A devolutionary deal, by Phil Woolas

3 May 07
Despite reports to the contrary, ministers are supportive of many of the recommendations made by Sir Michael Lyons. In fact, his major report will be informing public policy for many years to come

04 May 2007

Despite reports to the contrary, ministers are supportive of many of the recommendations made by Sir Michael Lyons. In fact, his major report will be informing public policy for many years to come

Let me say straight away how much the government appreciates Sir Michael Lyons' programme of work, which concluded with his final report in March. However, before that, it had already contributed a great deal to the development of the measures in the white paper and the emerging 'place shaper' role of local government.

This was a major piece of work and an in-depth debate on the form, function and financing of local government.

Like us, Lyons looks longer term. Many of the suggestions and recommendations will continue to feed into policy as we travel down the devolution road. That is why it makes no sense to respond point by point. So I will pick out a few immediate highlights.

Already we are moving forward with many of the changes Lyons advocates, giving local government and local partners the space to take on that place-shaping role.

For example, there will be far, far fewer targets and indicators — and they will reflect local priorities as well as national standards.

We are setting up the new devolutionary deal between central and local government, through the statutory Local Area Agreement and local partnership network. One important change is that, no matter what the source of a funding stream, local government and its delivery partners can use it for taking priority actions and improving priority services in the area. The default will be that funding is not ring-fenced.

Will the new LAA work? This is the best opportunity local government has had for decades to step forward and act as the strategic leader of its communities. The talking is now over, the challenge is for councils to step up to the mark and take the opportunity.

However, we must not get distracted by detail and lose the big picture. And, once and for all, we must break the dependency culture that has built up in the past 50 years as a legacy of centralising measures imposed from Whitehall.

The new LAAs will work if local authorities and local communities grab the opportunities and make the most of them. Government can only create the opportunities and step back — that's devolution. I believe the pessimism we hear is more a lack of imagination on the part of the commentators than a lack of commitment on the part of government or enthusiasm on the part of local government.

Inevitably the discussion around the Lyons report has focused on finance. We entirely agree with one of his main conclusions — that council tax is not broken. As the report points out, it has clear benefits. For example, it is highly collectable — properties don't move but people do. At 96.8%, collection rates are at their highest level ever. It is also transparent and provides a stable environment for councils.

However, it also has a personalised element, with a 25% discount for single occupiers. And it is underpinned by council tax benefit, which pays for 15% of all council tax levied. But we must all do more to make sure that those who need this benefit don't miss out.

I know there has been some criticism over our not accepting Lyons' recommendation to abolish capping. We agree that decisions about council tax are primarily a matter for local authorities. However, they need to exercise this responsibly.

Average council tax increases reached 13% in 2003/04 at a time of low inflation and increased investment in local government. Indeed, since 1997, there has been a real-terms increase of 39% in grant for local services.

Authorities have since shown greater realism, because they know that we are prepared to use our capping powers if necessary, and this year is the third in succession in which the average increase is below 5%. In view of local government's positive overall response to keeping council tax down, we have not exercised our capping powers this year.

As history shows, it is not council tax itself but increases in council tax that concern citizens most. However, two factors mean, I hope, that councils will continue to show restraint. First, the stability and predictability of three-year funding, giving councils the information to plan ahead. And, second, the shift of focus and accountability for authorities from Whitehall to their local communities.

The evidence in the report shows that a revaluation would not, in itself, have a significant impact on the fairness of council tax relative to income. However, it would cause significant disruption for families and individuals. For this reason, we have made it clear that we will not look at a revaluation during the lifetime of this Parliament. With a three-year settlement period imminent, it would not be sensible to replace more stability with the turbulence of revaluation.

I hope this clear position will put an end to some of the extraordinary myths about revaluation. We are not introducing a tax on home improvements, or patios, or views, or even garden gnomes. Nor do rising property prices have any impact on council tax. Only if a property has increased in value relative to neighbouring properties because it has been extended or improved can its band increase — and then it can only happen when the property is sold on.

What's more, the Valuation Office's powers of entry have not changed since council tax was introduced in 1993 and nobody has ever been prosecuted for not allowing an inspector into their home.

On business rates, we agree with Lyons that this is a successful and stable property tax, and with his conclusion that there is no case at present to change the current Retail Price Index cap on annual increases in the overall yield. However, we also accept Lyons' case for improving some aspects of the regime.

In particular, empty property relief needs modernising to reflect the current high need for development land — as Kate Barker stressed —and the state of the market today.

We also agree that a local supplementary business rate could provide an opportunity for communities to raise additional resources for strengthening their local economies. We will also be taking forward Lyons' recommendation of a review of other business rate reliefs and exemptions.

All in all, the Lyons Inquiry and reports have contributed hugely to the fund of knowledge and analysis of local government today. There is only space here to discuss a few 'highlights' — there are many more layers and themes worthy of comment.

I believe they will still be informing policy many years ahead.

Phil Woolas is the local government minister


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