Place-shaping: a shared ambition for the future of local government (Lyon’s Enquiry)

Lyons Inquiry final report and recommendations
Sir Michael Lyons has published the much anticipated final report from his independent Inquiry into the future role, function and funding of local government – Place-shaping: a shared ambition for the future of local government. He said:
"I believe that local government is an essential part of our system of government today. Local government's place-shaping role – using powers and influence creatively to promote the well-being of a community and its citizens – is crucial to help improve satisfaction and prosperity through greater local choice and flexibility.
"In my final report, I call for a new partnership between central and local government. This needs to be based on changes in behaviours from all tiers of government to achieve a stronger relationship – creating a shared ambition for the future. Central government needs to leave more room for local discretion and recognise the value of local choice; while local government needs to strengthen its own confidence and capability, engage more effectively with local people, make best use of existing powers, and stop asking for central direction.
"I have also concluded that council tax is not 'broken', but is seen as unfair and has been put under too much pressure."
Sir Michael presents a mosaic of reforms which tackle a complex set of problems. They include essential reforms in the short-term to tackle the most urgent problems and more radical reform options for future governments.
Short term recommendations include:
  • greater flexibility for local authorities to place-shape with less control from the centre – by reducing specific and ring fenced grants, a new power to levy a supplementary business rate in consultation with business, and a new power to charge for domestic waste to help manage pressures on council tax, and an end to capping of council tax;
  • changes to improve fairness of council tax, recognising that council tax benefit is a rebate, automating the system to ensure 1.8billion pounds in unclaimed benefit helps the poorest households, and raising the savings limit for pensioners to 50,000 pounds;
  • improving transparency in the funding system by being clear about the contribution made by national taxation, and ensuring a more independent voice to inform Parliament and the public; and
  • improving incentives for local authorities to promote economic prosperity and growth, initially through reform of the Local Authority Business Growth Incentives Scheme.
In the medium term the Government should:
  • revalue council tax to update the tax base and improve fairness;
  • at the same time, reform council tax by adding new bands to reduce bills for those in the lowest value properties, paid for by increased bills for those in higher value properties paying more – there should be no increase in average council tax bills as a result of this;
  • consider assigning a fixed proportion of income tax to local government;
  • find ways to improve the incentives within the grant system; and
  • consider introducing the power to levy a tourist tax if local government makes a strong case based on local public support – this would be appropriate only in some areas.
In the longer term, future governments could consider more radical reform options such as local income tax or re-localisation of the business rate, but these reforms may require greater public support and understanding than currently exists.
Sir Michael concluded:
"Some of these changes can start immediately, building on current changes to the performance framework and Local Area Agreements; others can be taken forward in the Comprehensive Spending Review; whilst some require primary legislation. This package of reforms is designed to set out a developmental approach towards a more devolved and ambitious future for local government, based on improving relationships between central and local government, better local choices, more effective management of pressures, and greater public trust in the system as a whole."
Sir Michael was Professor of Public Policy (2001-2006) at Birmingham University and was Head of the Department of Local Government Studies (2001-2004). He was Deputy Chairman, then Acting Chairman, of the Audit Commission (2003-2006). He was also a member of the independent review of the Fire Service in 2003.  Sir Michael has previously published two reports of his Inquiry work on local government role and funding, which started in the Summer of 2004: "Lyons Inquiry into Local Government: Interim Report and Consultation Paper"; and "National prosperity, local choice and civic engagement: a new partnership between central and local government for the 21st century". Earlier reviews for Government that Sir Michael has undertaken include:
  • "Well Placed to Deliver – Shaping the Pattern of Government Service", published in March 2004, which dealt with the relocation of public sector jobs away from London and the South East; and
  • "Towards Better Management of Public Sector Assets – A Report to the Chancellor of the Exchequer", published in December 2004.