Discover how Local Councils can be funded

A recent proposal by Malta’s opposition to change how government funds local councils caught my eye. The Nationalist Party thinks councils should be able to keep some of the taxes raised there. I think they’re confusing two different things. And they’re not aiming high enough.

I

Malta local councils are currently funded by the national government. The yearly budget has a specific amount of money which government allocates based on a formula defined by law. In short, councils get more money if there are more buildings, if there are more roads to clean, etc. It’s a simple matter of ‘You’ll get more if you need more,’ as long as central government decides if you need more or not.

Robert Cutajar (PN), Malta

Mr Robert Cutajar, from Malta’s opposition, recently spoke about how this could change2. The Times of Malta reports on Mr Cutajar’s idea that government could give councils part of any taxes raised in that locality. He was clear in not wanting new taxes.

I like the idea but I think there are two important points which Mr Cutajar didn’t dwell upon.

  1. Why should councils get tax revenue from activities affecting the whole island?
  2. Why should we assume that councils need revenue in the first place?

These questions were not tackled.

That’s okay; I’m here to help.

II

The examples Mr Cutajar used fell into two different categories. He mentioned examples of permits for tables and chairs in public areas, and hotel bed nights tax. These two are different because of what they imply.

Do Malta’s local councils need to rely on government revenue?

In the first example, establishments request permits to place tables on, say, a pavement. The establishment is using a resource that is within that locality. The establishment’s customers enjoy eating al fresco and give that establishment their custom. In this case, the establishment gets something it didn’t have (open air space) for money. If some of this money goes back to the council, it would be a good thing. After all, the establishment’s customers “used” the locality somehow (roads, buses, infrastructure, etc.) so it’s only fair that some of the money left in the locality goes to the council itself.

In the second case, government levies a hotel bed nights tax on travellers using hotels. The bulk of these travellers are foreigners. They will use the entire country, not just the locality where their hotel is. If we give some of this money to the local council, then localities like St Julians will be flush with cash. But tourist-attraction rich localities like Mdina will get nothing.

This is a minor quibble. As Mr Cutajar elaborated in an interview in last weekend’s Malta Independent, the calculations could and should take this sort of thing into account.

But, I ask you, why not go further? Do we even need to fund local councils at all?

III

The Times of London reported on the East Hampshire local authority last March. Mr Ferris Cowper runs this authority and it has the distinction of being the only UK authority that has reduced its council tax. Mr Cowper wants to remove this tax. They’re on track to make a GBP 5 000 000 surplus by 2022.

Cllr Ferris Cowper (UK)

This caught my eye. If there is some way to learn from his example, we should take note.

The first point Mr Cowper talks about is increasing efficiency. By sharing 14 staff with a neighbouring council, they saved GBP 600 000 a year. I wouldn’t expect such a large saving in Malta. Pooling resources between neighbouring localities should make a saving, I would think.

Mr Cowper has also organised the council to sell resources like litter collection to other localities. Maltese local councils can raise funds themselves, so there’s scope for opportunity there too. Mr Cowper boasts GBP 10 000 000 in sales per year.

So why not go further and light the flame of creativity in our local councils?

IV

As Mr Cowper notes, the biggest achievement is ‘pathfinding a mould-breaking attitude’. We can do this  in Malta too. I think this is critical; the attitude should be to reduce not increase dependency on central government.

I fear that our politicians take funding for granted. As a result, they assemble agencies, and engineer entities to rely on handouts.

This British local council is on track to make a GBP 5 million surplus.

But they can be (more) self-contained.

So why aren’t they?

If you know someone who wants profit-making local councils, please share this article with them.

References

  1. Local Councils Act; Ministry of Justice; Retrieved 2018-04-10
  2. Councils should receive at least part of tax revenue charged to businesses in their localities – PN; Times of Malta; 2018-04-04
  3. ‘More funding for local councils means more responsibility and more accountability’; Kevin Schembri Orland; The Malta Independent; 2018-04-21
  4. Town hall trailblazer Ferris Cowper bangs drum for axing council tax; Lucy Fisher; The Times; 2018-03-01

All references were valid and correct when this article was published. Changes to referenced websites or web pages may render some references invalid. If this is the case, please leave a comment below.


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