The Lib Dem plan for Local Government: Localise business rates. Replace council tax with local income tax. Cut central income tax. Give local communities the power and freedom to raise their own resources. Allow local people the power to choose through th

Councils should be set free from depending on Whitehall funding by raising three-quarters of their money locally, Liberal Democrat Leader Nick Clegg said today in a speech to the Local Government Association Conference in Bournemouth.

Nick Clegg explaining the Liberal Democrats' position as the only party willing to properly devolve power and money away from central government by re-localising business rates and scrapping the council tax.

Nick laid out the Lib Dem agenda for local government saying:

""Localise business rates. Replace council tax with a local income tax. Cut central income tax significantly, and cut central and regional grants too. Give local communities the power and freedom to raise their own resources instead. And allow local people the power to choose through the ballot box.

"This might sound radical. But it's what they do in countless other developed economies. It's called local democracy. We should try it for a change."

The speech to the LGA in full said:

I want to talk today about decentralisation.

Giving power to people and communities.

That's probably not a big shock to any of you.

The Liberal Democrats have been talking about decentralisation - giving power to people and communities - for a generation or two.

And these days, if we're honest, most politicians in most parties have caught on.

Whether it's "double devolution" from Labour or the "post-bureaucratic age" from the Conservatives, the notion of dismantling excessive central government and transferring power to local communities is very much in vogue in the political rhetoric of our age.

Now, it's always nice when people agree with you.

So you might expect the Liberal Democrats to be dancing on the tables saying: "Yes! They finally got it! They finally realised we need to devolve power if we want to make Britain fairer!"

There's just one problem. They didn't really get it.

This is a room full of councillors. I expect most of you do get it.

You see the potential of what you could achieve if your every move wasn't stifled by the dead hand of Whitehall interference.

But the sad truth is that the national politicians in Labour and the Conservative parties have missed the point of devolution.

They talk the talk. And that's it.

The Liberal Democrats are different, and always will be different.

We don't just talk about empowering people and communities. We are making it happen, every day.

So today I want to look at what decentralisation should really be about. What it can achieve. And how we can make it more than a rhetorical fad.

I am drawn to the philosophy of decentralisation and local empowerment for many reasons.

There's the basic principle of subsidiarity - the liberal belief that decisions just ought to be taken as close to the people they affect as possible.

But it's more than that.

Centralised government simply doesn't work to deliver the change I want for Britain. It doesn't improve services fast enough. And it certainly doesn't deliver fairer outcomes - where everybody gets opportunities no matter their background.

If the New Labour decade has taught us anything - this is surely it.

The great experiment of trying to improve our public services for everyone by pouring money in through a tight funnel in Number 10 Downing Street has failed.

And there's now no more money to put in.

So it's time to think about how we improve our public services - not just how much we spend on them.

And the biggest "how" of all is decentralisation.

Just look at some of the best models of public services across Europe - and you'll see it's the localised ones that work best.

And - crucially for me, and the Liberal Democrats as a progressive party - the localised services are those that deliver the fairest outcomes as well.

In Britain today there is often a pervasive notion that the only way to deliver fairness and opportunity for all is to have absolute rigid uniformity.

And this generates the media refrain of a postcode lottery.

But people are different.

Uniform services - almost by definition - do not fit individuals.

We need variation, flexibility and personalisation in the way services are run and delivered if they are to fit into real people's lives.

A postcode lottery is a terrible thing.

But the terrible part isn't that things are different in different areas.

The terrible part is the lottery - it's that you don't get to choose what fits you, or fits your postcode.

I want things to be different in different places.

I want things to be different for different people.

I just want people to be able to choose what suits them - not have it handed out arbitrarily by a bureaucratic lottery no-one understands.

I've explained why I want to devolve power.

Now I want to address what I really mean by devolution - because it's a word that's often used, but rarely followed through.

Real localisation means giving communities autonomy.

The power to disagree with central government.

And to do something different.

I believe this is only possible when communities are in charge of their own money.

It doesn't matter how much you negotiate agreements, promise to cut targets, do away with inspections, or tinker around with concordats.

