Debate: A reply on fiscal decentralization

Abstract

In a recent piece in Public Money & Management, I drew attention to the tacit balance between redistribution and incentives that continues to characterize local government finance in England (Sandford, 2017). The latest local government finance settlement, in December 2017, exhibits continuity in this regard. A shift from 50% to 75% local retention of business rates will tip the scales a little towards incentives from 2020 or 2021; but a detailed technical consultation on ‘fair funding’ (MCHLG, 2017) has come to overshadow the bold rhetoric around economic growth. Replies from Guy Ware (2017), and Muldoon-Smith and Greenhalgh (2018), identified two perennial challenges that frame this balancing act. Respectively, they identify approaches to English local government finance marked by repeated short-termism and crisis management; and local authorities’ financial dependence on property taxation, with erratic attempts to build incentives into the system. Both authors identify key issues facing English local government: but they also remind us that there is a gulf between the solutions they present and the political environment. In this response I explore very briefly why this is so.