Beyond Whitehall's grasp: Parliament must let councils provide the services their localities want, argues Graham Allen

SOMEWHERE between the musty lavender of the mayor's parlour and the red braces of the recession-beached technocrat there is a better vision for local government - it is about independence, democracy and responsibility.

In recent years the role of local government in our constitution has suffered. What is not forbidden is now capped. The governing principle is: 'Find out what Jimmy is doing and tell him he mustn't'

The suffering began under Margaret Thatcher, who had a malice against local government that went beyond the actual follies encountered at the fringe. She didn't mind if that malice spilt into the doings of Conservative local authorities trying to do their job with care and at necessary expense.

The result is that local authorities have become merely tools and agents of the executive - central government. Experience since 1979 has served only to illustrate how far this can go - with all the demoralisation, interference, inefficiency and wasted potential it has created.

The only proper objective of all political parties now is to ensure that duly elected local authorities are guaranteed their independence beyond the reach and whim of even a Labour government. They should be free to carry out their local mandate safe from political interference and insured against financial manipulation by central government. Of course, central government should still lay down standards and minimum provisions, but the petty interference in local decision-making that has typified recent years must be denied any legal basis.

The European Charter on local self-government, enacted by all EC countries other than the UK, should be ratified by the UK to underpin the process of independence, but this will be the most modest of starts. The simplest way to guarantee the rights of local authorities would be through an open and clear definition of their powers, either in an addendum to a bill of rights (to which Labour is pledged) or, in the long term, in a written constitution. In either circumstance, local government, like the individuals who elect it, could take central government to court if its liberties and powers were infringed.

Between the cautious and the long term lies a more obvious route, and the debate should now be initiated. In an amendment to the Parliament Act and/or in a new Local Government Act, local authorities should be given the powers to do whatever is not prohibited by statute law; and to receive a set percentage of the national revenue from income tax.

The current Parliament Act allows the second chamber to obstruct - forever if it so wishes - any attempt by the first chamber to extend its own life. A terse amendment to this Act could equally protect local government from interference by allowing the second chamber (itself scheduled for reform by an incoming Labour government) to obstruct any attempt by the executive to dominate local government.

A Local Government Act by itself, without the guarantee of a Parliament Act, would have the disadvantage that it could be undone by the next interfering regime. The rights of our communities are too precious to labour under such uncertainty. Even if legal independence were to be guaranteed, however, it would mean nothing without financial independence.

Around half of local government income is first collected by central government before being distributed back to the localities. This essentially technical function of distribution has become politicised and arbitrary due to manipulation by central government and is seen at its worst extremes in the capping measures of the Conservatives.

The percentage of revenue from income tax going to local authorities should in future remain at the same percentage as is currently allocated. It could, however, be handed over as one total sum for local authority expenditure to an independent local government commission operating at arm's length from central government that would be charged with formally distributing it to each local authority. The commission would largely be made up of elected local government representatives - no 'man in Whitehall' to blame any more. To improve the sense of personal involvement in local government, the element of income tax earmarked for local purposes could be clearly identified on everyone's wage slips alongside national insurance and the remaining national income tax.

In addition to this 'ring-fenced' money, central government would continue to offer specific help for particular problems, just as the US federal government can assist individual states on time-limited projects. Representatives of local people could receive the remaining half of their income from an open menu of local revenue-raising powers from fair rates to a sales tax. A locally set business rate would also be restored. Local democracies should be confident and competent enough to be able to raise and spend what they decide is appropriate - always mindful of the need to balance delivery of services against the electoral consequences.

Throwing away the crutch of central government would be frightening as well as exciting, for it would also entail a new measure of accountability. This could be exercised in two new ways. First, elections might take place each year for one-third of council seats and single-member constituencies could be restored. This would allow the local electorate to exercise control, and would assist local parties, which would have to organise themselves to fight regular elections and train and equip councillors who would be intimately known to their voters.

Second, local authorities, if free to raise and spend what revenue they wished, would also have to operate under a constitutional balanced- budget provision similar to that operated voluntarily by 37 US states. It may be argued that sections of the Local Government Finance Act contain this provision, but it would be much clearer if this were spelt out in the Parliament Act.

The constitutional requirement to balance the budget annually would mean that revenue would have to match spending. Borrowing, provided it was covered in the revenue costs, need not be controlled by central government, nor is there any reason why it should even appear in the public sector borrowing requirement (PSBR), which might itself be more accurately renamed the central government borrowing requirement.

A new vision of a plurality is needed to replace the outmoded 'winner-takes-all' centralist politics, and locally accountable government is central to its realisation. Free local Labour councils could work so well that neighbouring Tory councils would rush to emulate them or be ousted. We should not be afraid to face that test.

There is immense creativity in our local communities and these assets must be restored and cherished. A thousand flowers will bloom - not all of them to the liking of the party in central government. However, we must be mature enough to accept that the price of one council's job-creation initiative, services programme or innovative community care scheme may be another council's grammar school or contracted- out cleaning contract.

One welcome effect of local independence would be to raise the morale, confidence and calibre of those seeking election. Representing your locality would once again have a purpose and a pride. A pluralist view means working for the day when local elections matter at least as much as those for the House of Commons. In order to give life to that vision we must now open up a debate on the constitutional relationship between local and central government.

The author is Labour home affairs spokesperson for the constitution and democracy but writes here in a strictly personal capacity.

James Fenton is on holiday.

(Photograph omitted)