In the end, if local government is spending central government's money - central government will want a big say in what it's spent on.

So at the heart of any real plan to transfer power downwards in Britain must be a plan to transfer taxation downwards.

Britain has the second most centralised taxation system in Europe.

Second only to Malta.

And Malta has a population about the same size as Croydon.

This has to change.

Until it does, all this talk of double devolution and post-bureaucratic ages will be so much hot air.

It will just be national politicians telling local councils to devolve power to individuals and communities, while devolving nothing from the centre.

That second stage of devolution - from councils to people - is vital for responsive, flexible services.

It's vital to give people control over what goes on in their neighbourhoods.

But it will never be enough while central government aggregates as much power as possible to itself.

Councils can't devolve power if they don't have any themselves.

Let's take a look at what Labour and the Conservatives are actually offering.

I believe they are letting you - as councillors - down, as well as the communities you serve.

The government's approach to devolution is not about empowering communities.

It's about absolving the government of blame for things that might go wrong, or be unpopular - while still maintaining enough control to take the credit if things go well.

Basically, they're attempting to centralise praise, and devolve criticism.

This manner of treating councillors like children - instead of elected politicians with a democratic mandate - ruins good ideas.

Take local area agreements.

A great idea in principle, giving local authorities more power to coordinate local services.

Local authorities were supposed to be able to choose their own priorities, suited to their own communities.

Instead, they have to choose from a pre-defined list of government priorities.

How is that local control?

Eco-towns - another rather good idea - have been messed up, too, by the government's failure to recognise the importance of genuine local control.

The central idea of eco-towns is a good one.

As we build the new homes we need, let's make them as sustainable as possible.

Let's stretch ourselves beyond what's needed, push back the boundaries and create world-leading green communities.

But they haven't gone far enough in terms of sustainability.

They're just aiming for energy efficiency that should be the norm - not the gold standard.

And many of the proposed new developments look dangerously like commuter havens.

Homes may be energy efficient but if their location and the local facilities mean people drive everywhere, the overall environmental impact may be negative.

Beyond the unambitiousness of these proposals from an environmental perspective, there's the government's determination to ride roughshod over the wishes of local people.

These developments are not included in local structure plans.

In fact, some have already been turned down for planning permission - the government's badging them eco-towns to crowbar them through.

Their determination to ignore local wishes is profound.

So profound that one council's application for eco-town status was turned down solely because the development was included in the local plan.

How can a minister look at an application which fits every other criterion and say - "Local people actually want this. No, sorry, can't support it."

The truth is the government is dreadful at localism, because they fundamentally believe that central government knows best.

That local people should be given control only as and when they promise to do what they're told.

It's such a pervasive belief that the government can't even get regionalisation right - let alone devolving further down the scale.

Look at regional ministers, one of the Prime Minister's bright ideas from last summer.

They've been in place for a year.

But they don't answer parliamentary questions. They don't face scrutiny from parliamentary committees. They don't - and I'm quoting Hazel Blears here - make policy decisions for their regions. They don't even seem to visit their regions very often - I discovered recently that the East of England minister hadn't quite made it to Essex yet 12 months into the job.

In fact, it's not clear what these pointless gimmicks do spend their time doing. Except costing us a lot of money.

I've looked into this - and by the time of the next general election we taxpayers will have spent well over two million pounds on this futile project.

It's time to scrap regional ministers and spend the money on something useful.

Devolving power isn't about having a national minister "advocating" national policy in the regions.

It's about letting the regions - and below them, councils, communities and people - make decisions for themselves.

It's because the government doesn't want to go this far that their approach to the fundamental issue of money is so wishy-washy.

They're only interested in supplementary top-ups for councils.

Like additional business rate supplements

But what we need is a total restructuring of local government finance.

So councils are raising at least three quarters of the money they spend in their own community - not dependent on central government for it.

Sadly, the Conservatives won't go anywhere near changing local government finance. Perhaps their fingers are still burnt from the poll tax crisis of twenty years ago.

Remember - in government, the Conservatives had an abysmal record of centralisation. Introducing rate-capping. Compulsory competitive tendering. And nationalising the business rates.

