Lyons laments, by Joseph McHugh

22 May 08
A year on from the publication of his report into local government, Sir Michael Lyons tells PF he is disappointed that more progress has not been made. Joseph McHugh reports

23 May 2008

A year on from the publication of his report into local government, Sir Michael Lyons tells PF he is disappointed that more progress has not been made. Joseph McHugh reports

When Sir Michael Lyons delivered his long-awaited report on the future of local government, it was the culmination of an inquiry that had taken almost three years.

Commissioned by Gordon Brown in 2004 during his tenure as chancellor, it came against a backdrop of protests over high council tax bills, plummeting turnouts in local elections and widespread confusion among the public about what local authorities actually do. These elements combined to make the case for change and, this time, it seemed the government might just be listening.

After several changes to the remit of his inquiry, Lyons' conclusions on the function, form and financing of local government were finally published alongside the 2007 Budget.

Staying within the limits of realpolitik, he advocated: retaining council tax; abolishing capping; a full council tax revaluation; the possibility of additional tax bands; a supplementary business rate; incentives for councils to expand their tax base; fewer specific grants; potential new revenues, such as a tourist tax; and an overhaul of the council tax benefit system to promote take-up.

More broadly, his report also called for councils to place centre stage their role in 'place shaping' — their responsibility to work with the full range of local organisations and service providers to improve the quality of life of their residents.

These modest recommendations were as much as Lyons thought the government would accept – but even some of these proved too contentious. His proposals for an overhaul of council tax, a revaluation exercise and an end to capping were killed off within hours by the then local government minister Phil Woolas.

So was Lyons' mammoth inquiry a worthwhile exercise after all? He took time out of his new role as chair of the BBC to speak to Public Finance a year after he delivered his report.

Your recommendations were widely considered to be sensible and modest – and you yourself said beforehand they would be tempered with political realism – so were you disappointed that more of them were not accepted?

Yes, I'm disappointed there hasn't been more progress, although it was clear to me that issues around revaluation weren't going to be dealt with in the life of this government. I have acknowledged that some of the other changes would not happen in the life of this government. But I might have expected to see more progress on the recommendations around council tax benefit than there has been.

Do you have any ideas why this hasn't happened?

It's partly about whether there is public support, and it's also about whether there is political courage, and you need both of those things to enable change.

And does that political courage exist? Or does there need to be a cross-party deal?

Talk to senior representatives of all three parties and they all acknowledge that the current system is not fit for purpose and needs to change, and we need to facilitate more local choice. But, of course, the temptation in political contests is to exploit public fear about taxation change. So, paradoxically, there's a recognition that things need to change but a short-term incentive, for political advantage, in winding up public anxiety. And, of course, while the public are anxious you can't make these sorts of changes.

You promoted the notion of 'managed difference' as an alternative to the postcode lottery. Isn't it equally fraught?

We need to have a grown-up debate about the services we can provide for any given level of expenditure, and we need to dampen down the escalating belief that we can go on adding to the list of national entitlements that we can get anywhere in the country. The solution is to leave many more things so that local people can decide whether they want them and how much they want them.

To what extent have all the political parties been responsible for ramping up expectations?

It's been a consistent part of the postwar political debate, because it's very difficult to win votes by saying 'we're going to do less'. What you get into then is how you can offer to do more with the same money – it's all going to be done with greater efficiency. Now there's nothing wrong with pressing for greater efficiency, but it's not going to meet all our future needs.

And the idea that you're going to squeeze enough out to pay the bills on [for example] social care – well, it's just not realistic. We do need a discussion where people recognise that it can't all be done.

We've got to sort out what is the national entitlement and what is going to be left to local choice. That is one way of managing expectations and demand, and ending up with a community that feels empowered because it's been involved in the choice.

Is this another area that will need cross-party agreement to make progress?

Well, it's at least worth exploring. It would need no more than the parties getting together, establishing whether there are issues they all agree need to be sorted out, and then put in place some agreed next steps. It wouldn't bind their hands and prevent them from having different priorities and making different offers to the voters. It would just be a commitment to sort out the local-national relationship.

Is greater devolution feasible without greater financial autonomy?

No, I don't think it is. An attempt to excite the expectation of a stronger voice for the consumer, without local government having the freedom to respond to that voice, is likely to backfire. People will be more frustrated and more angry. I would very strongly argue that there needs to be greater flexibility. I think there has been some movement in this area – a reduction in ring-fencing – but there is still a long way to go.

You said reform would be a long-term project. How would you assess progress so far?

There has clearly been progress on some fronts, which should be acknowledged. Would I like it to be moving faster? Yes, I would. Would I like to be more confident that we could see our way forward to greater clarity around the responsibilities of local government, and a funding system that underpins that? Well, yes, I would.

That does leave the question – how might progress be made? I sketched out a pathway assuming that enough progress would be made by one government so that the next government, of whatever complexion, felt it had some new choices available to it.

Given that it seems difficult to get going down that road, maybe we need to argue for explicit agreement between the parties.

Do councils need to do more to push the agenda forward?

I see real enthusiasm for this agenda and a recognition that you need to build very powerful local alliances, including voters and the business community, so that when you ask government to leave more room for local choice, you're supported.

I see some councils working energetically; I see others who think this can all be delivered by a turn of the ministerial hand, and it can't. If they're not using the powers and the flexibility they've got, then arguing for new ones will sound a bit hollow.

And was the inquiry a worthwhile exercise?

It was an enjoyable thing to do, and frustrating at times. I learnt a lot and worked with some great people. It taught me some things about how you conduct a complex public debate, which is serving me very well in my new job.


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