Crisis-hit Labour councils demand bold tax and spending powers from 'Day One' of Jeremy Corbyn government

Crisis-hit Labour councils are demanding the freedom to tax land and holidays and to build homes, schools and children’s centres from “day one” of Jeremy Corbyn reaching No 10.

The party’s local government leaders are piling pressure on Shadow Chancellor John McDonnell to reverse the “destroying effects of Tory austerity” immediately, if Labour wins power.

In a clear challenge to the Labour leadership, they say cuts of almost 50 per cent to Whitehall funding of local councils has opened up a yawning £7.1bn funding gap by 2020.

Tory-run Northamptonshire County Council has effectively declared it is bankrupt, the town hall chiefs point out – and auditors warned others are on the brink.

Their “ten freedom tests” demands a package of new powers, including:

• * The scrapping of limits on council borrowing for housebuilding and for town halls to keep all receipts from right-to-buy sales, to build more homes.

• * The abolition of the requirement to hold a referendum before raising council tax above a certain threshold, currently 3 per cent.

• * To levy a “land value tax”, on the rental value, and a tourism tax - and possibly local retention of income tax.

• * Higher funding for social care, to end inappropriate 15-minute visits and pay care workers a higher ‘living wage”.

• * Allowing councils or local government schools with a good record to take over failing free schools and academies.

• * A Cabinet seat for a senior local government figure - and for a local government representative to be invited to every ministerial team meeting.

Sharon Taylor, who leads Stevenage Council and contributed to the "On Day One" report, said: “If John McDonnell wants to see an irreversible shift in the balance of wealth in favour of working people, then he must take steps to ensure a similarly permanent shift in the balance of power from Whitehall to local communities.”

And Nick Forbes, the leader of Labour Local Government Association group said: “If the next Labour government wants to deliver immediate and visible change for the many not the few, then the fastest and most direct route lies through local government.

“Communities across the country are demanding change to fix the housing crisis and support young people. With sufficient funding and greater freedoms local councils can generate economic growth, build new homes and strengthen communities.”

Labour’s election manifesto last year floated the idea of a land value tax, to replace council tax which is widely seen as allowing wealthy landowners escape without a proper charge on their rewards from rising values.

However, the party only promised to “initiate a review” and little has been heard of the proposal since.

The report has the backing of Andrew Gwynne, the shadow local government secretary, who wrote, in a foreword to the report: “The future of our country cannot be formulated by politicians in Westminster, but needs to be built in partnership with local leaders and local people.”

But Rishi Sunak, the Tory local government minister, said: “The cat is out of the bag. Labour want to impose huge council tax hikes while abolishing the right for local taxpayers to veto high increases.”