They were the ones who began the hoovering up of powers by central government that has done so much damage to Britain's communities.

So I am sceptical of their claims to believe in localism now.

Especially when it's so clear they'll say anything to win.

No matter how inconsistent.

You all know that one of the most important things councillors have to do is play a role in planning housing for the needs of local people.

Making sure there are enough homes - but communities aren't damaged by insensitive new development.

I'm sure every one of you has had to make difficult decisions, weighing up the pros and cons of different proposals.

Let me read you a couple of things David Cameron has said about housing developments.

At a Conservative party conference, he said - and I quote - we have to build "more flats for young people".

But just two weeks later he said we should have "fewer homes for young single people".

And then the next day, his housing spokesman changed the party's mind again and said we should be building more bungalows.

Just imagine what your neighbours and constituents would think of you as a councillor if you changed your mind three times in two weeks about something so sensitive as new homes.

This is a reckless approach to public policy.

Insisting on some Conservative right to enter Number 10 without deigning to tell us why, or what they'll actually do once the door is closed behind them.

While the Conservatives have no commitment to decentralise our tax system - while they have nothing to say about the unfair Council Tax - and nothing to say about nationalised business rates - their claims to a localist agenda will ring hollow.

They are letting down their colleagues in local government.

So what should we do to localise power in Britain? And put communities back in charge of their own destinies?

We need to radically circumscribe what central government does.

Not just setting councils free of the chains of central targets and central bureaucracy. But transforming the way we run all our public services. Shifting power downwards, where it can be responsive to local needs and circumstances.

The central state has a vital role - of course.

It must intervene to allocate money on a fair basis, to guarantee equality of access in our schools and hospitals, and to oversee core standards and entitlements.

But once those building blocks are in place, the state must back off.

And allow the genius of grassroots innovation, diversity and experimentation to take off.

So in the health service, for example, we should break down the current monolithic structure and give control over Primary Care Trusts given to locally elected health boards, accountable to local people.

It's time to look at how we make other services accountable too.

Like police.

Police authorities are not elected. But they are allowed to tax people.

This breaches the fundamental principle of no taxation without representation.

And contributes to the unease people have about the effectiveness of their local police.

Who often don't seem to respond to local demands.

I don't have a simple answer to the problem.

In seeking to devolve power, we mustn't set up a complex series of parallel governance structures at local level - that risks giving voters election fatigue as they're asked to pick representatives for a plethora of different organisations whose power and responsibility they do not understand.

Councils must remain at the heart of local governance. But that doesn't mean they have to directly run everything either.

Over the coming months, the Liberal Democrats will be exploring ways we can make services like the police more accountable.

Without damaging police neutrality.

Or councils' role in local life.

For all of the services we seek to localise, much of the funding must be raised locally, too.

Central government will never let go while it holds onto the purse strings.

The Liberal Democrats are committed to scrapping Council Tax.

It's Britain's unfairest tax.

Based on property values nearly twenty years ago, instead of what people can afford to pay.

But our commitment to Local Income Tax isn't just about fairness.

It's about localising power, too.

Because with a local income tax in place, we can decentralise our tax system.

Transferring tax-raising powers from national to local government.

My ambition is to switch from a regime where councils raise just a quarter of the money they spend, and get the rest in handouts from the centre.

To a regime where they get a grant for just a quarter of the money they spend - and get the rest from local taxes, decided by local people.

Ending the unfair "gearing" mechanism where people see their local taxes soar to pay for marginal increases in the council budget - and don't understand what they're getting for their money.

I don't want to go beyond this 75-25 ratio.

The government needs some leeway to make up the differences between needier and wealthier councils with a grant that varies between areas.

But with 75% of council spending funded locally, we'd have a very different Britain.

How do we achieve it?

First step: at the next general election, the Liberal Democrat manifesto will commit my party to localising business rates.

Putting councils in charge of how much businesses pay for their property.

Labour promised to do this back in 1997.

They chickened out.

It's no use looking to the Conservatives for help, either.

They're the ones who nationalised rates in the first place.

But I tell you now, we will never have localised power in Britain unless we put this fundamental tax into the hands of our councils.

