Two and a half years – and several extensions – after starting his review of local government, Sir Michael Lyons has finally delivered his conclusions to Ministers.
To the dismay of many, Sir Michael’s report was deliberately overshadowed by the Budget. And Ministers were quick to dismiss some of his proposals for reforming the thorny and unpopular Council Tax.
So was the Lyons Report simply kicked into touch – or does it deliver workable proposals to devolve power away from the centre?
Against the odds, Sir Michael has penned a sound and considered report that sets out pragmatic steps toward greater devolution. By emphasising an incremental approach – starting with a range of ‘quick win’ reforms – he prioritises action over endless debate.
In reality, the big political decisions on Council Tax were put off by Ministers months ago. The most important story in Sir Michael’s report is his support for greater financial autonomy – especially new powers and incentives to support ‘place-shaping’ and economic growth in England’s cities and towns.
Three key arguments stand out:
First, Sir Michael proposes a new locally-controlled ‘top-up’ on the business rate. The logic behind this proposal is clear. Businesses and city leaders in places like Manchester, Leeds and Birmingham agree on the need for better local transport. But because of their financial dependence on Whitehall, cities are unable to put together the funding packages needed to get key projects off the ground.
If Ministers agree to a business rate supplement, Birmingham could close the funding gap on the long-delayed renovation of New Street Station – and Manchester could raise a substantial sum to extend the successful Metrolink tram system. London, meanwhile, could borrow over £3bn, nearly one-third the published cost of Crossrail.
Second, Sir Michael argues for greater local flexibility over grant funding. Ring-fenced ‘guidance’ and informal steering have made councils more, rather than less, dependent on Whitehall in recent years. Less top-down prescription could result in more local innovation, stronger economic development initiatives, and better value for money.
Third, Government must use the grant system to incentivise housing and business growth. Currently, there are perverse incentives in the grant system; improved economic performance is often rewarded with swingeing grant reductions. Developing positive growth incentives would be an important step forward.
Currently, only a small portion of economic development funding is raised and spent by local government. Sir Michael’s proposals go some way to putting greater power, and financial control, into local hands. If these sensible confidence-building measures are shelved by the Treasury, then successful ‘place-shaping’ and real financial devolution will remain a long way off.
In an atmosphere of high and sometimes unrealistic expectations, the Lyons Report was never going to satisfy everyone. An incremental approach, focused on achievable, short-term goals, was the right way to go.
Michael Lyons has set out a clear path. It’s time to see whether Ministers – and Whitehall civil servants – are prepared to deliver devolution.
Download The Lyons Inquiry into local government: delivering devolution? by Adam Marshall.
