23 September 2005
Senior local government figures queued up to criticise the government this week after David Miliband announced that the council tax revaluation exercise was being shelved and the Lyons funding inquiry was being extended.
The decision to postpone indefinitely the revaluation of all properties in England – which would have resulted in redrawn council tax bands from 2007, imposing a significant extra burden on those at the top end – was confirmed by the communities and local government minister on September 20.
It was immediately attacked by senior figures from the Local Government Association and opposition politicians for being motivated by political rather than policy considerations, a charge hotly denied by Miliband.
Sir Sandy Bruce-Lockhart, chair of the LGA, slated the decision. 'We agree that there is a need for real clarity about what the government's rhetoric on devolution means in practice for local people,' he said.
'But none of this is an excuse for these important issues to be kicked into the long grass once again. The method of financing local services for local people must be resolved. Without reform, the government will simply continue to force up council tax and this must be addressed now.'
Even Sir Michael Lyons, whose review of town hall funding has been put back until December 2006, questioned the government's decision. In an interview with Public Finance, Lyons was at pains to distance himself from the move.
He said that the imminent move to three-year budgets for local authorities and ring-fenced school funding meant that it was reasonable to delay the revaluation to assess the impact of these changes.
But he made it clear he did not agree with the decision to delay revaluation at least until the next Parliament.
'It is a matter of public record that I do not take the same view as ministers,' Lyons told PF. 'You could argue for a one-year delay, but no longer, because if you're going to have a property-based tax then you need to have regular revaluations.'
However, Lyons rebutted suggestions that the government's decision to broaden the scope of his inquiry and extend the deadline to December 2006 was merely an attempt to avoid taking politically sensitive decisions on local taxation.
'I wouldn't have continued to work on this with an expanded remit unless I believed there was a serious prospect of decisions being taken at the end of it,' he said.
Under his new brief, Lyons will also consider the role and functions of local government. That decision, he said, had been taken in response to research that showed the public did not understand which decisions were taken locally and which were made by the centre.
His inquiry will now put together 'a map of where responsibility lies'; consider the merits of further devolution of responsibility to the local level; and examine the financial implications.
Making the announcement, Miliband said the revised timetable would allow revaluation to fit into the broader local government finance reform programme. It would also allow Lyons' conclusions to feed into the Comprehensive Spending Review, itself delayed until 2007.
'I think to start a process of reform with revaluation and then have a debate about functions and then do your financing is actually back to front. Revaluation should be at the end of the process, not the beginning,' he said.
Many in local government had been relying on the revaluation and its effects on council tax payers to force the government to reform the finance system. With that incentive now gone, fears are running high that changes considered long overdue will not happen.
LGA Labour group leader Sir Jeremy Beecham criticised the move. 'What has now been decided is unacceptable,' he said. 'It now seems certain that this increasingly discredited and dysfunctional [finance] system will survive into the next Parliament.'
Steve Freer, CIPFA chief executive, also voiced his concerns. 'We must all give our support to Michael Lyons' work. The worry is that he will now be reporting at a point in the political cycle at which there will be little appetite for bold solutions and no absolute imperative for change.'
Sarah Teather, the Liberal Democrat spokeswoman on local government, said the decision revealed ministers' refusal to tackle a manifestly unfair tax. 'The refusal to grasp the nettle of financial reform for local authorities is proof that new Labour has no commitment to social justice. They see fit to defend a tax that was designed to fall disproportionately on the poor.'
PFsep2005
