Nick Clegg is demanding councils be given the power to impose a massive range of new local taxes.
Among the levies he suggests are for fuel, alcohol, office parking, landfill and even speeding.
But the Liberal Democrat Deputy Prime Minister is being blocked by Eric Pickles, the Tory minister who is in charge of local government.
Hard-pressed taxpayers – who have witnessed enormous council tax rises over the past decade, and are now struggling to cope with the effect of the recession – will be angry at any sign the Government is planning to impose additional local charges.
Local Government Chronicle magazine has been passed a leaked letter from Mr Clegg to David Cameron, Chancellor George Osborne, Chief Secretary to the Treasury Danny Alexander and others.
In it, he calls for the introduction of American-style local sales and fuel taxes and parking levies, to enable councils to be almost entirely self-financing.
Currently, the vast majority of council finance comes from the Government – giving local authorities little chance to raise money should they decide to.
Mr Clegg’s aim is to increase accountability and interest in local politics by handing a wide range of tax raising powers to councils – which could spend the money as they see fit.
One theory is that this would allow authorities to reduce council tax for some residents as they can raise cash elsewhere. They would also be given greater freedom to borrow cash on financial markets.
However, the plans will also run up against opposition from the Treasury which would come under pressure to reduce nationally imposed taxes, such as VAT.
In his letter, Mr Clegg says councils should ‘have the greatest range of revenue raising powers and freedom from central government constraints’.
He called for a root-and-branch reform of local government finance, looking at a range of options, including:
- local taxes and duties such as for fuel, sales, landfill, workplace parking, tourism, alcohol, tobacco and stamp duty;
- local charges such as on parking, speeding, waste collection, road pricing, gambling licensing;
- greater freedom to borrow;
- freedom for councils to set their own council tax discounts cigarette.
In the letter, dated January 10, Mr Clegg called for a full review of local government finance, taking as its starting point the assumption that ‘taken collectively local authorities are self funding (outside the schools grant)’.
He said the review should ‘work back from that goal’.
LGC was told Mr Clegg had planned to announce the review at a conference last week but had been blocked by Mr Pickles.
The source said the Tories were only interested in increasing councils’ financial freedoms by allowing them to retain business rates.
A spokesman for Mr Pickles told LGC: ‘These are opening Lib Dem suggestions for draft terms of reference for a review which has not been agreed.’
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