So how much power do your councillors have?

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It's not new to say that local government isn't really master of its own destiny. Nor would I be the first to observe that local councillors - the people we elect to make decisions about that local government - have even less control over that destiny. Most thoughtful local councillors know that the big decisions about funding are outside local control and also that many of the ways in which that funding is distributed are not within the local council's gift either.

Back in 1961, when my Dad was first elected to the Municipal Borough of Beckenham, local councils undertook duties placed on them by national governments (e.g. refuse collection) but the funding for those duties, as well as the other things a council chose to do, was entirely raised locally through the rates or through charges. There was no revenue support grant, no centralised setting of business rates and no national fee levels. It was down to the councillors.

Between then and now something changed. My Dad always blamed the 1970 Local Authority Social Services Act for starting the rot but whatever the cause we moved from a situation where local government was controlled locally to a situation where, for most councils, what they do is defined by national regulation and the necessary funding provided by central government. In 2011 local government spent £147billion and £103billion of this - 70% - was central government grant funding (one caveat here - this is a net spending figure not a gross spending figure, the £147bn is the call on tax revenue from local government).

Not surprisingly governments have sought to control this level of expenditure (it is about a quarter of total government spending after all) and to try and direct the way in which the money is used. To understand how this budget works we can divide the activities funded through local government into three areas: education; social services and social care; and municipal services (bins, potholes, parks and so forth). This is an oversimplification but helps to explain how local government actually works.

For education the local council (as 'local education authority') is two things - a route for money to be paid to schools and the provider of services to those schools. The bulk of the funding is in the form of the Dedicated Schools Grant (DSG) - the formula for distributing this grant is defined nationally but administered through a schools forum rather than, as in times past, a committee of the local council. The schools forum is not an elected body, it is not accountable to the council and its membership is institutional (schools, LEA, unions, colleges, etc.). Put simply, local councillors do not control the funding of schools. So when you blame your local council for not improving education try to remember this fact.

In the case of social services and social care local councils provide services in response to demand - or 'need' if you prefer the approved social care word. The budget is what the US Federal Government would call "relatively uncontrollable". In any given budget period the council has to estimate how many people will require social services and/or social care. That's how many children might be taken into care, how many disabled people will require support, how many of the elderly population will need home helps and so forth. Since education funding is effectively outside the local authority this is the biggest area of council spending. And while councils have some funding flexibility, at bottom they have a duty to meet the need identified.

Municipal services consists of everything else the council does - this includes statutory services such as planning, libraries, youth services and the registrar of births, marriages and deaths. As well as those things we tend to think of as what councils do - empty our bins and maintain the roads, run parks and provide swimming pools. Councillors do have more discretion over these services and over how much funding they receive. For some things - swimming pools and public lavatories, for example - the council has absolute control and can open or close them as it wishes.

The truth of all this is that 80-90% of the spending and activity undertaken by your council (or councils if you live in the shires) is simply given - determined by regulation, set out in statute or otherwise required by central government. And three-quarters of what your council spends comes in the form of central government grant - with all the strings and restrictions that come with this. Ministers and bureacrats down in London will always want to make sure that, wherever possible, the agenda of the national government is met by the local council. As a result we have had restrictions of borrowing, limits to tax-raising powers such as rate capping, the use of regulation or ring-fencing to direct spending and, if all else fails, simply removing any power for councillors to control or change what the council does. We even got an instruction this year to hold a 'named vote' on setting the council tax!

So when, as we did in Bradford yesterday, councillors get together and "set the budget" bear in mind that what you're seeing is a finely tuned political row about a few million quid out of a budget totally over a billion. The budget debate - "we've found £200,000 to invest in saving kittens", "the Tories are casting old people into the darkness by reducing the walking stick budget by £50,000" and "Labour are failing youngsters by removing the swing seat cleaning service" - this debate isn't really about the budget at all, it's about the tiny bit of the budget that our system of local government allows us to control.

Sometimes it makes me wonder?

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Extortion, theft and fairness - the idea of taxation

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"Abracadabra, thus we learn the more you create, the less you earn. The less you earn, the more you're given,

the less you lead, the more you're driven,

the more destroyed, the more they feed,

the more you pay, the more they need,

the more you earn, the less you keep,

And now I lay me down to sleep.

I pray the Lord my soul to take,

if the tax-collector hasn't got it before I wake."

There is no moral basis for taxation. It is, as the dictionary says:

...that part of the revenues of a state which is obtained by the compulsory dues and charges upon its subjects

This is an imposition that many argue is straightforwardly theft. Here is Rothbard:

For there is one crucially important power inherent in the nature of the State apparatus. All other persons and groups in society (except for acknowledged and sporadic criminals such as thieves and bank robbers) obtain their income voluntarily: either by selling goods and services to the consuming public, or by voluntary gift (e.g., membership in a club or association, bequest, or inheritance). Only the State obtains its revenue by coercion, by threatening dire penalties should the income not be forthcoming. That coercion is known as “taxation,” although in less regularized epochs it was often known as “tribute.” Taxation is theft, purely and simply even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects.

