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5. No taxation or spending without consent

Our next milestone is the idea of annual referendums on government budgets, national and local. Whereas the American Revolution rejected taxation without representation, we go further and reject taxation (and spending) without consent.

This we call Referism. It relies on a political philosophy which is entirely compatible with The Harrogate Agenda, holding that, in the relationship between the British people and their governments, the people should be in control. The state is the servant not the master. Control is achieved primarily by holding the purse strings, where annual budgets must be submitted to the people for approval, via referendums. The catch phrase is: “it’s our money and we decide”. Governments are thereby forced to refer to the people for their funding, hence our choice of the term “Referism”.

At the heart of any government’s power is money. That is how parliament emerged as a force in the land, going as far back as 1215 when the tenants-in-chief secured the first draft of the Magna Carta from King John. The concession that more than anything else reduced the power of the monarchy was the principle that kings were no longer entitled to levy or collect any taxes (except the feudal taxes to which they were hitherto accustomed), save with the consent of his royal council. He who controls the money controls the Monarch.

The principle of financial control survives to this day. In place of the Monarch, the executive must refer to parliament each year for approval of its budget. Without that, it runs out of money. Our problem – and the nub of all our problems – is that this process has become a ritual. No parliament has rejected a budget in living memory, and none is likely to do so.

Each year we see the government of the day going through the routine of asking parliament for money, and we have to watch the charade of approval being given – only then to see vast amounts being spent on things of which the majority of us do not approve. Overseas aid is a classic example, where public approval would doubtless be withheld.

There must, therefore, be real control over budgets. The politicians cannot be trusted on this – it is not their money. The power must go to the people who pay the bills - us.  Every annual budget must be submitted to the people for approval, by means of a referendum. The politicians must put their arguments, and the people must agree, before any government can levy any tax or spend any money in the relevant period. We, the people, decide. We, the people, have the power to say no.In discussions about this demand, however, concern is often expressed that people would simply vote themselves more money. Fortunately, limited experience of referendums on taxation suggests otherwise.

This stems from experiments to assess the effect of referendums on increases in Council Tax, all in the context, incidentally, where the Department for Communities and Local Government acknowledged such referendums would take power away from central government and giving it to local people.

The first experiment was a referendum in 1999, in Milton Keynes, where the council offered three levels of increased Council Tax: five; 9.8 and 15 percent. Residents were able to vote by post or telephone for their chosen option. The 9.8 percent rise would have kept core spending at the same level, while the five percent increase would have meant cuts. A 15 percent increase would have provided extra revenue. Forty-six percent of those who voted opted for the 9.8 percent rise, 30 percent for the five percent increase and 24 percent for the 15 percent hike. The turnout was 45 percent.

At the time, council leader Kevin Wilson told the BBC: “The referendum gave the people an opportunity to be masters rather than servants”. The referendum, he said, had succeeded in its aim of reconnecting people with local government and giving public backing for council tax rises.

In February 2001, Labour-controlled Bristol City Council then announced that the public would get a chance to vote on their Council Tax levels, “under plans drawn up to tackle voter apathy”. The scheme had the backing of government ministers and, if the public had responded “positively”, the plan was to repeat referendums across the country.

Voters were asked whether they preferred to increase Council Tax by two, four or six percent, or to freeze it at then current levels. Of more than 115,000 people taking part in this referendum - the turnout significantly higher than at local elections - 61,664 voted for no rise, 11,962 for a two percent rise, 20,829 for a four and 19,841 for a six percent rise. Thus, the total of those voting for raised taxation, at 51,732, was outnumbered by those who wanted to freeze the budget.

Clearly, the response was not “positive” enough.  At the time, The Independent newspaper was to lament that, “in a victory for the maxim that people vote with their wallets, the results showed few people in favour of extra spending”. “Voters of Bristol pick school cuts over taxes”, it reported.

Nor was Bristol on its own. The London Borough of Croydon on 14 February 2001 asked its 235,000 registered electors to decide whether Council Tax should be increased by two percent (in real terms, an effective freeze), 3.5 percent, or five percent. Council tenants were also asked whether their rents should be increased, in return for additional services.

Then, 56 percent of the voters opted for the lowest possible rise. A total of 80,383 voted - a 34.2 percent turnout. Thirty-two percent voted for the 3.5 percent increase and a mere five percent went for the five percent hike. Of the 4,190 council tenants responding to the rents referendum, representing a 24.1 percent turnout, just over 58 percent voted for a rent freeze, keeping average rents at £65 a week. On offer to the tenants had been a community patrol service, community grants, money advice and debt counselling services – all of which had been rejected.

Croydon was to repeat the experiment the following year, with 74 percent of the taxpayers who voted opting for the lowest rise on offer, at 3.65 percent, on a 35 percent turnout.

These experiments suggested that people were most likely to reject extra spending, even when more services were offered. They also demonstrated that that there was some enthusiasm for voting on budgets – despite limited local and national media exposure. In Croydon, voters were not deterred by votes in successive years. Turnout increased marginally in the second year. And crucially, fears that electorates would necessarily vote for more spending did not materialise.

