27 April 2007
In the second of Public Finance's series of 'After Lyons' articles, the Conservatives' shadow local government minister argues for a pragmatic pick 'n mix approach to Sir Michael's conclusions
I come not to bury the Lyons report completely, but to praise it. After many false starts, the 400-page report by Sir Michael Lyons provides a route map for governments of any colour to decentralise, devolve and deregulate. It would be a mistake to consign all its recommendations to the same fate as the 1976 Layfield report or the ill-fated 2004 Balance of Funding review. Admittedly, his magnum opus wasn't entirely a charitable act, given that he received a taxpayer-funded payment of £363,663 to write it.
Conservatives would agree with the direction of many of the proposals. Local communities should be able to choose the best model of leadership for their circumstances. There should be more transparent funding of local government by Whitehall, especially over the actual costs of new burdens and the cumulative impact of additional responsibilities. Town halls must be given greater flexibility in how they can spend central funds.
There is also a case for councils having a stronger role in the realm of health and promoting wellbeing. And, crucially, the reality of politics is that a piecemeal, developmental approach is more likely to achieve a better deal for local communities in the long term than 'big bang' localism.
But our spirit of agreement does not extend to Lyons' proposals for local taxation. There is no avoiding the fact that public discontent with council tax was at the heart of why the report was commissioned in the first place, why it was delayed and delayed, and why Chancellor Gordon Brown subsequently sought to bury it on Budget day.
Soaring levels of council tax since 1997 have taken the average council tax bill in England to £110 a month on a Band D bill. Whatever the merits of direct — over stealth — taxation for accountability, this is a very noticeable and painful deduction from a household's take-home pay or pension. It is no surprise that user satisfaction ratings with local government have fallen as a result — whatever the quality of the services, people are paying more, but do not feel they are getting proportionately better services. Such taxes have also turned the public off the idea of proposals for new local taxes.
Lyons' recommendations fail to appreciate this deep-rooted scepticism. On top of new banding, the report recommends not just a council tax revaluation, but regular revaluations. Based on what the Valuation Office Agency was planning for the 2007 English revaluation, this would mean Gordon Brown's inspectors inspecting, photographing and cataloguing every home.
Council tax bills would rise purely for living in a quiet road, being near to a bus stop, or having a parking space. People who rent would be taxed just as much as those who own their home. Inspectors would have the right to enter people's homes, on pain of £500 fines. Regular revaluations would effectively turn council tax into a home improvement tax — by taxing the uplift in the material condition of homes before the house is sold.
One solution that Lyons floats for those on fixed incomes is a deferment scheme for pensioners. We all know the controversy over equity release schemes. Town halls would encourage pensioners to defer their local tax bills to raise collection rates; pensioners would instead pay — with interest — when their property is sold or on the death of the surviving resident spouse. Extrapolating council tax bills, a typical pensioner in England would face an eye-watering debt of £64,000 after 20 years.
In another statement of political unreality, Lyons recommends that town halls should levy new bin taxes to collect household rubbish. If residents are paying £110 a month in council tax, at the very least they want their bins to be emptied four times a month for that. The logistics of the tax would mean microchips would have to be installed on lockable wheelie bins and new municipal bin inspectors would police every bin.
If you did not pay, your bins just wouldn't be collected. This would increase fly-tipping and backyard burning. Based on the Republic of Ireland, the charges will be £451 per year to collect two bin bags a week. No council that has introduced fortnightly rubbish collections has cut council tax; why should anyone believe that bin taxes would result in a council tax reduction?
The small print also reveals plans to levy business rates on agricultural land and buildings, which are currently exempt. This would further undermine the rural economy, and force already hard-pressed farmers to sell off their land to unscrupulous developers.
It is thus unsurprising that Labour ministers decided that Budget day was the best time to 'bury' the bad news in the report. But it would be a mistake to tar the whole report with this, and miss the constructive proposals for reform of local democracy and local accountability. Many of these could yet be implemented by a future Conservative government — praise indeed, for Sir Michael.
Eric Pickles MP is shadow minister for local government
PFapr2007