Now it is also the case that the state, having extracted its income from us through compulsion, then spends that money for the betterment of society. Even the robber barons perched in their Rhineland castles didn't extract money with menaces from river traffic solely for personal gain. They provided services in their demesne (most importantly security and protection from other robbers).

In our modern democracy we even have the ability, through the ballot, to decide just how much we will take in taxation - we act, some would say, as if we are a club where the rules (including those about tax) are set through the political process. In this context the existence of taxation is axiomatic - the debate isn't whether we should have tax but the scale, nature and system of that taxation. We do not ask often enough whether taxation is necessary, appropriate or right.

The main argument justifying tax is based on how the tax is used not on the fact of the tax:

Unlike protection rackets taxation gives us something in return, namely public goods which benefit all citizens. Studies have shown that it is unlikely for people to organize to provide public goods by themselves (see the free rider problem), and thus it is in everyone’s best interests for the government to provide these goods and to support them with mandatory taxation.

The problem here is that this argument takes us no nearer a philosophical justification for taxation. A further concept - the 'free rider' - is introduced but that fact seems to be something of a red herring. After all, unless your tax system is a simple poll tax, there are plenty of free riders - taxing people does not, in and of itself, eliminate this problem.

Nor can we use the idea of 'public goods' to justify taxation - this is the 'roads, who will build the roads' argument that we know is false. The roads - the precursors of the freeways and motorways of today - were built with private finance on a voluntary basis despite that 'free rider' problem. Nor can we make this argument for health, housing, welfare or indeed most of the things provided through taxation by the modern state. All of these things can (and have been in history or are somewhere in the world today) be provided on a private, voluntary basis.

It seems to me that the crucial issue - if you reject Rothbard's simple 'tax is theft' argument - isn't some sort of theological discussion of how progressive tax is or isn't but the degree of consent to taxation. And there are two ways to assess this - firstly to look at the extent to which people avoid or evade taxes and secondly to consider whether people consider themselves to be overtaxed. A further question might be the extent to which taxation undermines the taxpayers ability to make personal choices - are we taking too much to fund 'collective' decision-making leaving to little to fund 'market' decision-making.

There is a lively debate about the extent to which taxes are avoided - we've read the attacks on businesses like Vodaphone and Amazon around their tax affairs and we've witnessed ministers and shadow ministers outbidding eachother to have a go a 'tax-dodgers'. And stories like this are legion:

The inability of HM Revenue and Customs (HMRC) to properly curb aggressive tax avoidance schemes is costing the UK billions of pounds, a report suggests. The National Audit Office said HMRC was dealing with a backlog of 41,000 cases involving individuals and small companies, with up to £10.2bn at stake. 

Add to this attacks on paying traders in cash, the rise in duty avoidance ('smuggling' and illegal production) for alcohol, cigarettes and other products, and the tightening of rules around gifts, trusts and charities. We have a situation where the proportion of society operating outside the tax system (wholly or partly) has risen:

...the latest estimates showed about 30 million people in the EU performed work that was not declared for tax. "Around half of all construction workers in Germany undertake shadow work; and over 80% of all Danes find shadow work acceptable – at least in some circumstances."

In the UK at least 13% of the economy is outside the tax system - this is some £308bn. We have to add legitimate avoidance of tax by business and individuals into this equation. All of which suggests that the degree of consent to be taxed must be questioned.

YouGov asked last year about the 'fairness' of the tax system:

Thinking about all the ways in which people pay taxation – such as income tax, VAT, Council Tax, excise duties – how fair do you think the system is for taxing people in [country] these days?

The result show that two-thirds of people saw the system as 'unfair' and this is regardless of whether respondents positioned themselves as 'left', 'centre' or 'right' politically. Again this suggests that the principle - taxation by consent - is creaking a little. However, other YouGov research suggests that - for all that we see the system as unfair - the most 'popular' choice is not to change taxes. However, a fifth of the population want to see a reduction - tax cuts with spending cuts - in the size of government.

None of this answers our question although it does suggest that a significant part of the population do not 'consent' to the current level of tax. And this part - whether through behaviour (avoiding or evading taxes) or through opinon - represents the challenge to those who see delivery via the state as the only option.

Finally there is the extent to which the individual is able to make personal choices post-tax. It it a statement of the obvious to say that high taxes - wherever and however they are levied - will reduce the amount of money available for consumers to spend in the market. And that if taxation reaches the point where this reduction is disempowering to the consumer then we can only describe this taxation as 'extortionate' - for want of a better word, as an act of theft.

