Three new council tax ‘super bands’ covering the most valuable properties and the devolution of stamp duty to councils will help local leaders retain more local cash, a new report has said.
The report on fiscal devolution from the Northern Powerhouse Partnership (NPP) sets out a number of measures aimed at giving local areas more control over their finances.
The revenue raised by a new council tax band would be redistributed across the country, according to the report, and would follow a revaluation of all homes, which was last done in 1991.
The NPP report also said that stamp duty should be devolved to local authorities, before replacing all residential property taxes with a land value based tax, including a redistribution mechanism and ‘cutting out the Treasury entirely’.
Lord Jim O’Neill, vice-chair of the Northern Powerhouse Partnership, said: ‘It’s time for a new era in English devolution where we give local areas greater control over their own destiny.
‘Proper fiscal autonomy would bring power and accountability closer to communities, while protecting local economies from shifting sands in Westminster and allowing us to focus on the fundamental barriers to productivity.’
The UK is one of the most centralised countries in the developed world, the NPP report said. According to OECD statistics from 2021, taxation at a local or regional level amounted to 16.2% of GDP in Canada, 13.3% in Germany, 9.4% in the US and just 1.7% of GDP in the UK.
The Chancellor announced in January that ‘we need to move more decisively towards fiscal devolution’ and in last week’s budget, single pot multi-year settlements were unveiled for Greater Manchester and the West Midlands.
The Northern Powerhouse Partnership’s report called for a reformed business rates system to all mayoral authorities or for its replacement with a locally-set land value tax, with transfers from the areas with highest values to those with the least.
It also said 1p of existing employers National Insurance contributions should go towards local transport services and infrastructure, and a tourism tax on hotel stays should be brought in.
These measures would bring decisions closer to the communities they affect and help close the North-South divide, according to the NPP.
‘A fairer and better balanced tax system between central and local government is the bedrock for a functional, productive, prosperous economy,’ commented Lord O’Neill, who was one of the original architects of the Northern Powerhouse economic vision alongside former chancellor, George Osborne.
‘While the changes we’re proposing will take many years to be felt in economic data, that should not put us off. These are deep-seated problems that have developed over decades and as such it will take decades to reverse them.’
