Here’s why it’s time to let England’s councils set their own taxes

Time to give it away, George. The chancellor George Osborne presenting his 2015 budget back in March. Image: Getty.

The author is the Labour leader of Sunderland Council.

As the party conference season arrives, the prospects for devolution in England are the brightest they have been in a very long time. There have been 34 proposals submitted to the government by various city and county regions, including my own north east. This momentum presents an opportunity for councils to show how effective local government can be in delivering services tailored to local communities.

We do, however, have some reason for caution. The Cities & Local Government Bill, the government’s flagship legislation, does not mention tax powers, instead focusing purely on councils’ powers to do what they will with the budgets given to them.

But tax powers are a critical element in driving forward economic prosperity across the country. Without them, the devolution agenda is only half-complete, and there is every danger of back-sliding. The question is, then, how can local authorities continue to press chancellor George Osborne to promote devolution deals, especially on the question of tax?

The first argument to make is that tax raising powers establish powerful incentives for better performance and accountability. Our upcoming report The Missing Multipliers: Devolution to Britain’s Mid Sized Cities, launched in conjunction with ResPublica, estimates that giving local authorities control over council tax, stamp duty, and more power over VAT  would meet Osborne’s deficit reduction objective by saving the Treasury £12.5b over the course of a parliament.


Reforms along these lines will end the situation of divided accountability which complicates the relationship between central and local government. Currently, Whitehall and the chancellor are responsible for allocating budgets but not responsible for the delivery of services. Councils are not responsible for allocating budgets, but are responsible for the delivery of services. This creates an unsustainable situation where councils feel constrained by the chancellor, and the chancellor feels encumbered by local councils.

Giving authorities like ours tax powers can resolve that situation. Councils with ambitious wealth creation plans will not have to go to the Treasury for money or special approval. They can change their tax rates, introduce new exemptions, and create new incentives to support local innovation. That will take the pressure off Whitehall budgets and generate new revenue through local growth, as initiative and the responsibility will be ceded to local councillors directly accountable to their constituents.

There will of course be disagreements between central and local government: anyone would expect that. These disagreements should not, however, obstruct our shared goal of making this country more productive, more innovative, and more efficient.

That’s where tax powers come in. If we are all bound to the same tax policy, we will not have the flexibility to inject life into our local economies. With these powers, the chancellor can fulfil the Government’s national policy objectives, and councils can pursue tailored constituency policies that meet the needs of the communities they were voted in to represent.

Perhaps then we can achieve a smoother and more constructive relationship between local and central government. We can also avoid the perception that the chancellor has veto over local authority policies he does not like by pulling purse strings.

I think this will also reassure our constituents that devolution does not mean that they lose their influence over the policies which affect their lives. Whatever tax policies and incentives a newly empowered authority wants to put in place will be subject to the public at the ballot box. Ultimately, democracy, both local and national, will decide the practical shape, the ambition, and the achievements of devolution.

And that’s what we want. We want to settle the question of accountability, so that we don’t get caught up in a two-way blame game with Whitehall. That’s good news for us, and good news for the government. It provides a framework of responsibility which allows for public service innovation and incentives for improved economic performance. We can all endorse that.

Cllr Paul Watson is leader of Sunderland City Council and chair of the Key Cities group of 26 mid-sized cities.

 
 
 
 

Everything you ever wanted to know about the Seoul Metro System but were too afraid to ask

Gwanghwamoon subway station on line 5 in Seoul, 2010. Image: Getty.

Seoul’s metro system carries 7m passengers a day across 1,000 miles of track. The system is as much a regional commuter railway as an urban subway system. Without technically leaving the network, one can travel from Asan over 50 miles to the south of central Seoul, all the way up to the North Korean border 20 miles north of the city.

Fares are incredibly low for a developed country. A basic fare of 1,250 won (about £1) will allow you to travel 10km; it’s only an extra 100 won (about 7p) to travel every additional 5km on most lines.

The trains are reasonably quick: maximum speeds of 62mph and average operating speeds of around 20mph make them comparable to London Underground. But the trains are much more spacious, air conditioned and have wi-fi access. Every station also has protective fences, between platform and track, to prevent suicides and accidents.