The problem is where this point of consumer loss sits. For Rothbard it was simple - any taxation reduces the ability of the consumer to make choices. But we have rejected this argument because of the 'equity' obtained from the collective provision of some services (security, health, education). It is true that these things could be provided voluntarily and privately but also true that the guarantee of the state is positive in providing these services.

We also know - although in the UK this is generally not the case - that funding through taxation does not prevent the use of choice within a market as the means of distributing a public service. What using taxation does is make these services -typically health and education - available universally regardless of the means available to the consumer.

If, however, taxation to provide health, education and security results in some individuals being unable to sustain themselves without external assistance, then that taxation certainly conforms to our idea of 'extortionate' - the act of taxation is an act of theft, even if we subsequently give back some money in the form of benefits allowing the consumer to sustain himself.

But what if the result of taxation is to prevent someone having the means to pay a mortgage, have a holiday, buy a car or have a meal out every now and then? Is this level of taxation justified? Are we disempowering these consumers by making it difficult for them, even impossible, to have commonplace things (cars, holidays, a night out)? Stopping people - through taxation - from having things that most of us consider aspects of a regular life indicates, again, that the level of taxation for such individuals is 'extortionate' - an act of theft.

The UK is such a society - we tax the income of people on low wages meaning that for many (probably millions) things we consider normal are precluded and for some that sustaining a basic life is only possible through welfare support. The UK is also a place where millions of people avoid paying taxes, mostly in little ways, and where the majority believe the tax system to be unfair.

The solution does not lie in taxing wealth (although we have pretty significant proxies for such taxation in the form of business rates and council tax) not does it lie in getting companies or the rich to pay taxes. It lies in recognising that taxation lacks any moral basis - it is simply a matter of finding an equitable and effective way to deliver a set of services (security, health, education).

It seems to me that two things are needed:

1. The end to taxing people below the point at which we provide benefits or subsidy
2. Where we can create 'markets' or choice-based systems within public services, we should do so

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Why I'm confused about those cuts...

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"Major cuts," is the cry. And I wonder. Mostly where the money is all going. For in the aggregate there are no cuts:

What’s more, the evidence indicates that U.K. has, at best, slowed down the growth of spending, but it has not engaged in actual spending cuts. I documented the trend in British spending earlier this year:

A look at the data in Her Majesty’s Fiscal Year 2012 Budget shows (see table 2.3) that total managed expenditures will increase from £696.4 billion in 2011–2012 to £733.5 billion in 2014–2015, and further to £756.3 billion in 2016–2017. Adjusted for population growth, this is slow growth, but not a savage cut. That table also shows a “projected” drop in Public Sector Gross Investment between 2012–2013, but if it ever materializes, it will be contained to that year alone.

And we're paying through the nose too:

Spending cuts in the UK can’t be blamed for the weak growth path the country is on. On the other hand, tax increases can. Here is a list:

• a VAT hike from 17.5 percent to 20 percent (probably the main culprit of the U.K.’s current problems)
• a new 50 percent tax bracket on incomes over £150,000, which will drop to 45 percent next year
• an increase in air-passenger duty to 8 percent
• “temporary” payroll tax of 50 percent on bonuses over £25,000
• a capital-gains tax hike
• a 0.088 percent levy on banks
• an increase to 7 percent in the stamp duty on the sale of properties worth more than £2 million and on properties bought through “non-natural persons.”

(For more, go here.) The bottom line is that the U.K. is another case of private-sector austerity (i.e., tax hikes) without public-sector austerity (i.e., spending cuts).

To paraphrase Ray Davies, I remain, yours truly...

...confused BD13.

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You mustn't scrutinise budgets...

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Bradford's Children's Services Scrutiny Committee took an item on the 2011/12 budget for the service and made a resolution:

Resolved –

(1) That the Strategic Director, Children’s Services be requested to progress the resolution of Council with regard to monitoring how the Pupil Premium was spent and report back to this Committee at the meeting on 29 November 2011.
(2) That a report on the budget savings 2011-12 made to date; the risks in achieving the remainder of those savings and details of specific pressures on the service be presented at the meeting on 29 November 2011.
(3) That a detailed breakdown of efficiency savings be provided at the meeting on 29 November 2011.

ACTION: Strategic Director, Children’s Services

Now you'll agree that this all seems perfectly reasonable - the Committee has asked some sensible questions about an important matter. However, the Council's leadership think otherwise and the Chairman is now told that such a resolution is outside the remit of the Committee since it might stray into the discussion of a budget for 2012/13.

What utter nonsense. On stilts. What is the point of scrutiny if it can't scrutinise?

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Nottingham's Labour Leader doth complain too much I feel

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Nottingham is the local authority that thinks the public shouldn't know about how it spends their money. It is, of course, run by the Labour Party. And now - with the release of some spending information following a Freedom of Information request - the reasons start to creep out:

Nottingham City Council has hit back after housing minister Grant Shapps accused officials of misusing corporate credit cards to settle purchases of pizza, wine and a trip to Alton Towers theme park.

