This week The Voice is running a four part series from the Centre for Cities, a think tank that works on analysis and policy to boost city economies. They launched their ‘Cities Manifesto’ at the Bournemouth Lib Dem Conference and this series looks in more detail at its main planks. You can also find out more at http://www.citiesmanifesto.org.

All the major parties spent party conference season trying to advance their localist credentials. However, there’s more the Liberal Democrats could do to reassert their radical localist credentials – most significantly, by taking their ideas on reform of tax and spending at the local level much further.

The balance of funding between central and local government is seriously distorted.

Local Government is responsible for more than a quarter of all public spending, but raises less than a fifth of the income needed to fund this expenditure.

This imbalance between central and local government undermines local accountability and transparency. It also reduces the incentives for local authorities to use resources efficiently and to grow their tax base, because there’s no direct link between the money they raise and the amount they’re able to reinvest.

This is why more financial devolution is a good idea for cities. . A first step would be to relocalise the business rate, which would take the UK’s share of revenue raised locally above 40%.

This idea forms part of our Cities Manifesto, and was also part of a renewed pledge to endorse localism which formed part of Vince Cable’s recent Bournemouth speech. It’s a great idea, and one which should be in the Lib Dems’ blood.

In addition to giving councils more accountability to local people, it would help to improve partnerships between councils and local businesses.

Business groups express concerns about the potential for rates to be raised locally, and by the spectre of tax competition between local areas. In many ways, these complaints are a hangover from problems with the system in the 1980s before business rates were centralised. But the benefits to business– in being able to help shape local spending and hold local authorities more directly to account – should outweigh these fears.

Relocalising business rates wouldn’t change the need for some equalisation of revenues between different local authorities. Westminster continues to collect 6% of the business rate total collected nationally, and some degree of redistribution would need to remain. However, given the new economic development powers coming down to local areas and the potential for regional governance structures to disappear under the next administration, local areas should be given much greater incentive to develop their local economies by allowing them to keep some of the proceeds of growth.

Localising business rates is just a first step, and as Vince Cable has suggested, reform of council tax and the potential to introduce a local element of income tax could be the next steps to increase the autonomy and accountability of local areas. The economic downturn means it’s unlikely that the next government will move quickly to devolve financial powers to cities. The Lib Dems should push to make the relocalisation of business rates a party policy, and examine further devolution of tax-raising powers to cities and the local level.

Richard Woolhouse, Senior Economist, Centre for Cities