Also demonstrated was the ability of electorates to handle multi-choice votes, a capability that gives much more flexibility than having to stick to a straight “yes-no” plebiscite.

Following the Labour defeat in the 2010 election, the idea of Council Tax referendums was taken up by the Conservatives. Communities Secretary Eric Pickles. He declared that by 2012, he wanted people to be able to reject Council Tax levels “if they exceed a ceiling agreed annually by MPs”, by voting on them in referendums.

This was based on a promise made in 2007, whence Mr Pickles called the plan a “radical extension of direct democracy”. In actuality, though, it was a considerably watered-down version of the earlier referendums – which themselves did not allow for outright vetoes. Nor was there any suggestion that they should apply to central government spending. Pickles averred that he was “in favour of local people making local decisions”, and also said he wanted to reverse the presumption that central government knew best when it came to deciding local priorities. “Let the people decide”, he went on to say – but only on local issues.

Eventually, in the Localism Act, the referendum principle was adopted, requiring local authorities to put any increase of two or more percent in core Council Tax to the people. Unfortunately, precepts – such as charges for Police and Fire Services – and other levies were not limited, permitting overall rises above the two percent level.

Illustrative of the commitment of most local authorities to democracy, for the financial year 2013-4, none increased their taxes in a way that would have triggered a referendum. Some cut public services. A number increased core taxes only by 1.99 percent, keeping them under the referendum threshold, while also increasing precepts and levies.

In an attempt to block the precepts loophole, Communities Secretary Eric Pickles tightened the "referendum lock" in a clause in the Local Audit and Accountability Bill. This attracted considerable opposition from the Local Government Association (LGA), which claimed it to be, "a significant threat to both local government’s financial stability and infrastructure investment". It would leave authorities unable to invest in major infrastructure schemes such as transport systems, putting jobs and investment at risk. [6]

A Department of Communities spokesman responded, saying: “There is no reason that the Bill will affect infrastructure projects. If local authorities want to raise Council Tax because of levying bodies then they should be prepared to argue their case to local people in a referendum”.[7] But the attitude of the LGA illustrated quite how far we have to go, and the degree of opposition to democratic controls over taxation.

While the principle of these referendums was a welcome development, therefore, its advent has not seen any great increase in accountability. In any case, Referism goes much further than a simple veto on increases in Council Tax and – even at local authority level – it needs to. As we have seen, when local authorities have been prevented from increasing Council Tax, they have simply developed alternative ways of increasing their revenues.

Crucially, though, Referism also applies nationally as well as locally, giving voters the power to reduce central government taxation. It also enables voters to control spending. A weak block on a preset level of increase is merely a sop, and does nothing to redress the power deficit.

As for costs of local referendums, in the 1999 experiment Bristol spent £120,000 on each poll, while Milton Keynes estimated £150,000. Tower Hamlets Council has estimated that a standalone referendum might cost up to £250,000 but, if combined with council elections, it would cost around £70,000 extra. Translated nationally, the total cost of local budget referendums would be between £30-60 million.

The late Sandy Rham, an IT expert and founder of the EU Referendum blog forum, suggested that the software on current lottery terminals could be adapted to allow their use for voting. A system that handles £6.5 billion in annual ticket sales could very easily handle around 40 million votes in a referendum. Add an online facility and you have a quick, cheap system of conducting referendums. Such a system is not only desirable but also necessary to minimise costs and disruption. Furthermore, they lie within the realms of possibility.  E-voting has been successfully trialled in Norway.

To bring down costs even more, Swiss and Californian practises could be adopted, where – if need be - voting on two or more issues is combined, perhaps to fall in the same period as the annual budget referendum. With that, there is no reason why referendums should be time-consuming, disruptive or expensive.

What then concerns doubters is that, should the people fully exert their power, government might be deprived of funds altogether. But there is nothing to stop safeguards being adopted to avoid this – in the short-term, at least.  There should be no problem in having a fixed date for a referendum, with the vote held well before the financial year for which each budget applied. If a budget was then rejected, there should be enough time for governments to resubmit, and again seek approval.

If a budget was again rejected, and it was too late to resubmit before the start of a financial year, there could, for example, be a system where permitted income stood at a proportion of the previous year’s figure, with adjustments made once a budget was approved.

In the USA, however, if Congress does not eventually approve the budget, the administration can no longer pay its bills. That tends to concentrate minds. In the case of Referism, the people could stop the money, giving them a continuous power. By contrast, a one-off referendum, offered by the government for its own tactical advantage, is to concede power to the centre. Power resides with the body which decides whether there will be a referendum, and determines the questions. When there are annual referendums, as of right, power resides with the people.

Without people power, the politicians decide how much they are going to spend, and demand that we pay them. Consultation is meaningless as we have no means directly of refusing their decisions.  After the event, we are then graciously allowed to hold our elected representatives to account at elections. But can anyone really assert that the current election processes change anything, or indeed are capable of changing anything?