Details of the £3.5m spend in the year 2009-10 emerged from a freedom of information request submitted by communities secretary Eric Pickles following the council's refusal to publish details of all spending above £500.

Among purchases queried by the minister are £7,011 spent at a wine shop, £958 with Russian airline Aeroflot, £69 on Domino's pizza and £63on gift websites. A further £80 was spent on admission for Alton Towers and a card was used to settle a £50 bill at a local pub.

I'm sure a great deal of this is explainable but, given the Council's dislike for spending transparency, it doesn't look good, does it! However, the local Labour bigwigs continue to dig their hole deeper:

Defending the council, deputy leader Cllr Graham Chapman accused ministers of 'playing silly games' and of acting irresponsibly by failing to request the information formally as ministers of state.He said he was confident spending would be justified once full details were checked.

Cllr Chapman said: 'Most of the figures are below £100 and we are going to be checking on each of the individual items on Monday. But with the wine, for example, it is likely that it was brought for an event at the council house, - where we hold weddings and events for local businesses as a way of making money.'

I do hopw Cllr Chapman is right - I'd hate for some of that spending to be dodgy!

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The NHS budget is growing - so why are they sacking nurses?

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Nothing, absolutely nothing makes the case for NHS reform better than this piece of shroud-waving from the nurses' union, the RCN:

Last November the RCN identified 27,000 likely NHS job losses during the next three years – but has now raised the estimate to 40,000.

Based on 9,650 posts at risk across 21 NHS trusts, 54 per cent of looming job losses involve clinical staff such as doctors, nurses and midwives.

The proposed job cuts analysed were a mere ‘snapshot’ of Britain as a whole, the RCN said.
Its chief executive, Dr Peter Carter, said: ‘Cutting thousands of frontline doctors and nurses could have a catastrophic impact on patient safety. Our figures expose the myth that frontline staff and services are protected.’

This reduction comes at a time when (along with international aid, for some bizarre reason) health spending is the only part of government spending not facing budget cuts. Here are the figures for resource 'departmental expentiture limits' from 2010/11 to 2014/15 (i.e. the budget excluding capital spending):

2010/11    £98.7bn

2011/12    £101.5bn

2012/13    £104.0bn

2013/14    £106.9bn

2014/15    £109.8bn

So the effect of an increase in funding for health care is the sacking of 40,000 employees (a suspiciously round number, by the way, so probably nonsense), half of whom according to the RCN will be from the clinical and medical staff. Part of the problem may lie in inflation but most of it can't - the NHS is incompetent, wasteful, inefficient and poorly led at every level. And the reason for this is that the consumers of healthcare - that's us the population of the UK - cannot exercise that consumer power. The various health unions - RCN, BMA, RCP and others - direct their attention to government. These organisations have been enormously successful:

NHS expenditure on doctors has doubled in the past five years. In 1999 the NHS spent £3 billion on their pay, increasing to £6 billion in 2004. The pay rise has not been matched by any significant increases in productivity.

And this has continued:

The figures show that, in 2000, the mean earnings of a consultant were £71,900. But by 2009 this figure had risen to £120,900 – an average yearly increase of 5.9 per cent. In contrast, across the whole of the pubic sector salaries rose over the same period by 4.5 per cent. For the private sector the rise was 3.7 per cent.

Staffing accounts for around half the total NHS budget and about 70 per cent of hospital costs. The Office for National Statistics recently estimated that productivity across the NHS as a whole fell by 3.3 per cent between 1995 and 2008, an annual average decline of 0.3 per cent. This was partly due the huge influx of new money in the early 2000s.

It seems to me - and the evidence supports this contention - that huge increases in "investment" have not brought the intended improvements in healthcare. Not that the NHS is always bad - thankfully around 64% of people surveyed are "satisfied" or "very satisfied" with the service rising to 80% with GP services. But this still means that nearly four in ten people aren't satisfied with the NHS and one in five are less than pleased with their GP.

Reform is needed - not moving procurement responsiblity about within the NHS family but shifting power to the consumer, to the patient. The last government set in train a fundamental shift in social care for adults - moving commissioning from bureaucrats to users through what is called 'personalisation'. While medical interventions are different there is a great opportunity to apply this principle to healthcare. At the same time the process of giving institutions - hospitals, clinics and so on - independence need speeding up. The lessons from the academies programme in education - real improvements from granting schools greater local autonomy - need to be learned and we need to stop viewing the NHS as a single monolithic service provider.

But most of all, we have to kick the BMA, RCN and RCS out from any positions of influence - these are simply trades unions and have no interest in the public. As with all trade unions their job is to secure the best deal for their members - nothing else. The government and health management should deal with them on that basis.

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