  But what if they are wrong?