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The long road to reform, by Sir Michael Lyons

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23 September 2005

The inquiry into local government funding has been widened, but the same questions remain, namely those of devolution, fairness, and how to tackle the public's understanding of the way councils work

The government this week announced its decision to extend the remit of my inquiry into local government funding to also consider the functions of local government.

One of the strongest conclusions to emerge from my work to date is that well-founded recommendations on possible reforms to the funding of local government need to be based on a clear understanding of the expectations and responsibilities of local government, which continue to change.

I am glad the government has accepted this and agreed to extend my remit to address these issues.

This gives me the opportunity to take a coherent look at the wider issues in local government, which has the potential not only to improve services and public understanding, but to improve the vitality of communities and their ability to determine their own future.

Local government finance is a complex area which has been debated since the Layfield Inquiry aimed to tackle it some 30 years ago. My work has confirmed that there is no 'golden key' to solving this problem.

People are concerned that local tax should be fair, but the concept of fairness means different things to different people. There will always need to be trade-offs; there simply isn't a single 'fair' tax solution to suit everyone.

Finance issues remain critical to my task, particularly those of fairness, accountability, clarity, efficiency and effective management. It is my belief that, for any package of funding reforms to be successful, the public must be able to understand them in the context of what local government does.

My research has underlined that the public has a weak understanding of what local government does and how it is funded. This is partly due to shared and confused responsibility for local services, together with a funding system that is one of the most complex in the world.

Work will continue on how best to reform council tax in the light of further work on the future responsibilities of local government.

My research suggests that, while council tax has suffered from problems relating to its rate of increase and perceived unfairness (both between areas and different groups of people), it continues to have real benefits as a local tax.

Revaluation will continue to be important but it should not overshadow what I believe to be the more significant issues of local government functions and responsibilities, the cost of delivering effective local services and the key spending pressures facing local authorities.

In considering how changes could help to manage pressures on local services, I am particularly interested in the question of whether - and if so where - the devolution of responsibility to local government could help to tackle the problems we face. For instance, could it help to improve accountability by clarifying who is responsible for local services?

Under what circumstances could pressures be managed by allowing choices (including the choice to do less, as well as more) to be made at the local level? I will be looking to expand these and other questions and formally seek responses later this year to inform my final report, which will be published in late 2006.

Finally, I would like to take this opportunity to thank those who have taken the time to submit evidence to my inquiry. The submissions I have received so far have been extremely useful, and will be reflected in my publications and reports.

I hope that those with a continuing interest in local government will remain engaged in these important issues, and join me in stimulating a wider public debate.

Sir Michael Lyons is chairing the inquiry into local government funding

PFsep2005

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