The network

The  service has a complex system of ownership and operation. The Seoul Metro Company (owned by Seoul City council) operates lines 5-8 on its own, but lines 1-4 are operated jointly with Korail, the state-owned national rail company. Meanwhile, Line 9 is operated jointly between Trans-Dev (a French company which operates many buses in northern England) and RATP (The Parisian version of TfL).

Then there’s Neotrans, owned by the Korean conglomerate Doosan, which owns and operates the driverless Sinbundang line. The Incheon city government, which borders Seoul to the west, owns and operates Incheon Line 1 and Line 2.

The Airport Express was originally built and owned by a corporation jointly owned by 11 large Korean firms, but is now mostly owned by Korail. The Uijeongbu light railway is currently being taken over by the Uijeongbu city council (that one’s north of Seoul) after the operating company went bankrupt. And the Everline people mover is operated by a joint venture owned by Bombardier and a variety of Korean companies.

Seoul’s subway map. Click to expand. Image: Wikimedia Commons.

The rest of the lines are operated by the national rail operator Korail. The fare structure is either identical or very similar for all of these lines. All buses and trains in the region are accessible with a T-money card, similar to London’s Oyster card. Fares are collected centrally and then distributed back to operators based on levels of usage.

Funding

The Korean government spends around £27bn on transport every year: that works out at 10 per cent more per person than the British government spends.  The Seoul subway’s annual loss of around £200m is covered by this budget.

The main reason the loss is much lower than TfL’s £458m is that, despite Seoul’s lower fares, it also has much lower maintenance costs. The oldest line, Line 1 is only 44 years old.


Higher levels of automation and lower crime rates also mean there are fewer staff. Workers pay is also lower: a newly qualified driver will be paid around £27,000 a year compared to £49,000 in London.

New infrastructure is paid for by central government. However, investment in the capital does not cause the same regional rivalries as it does in the UK for a variety of reasons. Firstly, investment is not so heavily concentrated in the capital. Five other cities have subways; the second city of Busan has an extensive five-line network.

What’s more, while investment is still skewed towards Seoul, it’s a much bigger city than London, and South Korea is physically a much smaller country than the UK (about the size of Scotland and Wales combined). Some 40 per cent of the national population lives on the Seoul network – and everyone else who lives on the mainland can be in Seoul within 3 hours.

Finally, politically the biggest divide in South Korea is between the south-west and the south-east (the recently ousted President Park Geun-Hye won just 11 per cent of the vote in the south west, while winning 69 per cent in the south-east). Seoul is seen as neutral territory.  

Problems

A driverless train on the Shinbundang Line. Image: Wikicommons.

The system is far from perfect. Seoul’s network is highly radial. It’s incredibly cheap and easy to travel from outer lying areas to the centre, and around the centre itself. But travelling from one of Seoul’s satellite cities to another by public transport is often difficult. A journey from central Goyang (population: 1m) to central Incheon (population: 3m) is around 30 minutes by car. By public transport, it takes around 2 hours. There is no real equivalent of the London Overground.

There is also a lack of fast commuter services. The four-track Seoul Line 1 offers express services to Incheon and Cheonan, and some commuter towns south of the city are covered by intercity services. But most large cities of hundreds of thousands of people within commuting distance (places comparable to Reading or Milton Keynes) are reliant on the subway network, and do not have a fast rail link that takes commuters directly to the city centre.

This is changing however with the construction of a system modelled on the Paris RER and London’s Crossrail. The GTX will operate at maximum speed of 110Mph. The first line (of three planned) is scheduled to open in 2023, and will extend from the new town of Ilsan on the North Korean border to the new town of Dongtan about 25km south of the city centre.

The system will stop much less regularly than Crossrail or the RER resulting in drastic cuts in journey times. For example, the time from llsan to Gangnam (of Gangnam Style fame) will be cut from around 1hr30 to just 17 minutes. When the three-line network is complete most of the major cities in the region will have a direct fast link to Seoul Station, the focal point of the GTX as well as the national rail network. A very good public transport network is going to get even better.