ABSTRACT
Thirteen years of Conservative rule since 1979 have resulted in British local government losing what were generally regarded as its most important freedoms. In 1979 all British local authorities had freedom to set their own chosen level of revenue (mostly current) expenditure and rate poundage, that is the tax level of ‘rates’ – the property tax for domestic and non-domestic property, and the only tax available to local government. In 1990 as part of the reforms involving the replacement of domestic rates by the poll tax, control of non-domestic rates had passed to central government and by 1991 freedom to set local tax levels had been removed – all local authorities had been issued revenue expenditure ceilings, exceeding which would subject them to central government capping. Although there had been problems with rates, including an obsolete basis for valuation 1 and a weak relationship of rates to ability to pay, which had resulted in a number of official investigations in the post-war period, few would have predicted the demise of domestic rates. Freedom on capital spending and finance also became far more restricted. Borrowing for capital spending was also constrained much more severely than in 1979, with ceilings on the amount of debt each local authority was permitted. The reductions in freedoms on revenue and capital were, of course, interrelated – they reflected the Conservative Government–s desire to constrain the growth of local government expenditure and reduce the role of the public sector and, at the same time, respond to public complaints about rising local tax levels. The difficulties of simultaneously securing these two objectives led to a rapidly escalating crisis in central-local relations in the 1980s. Finance was not the only source of conflict. 2 Central government increasingly questioned the efficiency, quality and appropriateness of local government provision and reduced the scale of local government’s functional responsibilities, with the creation of central development agencies for urban regeneration, deliberately bypassing city local authorities; special incentives for tenants of public sector housing to purchase their dwellings; the removal of London Transport from local authority control; and, in education, the removal of polytechnics, the imposition of a national curriculum, and finally the prospect of a majority of schools being given large fiscal incentives to remove themselves from local government control in the next five years. But that is another story, and this paper must concentrate on finance, which in any case was usually a major influence behind some of these decisions relating to functions. As the most prominent conflict focused on revenue spending it is this which will be examined in the next main section of this paper, followed by a briefer discussion of the development and operation of capital control 3 systems during this period.