It will engage them in their local economies.

Give them a financial stake in regeneration.

And give them real power over the resources communities need for services.

Of course we need to discuss protections for businesses, so we don't go back to the excesses of the 80s with punitive anti-business taxes in some areas.

But the fundamental point must remain.

Councils should tax businesses, not just people.

Localising business rates will mean that councils will be raising 50% of their money locally.

That's a vital first step.

That neither of the other parties will even think about.

But I want to go further still.

Replacing Council Tax with a fair tax won't, in itself, have a localising effect.

Because to start off with, we'll replace Council Tax pound for pound.

But a Local Income Tax gives us the opportunity to localise taxes further.

Once it is embedded, we'll cut income tax further at the centre.

Cut the grant to make up the money.

And let councils raise their local taxes to fill the gap.

Eventually, Local Income Tax together with local business rates will add up to that 75% target.

Local money for local services.

And as we localise more services, giving councils control of more local spending, I want to maintain that 75% target.

We'll keep cutting national taxes, cut regional grants and funding, give local communities control of the services, and let them raise the money to pay for them.

And if they raise taxes too far?

They'll find themselves voted out of office.

So that's the plan. Localise business rates. Replace council tax with a local income tax.

Cut central income tax significantly, and cut central and regional grants too. Give local communities the power and freedom to raise their own resources instead. And allow local people the power to choose through the ballot box.

This might sound radical. But it's what they do in countless other developed economies. It's called local democracy.

We should try it for a change.

There is one condition on which I would seek to craft this radical redistribution of power downwards in our country.

That councils do the same.

Letting go, allowing communities to make their own choices, and take control of their own destinies.

Councils are less distant than central government, for sure.

But they can be just as monolithic, as restrictive, and as unfathomable to local people.

I am not interested in seeing one set of politicians and officials in London cut down to size simply to give way to another set of politicians and officials in the Town Hall.

The real test of devolution is how much local people, families and communities are empowered themselves.

Liberal Democrat councils are leading the way in changing this.

In Kingston, which has a population of over 150,000, any group of 100 people can call in any decision the council has made.

And the opposition chairs the scrutiny panel - so this is no paper exercise in consultation.

In Hull, Liberal Democrats allowed public questions at cabinet meetings.

And in Cambridge, public contributions at planning committee, and questions at council meetings.

In Birmingham, Liberal Democrats in the administration have re-organised the council into ten 'constituencies' and given them £100m in service budgets and 2,500 staff directly responsible to each.

The 12 councillors representing each constituency have to meet in public, and to build links with the strategic partnerships and with key local agencies in each area.

There are minimum standards for each service across the city, but they have wide powers to adapt services to local needs.

They're mirroring the model I've outlined for national government - limited central rules, with local diversity - at a smaller scale.

In Chard, in Somerset, Liberal Democrats have brought justice home, making up for the loss of a local magistrate's court with a Community Justice Panel.

That sees low level offenders, makes them apologise for their offending, explain their behaviour - and agree a punishment.

They've got a reoffending rate of about 5%.

Because they're encouraging community action.

And putting power and decision-making in the hands of people, not officials.

I could list examples all day.

But the fundamental point is this.

Central government has a legitimacy problem.

Lots of what it does should be transferred to you - to democratically accountable councils.

You are closer to the people.

But being closer to people should never serve as an excuse for not giving more power directly to people.

The Town Hall may be closer than Whitehall, but it can still horde too much power behind closed doors. So let's remember that the powers which must be passed down from central Government to local Government must wherever possible be passed down further still - to people, families and communities.

Britain is stifled by our micromanaging, centralising government.

We've got to change it.

But when you're listening to people speak about devolution - ask yourself one question.

Who will make it happen?

Who is prepared to match rhetoric with action?

It is only a party that will commit to devolving power over money. To put its money where its mouth is.

Without control over the purse strings, you as councillors, and the people and communities in your area, will never really be in charge of your own destinies.

You'll still be treated like children, asking for your pocket money.

The Liberal Democrats are the only party willing to even contemplate giving that financial power to local councils and services.

So we are the only party that will make devolution happen.