06 April 2007
Regardless of press speculation, the Lyons report has not been consigned to the dustbin. In fact, it kickstarts the debate on reform, focusing first on the short-term decisions that ministers must make
Some of the coverage of my final report, Place-shaping: a shared ambition for the future of local government, has seen it as the end of a process, even as a missed opportunity for change. However, there are good reasons to be rather more optimistic.
The constructive and enthusiastic discussion at the inquiry's final conference, which took place on March 27, reinforced my sense that there is the appetite for the debate required to settle these questions.
The problems of local government finance were never going to be solved in one day. Indeed, as I quickly concluded during my work, they cannot be solved by technical means alone. They are rooted in wider political choices about how the decisions that affect our lives are made. My report is clear on that, and clear that local government's actions, and its ability to engage with local people, will be critical to building support for future changes.
In the nineteenth century, local self-government was celebrated as a way for communities to run their own lives and make their own choices. Yet we are now one of the most centralised countries in the Western world, and differences are too often portrayed as unforgivable 'postcode lotteries'. That those differences might result from choices by individual communities, or from valued local distinctiveness, often seems not to be considered.
This is not a sensible approach. Future challenges will require different responses in different places, the experience of local innovation, and enhanced public trust.
I can already see positive signs of a change in the debate — the need for varied responses identified in the Barker, Eddington and Leitch reports, a recognition by national political parties of the need to re-empower local communities, and welcome proposals in the recent local government white paper.
This is a good start, but change will not occur overnight. That is why I call for a developmental approach.
Short-term changes can expand future possibilities by building trust and demonstrating the value of local action.
One of the pressing changes is to address the perceived unfairness of council tax. I recommend changing council tax benefit by increasing the savings limit for pensioners, moving toward automated entitlement and renaming it a rebate to reflect its real nature as an adjustment to liability.
To be clearer about whose decisions really affect council tax bills, I call for measures to increase understanding of how national taxes contribute to local spending, better scrutiny of central government funding, and the abolition of capping. These will need to be combined with additional flexibility and fewer targets for authorities.
To provide the tools for local authorities to promote economic prosperity, I call for the power to levy a supplement on business rates for local investment. That needs to be combined with enhanced incentives, including changes to the Local Authority Business Growth Incentive scheme.
In addition, behavioural changes at central and local level will be critical to underpin changes to funding, and to create greater flexibility and stronger relationships with the citizen. Councils must demonstrate their ability to engage with citizens and build trust, and to act without waiting or calling for central direction. Central government needs to give them the space to do so, cutting formal and informal controls that seek to direct local choices, and being clearer with citizens about who is responsible for pressures on local budgets.
Some will be disappointed that I do not recommend relocalising business rates to change the balance of funding. However, I do not believe that in the absence of changes in central government's appetite for directing local decisions, this would address the real problem. Indeed, giving local government greater responsibility for raising tax without additional flexibility over spending would be the worst solution.
In addition, relations between businesses and local authorities are not yet strong enough everywhere for relocalisation. My proposals are intended to build relationships by enabling authorities to work with businesses to enhance economic prosperity and invest in infrastructure.
The government is committed to examining my short-term recommendations on funding, confirmed by ministers at the conference last week. These short-term measures, and a constructive approach to their implementation from central and local government, should help to expand the space for further change, including the potential relocalisation of business rates in the future.
This is not a simple argument in favour of the local, but about making use of the respective advantages of local and central government. The challenge is for everyone — government and local authorities, businesses and the third sector — to take forward the change needed.
Now is not the time to focus on the past, but to take advantage of a real opportunity to shape the future.
Sir Michael Lyons headed the inquiry into local government
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