Local Trusts — a very rough concept for voluntary taxationDisclaimer
This is a very rough think piece, coming from someone with no public policy experience. In fact, I don't imagine anyone else is ever going to read it, let alone think about it, so I dump it here purely as part of my own thought history.
In the current climate of chronic underfunding of local authorities (LAs), regional services and investment are being stripped back to, and beyond, the minimum required levels. Making progress on infrastructure or social issues in any given locale is, I assume, most plausible when your project is not reliant on the local council for funding. Perhaps, then, it’s time to look at constructing new and alternative funding models.
One such model might involve voluntary taxation. It would provide a means for people to invest in their local area, and develop projects that otherwise would be unlikely to come to fruition.
Local Trusts would be established to promote projects and manage funds. For every local authority, there would be a Trust. Every Trust would control several funds:
- A local authority-level fund, perhaps termed a City fund, Borough fund, or Region fund depending on LA
- Neighbourhood funds, one per electoral ward
Trusts would be managed by directly elected trustees, and overseen by the LA which would provide legal and administrative support. They would publish lists of projects by priority for the next financial year. Money raised in the current financial year, plus any surplus at the end of the current financial year, will form the basis of the budget for the following financial year. Trusts can only spend money they have raised, as they cannot borrow.
Tax payers could donate to any funds of their choosing, pre-tax through PAYE. Using an online portal, such as Government Gateway, tax payers could opt-in by specifying a percentage of their pre-tax salary to be paid to specified funds.
0.5% Neighbourhood fund — Edinburgh Almond ward
0.5% City fund — Edinburgh
These allocations can be changed at any time on the portal and changes will be reflected on your next salary, allowing for a processing period. There would be no limit to the number of funds a tax payer can choose to pay into, although there would be a minimum percentage per fund of 0.1% and a maximum total percentage of 100%. This would allow any individual to donate their entire income, after all other deductions, should they wish.
There should also be a mechanism for businesses to donate, pre-tax, to funds of their choosing.
It would also be permissible for Trusts to receive ad-hoc donations and to organise fund-raising initiatives to bolster their budget within the current financial year. This would be the only mechanism for dealing with cost overruns, as Trusts would not have the ability to borrow. Should a Trust’s cash flow run dry, any current work will stop. New income will need to be used to pay creditors before being allocated to new spending.
Trusts would be required to disclose the names of any entities donating more than a set amount per year.
The expectation is that funds will be used for projects within these categories:
- urban realm improvements (such as paving, lighting, planting, signage, street furniture)
- infrastructure (such as new paths, capital expenditure for schools (new computers, new facilities), new public buildings, transport)
- social (such as charities, events for schools, co-operatives, community buy-outs)
Trusts would be responsible for ensuring consistency between wards when similar projects are tabled, and for ensuring that projects work in tandem with LA priorities. Trust projects should not contradict or undermine LA initiatives or policies.
Clear guidance would need to be created to define what is out-of-scope for Trust funding. For example, maintenance of a local A Road can only be funded through LA budgets and maintenance of a local motorway can only be funded through central government budgets. It will be important to ensure LAs to not defer responsibility to Trusts for areas that are clearly within its own remit.
Projects for the following financial year and the priorities thereof would be decided democratically by public votes held annually, which would primarily be achieved through the government portal. Trustees would be responsible for working with the LA to approve projects and for publishing the decision reasoning.
Neighbourhood budget disparities
Inevitably, certain Neighbourhood funds will attract less income from voluntary taxation due to the socio-economic makeup of their wards. Such wards could, however, petition individuals, businesses and organisations to donate to their fund based on their prioritised projects. Businesses developing their Corporate Social Responsibility strategies, for example, may be more likely to donate to more deserving funds as opposed to well-endowed funds.
Trusts will have the ability to redistribute surpluses from funds to other funds under their control at the end of each financial year.